Let’s face it, 2020 SUCKED! 2021 is getting better, but it’s going to still be a while before hiring and human resources are back to normal. Pretty much every prediction we made last year was thrown out the window due to COVID-19, but that doesn’t mean there wasn’t change.  A TON has happened over the past 12 months, some because of COVID but others simply because we’re starting to see some innovation within and outside of the industry.  We saw the industry dip anywhere from 40-80% for some firms early into the pandemic. As a whole, It seems like the industry dipped only 5-15% combined for the year.  The CRA’s that did the best are the ones with a client mix that also did well during the pandemic including healthcare, grocery, logistics and manufacturing.  It’s unclear the effect on smaller CRA’s since more than 60% of screening volume comes through the biggest 5-6 firms, but I imagine the number is a bit higher for them.  

If I told you 12 months ago that within a short period of time all of your workers would be working from home for an extended period of time and you were going to have to completely pivot your business to make it happen, you would have told me I was crazy!  I would have heard 100 reasons why that can never happen in this industry due to data security, productivity, staffing issues, etc..  Guess what? You did it, and you did it quickly.  If you didn’t, you’re probably not reading this article because your business didn’t make it, unfortunately.

We have been standing firm on our soapbox preaching to you to innovate.  COVID-19 forced most of you to do it and that may turn into a good thing.  However, crisis forces innovation and good companies are able to do it.  Great companies are always thinking about innovation and consistently finding better ways to thrive in this industry.  COVID should be your wakeup call, every day you should be finding better ways to do things and inventing products, processes, automation and other things to make you stand out from your competition.

Without further adieu here are my predictions for 2021 and beyond:

1. Consolidation – This industry will continue to consolidate.  Typically when a private equity firm invests in or acquires a business or businesses they look to hold the asset for around five years. We are at the five year mark or beyond for several background screening firms including (but not limited to): Sterling, Cisive & Asurint.  Others that are likely between the three to five year mark are: HireRight, Universal, Global HR Research and a few others.  Does this mean that these firms will sell this year? The answer is NO.  But don’t be surprised if you start to see movement with all of them.  Now, once they sell you have new private equity firms buying them that need to grow by acquisition so that means that a lot of other mid size screening companies become targets.  I don’t know where and when but the following firms will be part of the acquisition conversation, either as buyers, sellers or both. DISA, Vertical Screen, InfoMart, EBI, Orange Tree, CERTN and Checkr.  2020 saw Accurate complete the integration of their Careerbuilder acquisition, don’t be surprised if you see them reloading for their next impactful acquisition.  Expectations on multiples of EBITDA are starting to get more realistic.  Multiples of revenue are a thing of the past and as the industry matures there will be very little differentiation, meaning they’re buying you clients and cash flow, no one is super special anymore….sorry!

2. Technology and Innovation – CRA’s and end users are getting crushed with mounting fees from courts, states and third party data providers like Talx where we’ve seen 200%  increases.  This is pushing innovation!  This is causing CRA’s to make economic decisions on what and how to sell various products.  For example: Your applicant is in NY and a NY OCA search is nearly $100.00, but your client really doesn’t even use the criminal records for the hiring decision, what should they do?  As screeners we need to force our clients to think differently and begin to use the tools that will enhance their hiring decisions.  Maybe finding a cheaper criminal alternative, adding more verifications or a social media search.  Now I know you’re saying to yourself, there is no criminal alternative in NY and you would be correct!  Be vigilant, there was no alternative NY criminal search yesterday, but there could be tomorrow.  Think. Outside. The. Box. Start to think about how you can create products and services to help your clients hire better people, faster.  This isn’t yesterday anymore, we have to think about tomorrow.  We’ve already begun seeing firms in Silicon Valley innovate like this.  CrossChq is finding new ways to do references.  Citadel is finding new ways to do verifications. Ferretly is doing social media screening differently than the competition.  CERTN has just raised 46 million dollars and you better believe they’re going to use this to find a better way to catch that mouse!

3. COVID-19 – Companies such as InfoMart, EBI, First Advantage, HireRight and others have either developed or are channeling COVID testing and contact tracing products, and they did it quickly.  Every single CRA had the clients, vendors and supply chain to develop these solutions and I stand and applaud those that executed on them.  I’m hoping the next pandemic is a century away but in reality there will be viruses that spread and people are going to react differently than they would have a few years ago.  These companies are well positioned to handle the next major virus crisis if and when that happens.

4. Social Acceptance – I don’t think that the use and application of criminal records in a hiring decision will be as socially acceptable tomorrow as they were in years past.  I stand by this statement, I’ve said it before and I’ll keep saying it.  End users will always order criminal record searches, the product will never go away but they will be less and less reliant on it in the future.  I think reference and validation services, social media screening, identity services and others becoming more and more important because of this.  I think it’s incumbent upon PBSA and CRA’s to continue to educate legislatures and the public at large that background screening is important, it saves companies from making the wrong hires, it mitigates risk in the workplace and it keeps people safe.  We have to keep this narrative front and center, it takes only one negative incident for the media and the social justice warriors to start a #hashtag or a movement that could significantly impact our industry.  Education is the key here and being as public as we can on why we do what we do is very important.

Ok, we are going to keep this at four for now, but I’m sure we will write about more in the coming months.  A few past predictions that have not yet bloomed but still may are; Blockchain and subscription based screening.  I still get lots of calls from entrepreneurs with ideas like validated employees and putting their results on the blockchain to make them portable.  I don’t see it happening anytime soon but there are people still wanting to do it and investors still willing to throw money at it.  Do I think it will ultimately happen and gain enough traction to be a real “thing” in the industry, NO, but I do think people will continue to try and someone could get lucky and do it right.  As far as subscription based screening goes, I do think it will ultimately happen and get enough traction to be something we have to compete with.  I still think this will be led by firms like Checkr and their acquisition of Themis last year and Rapid Court in 2020 is a great sign. 

Like my wife tells me, I’m rarely wrong (note: she has never said this) but I don’t intend on being 100% right with all of these, but they’re all possible.  Nick and I hope you all have enjoyed our 2020 COVID webinars and articles.  Like in the past we are here to help you innovate, market, hire and grow your screening firms.  As always, feel free to shoot me a message if you would like to chat about any of these topics or others.  If you enjoyed this please like and share it!