Due Diligence For Hiring

8m Read Time
04/02/2024

As more and more people join the potential workforce, acquiring talent for a business may seem like an easier task than before. After all, there’s a pool of well-qualified candidates to choose from. CVs are heftier than ever, diplomas, and certificates are not a rarity anymore.

Yet, circulation of people and widespread accessibility of knowledge come with a question: How should a recruiter act to verify which qualifications are genuine? What methods can be employed to ensure lists of experiences and achievements are not inflated? What’s the best way to decide the best hire in strong competition? Here’s where due diligence before hiring comes into play.

What is Due Diligence?

By its broad definition, due diligence means performing necessary care to prevent potential risks or damages. It significantly helps to assess the situation and develop informed decisions. In the business world, due diligence is often used to define analysis, audit, and research protocols in place dealing with corporate mergers, acquisitions, investments, or transactions. However, it also refers to assessment methods playing a key role in recruitment. Here’s a look at due diligence for employment operations.

Due Diligence in Human Resources – Why?

When it comes to due diligence before hiring, HR generally sticks to screening guidelines. Sometimes, companies choose to delegate this operation and instead outsource it to a third- party HR agency. Either way, there are usually provided checklists or guidelines to follow throughout the process. By default, such guidelines inquire about education history, job experience, civil registry, criminal history, licenses, and insurance. Even though this might seem enough as HR due diligence, such checks concern either what’s presented by a candidate or what can be reached through their public records. Nonetheless, not every detail is visible when an application is taken at face value – especially regarding suitability for higher positions (manager, head of operations, CEO, CTO…).

It’s important to notice that meeting the exact requirements of a job is different than having the essential qualifications and a clean public record. HR due diligence must investigate whether lists of education and experience are manipulated by the applicant to include knowledge and tasks they’ve only met circumstantially. Their familiarity with the specific assignments of a position must be verified.

Moreover, some issues may not be apparent on the candidate’s application files or records, such as:

  • previous fraudulent activity,
  • theft, money laundering, embezzlement,
  • unethical/scandalous behaviour,
  • temperament issues,
  • persistent tardiness concerning tasks,
  • breach of confidentiality,
  • noncompliant acts requiring immediate termination of the contract…

Especially if they are minor in scale, have gone down as something else, or if the applicant has managed to cover them up, such issues may remain hidden. As it helps a business to detect those shaky grounds, standardized due diligence before hiring creates a solid basis by:

Certifying the reputation of the workplace: Every employee will know they have been evaluated thoroughly without any bias or distrust to get their positions.

Composing professionalism: Employees and supervisors won’t have any doubts about the qualifications of their colleagues.

Gaining clients’ trust: It won’t be hard for the customers to notice that the personnel of the business all share a distinguished background, suggesting that high standards are valued.

Enabling anticipation in risk management: Possible cracks that wrong hires may cause (data leaks, delays, frauds, forgery, etc.) will be prevented before slipping into the cement.

Ensuring compliance with the business goals and protocols: The standards of the business will be protected from long-lasting damages and falls.

Those are the points where handling applications with due diligence makes a difference.

Example Practices of Due Diligence in Hiring

Background Checks

The most commonly used strategy of due diligence in hiring is a background check. The usual screening and interview process include such inspections by nature. Criminal records, address verification, banking details, medical record examination, and certified diplomas are essential documents for business entry. However, if a company aims to fill a specialist position or has an elite core team at its base, background checks should go in detail to ensure due diligence for hiring. Asking for proof about what CVs and cover letters provide is the key here. Due diligence for employment can consist of both asking for a reference and verifying the presented skills through case studies. Both of them feed into a sound background check.

Let’s assume a job seeker who describes their experience as 5 years of digital marketing. A hefty list of skills may seem reasonable at this point. Nonetheless, what this role entails may greatly vary from one company to another. While a recruiter is seeking a comprehensive marketing specialist proficient in various aspects of ad-campaign management and performance marketing, the applicant might be only accustomed to content marketing all this time. That means they most likely have 5 times a 1-year experience.

In regards to this, the recruitment authority should ask the job seeker for the contact info of their previous employer. Case studies, tests, trial scenarios, or simulations can be developed as well to evaluate each required competence. Clarifying the context of job experience requires a hiring process by design, not by default.

Ethics of Background Checking & Ethical Due Diligence

The purpose of background checks cannot be contrary to the ethics of due diligence. Thus, checks cannot be only about seeking the negative. Instead, they must be designed to make patterns of behaviour visible. Depending on the circumstance, one questionable point shouldn’t overshadow an otherwise genuine resume. If the check spots an abnormality other than a crime, and if that coincides with a tragic event affecting the candidate (death of a relative, family issues, illness, accidents…), the living conditions also should be taken into account. Abrupt resignations or temporary discontinuity in an applicant’s work history can originate from various factors other than criminal acts or inadequacy. Ethics of due diligence don’t advocate for excluding a candidate without concrete information on persistent bad conduct.

Background checks should always be communicated with the job seeker. They should be the one who gives the contact information of their previous employer. Furthermore, private information should not be sought or exposed in the form of due diligence. Privacy of the candidate must be respected in any case. All personal data must be legally obtained.

Checks of due diligence for employment are about matching the presentations of candidates with a thorough analysis of their professional past and public info. It goes without saying that any knowledge of contact (like address, phone number, email) gathered during this process can only be used for concluding the background review.

If conditions allow, case studies that take a certain amount of time should ideally be compensated – with a one-time fee or free coupons. Transparency is particularly important to assure ethics of due diligence. The applicants should not feel like they are abused to completing a task deemed a “chore” with a fake hope of a permanent contract. They must be informed about the purpose of the screening task at hand. If compensating their time is not possible, tasks of due diligence for hiring must be clear and concise, consuming little time.

Screening & Interviews

Screenings are good for verifying the resume and surveying the motivation of a candidate. Nevertheless, interviews have a limited time frame. Still, handling job interviews with due diligence is possible. Following a well-structured, unbiased guideline during every interview helps to gather and verify as much info as possible.

How much those interviews can be compatible with HR due diligence before hiring clearly depends on the HR personnel. As Atul Gawande mentions in his book “Checklist Manifesto”, there are some incongruous traits recruiters should keep at bay. They shouldn’t be like a “sponge”, meaning be keen on getting excessive, irrelevant data. That would only complicate the due diligence, making it harder to develop well-informed decisions. Recruiters also should avoid acting like an “art critic” as HR due diligence cannot be based on gut feelings. Lastly, interviewers can’t take the stance of a prosecutor. Seeking after the negative won’t present the whole picture of a candidate.

Conclusion

In the dynamic landscape of today’s job market, where resumes are abundant and qualifications are diverse, due diligence for employment emerges as a crucial practice. Due diligence for hiring goes beyond the surface-level checks. It incorporates comprehensive methods to ensure that the qualifications, experiences, and ethical considerations of potential hires align with the organization’s goals. By implementing HR due diligence, businesses can certify the reputation of their workplace, foster a culture of professionalism, gain the trust of clients, and proactively manage risks.

Ethics of due diligence are not just about identifying possible red flags but understanding the broader context of a candidate’s professional journey. In the end, a diligent hiring process not only safeguards the business from potential pitfalls but also contributes to building a team of competent and ethical professionals.

We at Komba are fully aware of due diligence for hiring and committed to following the necessary steps to implement it as a practice. We stick to ethical due diligence methods in our hires. We are eager to lead the way for providing guidance in HR due diligence.

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