Recent ethical debacles underscore the need for closer scrutiny and screening when it comes to C-suite positions.
Tracy McCarthy, currently the senior vice president for human resources at Chicago-based SilkRoad technology inc. -- with a 20-year background in the HR field (including as a CHRO at a mail-order retailer and in HR leadership posts at other retailers) -- says one of the worst pieces of advice she's ever received came during an earlier job when her 200-employee company was searching for a new CEO.
A leading and well-known candidate had emerged for the post and a board member told McCarthy there was no need to run a very extensive background check. "They said that we shouldn't do that, that a background check would be insulting, that this is a known person," says McCarthy, whose current employer, SilkRoad, offers a full suite of HR solutions.
McCarthy says she went ballistic at the suggestion. "I said I think we owe it to ourselves, and our investors, to do an extra, extra deep background search -- to look at everything that might be out there," she says.
McCarthy -- and other human resource executives and experts -- say double- and even triple-checking a C-suite job candidate's resume, references and educational background isn't just a way to spare the company from future embarrassment; it also offers career protection to the candidate who might be able to correct a resume error before it becomes an indelible stain on his record. And some experts argue that problems with the hiring of the very top executives run deeper than the resume, that candidates should be psychologically assessed and past co-workers should be mined better for information.
Earlier this year, the business world learned, yet again, just what can go terribly wrong when candidates for the highest-level jobs are not properly vetted. In May, Scott Thompson had been CEO of the large but troubled Internet-content giant Yahoo! for just four months when an activist investor challenged his educational background as listed in one of the firm's filings with the U.S. Securities and Exchange Commission.
The filing, and other public information about Thompson's biography, said the new CEO held degrees in both accounting and computer science from tiny Stonehill College, but a simple check with the school revealed he only held the accounting degree. The disclosure not only cost Thompson his job (he has since taken over the CEO post at Conshohocken, Pa.-based ShopRunner), but gave a huge black eye to Sunnyvale, Calif.-based Yahoo! -- just as the Internet pioneer was struggling to rebuild its business model. It also led to some intense finger-pointing between the company; its well-known search firm, Heidrick & Struggles; and another contractor.
Human resource experts say the Thompson fiasco may have been headline-making, but it wasn't isolated. Rather, it's a striking example of deep flaws in the way CEOs and candidates for other high-level C-suite jobs are hired in the 21st century. Too often, these experts argue, job-seekers for top-level, highly visible posts are actually vetted with less stringency than lower-level hires, even in an age when the Internet can both magnify errors and increase the opportunities for puffery and fraud.
"The more senior you get, the more it's about relationships and less about filling out an application," says Rusty Rueff, a former HR leader at PepsiCo and Electronic Arts who is currently a career and workplace expert with the Sausalito, Calif.-based jobs and career site Glassdoor. Rueff and other experts say C-suite-level candidates are typically recommended by board members and are already well-known within an industry, which has the perverse effect of leading to lax background checks. "But you have to have precautions," says Rueff, "because the consequences are huge."
Fixing a Big Problem
The Thompson debacle at Yahoo! is just one of many cases -- not just in business, but in academia, sports and elsewhere -- in which poor background checks resulted in embarrassing and damaging episodes. The long list includes Food Network chef Robert Irvine, who falsely said he had cooked for the royal family; ex-Notre Dame football coach George O'Leary, who faked academic credentials and his gridiron accomplishments; and former Radio Shack CEO David Edmondson, also fired over falsely claiming college degrees, as was Etsy e-commerce founder Rob Kalin, and Bausch & Lomb CEO Robert Zarrella -- among others.
Experts say the lessons learned from the Yahoo! episode, however, should go beyond the most obvious one: that there should be a more comprehensive overhaul of the vetting of candidates for C-suite positions. They recommend background checks that are more thorough for top-executive slots than for mid- or low-level hires, not less stringent. They call for skilled and impartial third-party firms to undertake that the effort, but with the human-resource department involved and in charge throughout. They also say the Yahoo! debacle should inspire other changes in how references are used and should improve the profiling of candidates' actual skills for a particular job.
Here are some of the best recommendations:
* Stick with a process -- and avoid cronyism. A common pitfall and key reason that Yahoo!'s Thompson hiring went off the rails, according to experts, is that board members tend to get involved in the hiring of a new CEO, and these directors frequently not only make recommendations but make contact and even conduct informal interviews outside any official vetting procedure. So what happened with Thompson -- a board member recommended him, based on his track record at the Silicon Valley firm PayPal -- is far too common.
"People don't want to offend," says Christine Cunneen, CEO of Hire Image, a nationwide background screening company. She says both HR executives and outside search firms are reluctant to press for too much information from well-established executives, fearing a pushback along the lines of, "Don't you know who I am?" Experts say there's a simple solution to this problem: Spell out, in writing, a protocol of required background checks and other vetting measures and do not deviate -- no matter who the candidate is, or how well a company director knows him or her.
* Use an impartial firm to conduct a thorough screening. Most experts say the best way to catch resume fraud or other potential red flags is to use a third-party firm for background screening -- in other words, independent not only from HR managers who are subject to pressure from above, but also from the search firm anxious to successfully fill the open slot. Screening companies should be solely responsible for an extensive background check. That's because these firms are typically paid the same amount -- regardless of whether the candidate is flawed or passes with flying colors -- and its reputation rests solely on getting it right.
"Have one person handling compliance verification," says Greg Moran, founder of Chequed.com, an online employment testing and screening firm. "Let everybody else focus on the quality of the hire, but have one person with one set of understandings [and verification duties] -- who is not part of the executive search firm."
Additionally, experts say, companies that concentrate on verification tend to have a broader network of screening sources and contacts. A good verification firm will vet the candidate's education and work history, as well as any criminal record or other blemishes -- and it will know how to conduct its research without running afoul of equal-opportunity laws and other legal hazards.
* HR executives must stay on top of the process: It's vital that the company's in-house human resource staff stay involved, ask questions and double back on what any hiring or background consultants are doing. Experts also recommend that all pertinent information uncovered during the outside vetting be shared openly with the entire board of directors, and not just a small circle of insiders.
"It's critical that HR realizes its function of due diligence," says Jay Zweig, a Phoenix-based employment and labor attorney, who -- like others -- says it's all too common for in-house staffers to assume outside consultants are handling everything. Zweig -- managing partner of the St. Louis-based Bryan Cave firm -- also stresses the importance of a standardized procedure, saying applicants must understand that -- just like filling out a W-2 form in order to receive a weekly paycheck -- they must agree to submit to a uniform background check.
* It's time to rethink how references are used: A number of hiring authorities say references can be a highly useful tool for pre-screening C-suite applicants, both for objective verification of past work history -- puffed-up claims about past projects or tasks, for example -- but also for critical subjective information about the applicant's leadership skills. Typically, an applicant provides the names of higher-ups and past associates who -- either because of friendship or fear of the ramifications -- are not likely to provide information that's either critical or especially useful.
"Ask the person, 'Who else could I talk to that you could refer me to and might know something?' " says Charley Polachi, the founder of Polachi Access Search Partners who once worked with Heidrick and Struggles, the firm at the center of the Yahoo! Thompson debacle. He says it's often this second level of contacts -- not hand-picked by the job seeker -- that provides more judgmental evaluations.
Other job-search gurus recommend another tactic: Seeking out applicants' former subordinates, rather than the references they supplied or their higher-ups; often, these underlings have valuable insights into an ex-boss' leadership skills, and they tend to be more candid and willing to share. They also have a different perspective.
"When they're dealing with subordinates, that's when they tend to let it all hang out," says Robert Hogan, president of Tulsa, Okla.-based Hogan Assessments and a pioneer in developing online evaluations of high-level corporate hires.
Hogan says he believes in such interviews, as well as intense psychological screening of candidates, because -- too often -- the process fails to capture what he calls "The Dark Side" of would-be CEOs, traits such as narcissism and self-aggrandizement. He believes that's why -- according to his own research -- as many as 65 percent of CEO hires end in short-term failure.
Internet Takes Some Blame
It may seem counter-intuitive, but most experts believe that the rise of the Internet over the last 15 years has made verification of job candidates harder rather than easier -- for several reasons. For one thing, while it's tempting for HR executives to use the web -- especially social-networking sites such as Facebook and Twitter -- as a way to screen applicants for problems, that's not a good idea. That's because company officials may inadvertently learn details about the job seeker -- regarding religion or sexual orientation, for example -- that is proscribed under fair-hiring laws.
On one hand, the Internet tends to amplify false information about a job-seeker -- sometimes unfairly, as it's often not the candidate but someone else who is recording the inaccurate details. The flip side is that advanced technology has also created tools for a small pool of unethical job candidates to establish bogus credentials or even provide fake references aimed at covering up a firing or some other potential resume flaw.
Cunneen, the background-screening CEO, says her company and clients are increasingly on the lookout for the use of firms such as CareerExcuse.com, a company that promises "to act as your past employer" by offering work phone numbers and live individuals to act as pretend past colleagues. She says this is not nearly as big a problem as garden-variety puffery -- that is, applicants overstating their job duties or their accomplishments -- but it is a growing issue, especially because sustained high unemployment since 2008 has made job seekers more desperate.
But verification issues can extend beyond outside job applications. Experts say HR executives need to remember that even in-house applicants for a promotion to the C-suite, who've been with the firm for a long time, may have a background issue that went undetected at the time of their hiring and could blow up under the brighter lights of corporate management.
Polachi, the executive-search expert, says mandatory background screening for top jobs should be standard and it should be applied universally -- to inside candidates as well as outside hires, to relative newcomers as well as industry leaders with decades of experience.
The best advice, he says, is to obey the same motto Ronald Reagan used in arms deals with the Soviet Union: Trust, but verify.