Pre-Employment Background Investigations

Pre-employment background investigations are often one of the most overlooked, undervalued and critical parts of the hiring process. Pre-employment background investigations on potential new hires can save your school exponential amounts of financial resources as well as civil and criminal liability exposure. While it is true that all new hires are required to submit their fingerprints as part of the Live Scan process to the California Department of Justice, this process only uncovers arrests and does not include other risk factors indicative of potential future employment problems.

Various studies have concluded that the cost of a bad hire is between 100% and 500% of an employee’s annual salary. In addition, 25% to 30% of thorough background checks uncover issues that an employer needs to review before proceeding with hiring. Those schools that employ comprehensive background checks on new hires find that 1/3 to 1/2 of the applicants with problem background checks are not hired, presumably because of the likelihood that they would be bad hires. This means that between 8.3% to 15% of applicants are not hired due to problems discovered in a thorough background investigation.

With this said, consider the following return-on-investment (ROI) calculation for a school that conducts comprehensive pre-employment background investigations on all new hires:

  1. A base employee salary of $50,000 per year.
  2. The cost of a bad hire is normally 100% of the employee’s annual salary (from a range of 100% to 500%). Therefore, the typical cost for a bad hire in this scenario is $50,000.
  3. 10% of final applicants are not hired because of problems discovered in a comprehensive background investigation (from a range of 8% to 15%).
  4. $250 is the median range of a basic background investigation.
  5. Cost Avoidance Calculation For Each Background Investigation:
    Salary X Typical Cost of Bad Hire (% of Annual Salary) X % of Applicants Not Hired
    $50,000 X 100% X 10% = $5,000
    ROI = Costs Avoided / Cost of Thorough Background Investigation
    $5,000 / $250 = 2,000%
  6. Therefore, for this position, the school would expect on average to avoid $5,000 (10% of $50,000) of bad hire costs with each $250 basic background investigation. This is a Return-On-Investment of over 2,000%!

Now, consider the alternative:

Anytown School has a job opening for a Head Administrator and begins accepting resumes and applications. At the same time, the school hires a “reputable” search firm to assist in this process. A woman with seemingly impeccable credentials applies for the position. She interviews well and tells the search firm and the interview committee that she holds a PhD. in a natural science and has extensive experience. The search firm does not conduct a thorough background investigation or degree verification and the woman is hired. Soon after her employment begins, the school begins to see red flags with the behavior of the new Head Administrator and begins to question her credentials. Oracle Investigations Group is brought in to conduct a thorough background check on the administrator. Our investigation reveals that the administrator has lied about her education credentials and her PhD. certification. The school is then forced to deal with public scrutiny and the employee is released from employment but not before having to pay a year’s worth of her salary (close to $100,000) to avoid breaking their employment contract.

So, which option does your school and community deserve?