Integrity Testing Explored: A powerful pre-hire screening tool to reduce Total Cost of Risk

Transcription

1 Integrity Testing Explored: A powerful pre-hire screening tool to reduce Total Cost of Risk Western Carolina RIMS Chapter March 10, 2016 Presented by: Steve Watts Managing Partner/Co-founder Prevail LLC, Pinocchio LLC steve.watts@prevailrisk.com (404)

2 The Journey to Pinocchio

3 "In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you. - Warren Buffet

4 25% - 40% of all employees steal from their employers ($50 billion annually) 55% of theft perpetrators are in a management position Drug and alcohol abusers use three times as many sick days, are 4 times more likely to be in an accident, 5 times more likely to file for workers compensation, and 10 times more likely to steal 75% of adult illicit drug users are employed, representing 15% of the workforce

5 55% of all resumes or applications contain outright lies 35% of workers say they have felt bullied at work 2 million cases of workplace violence per year Workers compensation fraud accounts for 25% of all insurance fraud, or $7.2 billion annually

6 How often is our first priority a candidate who seems qualified Are they really fit for a job in any organization?

7 Later we discover they have: Exaggerated insurance claims Stolen from you Abused drugs & alcohol on the job Made threats against employees or the public

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9 Overt Integrity Testing

10 Candidate Screening Experience Skills Education Core Behaviors

11 Screening Tools Utilized - Fortune 1000 Criminal Records Checks 88% Employment Verification 86% Drug Screening 78% Education Verification 74% Verify Professional Licenses 59% MVR Checks 50% Credit History 39% Integrity Testing 35%

12 Overt Integrity Testing A simple 10-minute, online pass-fail test that truly weeds out the bad hires Hostility Drug Use Lying Theft

13 Overt and Covert Integrity Testing Obvious or overt Questions are quite direct How much did you steal from your employer last year? Disguised purpose Indirect questions / hypothetical situations What shape is your favorite: circle, triangle, or square?

14 Do you speed?

15 Speeding Is it right?...no Is it against the law?...yes Would I admit to it?...yes Would I hire someone who speeds?...yes

16 Guess what 25% of job applicants admit to what most employers consider high risk behaviors Examples: 4% admit to smoking pot at work 3% admit to shoplifting in the past year 3% admit would fail urinalysis 2% admit drinking/alcohol impaired at work

17 Cognitive Dissonance: The science behind Integrity Testing People with Cognitive Dissonance: Rationalize their behaviors as normal, or they justify their behaviors when their lifestyle is in conflict with their values Feel entitled or deserving of some reward or benefit

18 Theft Scale Sample Question: Excluding minor office supplies (pads, pens, etc.), what would you guess is the value of things you have secretly taken from work in the past 2 years? Note this question: A. None B. $5 - $25 C. $26 - $500 D. $501 or more Inquires about recent theft only. Excludes all amounts below $5.

19 Theft Scale Sample Question: Have you ever pretended to have a work injury in order to collect Workers Compensation Insurance? A. Never B. Only Once C. Only Twice D. Several Times

20 Theft Behaviors Would Fake Time Card if Never Checked Would Knowingly Buy Stolen Merchandise Would Give Friend Unauthorized Discount Would Steal if Had Low Pay Would Steal if Had Opportunity Would Steal if Angry Would Help Friend Steal Shoplifted in Past Year 0% 1% 2% 3% 4%

21 Drug & Alcohol Scale Sample Question: Excluding pills you got from a doctor (prescriptions), which of the following drugs do you currently use? A. Cocaine, Coke, Snow, Crack B. LSD, Acid, Mescaline, Peyote C. Heroin, Opium D. None Note this question involves: Only current use drug inquiries. Only job-related alcohol inquiries.

22 Drug & Alcohol Use Used drugs in past 3 weeks Alcohol impairs work Drinks at work Drugs impair work Arrives under effect of substances Would fail urinalysis Pot at work Regular drug use 0.00% 1.50% 3.00% 4.50%

23 Hostility Scale Sample Question: How often have you hit someone in anger in the past year? A. Never B. Rarely C. Occasionally D. Frequently Note: Hostile individuals often interview well. Hostility often comes out in hidden ways. 99% of all applicants pass this scale.

24 Faking Scale Sample Question: Since age 16, how often have you told a lie? A. Frequently B. Occasionally C. Rarely D. Never Note: Need to work hard to fail this scale.

25 Example hiring process Candidate Applies Review Applicant s Eligibility Integrity Test Administered Passing or Qualified Candidates Proceed Interview, Job Offer, Background Screen, etc.

26 Specific Capture-rate Results Overall Scale Theft Scale Drug Scale Honesty Scale Hostility Scale 25% High Risk 12% High Risk 9% High Risk 9% High Risk 1% High Risk *Individual categories will not reconcile to overall total, due to multiple category responses % s based on over 1MM tests in a national study.

27 EEOC requires that a test must be either nondiscriminatory or validated to be compliant Nondiscriminatory or Validated This test meets BOTH criteria.

28 Legal Compliance IF you use a screening company with validated and/or nondiscriminatory results: Supported by EEOC: Pre-employment screening ONLY! Federal and State guidelines require protected classes to pass at a rate that is 80% or better, compared to the relevant class.

29 Candidate Contesting Results Employment Background Screening and Drug Testing are regulated by the FCRA (Fair Credit Reporting Act) Both these services have multiple hands assembling reports, hence the candidates have the right to contest reports Integrity Testing is not regulated by the FCRA; candidates cannot contest results Reason: Candidates answer the questions directly without involvement of 3 rd party.

30 Benefits of Integrity Testing Improves Productivity & Morale Reduces Turnover & Absenteeism Reduces Frictional Costs (Legal, Rehab, EAP, & TPA) Reduces FMLA, STD, LTD, Sick Leave, & Unemployment Costs Reduces Employee Theft and Workplace Hostility Reduces Workers Compensation Losses

31 Results Supported by Various Studies SHRM HR Magazine (June-2011) Research has shown that Integrity Tests have the highest validity for predicting undesirable behaviors at work Journal of Business and Psychology (April-2011) Integrity Testing can result in substantial savings across multiple industries Integrity Tests can be a useful tool to assist employers in hiring individuals who are less inclined to engage in behaviors that are dangerous, aggressive or generally counterproductive Cornell University- (2009) Integrity tests are a potentially highly useful selection tool Do not create adverse impact and "Produce ROI results of as much as 800+%

32 Silverado Assisted Living Case Study: Impact on WC Claims Two-year study by The University of Arizona ( ) Screened employee population v non-screened employee population Claim data compared: Frequency Severity

33 Measuring Impact In Reducing Workers Comp Losses & Turnover # of Monthly Screens : 800 Average Claim Frequency Reduction 60% Average Claim Severity Reduction 54% Overall Average Loss Rate Reduction 72% Turnover Reduction >35%

34 Silverado Assisted Living Case Study: Impact on WC Claims Claims Filed 4.10% 11.30% Screened employees were 3x less likely to file a claim than those who were not screened. Non-Test Takers Screened Employees

35 Silverado Assisted Living Case Study: Impact on WC Claims 0.60% Claims >$5, % Incidence of a claim exceeding $5K was nearly 4x greater among non-test takers v. screened employees. Non-Test Takers Screened Employees

36 Silverado Assisted Living Case Study: Impact on WC Claims 0.10% Claims >$20, % Incidence of a claim exceeding $20K is nearly 12x greater among non-test takers v. screened employees. Non-Test Takers Screened Employees

37 Industry Results Example: Foodservice Industry Theft Scale Theft of Cash Up to $25 48% Up to $500 26% $501 or More 26% Top Admissions High Risk 8% Low Risk 92% Would Give Friend Unauthorized Discount 26% Would Fake Time Card if Not Checked 21% Shoplifted in Past Year 18%

38 Industry Results Example: Foodservice Industry Drug Abuse Scale Top Admissions Uses Pot Regularly 46% Would Fail Urinalysis Today 23% Used Illegal Drugs in the Past 3 Weeks 21% High Risk 10% Low Risk 90%

39 Industry Results Example: Foodservice Industry Faking Scale Hostility Scale High Risk 11% Moderate Risk 43% Low Risk 46% High Risk 1% Moderate Risk 5% Low Risk 94%

40 Reduction in claim frequency Reduction in claim severity Reduction in turnover Staffing Healthcare Manufacturing * 54 % * 21 % * 30 % Food Processing Retail Hospitality Construction *Study of 18 clients from

41 Concerns about Integrity Testing Cost Reduced candidate pool Disruption/slowdown of hiring process Adverse impact

42 The question is how much is he costing you?