Implications of the 2006 SHRM Forecast on Background Screening Industry

In reviewing the SHRM 2006 Forecast and its likely impact on the business of background screening one of the most pervasive trends that cuts across much of the results that are projected to have major impact on Human Resources is the rapid growth of outsourcing, particularly its popular twin offshoring.

The employment trends most likely to have a major impact on or cause a radical restructuring of the workplace included forty-two items. Of these, six appear to have direct implications for the background screening industry:

Ranked in top 10
Employee Security Concerns					41%
Privacy Concerns of employees				38%
Ranked in top 15
Increased use of outsourcing within the US			36%
Increased use of offshoring of jobs to other countries		35%
Lower HR Staff to employee ratios		35%
Ranked # 33 (out of 42)
Greater Use of Contingency Workers	20%

The discovery of the planned terrorist attack on airlines leaving London has simply added fuel to the concerns about security, which will likely be with us for some time to come. Accordingly, employers, particularly in the European community are likely to start moving towards more background investigations in the wake of recent events.

To no ones surprise privacy concerns is in the top ten. With 2005 having been the year of the data breach and high profile cases continuing to appear Privacy promises to take a more prominent presence in the workplace and will impact how background screening is performed.

With a number of high profile data breach and theft cases in India, the leader in offshoring, it has become very clear that given the extent of access to their client’s information that outsourced firm require to conduct their business, more stringent background investigation requirements are going to emerge. More clients will be demanding high standards, in some cases industries will move for higher requirements and even perhaps in some cases country’s will implement tighter laws to direct employers actions. I believe it is safe to say, as offshoring increases so will background investigations.

Lower HR Staff to employee ratios in many cases will be driven by the increased outsourcing of HR related activities which commensurately will likely reduce internal HR staff. The quagmire in this one is that it is a shell game to continue to use this metric because in reality the total number of resources applied to HR related work may not have been reduced, but simply transferred from internal to external resources. Background screening is likely to be a benefactor of this trend because outsourcing of background checks will likely continue to rise as less internal staff remains.

While ‘Greater Use of Contingency Workers’ is considerably down in the listings it is an area that forebodes well for background screening firms since businesses are becoming increasingly aware that temporary workers are a major potential problem for identity theft, loss of confidential records and trade secrets. Accordingly, there is likely to be growth in partnering opportunities with temporary agencies, contingency and professional employment organizations (PEOs).

International

The international trends most likely to have a major impact on or cause a radical restructuring of the workplace that are likely to have a direct bearing o background checking include the following:

Ranked in top 10
Expansion into Global Marketplace				37%
Economic growth of Asia			35%
Stricter Cross-Border policies for Global Business Practices			35%
Increase in Offshoring		24%
Increased security for expatriates abroad		24%
Ranked in top 20
Increase in number of foreign students who stay to work in the US	17%
Influence of European Union employment laws across Europe	17%

As I mentioned in the beginning, the trend that seem to cut across the forecast dealt with offshoring. The table I found most interesting in the overall forecast was the “Most Attractive” Offshoring Destinations Countries in 2005.

India China Malaysia Philippines Singapore

Thailand Czech Republic Chile Canada Brazil

It is noteworthy that the top six destinations are in Asia. Which simply means if you intend to be a player in the international background investigations and screening industry you must be in Asia. Based on our learnings from India these destinations also provide a roadmap into the locations where background investigations will likely increase commensurately with the pace that offshoring increases in the respective country. Add to this the highly ranked factors ‘global expansion’ and ‘economic growth in Asia’ and it simply means expanding opportunities for background screening worldwide, but particularly in Asia. With Olympics coming to China coupled with a world that is increasingly focused on security and preventing terrorism, expect a groundswell of background investigating to start happening in this part of the world.

The increase of security directed towards expatriates living in other countries will help fuel increase background investigations since in many instances kidnappings and other acts against expatriates involve insiders.

And, needless to say as privacy issues continue to rage in the US the influence of the Data Protection laws of the European Union are likely to take center stage and provide the framework that will be followed not just in Europe, but in the Asia Pacific region and the rest of the world.

Overall, this years forecast appears to have a number of trends that should they materialize will likely create increased business opportunities for background screening firms.

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The structure of the report is based on a survey of human resource professionals about their views on the key issues

in demographics, economics, employment, international affairs, politics, society, and science and technology that

will have the greatest influence on the workplace in the next decade.

I welcome your feedback on my views regarding the SHRM 2006 Forecast as well as your comments about the Forecast itself. Please email me at wbnixon@aol.com and I will post your comments in the next edition.