Background Verification’s Importance and Risk

Good evening, ladies and gentlemen. I have the honor and privilege of having Dr. John Chinotra present today. Dr. John has had the best of both the worlds. He's the ex army officer where he put in 21 years in the armed forces, and now he's been 22 years in the corporate world. He is a PhD in corporate strategy. He has held leadership positions in large multinational corporations and Indian companies, and has hands-on experience in turning around companies, especially in the background verification industry. He is presently the executive director of Premier Consulting and Investigations Private Limited, which is a background screening company. Welcome, Dr. John.

Dr. John, since you are from the background screening industry and you have vast experience, would you like to explain as to why is a background check necessary?

This is perhaps one of the most important questions which CEOs and top level executives face: should you carry out background verification? As such, my answer to it is a very, very strong yes. And the reason for that is, you have heard the old saying, a bad apple spoils the whole lot. So the aim of background verification is to prevent criminal and undesirable elements from entering the workforce. There are many methods which are undertaken, but it is just to see that your workforce is healthy, your work environment is good, your cultural fit is appropriate, and you get competent employees. This, in a nutshell, is the importance of background verification.

Now, you know, employees, when they enter an organization, they enter at various levels. One is an entry level, somebody joins at the mid level, and then you have chief executive officers being replaced and new ones coming in. How does the background check differ for an entry level employee, a mid-level employee, and a senior level employee at the CXO levels?

This is a very relevant question. Actually, the types of check which are carried out on an individual depends on three primary factors. First is the level at which he is coming in. Second is which industry it is. And third is what is the vulnerability of that person to get into wrong things, right, and the location also. Now let us go down to the level. When you are hiring a CEO, you would like to carry out a whole battery of checks. You would like to know what kind of a person he is, what is his credit rating, is he a people's person or not, what has been his track record, how is his interaction with people, how good are his communication skills, what is his exposure to social media, does he have a political leaning, is he a fair person, how is his integrity. All these questions you would like answers to before you hire a person, because the risks are very great.

For that, a complete battery of checks, which varies from civil or credit rating to criminal records. The directorship then is checked. His exposure to political parties and his leanings are checked. We interview his ex-colleagues to find out what kind of a person he was, what kind of a role he had, what was the span of control, and the whole lot. While in the case of a middle level, you don't require all those things. You would wish, you should be sure that firstly he's the person he's purporting to be. That means his identity check is very much required. You should find out that he's not a criminal. You should check up whether he actually has the education qualifications which he has claimed, and was he holding the designation which he has referred in his CV. It is not that important whether he is mistaken in a CV; it shows the lack of integrity of a person. If he has lied at a particular level, he is likely to lie and be unethical in the other levels.

So in the middle level, at the entry level, if you are hiring directly from a college, you don't need to really carry out an educational check. But an employment check, maybe it is his first job, that is not required. But you still would like to know what kind of a person he is, where he lives, what were his antecedents before, does he have a criminal record. So it depends on the level. The second thing is what kind of industry it is. It is very obvious that if you are hiring a person for the aviation industry, he has to be double checked and triple checked, and in a lot of detail. If it is just a manufacturing industry, there is no need for such detailed checks. And third is the location. Now, if you are hiring people from highly disturbed areas where there is insurgency, you would like to check whether he has had a record with any kind of undesirable activities.

Colonel, you made a statement that you'd like to check if a particular person has had a political leaning. How does the political leaning impact the job situation of a person?

Actually, ideally it should not. But if he is biased and his decisions are based on unethical leanings, which may or may not be purported by a particular party, at least you get a hint. I won't say that this will disqualify him for a job, but it is worthwhile finding out about his political leanings, what his activities with trade unions were, how he managed to do it, especially at the decision level position. A management, before hiring a person, would like to know all these, and background checks do a lot to achieve that.

In one of the articles that I was reading, it said that almost 25 percent of the people inflate their CVs. How relevant is this statement?

This is actually very relevant. With the technologies coming in, like Photoshop and all, even your educational qualification can be photoshopped. It is highly detectable when it goes under a trained eye and the verification is carried out from universities and colleges. So this is very, very prevalent, and the discrepancy rates are only increasing rather than going down.

So when a person inflates a CV, what is the inference that you would make?

Firstly, he is not truthful. It hits at the basic level or the premise on which he is being hired. It may have something to do with education or this thing. The very fact that he has lied on a basic thing shows that he is not a person of great integrity. Then the kind of checks — there are such exhaustive checks which you can actually profile a person's personality very, very accurately, and that is why background verification is very, very important. I would like to bring out one very important thing. Companies work years to build a reputation, but we must all realize that the principal employer is responsible for any negative action of his employees, so he becomes liable also. So negligent hiring as a principal is applicable to everyone, every employer. So I would advise senior people and CEOs to be very careful before hiring, and this is one of the ways of ensuring that you get a good hire.

In the United States, all the multinational companies are mandated to do a pre-employment verification check. In India it is not so. How does the scenario change between a company that is American driven as opposed to a company that's Indian driven? Do the ethics change on this particular fact?

Actually, the ethics never change. Ethics are a constant. However, the requirement does change. In fact, I would say that it is more important to do background verification by Indian companies in India rather than the US. Now, as we know, in every field we are about a couple of decades behind the American economy and the advanced countries. As such, this is an industry which is evolving. Its importance is being realized, and this was spearheaded by the information technology revolution, where the clients were primarily from United States and Europe. So they had an established background verification infrastructure, and that is how we learned it from them. And I must say that this is a very fast evolving industry in India.

John, can you briefly tell the audience, what does an organization achieve if it does a background check of its employees as opposed to if it does not do background checks?

For example, I would say that background checks actually minimize hire risk. So it is very dangerous to hire a person who is undesirable, who is not a cultural fit. His personality should, I mean, be adjustable to the kind of culture that your organization has. And please do not underestimate it. An undesirable or an awkward person coming into a workforce can turn many employees against the company unnecessarily, which could have well been avoided. This highlights the importance of background verification. And I talked about the legal liability which you have for negligent hiring. That is always there. I've had a case where I have been held responsible. Sometime I will explain that story to you. But I was almost hauled up by the police, being accused of having hired a person who had terrorist links. Ultimately we proved it otherwise, but thank God we had carried out background verifications, so we could prove it to the police that we did our due diligence, and law and order is not our problem, it is a police problem. So it was his responsibility rather than mine.

How do you make out whether a person is culturally fit for that organization or not?

Actually, there are two checks which really help. One is the reference check. And you know, it is very often that a background verification company should understand the culture of the organization which is his client. So it should be, the moment you find that a person with extreme values, I mean lower integrity levels, and you straight away know, once you carry out a referencing or a professional discreet investigation, you know that this guy will not suit this organization properly. So you should have the guts, even at the loss of some revenue, you should stand up and tell the organization that we recommend that you do not take this person. The rest is up to you. See, the command decision always remains with the employer.

Which is the test that you as a background screening company do which determines cultural fitness?

First, the first and the most important is the psychometric test. The psychometric test, I would tell you, it actually profiles your personality and the way your mind thinks. We carry out a psychometric test called DISC, which will be explained some other time. But it is so important, you can actually make out what kind of a personality that he is, what are his tendencies, what is his propensity to become unethical. You can profile that person perfectly, and that is why I recommend, especially for senior hires, to carry out these checks like DISC and psychometric analysis.

But would you not do a DISC or a psychometric analysis before you instruct a background screening? Is it a hiring process or is it a background screening process?

It is actually both. A lot of companies carry out psychometric tests through different vendors even before a person is called for an interview. That is the ideal situation, but most of the time it doesn't get done, so it comes into our lap. We carry out the background verification for them depending on the requirement of the client.

That's understood. Now tell me something. What is the downside to an organization that does not do background checks?

I covered this briefly in the initial part of this. See, the biggest vulnerability is that if you get an undesirable or an unethical person who is not a cultural fit, it affects the work environment. There are greater chances of fraud, trade union activity, undesirable labor activity coming out, which is instigated by one or two, as we call, bad apples. So it should be the endeavor of every employer to verify these people in as much depth as possible, as is practicable and affordable, so that your hires are good, hiring risks are minimized, and you protect the reputation of a company which you built painfully over many, many years. Just one incident can take things in a very different way.

The typical Ryan International School is an example. You know, it's a case in point where the reputation of the school was so badly affected by the actions of a couple of people.

Yes, I remember that case.

Now, you know, I have another question. Now, there are certain positions within an organization, let's say the purchase department or something. What would you recommend that we do for a person who's joining the purchase department?

This is a very, very important question, and I would like to take some time in explaining this. See, when a person is being inducted as a purchase manager, you carry out his background verification, you carry out his reference check, you find out the kind of standard of living which he has, you check up his credit score and all that thing. Now, when this check is repeated, maybe after two years, you may find a person's standard of living has changed drastically. His bank balance may have bloated. There are many changes that have happened. And in fact, he may have got involved in a criminal case or a civil case which has not been reported. So this highlights the importance of that. So when you carry out these checks periodically, it becomes so very clear whether a person has misused his authority, made money on the side, and has been unethical.

Now, you see, a lot of these data integrity considerations are popping up in various countries. Like, Europe has the GDPR, you have the Data Protection Act, and you have the privacy laws in various countries, and in India too a privacy law is likely to get enacted. What are the challenges that you feel are going to be faced by you in the integrity of data and the security of data that you have on each employee?

This is perhaps one of the biggest challenges which any background verification company faces. And in fact, I personally have gone out of my way to find out what are the steps that we need to carry to ensure data security and adherence to compliance on privacy laws, especially GDPR and the others which are quickly coming in. In fact, most of the large foreign clients insist and take a certificate of GDPR compliance. And you would agree that this is an expensive business, and we are forced to invest in that, and for the right reasons. The information which is shared with us is personally identifiable data. The ownership is with the individual. We have no right to use it, store it. And in fact, every action should be taken to destroy that data, or purge it as we call it, as soon as the usefulness of that information is finished. So there has to be a retention policy and very strong privacy laws implementation. It also affects the IT infrastructure that a company has to adopt. Every step, every firewall, every demilitarized zone, every activity that ensures IT security and cyber security must be implemented. That is the responsibility we hold for our clients.

What is the advice that you give to various organizations on the frequency of background checks on existing employees?

I strongly believe that everything changes on a day-to-day basis. But the practical way of looking at it is, you should carry it out every year, or maybe in six months if possible. Because you never know when a person has been tempted, when he's committed a crime which is not reported, whether he has changed his residence and can run away with your stuff where he becomes untraceable. There are a lot of activities that can happen. His credit score may change. He may have borrowed heavily, invested heavily in the stock market and lost a lot of money. That will actually tempt him and pressurize him to make money on the side, and his values may kind of get diluted. So I strongly advise that at least on a yearly basis you should carry out most of the checks. Yeah, education check may not be required unless he reports that he's acquired a higher education, but the other sensitive checks which I mentioned before, I think, should be repeated every year at least.

You have been working for many years in the background verification industry. What are the challenges that your industry faces today, and how do you propose that they be met?

The biggest challenge that we face is compliance and trust that our clients bestow on us. Now, as far as the IT security and data protection is concerned, as I have covered it before, we have to be very careful that no information of their workforce leaks to any other source, and it should be destroyed as soon as its usefulness is over. The second challenge which we have is that most of the universities and the employers are not aware of the importance of background verification, and hence they don't respond quickly. Now, I have often had a company telling me, John, for your background verification which is worth maybe 3000 or 3500 rupees, I am unable to send this person on a project in the US, and I am losing money in dollars, and thousands of it. He is absolutely right. So to get the background verification done quickly, that shortens their recruitment cycle, is very, very important, and it saves a lot of money for our clients.

John, one more question that I have is that you frequently interact with the chief executive officers of various organizations. What is the advice that you would give them as regards the background screening?

My first advice to him is, whether someone advises you or not, you must carry out background verification, at least for the compliance, so that you do not become liable. That is the minimum level that you should do immediately. There is no two opinions on this. Please cover your hiring risk for which you become vulnerable as a principal employer. That is only the lowest stage, but I would say that whatever you can afford, you must upgrade. And as you grow, it becomes more and more important, because the stakes become higher and higher. So this is a very, very clear advice I would like to give all the CEOs: please ensure that background verification is carried out, it is carried out correctly, and pursued regularly.

Dr. John, I'd like to thank you for your time and the advice that you've given to various chief executive officers, and for explaining the process of background verification. I really thank you for spending time with me. Thank you very much.

Thank you very much for having me.