Case Study: Streamlining HR Risk Management

How the world’s largest privately owned fitness chain increased recruiting effectiveness while significantly reducing costs and liability.

by Tonia Walsh

In 1983, 24 Hour Fitness opened for business and has since grown to more than 320 clubs in 14 states serving 2.7 million members. Amid rapid growth, coupled with processing more than 1,000 new hires per month, Bill Prescott, senior director corporate & field human resources, and I decided to restructure our background screening initiative into a streamlined, risk-management program.

An unnecessary amount of administrative effort was being consumed by our internal and outsourced employee-screening processes. Before searching for a better provider, the HR team at 24 Hour Fitness recognized the need to understand and assess its business realities. The decision to make restructuring a tactical priority was based on the organization’s commitment to address four key challenges that threatened to keep us from achieving an important strategic human resources objective—recruit talent more effectively while reducing costs and liability.
1) Timeliness of the reports. Background checks took five to seven days to complete, negatively affecting time-to-hire.
2) Accuracy of the information.
Discrepancies were discovered between the criminal information some applicants volunteered during their interview and the background check results from the current vendor, creating concern about the integrity of the data.
3) Customer Service. Response times took up to a week for some service inquiries, creating mounting frustrations with corporate and field managers.
4) Compliance. Procedures were not in place to effectively track and fulfill federal and state requirements that govern the use of consumer reports for employment purposes.

We began our due diligence by investigating a select group of top-tier background screening providers. The initial list of 50 was reduced to 12 who were asked to submit proposals based on provided criteria. In the early stages of evaluation, 24 Hour Fitness was faced with the difficult decision of selecting a vendor from companies who all claimed to have the ability to move us to a streamlined risk-management program. According to Prescott, every company made the same claim; it was the fastest, most reliable, secure and compliant, and delivered the best service. To help offset the confusion of stated similarities, on-site vendor visits became a necessary part of the selection process, allowing 24 Hour Fitness to narrow the field to three providers. These multiple visits were designed to assess the provider’s knowledge, organizational effectiveness, technological capabilities, customer service, and support services.

More than 50 percent of the vendor selection process was based on choosing a provider with the requisite technology competencies needed to solve our four key business issues. This included how a provider’s back-end information management system affected compliance and efficiency. Some vendors, although appearing to have automated web-based ordering functionality, presented a solution that was mostly manual behind the scenes. This type of paper-driven workflow increases the probability for human error, creating unnecessary liabilities. Technical expertise, in addition to product knowledge, became a clear imperative.

We also discovered that many companies process background checks for employers without paying important attention to a wide range of federal and state compliance requirements. For example, certain information that is illegal to use in an employment decision varies by state, making compliance difficult. With our fitness clubs distributed across the county, the assurance that each background check would be delivered in a compliant manner became a key selection criterion.

AbsoluteHire offered a solution that complemented our hiring process. This vendor leveraged its software engineering skills to develop a system in-house, which completely automated back-end information management. Its system also included an innovative customer relationship management system, providing prompt response to customer needs.

Eighteen months after the decision to move forward with a new provider to streamline risk management, 24 Hour Fitness has achieved continued success in meeting our objectives.

With higher levels of automation being used through the new vendor, 24 Hour Fitness has improved time-to-hire by more than 20 percent and has reduced the cost per background check by more than 30 percent. At a pace of hiring 1,000 candidates monthly, that translates to a measurable difference. The failed background check ratio has increased from approximately 5 to 25 per week, delivering a complete review of potential criminal activity. As a result, employee quality has increased significantly.

Customer service response time is reduced from a week to less than 24 hours. Inquiries are tracked and managed via the vendor’s proprietary customer relationship management system. Process improvement reports are used to evaluate and troubleshoot situations that otherwise could become unmanageable. Each background check is evaluated by AbsoluteHire and filtered against state and federal reporting restrictions prior to delivery, ensuring compliance and consistency across the entire organization.

With rapid changes in technology, hiring standards, and employment laws, taking time to find the most competent vendor is vital. By improving our background screening program, 24 Hour Fitness was able to reduce costs, gain greater efficiencies, and further minimize liability.

By working closely with our new partner, we finally achieved what every HR team longs for: more time to devote to meaningful strategic human resource initiatives.

Posted November 10, 2005 in Talent Acquisition

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