Post on 25-Apr-2018
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-founderPrevail LLC, Pinocchio LLC
steve.watts@prevailrisk.com(404) 242-4720
"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
• 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
• 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
How often is our first priority a candidate who seems qualified
Are they really fit for a job… in any organization?
Later we discover they have:
Exaggerated insurance claims
Stolen from youAbused drugs & alcohol on the jobMade threats against employeesor the public
• 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%
Screening Tools Utilized - Fortune 1000
Overt Integrity Testing
A simple 10-minute,online pass-fail test
that truly weeds out the bad hires
Lying
Theft
Drug Use
Hostility
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?”
Is it right?...NoIs it against the law?...YesWould I admit to it?...YesWould I hire someone who speeds?...Yes
Speeding…
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
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
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?
A. NoneB. $5 - $25C. $26 - $500D. $501 or more
Note this question:
9 Inquires about recent theft only.9 Excludes all amounts below $5.
Sample Question:
• Have you ever pretended to have a work injury in order to collect Workers Compensation Insurance?
A. NeverB. Only OnceC. Only TwiceD. Several Times
Theft Scale
0% 1% 2% 3% 4%
Shoplifted in Past Year
Would Help Friend Steal
Would Steal if Angry
Would Steal if Had Opportunity
Would Steal if Had Low Pay
Would Give Friend Unauthorized Discount
Would Knowingly Buy Stolen Merchandise
Would Fake Time Card if Never Checked
Theft Behaviors
Sample Question:• Excluding pills you got from a doctor (prescriptions), which of
the following drugs do you currently use?
A. Cocaine, Coke, Snow, CrackB. LSD, Acid, Mescaline, PeyoteC. Heroin, OpiumD. None
Note this question involves:– Only “current use” drug inquiries.– Only job-related alcohol inquiries.
Drug & Alcohol Scale
0.00% 1.50% 3.00% 4.50%
Regular drug use
Pot at work
Would fail urinalysis
Arrives under effect of substances
Drugs impair work
Drinks at work
Alcohol impairs work
Used drugs in past 3 weeks
Drug & Alcohol Use
Sample Question:• How often have you hit someone in anger in the past year?
A. NeverB. RarelyC. OccasionallyD. Frequently
Note:– Hostile individuals often interview well.– Hostility often comes out in hidden ways.– 99% of all applicants pass this scale.
Hostility Scale
Sample Question:• Since age 16, how often have you told a lie?
A. FrequentlyB. OccasionallyC. RarelyD. Never
Note:9Need to work hard to fail this scale.
Faking Scale
Example hiring process
Candidate Applies Review Applicant’s Eligibility
Integrity Test Administered
Passing or Qualified Candidates Proceed
Interview, Job Offer, Background Screen,
etc.
Overall Scale 25% High Risk
Theft Scale 12% High Risk
Drug Scale 9% High Risk
Honesty Scale 9% High Risk
Hostility Scale 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.
Specific Capture-rate Results
EEOC requires that a test must be either non-discriminatory or validated to be compliant
ValidatedNon-
discriminatory
or
This test meets BOTH criteria.
Legal ComplianceIF you use a screening company with validated and/or non-discriminatory results:
• Supported by EEOC: http://www.eeoc.gov/policy/docs/factemployment_procedures.html
• 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.
• 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 3rd party.
Candidate Contesting Results
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
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+%“
Results Supported by Various Studies
• Two-year study by The University of Arizona (2010-2012)
• Screened employee population v non-screened employee population
• Claim data compared:FrequencySeverity
Silverado Assisted LivingCase Study: Impact on WC Claims
• # of Monthly Screens : 800• Average Claim Frequency Reduction – 60%• Average Claim Severity Reduction – 54%• Overall Average Loss Rate Reduction – 72%• Turnover Reduction – >35%
Measuring Impact In Reducing Workers Comp Losses & Turnover
Silverado Assisted LivingCase Study: Impact on WC Claims
11.30%
4.10%
Claims Filed
Non-Test Takers
Screened Employees
Screened employees were 3x less likely to file a claim than those who were not screened.
Silverado Assisted LivingCase Study: Impact on WC Claims
Incidence of a claim exceeding $5K was nearly 4x greater among non-test takers v. screened employees.2.20%
0.60%
Claims >$5,000
Non-Test Takers
Screened Employees
Silverado Assisted LivingCase Study: Impact on WC Claims
Incidence of a claim exceeding $20K is nearly 12x greater among non-test takers v. screened employees.1.20%
0.10% Claims >$20,000
Non-Test TakersScreened Employees
Industry Results Example:Foodservice Industry
Theft Scale
High Risk 8%
Low Risk 92%
Theft of Cash
Up to $25 48%Up to $500 26%$501 or More 26%
Top Admissions
Would Give Friend Unauthorized Discount 26%Would Fake Time Card if Not Checked 21%Shoplifted in Past Year 18%
Industry Results Example:Foodservice Industry
Drug Abuse Scale
High Risk 10%
Low Risk 90%
Top AdmissionsUses Pot Regularly 46%Would Fail Urinalysis Today 23%Used Illegal Drugs in the Past 3 Weeks 21%
Industry Results Example:Foodservice Industry
Faking Scale
High Risk 11%Moderate Risk 43%Low Risk 46%
High Risk 1%Moderate Risk 5%Low Risk 94%
Hostility Scale
Reduction in claim frequency
*54% *21%
Reduction inturnover
*30%
*Study of 18 clients from 1996-2013
Manufacturing
Food Processing
Hospitality
Construction
Healthcare
Staffing
Retail
Reduction in claim severity
• Cost• Reduced candidate pool• Disruption/slowdown of
hiring process• Adverse impact
Concerns about Integrity Testing