My observations are presented as challenging possibilities or points of discussion. I do not presume to be an expert on the background screening business, but I am quite knowledgeable about that particular space in the market. I am an expert on the assessment industry, and from that vantage point, I have observed several false starts that attempted to merge the two businesses. Today, technology and disruptive innovation in the assessment industry combine to present a completely different solution.
The background screening industry has effectively reached a plateau. With the increasing digitization of information, all of the players essentially have access to the same information. There may be some differentiation in efficiency, but technology is shrinking every day. Service elements also offer little in the way of sustainable competitive advantages. The future seems destined for limited margins locked into an inelastic business model.
Further limiting the background screening business model is their point of entry into the selection process. Big Retailer wants to hire 25 cashiers. That job posting draws 1000 job applications. Big Retailer reads resumés; holds interviews; and applies skills testing or other elements to reduce that number to the final 50 candidates. At that point, they purchase background screening to confirm 25 new hires. No revenue is realized until the final 50, and none is realized after the hiring. The greater potential lies in providing information to reduce the 1000 candidates and adding other points of value to the overall process.
Some exciting possibilities have the potential to disrupt the industry and change the game dramatically. The sister to background screening is the pre-employment assessment industry, yet this relationship has traditionally offered little in the way of synergistic partnerships. Assessment companies were more than happy to have screening firms sell their tests and vice versa, but this presented more delivery problems and product knowledge issues than any benefit that might have been realized. Compounding the problem, most assessments depended upon awkward methodologies that in no way, complimented the background screening program. The pricing was also prohibitive in most situations, with assessments pushing the costs of a combined proposal out of consideration.
Current psychometric technology can quickly and easily collect DATA on hard-wired personality traits and abilities. The online questionnaire is simple and beneficial for the candidate, and they can receive a positive job strengths report, reflecting well on the company’s selection process. Most importantly, the DATA is now available to add value to that selection process in terms of efficiency and effectiveness.
Imagine that the job of a Big Retailer cashier requires certain job behaviors that depend upon hard-wired traits and abilities. They want cashiers that:
Check out customers accurately
Create a warm & friendly shopping experience
Follow security procedures consistently
Are happy doing routine, repetitive work
They would also like these cashiers to have clean background screens, but their primary efforts are spent on identifying these job behaviors first. An integrated system could use DATA to selectively screen out candidates that lacked any specific trait or ability that was essential. In effect, it would be a definable filter and each filter could be applied separately. For example:
1000 Cashier Candidates →Filter out those who miss details (missed scans, miskeyed SKUs)
700 Cashier Candidates →Filter out those who are not warm & friendly with customers
300 Cashier Candidates →Filter out those who cannot do repetitive work (quick turnover)
200 Cashier Candidates →Provide behavioral event-based interview questions
50 Cashier Candidates →Background Screening
25 Newly Hired Cashiers+Provide onboarding, Training & Management Guides
At each filter point, there is a small per candidate charge as the DATA is applied to enhance the selection process. The DATA allows engagement with the complete process, going beyond the hire. The DATA also enables important analytics to correlate the candidate quality with the recruiting methods, enabling the client company to adjust their sourcing to be more effective.
The revenue impact of this is dramatic. Multiplying existing numbers by significant factors never before imagined. The sustainable competitive advantage that this offers to first movers is powerful.
This is the future transformation of the background screening business. There are many options and paths for this transformation, but it is inevitable. Over 70% of US companies are using assessments in some way, and the newest entries into the high end of the market are shattering the price barriers with highly accurate DATA, accessible to any type of job or business situation. We would like to discuss these observations and possibilities with interested players in the background screening industry.