Seeking the Gold


As we enter yet another holiday season and with 2006 on the horizon, many retailers are focused on the all-important priority of finishing strong in 2005 and getting the jump on next year. This time of year for many of us is a report card of sorts. We work all year, doing the things we need to do, planning, strategizing, and thinking about every imaginable detail.

Mistakes made at this time of year are potentially disastrous, so it is vital that the smallest details are not overlooked. Let me give a sport analogy. If a golfer hits a slice in a 10-mile-an-hour wind, the ball may end up in the rough. That’s not good, but it’s probably not a disaster. That same ball struck poorly in December when the wind is blowing at 40 miles per hour will likely go out of bounds, resulting in a penalty that can ruin your score. The message here is to cure your slice before the dollar losses are doubled, tripled, or quadrupled.

You might ask, “How or what does this have to do with background checks and pre-employment screening?”

When a company chooses its employees, be it a sales associate or an executive, they take a huge risk for a potentially big payoff. That risk is often underestimated as companies hire hundreds or thousands of employees, just as they did the year before and the year before that. The problem—they still have a slice and they still struggle for proper levels of execution and to keep the ball in play.

Yes, many retailers ramp up hiring at this time of year, but many of these problems were occurring all year long. It’s just that the wind is blowing harder right now and every mistake, error, or detail overlooked now leads to a much greater potential problem.

I think that we would all agree that hiring the right employees is at the top of everyone’s to-do list. But is it at the top of everyone’s to-do-right list?

The intent of this article is not to sell anyone on a particular vendor or solution provider. The larger and much more important task is to introduce, educate, and open the eyes of the reader to the importance of pre-employment screening, which from hereon in will be referred to as “seeking the gold.”

The solutions are not easy, must be well thought out, and don’t come cheap. Anyone not willing to reconsider or re-evaluate your investment in this arena should stop reading now. For the rest of you…hopefully the majority of you…this article is for you and maybe, just maybe, some good will come from it.

Background Checks

I think that the majority of all retailers do some type of background check on certain levels of employees. Most every company recognizes the need to not hire criminals, which is generally a wise practice. But it is deeper that that.

How much are we willing to pay to accomplish this goal? We must be aware that many criminals fail to list previous criminal convictions on the employment application, as somehow, somewhere, someone told them that this is frowned upon by most employers.

Many of these individuals move from one county to another, once they figure out that most background checks are done on a per county basis.

Some move out of state, if necessary, and purposely avoid mentioning or referencing the county or state where the conviction occurred. All of this is at a cost to the retailer.

Here are a whole bunch of questions to ask as you make decisions on this issue.

  • Do you do one county checks ortwo county checks? Some companies offer a package deal, all counties discovered for one low price.
  • Does your background check company use a runner to the courthouse or a database search?
  • Is the runner getting better results? We know it’s more expensive, but Circle 23 on advertiser information formalso more current. Have you ever done a comparison? You might be able to do three database checks for every courthouse runner check.
  • What about pre-employment background checks? This process has some pros and cons as well. If I am paying to run a check on perspective candidates or so-called “A-list” candidates, can I assume that I will run more checks than if I just did post-employment checks? After all, I have not hired these people yet and we must have back-up candidates.
  • What about doing post-employment checks? I realize that the criminals may be on the payroll for a few days. Is this a good risk to take?
  • If I hire a criminal with a history of violence or serious theft issues, am I taking too much risk?
  • What about the downside of staffing? If I need to get jobs filled and the background check adds a few days to the process, should I consider this as the reasoning to use pre- or post-employment checks? Maybe I will do pre-employment checks on management and post-employment on everyone else.
  • What about the average age of my employee? Is it pointless to process criminal checks on most 16- to 18-year-olds as most states seal the records of minors?
  • What do I consider a criminal charge worthy of not hiring or firing someone? Certainly, theft convictions as well as most any type of violent, sex, or weapon-related offenses. These are no-brainers and a done deal. But what about drunk driving and vehicle-related charges, domestic squabbles, bad-check issues, drug charges, and the unfortunate bar fight after the Super Bowl six years ago?
  • Do I choose the same standards for all of my employees, whether they are a retail clerk or maintenance personnel?

Validating the Results

  • If you are doing background checks, how do you know if what you’re doing is worthwhile? Still more questions.
  • What is my background hit percentage? How do I calculate this against the national or market or category average? Who has these averages? And are they accurate?
  • I need to do proper benchmarking. Is everyone using the same meter to gauge performance and the same set of rules to determine criminal convictions?
  • How can I understand whether my company is better or worse than the rest of retail?

The answers to most of the questions are possibly a few “I don’t know”s and some “Nobody really knows.” That said, you could do some quality control and some guesstimates.

One way is to look at your turnover rate year by year, separating employees and management. This will help you understand how much you want to spend on these checks and who you will spend it on.

Some companies look only at high-theft markets or stores or just certain levels of management. Others may do all employees, but increase the number of counties checked for management.

For most retail operations a 3 percent hit rate on basic criminal convictions is a number to try to get under. This percentage might include your garden-variety criminal cases from theft to vandalism to simple assault. If you are higher than this number, whether you are doing pre- or post-employment checks, you might need to understand the quality of the interview process before these candidates are submitted.

A best practice might be to look and compare markets for spikes and dips. Once a few adjustments are made and a renewed focus is established for the initial interviews and better behavioral questions are added, the percentage may drop dramatically. This may result in reduced checks or a focus on checks in certain stores or markets.

You may never get any real market or category comparisons, as everyone does the process a little differently. Even a small twist in the process can result in a vast contrast.

One thing for sure, background checks alone are only part of the process called “seeking the gold.”

Complement the Process

Regardless of what markets you operate in, the chore of prosecution is a tremendous burden. The costs are significant…and I am just referring to the retailers. Many companies who prosecute virtually all employee dishonesty or shoplifting cases that should be prosecuted have to realize this expense. This is a big number. More importantly, it takes focus away from the real loss prevention job at hand, just so that we can be assured that justice was served.

Few companies would share their prosecution rates in either category for fear that they may become a target. Most just simply say that they prosecute everyone and the others leave the topic alone.

You must understand that more and more counties and states are turning to diversion programs instead of convictions. We may not know if prosecution rates are down as a percent to total, but we do know that it may not be wise to leave all our eggs in one basket.

Criminal background checks need a partner or two. They cannot go it alone. Now we certainly do not want to understate the need for quality interviews as mentioned previously or the importance of the reference checks, but those two subjects deserve an article just to themselves. They are vital components of the interview and hiring process and without correct execution, neither background checks or pre-employment testing will yield the desired result.

Serious consideration to proper education verification, driving record, and credit reporting offer value, but should be considered as they apply to certain types of employment.

Pre-employment Testing

In the minds of many loss prevention professions, pre-employment testing is a compliment to criminal background and employment reference checks. When tailored to the specific needs of the company, this process can serve well as we are “seeking the gold.”

There are a host of appropriate solutions in the marketplace for proper pre-employment testing, or for that matter post-employment testing. For the purposes of this article, we will focus on pre-employment. Again, as in the case of the background checks, this is a money proposition, and the proper testing component must be tailored to the needs of the company.

When thinking of testing, most employers consider integrity first, as this may be the perception of where the most value is offered. It is true that we want to test our employees, using statistically validated testing components, to access the likelihood that they might steal from us.

Certainly integrity testing is a priority, but what about personality? Isn’t it essential that we find suitable personality styles for our business? Would we want the same personality profile for a salesperson hired for a bookstore as opposed to one hired for a pet store? Probably not.

What about dependability? That is important. Are we getting a measure of dependability from our current assessment? For certain retailers, dependability is crucial and for others it might be only as important as the other types.

You may want to consider certain tests for potential employees who are being considered for their first job versus a different type of test for someone with relevant work experience.

What about the behaviors such as the likelihood to waste time on the Internet, playing video games, or misuse company property?

What about the candidate’s perception of office supplies, using the copy machine for personal matters, and similar behaviors that might be perceive as the “non issues?”

What about safety assessments and how important that might be in environments where accident risk is increased due to the product or equipment on site?

At any rate, there are a myriad of different testing components that can be used, but the important thing to remember, aside from cost, is what you hope to gain from the testing. The testing needs to have a purpose or mission. That purpose should be to find the most suitable candidates for the appropriate jobs.

The Methods

Expense is one thing; finding a way to get the testing done is another.

First of all, you have the standard pencil-and-paper testing. This is the oldest method, but it is a viable solution for many retailers.

Then you have online assessments. Since the Internet is available in virtually every household in the United States, it certainly seems like a logical alternative.

Ensuring the integrity of the results of either method are a challenge, but most companies offer several ways to get it done correctly.

Some of the assessments can be given at job fairs.

There are companies that will interview the candidate for you either early in the process or in the late stages. This can be performed at your location or at their offices.

There are integrated solutions that combine a testing component with the background check from the same solutions provider.

There are drug-screening tools that some companies use as a standard employment test that serves to screen out positive testers. The applicant generally sees that a company performs drug testing on a sign when they walk in. That means that they need not apply.

We would be leaving something out if we didn’t mention understanding results. Many companies issue tests, but not everyone scores or manages the findings correctly. Ensuring that you are on the same page with your testing solution provider with respect to results is vital. Many good employees might be judged “not recommended” for reasons of simple misunderstanding of results or just not sharing properly what you are seeking in an employee with the solutions provider.

It should also be noted that any pre-employment testing is an issue that needs to be understood and evaluated by your company’s legal department. Many rulings, such as the recent ruling on use of the MMPI® (Minnesota Multiphasic Personality Inventory) should be considered appropriately.

Assess Yourself

At the end of the day, whether you use just background checks or just some testing components or both, you need validation. This is a must.

Do you have better employees than before the testing and criminal background checks? Do you know?

Have you stopped to understand the results? Have you analyzed those results?

Before you consider a change or an adjustment, do your homework. Some due diligence in the area is a best practice for many companies that needs to be done frequently. You cannot just be done with it and move on. People change, lifestyles change, as do priorities.

An article like this one hopefully serves to get readers to rethink their process. Some will and some won’t. Some do it as a matter of practice. Some want statistical correlation as an industry standard before revisiting the idea of change. I might suggest that a simple question is the order of the day—“Is my program working?”

Screening programs may include searches of a database that provides retailers with information submitted by other retailers that chose not to prosecute a theft case, but want to share the information with the industry.


Retailers can consider an instant and secure access to pre-employment screening services offered in real-time.

– IntelliCorp

The use of online questionnaires can be integrated into the hiring process and even used at events like job fairs.

– IntegriView

Using electronic integration with state and county court systems allows for instantaneous criminal record results.

– Sterling Testing

Companies can consider customized interview guides that help store managers avoid bad hiring decisions by recommending questions and highlighting potential areas of risk.

– Unicru

Retailers should ensure that they are using non-invasive, non-discriminatory and well-validated testing instruments.

– Wonderlic

Integrity interviewing and pre-employment screening can be conducted either at the retailer’s location or off-site.

– Integrity Verifications

Don’t allow your company to be either over or under sold when designing solutions to manage your company’s specific risk.

– The Wackenhut Corporation

Today’s screening programs should be a seamless integration into existing systems utilized in the retail industry to streamline internal processes and maximize efficiencies.

– ChoicePoint

Technology is now available to ensure consistent hiring decision-making that meets compliance regulations, minimizing discriminatory law suits.

– Accurate Backgrounds

Retailers should look for programs that can be tailored to individual positions in order to maximize the benefits of background screening.

– InfoMart

Any company selecting a consumer reporting agency for background screening must consider compliance with FCRA regulations as equally important as accuracy, turnaround time, technological capabilities, and price. 

– Edge Information Management

Retailers should consider taking a “best available” approach to screening applicants to include a minimum of a national criminal database search, SSN validation, and a county criminal search in counties of record.

– National Background Data

Court Ruling Changes Use of MMPI in Employment Screening

The Americans with Disabilities Act prohibits discrimination against individuals with disabilities. The term “disability”—as it is defined under the ADA—includes both physical and psychological impairments that substantially limit a major life activity. In support of its purpose, the ADA prohibits the use of “medical examinations” that screen out, or tend to screen out, people with disabilities from employment. Recently, the 7th U.S. Circuit Court of Appeals addressed the issue of whether a specific psychological test is a medical examination for purposes of the ADA and determined that it is such a test (Karraker v. Rent-A-Center, Inc., 7th Cir., No. 04-2881, June 14, 2005).

Brothers Steven, Michael, and Christopher Karraker all worked for Rent-A-Centers, Inc. (RAC), a chain of stores that offers household goods and appliances on a rent-to-own basis. In order to be considered for a promotion at RAC, the Karrakers and others were asked to take a series of tests, one of which was the Minnesota Multiphasic Personality Inventory (MMPI), a test which measures psychological characteristics, and that can be used to diagnose certain psychiatric disorders. According to RAC, the company used the results of the MMPI in conjunction with certain other test results to measure personality traits relevant to math and language skills, and to determine interests and personality traits. The company based its promotion selection upon the results. An applicant therefore could be denied a chance for advancement simply because of an “unfavorable” score on the MMPI.

After all three of the Karraker brothers were denied opportunities for promotion because of the number of “weighted deviations” from the norm that they received on the tests, they sued RAC for violation of the ADA. The district court granted summary judgment in favor of RAC, finding that the company’s use of the MMPI as part of a test to determine personality traits did not violate the ADA, as the test was used in that manner was not as a “medical examination” prohibited by the Act. On appeal, that decision was reversed by the 7th U.S. Circuit Court of Appeals.

The EEOC, in a guidance relevant to this issue, defines “medical examination” as a test that “seeks information about an individual’s physical or mental impairments or health.” According to that same guidance, psychological tests that are designed to identify a mental disorder or impairment constitute medical examinations, but tests that simply measure personality traits, such as honesty, do not constitute such examinations.

While RAC claimed to have used the test only to measure personality traits, the 7th Circuit found that the use of the MMPI test as part of that measurement “likely had the effect of excluding employees with [psychological] disorders from promotions.” The Court based its decision on the fact that the MMPI is designed largely to diagnose mental illness, and would have that effect, whether or not intended by the employer using the test.

This case has a limited holding with potentially broad consequences. Although the Court ruled only that the MMPI is to be considered a medical examination, there are various other psychological tests that are used by employers to determine “personality traits.” Employers should be aware of this particular decision, not only because it excludes the use of the MMPI in many circumstances, but because of the wider ramification that any use of a test that may diagnose psychological disorders can lead to unintended violation of the ADA, even if the primary use of the test is for another reason. Employers should review their testing procedures and should have their testing process analyzed to determine whether such tests include any psychological diagnostic component that may be prohibited under the ADA.

EDITOR’S NOTE: This summary was provided by Maria Greco Danaher, an employment law attorney with the firm Dickie, McCamey & Chilcote. This information does not constitute legal advice or opinions. More information is available from their web site at

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