The CFO's Guide to Auditing Background Check Spend in 2020

As CFO, you're constantly looking for ways to rein in wasteful spending and lower operational expenses. One area that's easy to overlook is employee screening, since the day-to-day tasks associated with background checks typically fall under HR's purview.

Now is a great time to audit your background check spending and budget. Start by asking the following questions.

1. How much is the organization forecasting to spend on background checks this year and next?

Warning: even though there should be a forecast for this, there's a good chance it doesn't exist, especially if your company is paying for background checks transactionally, one at a time.

Background checks shouldn't be treated as a product. Employee screening is a process—one that's part of talent recruitment and retention. Background checks aren't (and shouldn't be) one size fits all, either: different job roles will require different sorts of checks. As a result, costs will vary depending on the type of check you're ordering.

For example, you might have random drug testing in place for employees working with heavy equipment in the manufacturing plant. But you might only conduct annual drug rescreens for folks in the marketing department.

Make sure you and HR are on the same page regarding forecasts and costs. Then, work with a quality background check service partner to review the program and the costs. Adjust both, as needed. Do this annually, at the very least (twice a year or quarterly would make more sense).

But here's an important caveat: the true cost of employee screening involves much more than what you're spending in dollars on each screen. Think of the costs associated with employee turnover, non-compliance, employment lawsuits, and brand damage. Not to mention the low morale your HR department might be experiencing due to vendor frustrations.

We address these areas in the next set of questions below.

2. How much time is HR spending on background checks?

Again, you should be asking this question annually (at least). Why? Well, we find that many HR people are "good soldiers," meaning they might be reluctant to complain to you about a slow or frustrating background check process unless you directly ask them about it. They don't want to trouble you because they know you have plenty on your plate already.

But here's the thing: If you could reduce the amount of time HR members spend on employee screening by, say, 20%, think about what they could do with their newfound time. Maybe they could focus more on developing employees, running a mentoring program, recruiting new hires—in other words, any number of things that would only benefit the organization.  

So make sure you regularly ask HR how long the background checks are taking, how involved HR team members have to be in the process, and if there's a way to reduce this investment of time so they can reallocate it elsewhere (a good vendor can provide insight regarding the latter).

3. How welcoming is the screening experience for applicants?

One of the things keeping CFOs up at night is talent recruitment in a tight labor market. As such, the screening process is critical because it serves as the applicant's first impression of your organization. The process should be a smooth, easy, positive experience.

So, ask yourself:

  • What percentage of your background checks are initiated via candidate text messaging, versus email, or even worse—paper? If the answer is less than 90%, you're doing something wrong, because the majority of applicants will want the ease of doing everything from their phone—not through email or paper.
  • Do applicants have easy access to helpful support if they have questions, or are they dealing with an ineffective customer "service" department that's been off-shored?
  • What are people saying on the virtual street about the hiring experience? Check out reviews from people who've gone through your hiring process. A great place to look is Trust Pilot.

4. How long, on average, does the screening process take?

This is a trick question, because faster isn't better, in this case.

A super-fast check that misses relevant info, like a criminal conviction, could come back to haunt you if that employee commits another crime while working for you (just imagine the costs associated with negligent hiring and negligent retention lawsuits).

Or if the vendor cuts corners regarding compliance, all in an effort to provide a faster turnaround, your organization risks big fines, more lawsuits, and the brand damage that accompanies both.

Yes, speed is important, but it shouldn't trump accuracy or compliance.

5. Is the background check process doing its job?

The goal is to fill seats with the right people. As we noted above, filling seats fast simply to fill them isn't a good long-term solution.

So, how can you tell if the screenings are getting the job done? Consider employee turnover figures year-over-year. If the number has gone up, something is wrong, and the screening process could be part of the problem—a problem that's likely costing your organization big dollars since the cost of replacing a bad hire is expensive.

The Huffington Post outlines a compelling hypothetical. "As an example, if you are a 150 person company with 11% annual turnover, and you spend $25k per person on hiring, $10k on each of turnover and development, and lose $50k of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million. Reducing this by just 20%, for example, would immediately yield over $300k in value."

And again, you could reinvest these savings into your workforce, which is a win-win for everyone.  

Do you need guidance auditing your employee screening expenditures?

We'd be happy to help.

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Danielle Deutsch

Posted by Danielle Deutsch

Danielle is the Senior Digital Marketing Coordinator at Good Egg. In her spare time you can find her either visiting an aquarium, enjoying a Broadway show or competing in a Crossfit competition.

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