Pre-Employment Screening Industry ReportThis essay Pre-Employment Screening Industry Report is available for you on Essays24.com! Search Term Papers, College Essay Examples and Free Essays on Essays24.com - full papers database.
Autor: anton • May 3, 2011 • 1,523 Words (7 Pages) • 1,225 Views
Pre-Employment Screening Industry Overview
Due to the increasing costs associated with workplace embezzlement, fraud, violence, and other unethical business practices, the need to manage hiring and personnel risk has never been of greater importance than in today's business environment. The process of verifying past employment, education, and criminal history is an essential facet of many contemporary corporate risk management programs. The pre-employment screening industry is a small, highly fragmented sub-industry of the much larger Business Process Outsourcing (BPO) sector, a space dominated by a handful of large companies accounting for almost 25% of the industry's total revenue. Total revenue for the pre-employment screening industry is forecasted to be approximately $4 billion in 2007 with the top five players--U.S. Investigations, First Advantage, ChoicePoint, Kroll and ADP--accounting for approximately $900 million in annual revenue. HireRight, Axciom, and Accurate Background are examples of some of the more prominent mid-size companies in the industry.
Pre-employment screening is the process of verifying a potential employee's character, general reputation, and personal characteristics. It may include any of the following: criminal background check, investigation of civil records, asset and bankruptcy records, credit reports, and driving records. Background checks also usually include verification of any licenses, education achievements, employment history and personal and professional references.
Pre-employment screening has become an important practice for all employers due to the increasing costs associated with negligent hiring lawsuits and the threat of workplace violence. Consider the following figures:
* On average in U.S. businesses, at least half of all new hires don't work out and it costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee and $40,000 to replace a senior executive (Recruiting Times)
* Workplace violence costs employers $36 billion annually (Pinkerton Security Study)
* Annual losses stemming from computer breaches in Fortune 1000 companies amount to $59 billion, including inside and outside breaches (with inside jobs costing businesses an average of $450,000)
The above statistics can be greatly reduced by observing the practice of screening any potential employees. In addition, many employers seek to reduce their costs even further by outsourcing pre-employment screening and allowing their human resource (HR) departments to focus more on strategic functions. By outsourcing this function to a pre-employment screening company, an HR department can take advantage of cost savings due to the screening company's economies of scale and more sophisticated screening technologies. The Society of Human Resource Managers (SHRM) estimates that almost 80% of all employers use pre-employment screening companies to some degree.
Poised for Growth
Pre-employment screening companies have seen double-digit revenue growth over the last several years due to several factors, including an increase in negligent lawsuits, the global terrorism threat post 9/11, the strong U.S. job market, and new government regulations such as the Patriot Act and the Voluntary Guidelines on Workplace Safety and Security implemented by the Food and Drug Administration advising employers to perform background checks on potential employees. According to a survey of pre-employment screening companies conducted by KPMG, almost 90% of respondents project growth in the pre-employment screening industry in excess of 10% for the next 12 months with almost 60% forecasting growth of greater than 25%. Forecasts call for the industry to grow at a 25% to 35% clip over the next 12 months with most of the growth stemming from small and mid-size firms. While the majority of growth at smaller firms continues to come from the addition of new customers who are first time users of outsourced pre-employment screening services, large and medium-sized firms continue to grow as a result of increased order flow and overall volume. Future growth in the industry will be dependent on a variety of factors including but not limited to, a company's ability to develop new technology solutions that can easily interact with current employer's enterprise level HR systems such as PeopleSoft and SAP, macroeconomic factors such as a strong economy and solid job growth which increase the demand for employee screening, and ever increasing safety, security, and legal concerns.
Pre-Employment Screening Companies
The large companies in the pre-employment screening industry such as U.S. Investigations, First Advantage, ChoicePoint, Kroll, and ADP compete on price as much as midsize and smaller firms do, but also attempt to differentiate themselves by offering clients a one stop shop of HR outsourcing products and advanced technology solutions that seamlessly integrate with their clients existing enterprise systems. However, despite competitor's best efforts to differentiate themselves through advances in technology, a general trend is emerging in that more basic background screening services are viewed as commodity products in today's marketplace. One way midsize and smaller companies seek to circumvent price wars with the larger firms is to grow revenue by recruiting new companies and decreasing turnaround time for background checks.
Top Pre-Employment Screening Providers of 2005
Company Number of Background Screenings in 2005 Revenue from Background Screening services in 2005 Number of Corporate Clients in 2005
1. Kroll > 20 million >$100 million >10,000
2. USIS 20 million $750 million (All Businesses) >30,000
3. ChoicePoint 8 million $377 million N/A
4. First Advantage 4.5 million $170 million >4,000
5. HireRight 3.6 million $38 million >1,000
Kroll Inc. (NYSE: MMC)
Kroll Inc. is a fully owned subsidiary of Marsh & McLennan and operates under Marsh's Risk Consulting & Technology Practice providing employee and vendor background investigations and identity theft services. Kroll is one of the largest providers of background screenings