The difference between hiring a good employee and a bad one can make or break small companies. Many businesses require a background information as part of the application process, and even more check with a job candidate’s previous employers and references to determine what type of person the company is considering.

The typical U.S. business spends 80 percent of its operating budget on personnel, said David Solly, and industrial psychologist and president of Peak Organomics. He said the average cost of hiring a hourly employee is about $4,500. The average cost of replacing a mid-level manager is $30,000 and the average cost of replacing an executive is $50,000.

It therefore behooves organizations to conduct a thorough background check on potential employees, said Ralph Sanchez, Jr., CEO of Academy Investigative Services. Sanchez was a police officer for more than 18 years and has operated a private investigation business for 19 years.

“Background checks can save businesses time and money,” Sanchez said. “Looking into a job candidate’s past can help a company avoid future problems with an employee.”

Sanchez said he looks into a person’s criminal and civil background when he assists companies during the hiring process. He works with the National Criminal Investigation Center, the Federal Bureau of Investigation and the Colorado Bureau of Investigation to determine if an applicant has been convicted of a crime.

For civil issues, Sanchez said companies sometimes ask him to find out whether an applicant has liens or has filed for bankruptcy.

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“Businesses sometimes want to know this information because they believe if a person isn’t fiscally responsible in her personal life, she won’t be fiscally responsible in the business world,” he said. “What I offer to companies is a comprehensive look into a candidate’s life – sort of a profile of the individual.”

Sanchez said he looks for aliases because people sometimes use a variety of names. He also tells the businesses to ask for a candidate’s last three addresses so he can interview neighbors. The process provides information about the character of the person.

Sanchez obtains education transcripts and asks for five references. He asks references how long they have known the candidate, how they became acquainted and what the person’s family is like.

“This can sometimes indicate red flags regarding an applicant,” Sanchez said.

Some candidates are given polygraph tests to determine honesty and loyalty. The fields for which most tests are given include pharmacy, banking, casinos, law enforcement and sensitive technology work.

Before either a background check or a polygraph can be conducted, applicants have to agree in writing to the process, Sanchez said. Also, a standard should be used for all applicants to ensure fairness.