Here at GroupOne Background Screening, we often hear the argument against background and reference checking as being “too expensive and time consuming.” This is not just a dangerous attitude, but potentially a very expensive one.
The Harvard Business Review points out that as much as 80 percent of employee turnover is due to “Bad Hiring” decisions. The study revealed that one-third of executives surveyed believed the top factor leading to failed hires was the poor matching of an employee’s skills. HR Management magazine identified the annual return on investment (ROI) in background and reference checking as an amazing 900 percent.
Replacing a lost hire costs businesses between 25-150 percent (per the Saratoga Institute) of salary and benefits, based upon the skill level of the employee. In a study conducted by the Center for America Progress, the cost of losing an employee can cost close to 213 percent of the salary for a highly-trained position. So, if an executive is making $120,000 a year, the true loss could be up to $255,600 to the company!
The U.S. Department of Commerce reports that 30 percent of all business failures result from theft or embezzlement. A study by the University of Cincinnati found that 64 percent of small businesses report employee theft, with the average amount stolen being $20,000.
The National Council on Alcoholism and Drug Dependency reports that 35 percent of employees who are hospitalized for work-related injuries are problem drinkers.
Comprehensive drug screens, background and reference checks are minimal costs providing safety and great savings to your firm in the long run. The real question should be, “Can an employer afford not to perform background and reference checks, as well as drug screens?”
From these numbers, it’s clear the cost of checking is nowhere near the devastating cost of a bad hiring decision. As we always say at GroupOne, “Better safe than sorry.”