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Mutual benefits through association.

Someone once said, "if you want to be in business for one year, build a product; if you want to be in business for 10 years, build a better product and a good image; if you want to be in business for I 00 years, build people."

A company's success depends on having the right kind of people working for it. These people are not born to the job, they are the result of proper selection, orientation, and training. These are the elements of hiring that are most often neglected.

A company cannot increase sales, become profitable, build or manufacture a product, or provide excellent service without first having the right people. How does an employer determine the proper selection method?

A human resources director looks for a few common quality traits, such as a stable work ethic, the ability to communicate well with people, and the ability to sell. One goal of a security or loss prevention director is to employ people who have a demonstrated track record of integrity and honesty.

The human resources and the loss prevention departments are sometimes at odds about hiring decisions, but both agree that integrity and honesty are important character traits for the success of any organization. The key is to implement a suitable and mutually agreeable method that identifies particular character traits.

A number of employment screening methods are available to help hire the best employees, such as background investigations, limited use of polygraph examinations, paper-and-pencil integrity testing, attitudinal surveys, graphology, and substance abuse testing.

The following list provides some general pros and cons of each.

Background investigations:

* Parameters can be set to limit an investigation as they are needed.

* Procedure can be costly and time consuming.

* Prejudicial or biased information can sometimes be provided.

* Former employers may be reluctant to reveal negative information.

Polygraph examinations:

* Use was restricted as a result of the Polygraph Protection Act of 1988 in the normal scope of employment; specific exemptions do exist.

Paper-and-pencil integrity testing:

* Dishonest individuals may be discouraged from applying.

* Tests tend to be "confessional" type questionnaires.

* Scoring or grading can be somewhat of an inconvenience during the interviewing and hiring procedure.

* Validity is being questioned in an Office of Technology Assessment study.

Attitudinal surveys:

* Focus centers around an individual's past attitudes and beliefs, which can predict future behavior.

* Typical format is usually noninvasive and nonaccusatory.

* Validity studies are available.


* No evidence is available on validity regarding theft or other criteria.

* Method is difficult to determine qualifications of graphologists.

* Method is difficult to standardize.

Substance abuse testing:

* Current state of the law includes federal and state restrictions and applicability of the "right to privacy."

* Guidelines for testing include standards, written policies, and confidentiality of results.

No one method is intended to be all encompassing or perfect for an organization. Seeking the best person may require a combination of many methods.

A background investigation may include a criminal history check on a local or state level, a credit check, or a simple check on the validity of the individual's current driver's license. However, what is usually missing from an in-depth background investigation is adverse or accusatory information, particularly regarding a person's integrity, from the former employer, who may fear legal liability.

Therefore, obtaining this type of information, although advantageous for the loss prevention department, may not coincide with the needs of the human resources department.

The loss prevention department typically has the primary objective of protecting the assets of a corporation. This can become complicated if a dishonest employee gets in and out of the system before being apprehended or someone with a history of thievery is hired.

An alternative means of employment screening that is not widely publicized is also available. It is proving to be an effective means of screening out potential employees with backgrounds of dishonesty. This method involves the use of shared information through a "mutual association."

Prior to the enactment of the Fair Credit Reporting Act (FCRA) in 1971, retailers in a few major metropolitan areas around the United States routinely exchanged information about individuals apprehended for acts of dishonesty against a particular company.

At the time, this practice was essentially a covert activity. The information was exchanged to flag high-risk individuals based on known incidents of theft.

Under this system of information exchange, an individual would have found it difficult to get a job at one of those companies that was exchanging or sharing information. In addition, an individual was not usually given a reason for being denied employment.

With the enactment of the FCRA, openly sharing proprietary or sensitive information regarding a person's trustworthiness and integrity for purposes of employment became legal, providing certain guidelines were followed.

A mutual association is typically made up of businesses, such as retailers, financial institutions, and hospitality establishments - hotels, restaurants, heath care institutions, etc.

These types of businesses typically have high employee turnover in lower grade positions and, by their nature, usually allow employees access to cash and company merchandise. Management in these industries is obviously concerned with hiring honest individuals.

A mutual association acts as a clearinghouse for receiving, storing, and disseminating information about individuals involved in employment dishonesty, shoplifting, refund or credit card fraud, and passing bad checks.

Participation in a mutual association provides the member company with the ability to complete an efficient and inexpensive legal inquiry. This inquiry helps to determine if a prospective employee has at any time during the preceding seven years been apprehended for the commission of a theft against any other member company.

James A. Prozzi, a,labor attorney with the law firm Jackson, Lewis, Schnitzler and Krupman in Pittsburgh, and legal counsel for the Employers Mutual Association of Pennsylvania, comments that section 1681h(e) of the FCRA states that no lawsuit for defamation, invasion of privacy, or negligence may be brought against a user or a provider of information unless it can be proven that false information was furnished with malice or willful intent to injure.

This protection is significant, since it exceeds the legal protection against defamation suits under current law in the states in which mutual associations operate for the benefit of employers that use the information.

Prozzi points out that as long as a mutual association limits that data to only admitted or proven acts of dishonesty, it would be difficult or impossible for an individual to prove malice or willful intent based on the dissemination of the information.

Michael W. Aldrich, vice president of loss prevention for the Joseph Home Company in Pittsburgh, states that the mutual association is an efficient and economical way to help reduce theft losses. "The mutual association has been successful in helping us avoid hiring individuals who have been involved in thefts from fellow retailers," he says.

Keith Weiner, former district loss prevention manager for Toys-R-Us in Cleveland, points out that the mutual association program is an excellent resource for protecting a company against employee theft by screening out known thieves before they can be hired.

Why screen applicants? People who have demonstrated past unethical or unacceptable practices, such as stealing or fraud, generally have poor attitudes, exhibit poor performance and work habits, and usually create personnel or morale problems.

Fireman's Fund Insurance Company estimates that at least $67 billion is lost each year to employee cheating and stealing. That includes everything from padding expense accounts to stealing office supplies.

A 1988 US Department of Justice survey indicates that retailers' average cost of employing a dishonest individual is between $4,500 and $5,000. This includes what he or she steals, lost productivity, cost of apprehension, and training a replacement.

The staff of a mutual association is responsible for the day-to-day management and administration of the association. This encompasses receiving, storing, and disseminating information in a proper and timely fashion for the benefit of the association members.

The accuracy and verification of all information passing through a mutual association is an important responsibility. Strict procedures adherent to the FCRA must be observed by the association at all times to protect member companies.

Member companies are provided employment inquiry forms, which are completed by each prospective employee. (See the accompanying example.) Upon receipt of the completed form, the mutual association searches to see if the individual is on file and, if so, forwards a hard copy follow-up report to the member company.

The member company, under the guidelines of the FCRA, then must inform the individual of the information on file and allow the individual to contact the mutual association directly if he or she chooses.

Additional safeguards, such as member code numbers and code names, are established in advance to ensure that information is disseminated only to authorized member company executives.

Typically, mutual associations charge an annual membership fee. This fee covers such expenditures as insurance and administrative costs and is usually based on the number of employees in the service region. Additional nominal fees are charged for conducting employment inquires.

Using this employment screening process to ferret out individuals with a history of dishonesty is a primary step in preventing a high-risk individual from entering or reentering the system. The mutual association is a resource that deserves consideration during the preemployment screening process.

Mutual Associations

Around the Country

Mutual associations serve approximately 60 to 70 percent of major metropolitan areas throughout the United States, includes the following:
Atlanta, GA Houston, TX Pittsburgh, PA
Baltimore, MD Los Angeles, CA St. Paul, MN
Chicago, IL Miami, FL Tampa, FL
Cleveland, OH New York, NY Washington, DC
Columbus, OH Philadelphia,
Detroit, MI PA

Robert H. Ralicki is president of Executive Management Services Inc. and Employers Mutual Association, both in Pittsburgh. He is a member of ASIS.
COPYRIGHT 1992 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Special Supplement: A Consumer's Guide to Retail Security; alternative method of employee selection and screening
Author:Ralicki, Robert H.
Publication:Security Management
Date:Mar 1, 1992
Previous Article:Survey of shoplifters.
Next Article:What's in store with EAS.

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