By Irwin Feigenbaum

Did you know that an estimated 36,000 companies are "stolen out off business" every year - by their employees! This alarming statistic is reported by Profiles International, a leader in the development of assessment survey devices.

According to the recently released 2000 National Retail Security Survey, U.S. retailers lost more than $13.2 billion from employee theft. According to the study conducted by

The University of Florida with a funding grant from Sensormatic Electronics Corporation, employee theft was up almost 2 percentage points from the previous study conducted in 1998.

The National Restaurant Association estimates that 2 percent of all restaurants' gross sales is lost to employee theft every year. Workers steal food, liquor, cash, merchandise, and silverware, often getting away scot-free because they know how to cover their tracks.

According to an NCS (National Computer Systems Inc.) survey, each restaurant employee steals an average of $218 worth of inventory annually.

Moreover a survey of employed people revealed that 56% admitted lying to their supervisors, 41% admitted falsifying records, 35% admitted stealing from employers and 31 % admitted abusing drugs or alcohol. This is your applicant pool!

There is an art to hiring "right from the start", and once you understand how to do this and what instruments you will need, you can then eliminate profit-stealing activities such as theft, fraud, turnover, tardiness, and unauthorized sick days. Learning how to "hire smart" requires that you first understand the hiring process itself.

This is the application or resume phase where we get our first glimpse into the candidate's background. We learn about the education and training our candidate received, where the person previously worked, how long they stayed, and why they left. At this point we must raise a red flag. Resumes often contain false claims of education and experience while they omit information employers would like to have before making hiring decisions. In a survey of recent college graduates, 95% said they would be willing to make a false

statement in their résumés in order to get a job. Forty-one percent admitted they had

already done so, according to a report in Nation's Business (May, 1999).

An employer should always require an application to be completed and signed for many reasons. This is the first test of how thoroughly the candidate follows instructions and completes a task. Also, when an application contains a signed release form, it gives you permission to conduct background and reference checks.

This is the interview phase. You can hear and see how the candidate presents him or herself and how she or he responds to various questions- from their previous work experience to what they are looking for in a "new" job. Ask open-ended questions that cannot be answered with a yes or no answer. From this you begin to put the pieces of the puzzle together, gaining some insight into their personality. Does the information that you gathered in Phase I correlate with what you discover in Phase II?

The interview has become the most influential factor in hiring and promotion decisions. However, experience shows only a coincidental correlation between the ability to deliver well in an interview and to deliver well on the job. Studies by John Hunter, Ph.D., at Michigan State University, have shown that the interview is only 14% accurate in predicting a successful hire, that background and reference checking has 26% accuracy, that aptitude and personality testing has 53% accuracy, and that job profiling increases the accuracy to 75%. Therefore, a hiring process that takes advantage of as many predictors as possible will greatly increase your hiring success. Unfortunately, many employers have accepted these poor results and the high cost of excessive turnover as a business reality. They have flown the white flag of surrender.

Unlike the previous phases, Phase III discovers "what lies beneath the surface" and is not visible to the naked eye - the person's character and work ethic. Employers should be doing background and reference checks on all potential employees since many resume writers "write good fiction." Many firms have begun the use of assessment screening to gain entry into the areas that cannot be obtained from the application and interview process.

The main purpose of screening job applicants is to predict how an applicant will behave on the job before they are hired. After all, it is better to make this prediction before hiring an applicant, rather than after the applicant is already on the payroll. Three methods exist to forecast how an applicant will behave on the job: interviews; reference checks; pre-employment tests.

Extensive research conducted for the federal government and private businesses found most interviews and reference checks are poor predictors of actual on-the-job performance. In fact, this in-depth research by leading industrial psychologist John Hunter, Ph.D., and Frank Schmidt, Ph.D., showed most interviews and reference checks

were about as useful as flipping a coin.

However, it is the use of pre-employment tests that have proven to be the best predictors of actual on-the-job behavior. Why? Because of these three screening methods, only tests are developed with scientific research techniques to make sure they help predict how a person conducts oneself on-the-job. In contrast, most interviews and reference checks rely chiefly on subjective, unscientific "hunches." As such, tests assist managers in making more objective, informed hiring decisions, whereas typical interviews and reference checks provide mainly subjective "guestimates" of an applicant's potential to do the job. Reference checks are even weaker and are becoming more difficult to obtain.

Hiring smart is only the first step in dealing with issues of honesty and dependability.

It is vital to create a caring and nurturing environment. Research suggests that one of the most effective theft deterrents is to treat employees well, providing them with an encouraging, nurturing environment. It's impossible to completely eliminate counterproductive behaviors and theft in the workplace, but companies that establish and communicate positive corporate values, can experience a significant reduction.

As you can see, hiring honest and dependable employees requires both the art of hiring smart as well as the use of science to complete the task thoroughly and effectively.

The added benefits to such an approach is the reduction of costly employee turnover, as well as providing future promotable candidates for your organization, who have the appropriate work ethic needed to make your company more successful and profitable.

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