Due Diligence

by TIM BENNETT, General Manager, Japan & Korea, First Advantage Japan KK

Firms budget for the financial costs of employing good staff, but many fail to consider the potentially severe implications of a bad hire.

Before an employee is terminated, substantial costs are often incurred in terms of the time that management spends on corrective action, mediation, and negotiation. As well as risking the firm’s reputation, losses can result from negligence or willful misconduct, as well as direct payments to the departing employee and potentially unlimited legal expenses.

You can’t always identify a bad candidate at an interview, but a well-managed hiring process including pre-employment assessments and screenings is a professional and very cost-effective way to reduce risk.

Background verification practices in Japan

In Japan, the HR department traditionally carries out pre-employment screening, which often involves little more than phoning for personal references if they have time. More disturbing is the practice of employing a private investigator to contact neighbors and former colleagues, which is generally considered to be unethical and unreliable.

Modern pre-employment screening firms, however, ensure that candidates understand the process and have consented to their qualifications and experience being verified.

The PrivacyMark System in Japan helps to ensure that personal information and privacy are taken seriously, and that firms have audited processes and procedures in compliance with that of the Japanese Industrial Standards Committee. The authorized use of PrivacyMark by private enterprises demonstrates that they comply with the law and have voluntarily established a high-level personal information protection management system. Although PrivacyMark is gaining greater recognition, it is still voluntary and too many firms handling personal information choose to avoid the costs of compliance.

This is Japan. Why conduct a background or reference check?

You may believe that in a country where you can forget your wallet in a restaurant and still stand a good chance of it being handed in, people wouldn’t lie to get a job and that pre-employment screening is only necessary for senior executives and other key positions. Not true.

We have exposed candidates who falsely claimed to have degrees, and exaggerated their work experience. Some have blamed the recruitment consultant for advising them to remove gaps in their career by extending employment periods to invent a continuous history. Applicants who have studied or worked abroad might be tempted to not disclose information, such as criminal convictions, or make false claims thinking that they cannot be verified.

What can we check in a background investigation?

Each country has different procedures and systems, with the US being one of the most open. In Japan, however, criminal records are not available to anyone and personal credit rating checks can only be requested by the individual concerned or by firms authorized to carry out credit risk assessments.

Of course, having a criminal conviction or poor personal credit history should not necessarily be a barrier for a qualified and good candidate. However, creating a false history to gain employment raises immediate concerns about the applicant’s honesty, and in many countries it is also a criminal offense.

So, what it's gonna be?

In the end, you have to ask this question: "How can you ensure that you are hiring the person for what s/he is claiming to be?" The answer is simple: do your own due diligence by doing a professional background and reference check. It may add some costs to the entire hiring process, but would you really go into a "marriage" without knowing if you are marrying for real or for the reel?

NOTE: To learn more about this topic, you may want to attend the JHRS Event: "Trust but Verify: Background and Reference Verification in Japan" on 27 Oct 2010 (Wed), 18:30-20:30 in Shinagawa. For details and registration: http://www.jhrs.org/calendar?eventId=188419