A few days ago, we published an article laying out the business case for outsourcing some or all of your CRA’s employment verification orders. I can already hear the pushback:
“We can’t outsource verifications. Our particular employment verification method is part of our secret sauce.”
“Why would we outsource? It’s much more affordable to handle verifications ourselves.”
I expect to hear these arguments because I made them myself — when I ran my own CRA roughly a decade ago. At the time, I was the co-founder and owner of EmployeeScreenIQ, a nationally recognized CRA. Bill Wilder, InformData COO, approached me to discuss outsourcing our verifications. That’s when I unleashed my “secret sauce” reasoning.
(Spoiler alert: I was wrong. Verifications were not part of my background screening company’s secret sauce. And they’re probably not part of yours.)
“Ok,” Bill replied. “If you’re not going to outsource to protect your secret sauce, do it for the monetary value. How much does it cost you to conduct a verification?”
“Between $2 to $3 ,” I estimated.
“With respect,” Bill said, “you’re full of —.” Well, I’m not going to say what he said I was full of, but as it turned out, Bill was absolutely right. I had vastly underestimated just how much it was costing my company to keep our employment verification operation entirely in-house.
As Bill patiently explained to me then, and he continues to explain to CRAs to this day, a total cost of ownership (TCO) study would likely reveal several factors that were causing verifications to hurt my company’s profitability more than my back-of-the-napkin calculations could reveal. These are the same reasons background screening companies are still struggling with verifications today.
(Another favorite saying of Bill’s is that verifications account for about 10% of the average CRA’s revenue but 90% of their headaches.)
1. Conducting verifications efficiently is a logistical nightmare
If your CRA has a single customer for verifications and a single researcher, you can probably handle verifications internally with relatively good efficiency. But as your client list grows and you take on more employees, the complexity increases by orders of magnitude.
Each end-user demands their own particular calling pattern. (For example, “Call twice on the first day. Wait a day. Then call again — but only in the morning.”) As researchers jump from end-user to end-user, they must be sure to follow these customized requirements or risk the end-users’ dissatisfaction.
A larger research team also calls for careful segmentation to avoid wasteful duplicate efforts. Do you assign callers to end-users alphabetically, or do you devise another scheme to optimize efficiency?
Managing a multi-researcher verifications team with an extensive client list is a massive undertaking that can consume countless hours of administrative overhead— hours that would otherwise be spent on more profitable activities.
2. Your verifications team rarely operates at full productivity
Assuming you were even able to sort out the logistical challenge of managing a large verifications research team while catering to several end-users’ customization needs, the problem remains that researchers come and go — especially in today’s employment landscape.
Getting a new hire up to full productivity as a verifications researcher can take months, which not only hampers your ability to fulfill your current demand without falling into backlogs but prevents you from scaling up quickly when demand spikes.
3. Staffing costs more than just salaries
Expanding your verifications team to cover higher volumes doesn’t just mean more paychecks (although, it means that, as well). It means dedicating office space and equipment to your researchers and paying for their benefits.
When your researchers take time off, as they’re entitled to, you must continue paying them while absorbing the productivity loss. And when demand for employment verifications declines, such as during the late-summer lull, you may find yourself paying for more researchers than your volume would normally dictate.
4. Automated verifications are distorting your cost calculations
If your CRA is like mine, you try to run as many verifications as possible through automated solutions such as The Work Number and National Student Clearinghouse (NSC). And while NSC offers pretty deep coverage, The Work Number will only clear about 30-35% of your orders. The remaining orders must go through a manual process.
So, what do you do when you try to determine your company’s cost per verification? Most CRAs will divide their labor costs by the total number of verifications. But this formula overlooks the fact that your manual research team only worked on 35% of your incoming verification orders.
Long story short, when I estimated my company’s costs to Bill, he immediately recognized that our costs were likely twice as much, if not more.
(This isn’t to say automated verifications don’t cause their own problems. Often automated data sources are wrong or imprecise about job titles.)
5. You’re missing opportunities to optimize the verifications process
End-users for employment verification services value two metrics above all: turnaround time and completion rate. Unfortunately, for most small- and medium-sized CRAs, these two metrics seem to be almost entirely in the hands of the mysterious and unpredictable sources that provide employment information.
How many times have your team members called a source repeatedly only to learn when the source finally answered that it was the wrong person all along? How many times have misspelled or vague resume listings tripped up your researchers?
Most CRAs lack the scale and technology to uncover critical insights about the verifications process and act on them. But large-scale background screening data providers have access to these resources.
Here at InformData, we’re constantly pouring through millions of verification data points to answer questions such as:
- When is the best time to call a source to ensure a response?
- How often should we call a source?
- How much time should we leave between calls?
And as we gain insights into particular sources, our state-of-the-art call center technology learns the patterns and uses this new knowledge to improve future calls. One out of every two verification orders we receive is for an employer we have verified at least once before. So, we know exactly which number to call, who to speak with, and what to say.
Run those numbers again
If you think you know how much it costs your CRA to conduct employment verifications, I encourage you to think again, accounting for the five factors I’ve listed in this article. My guess is, like me, you will discover what I did all those years ago: That, all of a sudden, outsourcing verifications is starting to make a lot of business sense.
Of course, I’m not talking about outsourcing to just any background screening data provider, but one with the scale, technology, processes, and expertise to take on any volume of verification orders while providing the customized service and accurate results your end-users count on.