International Recruiting Applicant Screening in Developing Markets

The White House sent Steve Casteel to Iraq for two years to recruit 200 people to rebuild the Interior Ministry under the Coalition Provisional Authority. In Iraq and in his previous position as chief of intelligence for the U.S. Drug Enforcement Administration, Casteel learned how to screen candidates in Latin America and the Middle East.

    “Recruiting in Iraq is not that different from recruiting in Jordan or Egypt, or China, for that matter,” Casteel says. “You can use any databases that are available–military and police data, for example–but in the end you have to rely on local contacts to research an applicant’s reputation and history in the community. You can’t just use a Western approach.”

    Casteel is now senior vice president for international business development at Vance International Inc., an investigation and security consulting firm based in Oakton, Virginia, with 3,200 employees worldwide. His approach to screening and background checks will become increasingly relevant as globalization accelerates in 2007 and corporations pursue a broader mix of geographies and less familiar locations.

    Business reports indicate that companies will continue the trend toward staffing new facilities with local nationals instead of expatriates.

    “Multinationals have found that they can reduce costs and eliminate many problems by hiring locals,” Casteel notes. “Shell, for example, has moved to local hiring in Nigeria.”

    As Shell has discovered in Nigeria, however, recruiting in the developing nations requires extreme due diligence.

    “By far, the biggest risk in recruiting in less-developed markets is corruption, most likely in the form of political corruption but also, in some locations, organized crime,” Casteel reports.

    In 2005 alone, Shell Nigeria investigated 74 cases of employee fraud and ethics violations, ending in the dismissal of 24 career and contractor staff, warning letters to 49 employees and delisting for six contractors. In addition to the recruiting difficulties that arise from corruption among candidates and employees, Shell is also plagued by local scam artists who make bogus offers of employment at Shell Nigeria and then shake down job seekers for money or personal financial information.

Digging deeper
    “The biggest weakness among companies that are recruiting in the developing countries is their lack of knowledge about the local market and their willingness to rely entirely on cheap background checks,” says Bob Sikellis, managing director and associate general counsel at Vance. “In the U.S., the quality of standard pre-employment screening is good enough for entry-level positions. But outside the U.S., the quality is abysmal. The databases are simply not available.”

    Instead, companies must develop the capacity for deeper pre-employment investigations, often working with local partners. Even then, the company must know which local security companies do quality work.

    “In Iraq, there are 52 security companies, and you need one that has local operations in the city where you need to recruit,” Casteel notes.

    “Companies need to be very cautious and do full due diligence on the security companies they choose to work with,” Casteel says. “Just because a local vendor seems to take a Western approach and shows up in a business suit does not mean you will get high-quality work. This is true anywhere.”

    The client company should ask the security firm exactly what information they will provide.

    “And, as the Hewlett Packard case demonstrates, the security firm should also explain exactly how they will get that information,” Sikellis says.

    The fact that negligent hiring lawsuits are uncommon abroad does not reduce the need to screen applicants carefully.

    “To focus on the potential for negligent hiring lawsuits or other legal actions is a dangerously narrow approach,” Sikellis says. “Outside of the U.S., the ability to remove employees is so limited that you want to be extremely careful about who you hire. In many countries, a company that removes an employee faces long unemployment payments and other significant costs.”

Local demand
    Originally, the push for screening in the developing markets was driven by the multinationals, but now local employers are increasingly recognizing the need for background screening, according to Chuck Papageorgiou, executive vice president of international services for First Advantage, a risk mitigation and business solutions provider. The company, based in St. Petersburg, Florida, employs 4,500 people, with 1,200 outside the U.S. devoted to employee screening.

    Papageorgiou reports that screening by local employers in the developing markets has accelerated during the past three years, driven by different factors in each country. In India, for example, the rise of diploma mills has generated a new focus on education credentialing.

In other developing countries, concerns about cyber-crime, corruption and terrorism have spurred local employers to institute screening policies along with the multinationals that operate there.

    In addition, developing-market BPO providers that work for financial institutions must screen applicants to meet their contractual obligations.

    “Some of the contracts are very explicit,” Papageorgiou says. “This is spreading to other industries, especially design firms and manufacturers with high-value intellectual property. Also, more companies are screening all management applicants because they see credentialing managers as very important.”

    India’s outsourcing industry has been rocked by cases of data theft and fraud. KPMG’s 2006 survey on fraud in India reports high levels of deception in CVs, fueled by unethical practices at placement agencies. In March 2006, Wipro cleaned house after discovering major screening shortcomings in the placement agencies it used.

    The National Association of Software and Service Companies, the trade group representing the Indian IT software and services industry, launched a national skills registry in early 2006 that provides information on employees’ backgrounds. Job candidates authorize release of the information to employers.

    Papageorgiou does believe that other nations will soon follow with the same level of self-policing.

    “But we are seeing professional associations in some countries building membership rosters, and we can work with this information to verify certifications,” he says.

    According to Papageorgiou, companies in India are also plagued by scammers posing as recruiters who demand money and personal financial information from job seekers.

    In both India and China, candidates and employers can no longer rely entirely on familiar village contacts to make recommendations. Dramatic increases in worker mobility in recent years leave candidates and employers more vulnerable fraudulent practices

Living with limitations
    In some countries, full accurate screening is simply not possible.

    “We deem screening in these countries as ‘nonreliable’ for background information,” Papageorgiou says. “The limits on the amount of information available about candidates may enter into site location discussions, and some companies may decide that they cannot expand into these areas.”

    “There are many ways to get information in many countries if you are willing to break the law, which we are not,” Papageorgiou says. “We advise clients of these restrictions and then use research teams to gather as much information as possible on criminality, for example. The key is to make sure that the client is well aware of the limitations.”

    In India, the crime rate is relatively low and some information is available about most job applicants.

    “If all the education and employment checks are clean, it is highly likely that the candidate is clean,” Papageorgiou says. “In other locations, a clean check may not mean the same thing.”

    In China, educational and professional qualifications, employment history and employment performance history can be secured, but criminal record checks are more difficult.

    First Advantage is developing statistical models that provide some indication of the probability of criminal records and other negative factors for specific groups of applicants. These models are in place in some locations and in development for others.

    First Advantage abandoned the idea of screening candidates abroad from offices in the U.S., and now has offices staffed with its own employees in the Philippines, Singapore, China, Japan, India, New Zealand, Australia, Canada and the United Arab Emirates. It will open an office in South Korea by the end of 2006 and new offices in Europe, Africa and the Middle East in 2007.

    The international portion of First Advantage’s screening services now represents 25 percent to 30 percent of its total screening revenues. The company expects 20 percent growth in the international portion in 2007.

    “In this industry, it is extremely expensive to have a physical presence on a worldwide basis, but there is a competitive advantage in expanding our international presence,” Papageorgiou says. “In addition, the market for screening is relatively saturated in the U.S.; the real growth in screening is abroad.”

    For clients, the biggest advantage in using screening firms that have a physical presence overseas is speed and more control over compliance. Also, firms with offices abroad may be more effective in managing costs because they utilize their own staff and operations.

    In any developing market, screening must be tailored for the specific risk level, legal environment and infrastructure, and executives should be aware of any limitations.

    “When a company moves into a new location, it must develop a market-entry strategy,” Sikellis says.

    “Recruiting should be part of the discussion and HR should have a seat at the table.” Sikellis says. “HR executives need to analyze the personnel risks and maintain a close relationship with legal counsel while they do this.”