In this podcast episode, Max and Daniel Callaghan of Veremark explore the world of background screening for employment and how blockchain is making the process more secure and cost-effective for both job seekers and employers. They also highlight the problems facing the background screening industry and why background checks are important for employment in various sectors.
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In this podcast episode, Max Armbruster interviews Daniel Callaghan, the CEO of Veremark, a company that provides background checking and credential verification services. They discuss various aspects of recruitment, including the importance of background checks, the role of technology in verification, and the challenges of remote work.
What did this interview teach us about the use of blockchain in recruitment?
Daniel discussed the potential use of blockchain technology in the recruitment process, particularly in the verification of candidates' credentials and work experience. He highlights a few key points about how blockchain can benefit the recruitment industry:
- Streamlined verification process: Blockchain can make the verification process more efficient by allowing organizations to share and access verified data instantly. With a permission-based blockchain, all parties involved can access the relevant data on-demand while maintaining the required privacy and security.
- Enhanced trust and security: Blockchain technology offers a secure and tamper-proof way to store and share information. In recruitment, this means that once a candidate's credentials are verified and stored on the blockchain, it's nearly impossible to alter or forge the data. This increased level of trust can help reduce fraud and misrepresentation in the hiring process.
- Incentivized data sharing: Daniel mentions a consortium of organizations that uses blockchain to share verified data among its members. This model not only streamlines the verification process but also encourages organizations to share more data by providing rewards for doing so. The more data each organization shares, the more data it can access from others, creating a mutually beneficial ecosystem.
Overall, the interview highlighted the potential of blockchain technology in transforming the recruitment process by improving efficiency, trust, and security in candidate verification.
Three key takeaways for recruiters:
- Be thorough and consistent in background checks: Always perform comprehensive background checks on all candidates to ensure that they have the necessary qualifications, experience, and personal attributes for the role. Skipping this step can lead to hiring mistakes and potential legal issues.
- Leverage technology for efficient verification: Embrace digital tools and platforms that can streamline the verification process, improve accuracy, and ensure a secure way of sharing and storing information. This will save time and resources while maintaining a high level of trust in the hiring process.
- Be prepared for the challenges of remote work and global hiring: As remote work becomes more common, recruiters need to adapt their verification processes to accommodate candidates from different countries, education systems, and industries. This may require additional research, collaboration with international partners, and a willingness to learn about diverse cultures and backgrounds
Max: Welcome back to the Recruitment Hackers podcast. I'm your host Max Armbruster and today on the show, I'm delighted to welcome Daniel Callaghan, who's the CEO and founder of Veremark. Veremark is a Singapore-based, UK-based, I think - a little bit of both-based - background verification company that is using some cutting edge technology with blockchains - Blockchain security - to transact and to collect and verify data for candidates and for employers. And so I'm going to ask Daniel, a little bit - an introduction on the world of blockchain and permissions and how it applies to recruitment.
And, hope to educate myself and my audience in the process. So you're going to be Professor Blockchain, Daniel; I hope that's something you could at least pretend to enjoy for the 15 minutes of this interview.
Daniel: Sure, I'll definitely pretend to enjoy and perhaps pretend to know what I'm talking about as well. So -
Max: Excellent. Thank you. So, Daniel, I gave a brief introduction on your background. Perhaps - could you share with our listeners how you ended up starting a background verification company. It sounds like, not something you planned for when you went to university. Just one of those accidents in life?
Daniel: Yeah. One of those happy accidents for sure. So, hello, everyone. Thanks very much, Max for the invite. As mentioned, I was one of three founders of Veremark. Veremark is a global pre-employment screening and background-checking platform. We are both based in London and Singapore. What it's worth, we're a UK top company, but most of our operations are actually on a global scale. And we operate remotely as well. So who knows where we really truly headquartered these days? When we talk about pre-employment screening and background checking, what we mean is to say certainly, in the field and context of HR tech is, as you join a company, they may often be required, either through best practice of wanting to get it right or by regulatory requirements, to check that the person is fit and proper for the role.
That is to say, have they worked where they've said they worked? Have they studied where they've said they've studied? Do they have a criminal record of any shape or form? Are they politically exposed people? Or have they just been in the newspaper for generally doing stupid, and potential reputational damage and stuff? And they use us as a service globally to deliver all of those checks across 180 markets in the few clicks of a button. How did I get into it? Well, I personally have about 15 years in the world of HR Tech, I built one of Europe's first freelance marketplaces.
So I saw, when we were placing consultants into high-end consultancy roles around the world, that background screening was a real inconvenience then. I then had a brief spell on the digital innovation side for the world's largest recruitment company and saw how much of an inconvenience background screening and reference checking was on that side of things. And then ultimately, you know, realizing that the dissatisfaction in the market was as high as it was, there was this fantastic opportunity to help a company, you know, reshape and reform the market. And it's around that time that we saw the potential to introduce the new blockchain technology, which can really enable people to take and own and share their own verified data points with them as they go through it.
Max: So, I think you and I are about the same age and we've been in recruitment and sort of recruitment-related functions before we started our company. And I think that the biggest shock to the industry, or maybe the biggest entrance to the industry was around early 2000s or 2005-ish when LinkedIn started taking market share over the job boards. And it seemed like LinkedIn has - is sort of the death of the resume and sort of an end—could potentially have caused a threat to the whole background verification business because it's a place where you can go online, where people are not supposed to lie as much as they can lie on a resume because there are kind of - there's a bit of a - it feels like there's some level of social proof to your background.
But it's not enough. Right? There's a whole world of information that lives outside of LinkedIn.
Daniel: Yeah, I mean, LinkedIn is the land of fantasy, really, in many instances.
Max: I was fishing for a comment of that sort.
Daniel: Yeah. I mean, how many visionaries and such are there in the world, truly? You know, anyone can write whatever they like on LinkedIn profile, right? And often many people do. Equally, lots of people write whatever they like on a CV. So, we publish a report on how many discrepancies we find. And you'll find that around one in three, or depending on where you are in the world, there are definitely strong and regional differences. About one in three, one in four people would have lied or have a discrepancy appear on their CV. About 50% of those will be in where they worked, and 25% will be in where they have studied or what they have studied.
And it could be a minor thing like getting the dates of your employment wrong, or you know, extending it by a couple of months or six months or a year or wherever, to try and fill a CV gap. It could magically becoming a sales director as opposed to a sales manager. Or it could be trying to omit that, you know, you're not eligible for rehire, should I say. Whilst on CVs people, you find, let me put it this way, the diploma mill? Now the diploma mill market of fake PhDs and degree certificates is now globally worth $7 billion.
Max: Wow. So to rephrase that, there's $7 billion of revenue generated from fake diplomas.
Daniel: There's people paying $7 billion worth of it to diploma mills, to get fake certificates for their PhD or their master's or their BA,
Max: What a waste of money, they should just learn how to use Photoshop.
Daniel: Well, that's probably why they needed the fake certificate in the first place. But if you compare that the entire background screen industry is only worth 8 billion. The size of the problem of people obviously claiming what they - false truths or such in the world is a serious one. And particularly if you think about, you know, people who are building bridges, you know, civil engineers, nurses, doctors -
Max: Yeah. People with real jobs that could cost lives.
Daniel: Yeah, absolutely. And that's why background screening is an absolute necessity. Even in the normal world of all HR generally, you know, think about the damage you can have to have a toxic person with a violent history or, history of abuse of some sort in your organization; not be aware of him, and what the ramifications that could have from a virtual or real-world bullying scenario and such.
Max: I assume that you are an advocate for background screening for every company. I'm gonna go ahead and jump to that assumption. But are there some industries that, where - they're much more demanding than others? I imagine, you know, defense, security jobs, and then highly - jobs that - where you deal with, maybe in the medical sector. Any other categories I'm missing?
Daniel: Definitely. There are all the regulated sectors, as you mentioned, like financial services as well or such, where, you know, these companies have to do it by law, the government will dictate that they do this if they want access to the more open markets or more mature markets. And then also any businesses that are looking to be ISO certified, or SOC 2 certified will need, if they want to maintain their credentials or pass their audits will need to do background checks on their staff as well. So unfortunately -
Max: That's a lot. That’s almost like all the IT sector. Yeah, technology. You mentioned something about cultural differences with some countries, some areas, some regions having candidates who have a more vivid imagination, or as another way to put it is to say that these candidates are more socially upwardly mobile and kind of have that fake it until you make it mentality, to put a positive spin on it; because I don't think, I don't want to discredit their efforts entirely. It could come with good intentions to feed your family. And because, you know, you could, you know you could do it. So why not just say you can? Yeah, just to show a bit of empathy for that whole 30% of the world population, you mentioned. What are regions where you see this sort of behavior most prevalent?
Daniel: Because you're very right and we joked about it earlier, but there are - obviously, a degree is a piece of paper, it's a statement, obviously, of having achieved something. But equally, you get lots of people who are just as capable without qualifications. And societies still, for whatever reason, deems that the degree qualification is worth its merit. But the purpose of background screening is less about the actual qualification itself, and more about the integrity as to why or equally the person would have subsequently chosen to lie about it. And that's often you know - we talk about very much checking the claims credentials and integrity of prospective employees. Because if they're willing to lie about the small things, then what are the big things that they may lie about?
Max: So, just to stop you here for a second and we'll go back to the cultural question. On the integrity bit, that's really good insight, where often employers are - they want to measure integrity, but like, it's so hard to do in an interview, right? You can't just say, tell me how much integrity you have. Or ‘if you find this wallet on the floor, what do you do with it’ kind of exercise. Because everybody would know how to answer those interview questions. So this is a very good proxy to check integrity.
Daniel: Yeah, I mean, it's certainly a first hurdle they have to get through in many respects to see how they do. But to sort of marry that with the answer to your regional thing, it largely comes down to where the strength of the incentive lies. So when you talk about upwardly mobile people, then yes, actually, you find that the people who are coming from more emerging markets, they have a greater incentive to lie, right? So Singapore, as you know, is a very nice place to live. It has a very high standard of living, it also has -
Max: The weather is too hot.
Daniel: The weather is too hot, yeah. But the - it also has a very high bar to be able to get an employment pass or accepted for work, right. It's a very competitive job market. So actually, across the whole of the region, Singapore has the highest level of discrepancies. Because the incentive and you know, the expected level of competition, you know, the reward, if you do get away with the lie, is the greatest.
Max: Very counterintuitive. I would have thought that in Singapore, people don't lie, because they know they're gonna get caught. But it turns out, yeah, it's more of an economic incentive thing.
Daniel: Yes, exactly. And so again, when you're doing a credit check, you're not really checking if the person has good credit score, or companies aren't checking, they're checking, what is the risk that this person could be motivated to act inappropriately given the opportunities? And that's -
Max: Meaning if somebody is ladled with debt, you don't want to put them in charge of the cash register?
Daniel: Yeah. Exactly. I mean, certainly, along those lines. And that's what they will do it for - will be checking for. As opposed to did this person really get an A grade or a B grade and that university?
Max: Okay, well, thanks for the crash course on background screening. And yeah, the differences with the regions is interesting. So I guess if there's a strong economic incentive, people are going to be more likely to bend the truth. And so, what's the reverse of that? Where are environments where people are most honest and transparent?
Daniel: Yeah, well, we're very pleased to say that thankfully most of the world is honest and transparent right. So if there's only one in four that has - also more mature markets, like the UK for example, has a much lower rate of discrepancies. But even within the UK, it will vary by industry right. So actually IT and tech will have a higher default rate than say medicine and such. But even if we say it's one in three - one in four rather, that means three in four on random. The vast majority of people are still good and honest.
Max: And actually, for the one in three, maybe they just have a small case of Alzheimer and they just, they've got a couple of things wrong. No, no.
Daniel: Exactly. I mean, we are not grading the severity of the discrepancies here, we're just saying this is a mismatch data point from what we've already discovered at the source of information.
Max: Okay. Now, Professor Blockchain, what - how does this technology apply to your world? This is a technology blockchain which rose to fame through the rise of cryptocurrencies and Bitcoin and now applied across all kinds of industries. And why would a customer value your blockchain technology; what edge does it give them?
Daniel: So, the value to the customer is, in the first instance, relatively limited. What Veremark is really enabling you to do is, over time, give a lot of value back to the broader market in general. So, what we mean by that is to say, what we do is, we will run the checks, all the checks are completed. And as all the checks should be completed, we then take the verified data, and our data is verified at source. So it could be government records, it could be direct from the university and so forth. So that indisputable data that's been verified at source, that is non-subjective -
So it's very binary in its outcome; we then turn those data points into digital credentials. And those digital credentials get stored on the blockchain, which ultimately means, again, that they can no longer be tampered with. So that fact point is now uneditable. Because that is the nature of the blockchain, that once it's on there, that you can't really mess around with it. What that enables us to then subsequently do is give them access to that verifiable or ownership, if you will, of that verified credential, back to the candidate and back to the individual.
So then, as they move throughout their career they can own and take that access to their data with them. So subsequently, in this growing world of the gig economy, or project-based work, and so forth, when they are next asked to prove that they went to XYZ University, or when they are asked to prove that they worked with XYZ companies, those data points that have already been checked can just instantly be shared with the future prospective employer. And then for that future prospective employer, and for the candidate, they no - neither of them - no longer need to suffer the inconvenience of waiting 12 days for this data point to be checked.
Neither of them needs to suffer the inconvenience of paying an extra $20 per check, or such. That data is instantly transferable, is instantly trustworthy, because you can see the full digital audit trail of everywhere it's come from. And you can then, you know, it helps people share how good they are in a true format that has been verified by an independent third party, and get to work fast.
Max: So compare that to the world before blockchain and the encryption of that data. It was a world where there was - you wanted to start the background checks from scratch every time
Daniel: You had to start a background check from scratch every time. So whatever happens, whenever you're moving, you are encountering extra cost, encountering extra effort on both sides. And really it was the large incumbents in the market who were very happy about this, obviously, because every time you redo a check, you have to use them. So, it's obviously a great revenue stream for them. With Veremark, obviously, all of that repetition is eliminated. So what would have taken 12 days now takes 12 seconds.
Max: Okay. And are there different levels of - you mentioned, the data being on the blockchain being impenetrable and cannot be changed. So it's sort of an encryption mechanism for pieces of data. Are there different types of blockchain and permissions for those of us who are new to the field?
Daniel: So there are definitely - I mean, there's been an explosion of blockchains. Obviously, people are familiar or would have heard things like Bitcoin, but blockchain as an underlying technology, mindset or approach is not always to be associated with crypto. They're very different spheres; they are related, but you know, lots of crypto you run on blockchain, but not all blockchains are on crypto, if you understand that point.
Point being there are certainly lots of blockchains out there. You can ultimately have either open blockchains, which are things like Ethereum, which is: anyone can post and post data onto, then you'll have permission blockchains, which are essentially, perhaps networks of people who have decided to collaborate and work together. You might have three banks or four banks, working together as a consortium who create a blockchain to enable faster transactions. And then you can have entirely private blockchains, which could be, you know, obviously, singular to one company or such. Veremark, as it stands, operates on Ethereum but the keys and the access to the data, if you will, are owned by the candidate.
So it means that it ultimately becomes truly free from Veremark and we give the gift of data back to the candidate.
Max: Oh, okay. I thought that was going to be a private blockchain given Veremark is a private company, but I understand. So the data is owned by the candidate, and they have the encryption keys. And of course, they can - okay, got it. And -
Daniel: We say encryption keys and such but it's a very simple user interface. Imagine, from a very mild perspective, imagine just your apple wallet or such. That's how you access it and interface with your own credentials that have been verified and share them around. So it's not like you need to all of a sudden have a degree in computer science to figure this out.
Max: I don't want to go too deep into the economics of your business. But would it be possible in the future for an employer or a candidate to transact with this background verification at a reduced cost? Because it's already in the blockchain, and therefore you don't have to check the data again. And you were talking about the cash cow that this business had become where you started from scratch over and over again. So how do the economics work out over the next 5-10 years for the industry at large and then for your business in particular?
Daniel: Yeah. So I mean, we're, at the moment, we give that data and repeated check data away for free. We think we're at the advent of a whole category around credential management. If you look at companies who are now publishing certificates from their internal learning programs, or even in the world, or a lot of the world now has some form of digital certificate in the form of a COVID vaccine. We think that there's a big future for these digital credentials, where we're helping just to see the market and so forth.
Ultimately, our aim is to very much bring down the cost and the overall inefficiencies around doing these repeat checks. As a company, without all the legacy burden of an operational costs that our counterparts have, it means that we've already incorporated that into our model. But we want to make it as fast and as easy for people to prove how good they are, and to get the jobs that they want in the smoothest possible fashion.
Max: So the cost of - the unit economics over time of the background check should come down as more and more candidates become fluent and how to use their existing credentials.
Daniel: Yes. Absolutely.
Max: Okay. And has that downward price pressure started to affect the big boys?
Daniel: I think we're way too early for -
Max: Too early for that. Okay. Protect your margins in the meantime, and enjoy the ride. And what do you think about - you mentioned a third - The second type of blockchain you mentioned was like a network blockchain where you have multiple people participate in a network, and then they validate each other's data, I guess. Would that apply for background checking as well? Where you could say, you know, talk to my three former employees and - or employers, and they'll tell you about me and something like that.
Daniel: So something like that; there's certainly instances - again, really, obviously, remember, when people talk about blockchain, they think largely about the world of finance and payments. Actually, the world of work and career data is extremely applicable to that as well. So you now have a consortium that is called the Velocity Network Foundation as one example. They have brought on board, including Veremark, you know, maybe 20, or 30, of the world's leading HR providers, HR tech providers, that will range from companies like SAP; the Student Clearinghouse in the United States, which holds all of the everyone's University graduate graduation data, ATS - ADP, you know,
a whole lot of - a whole array of sort of the good and the great, and they have all come together to work out ways in which, if you are part of this consortium, then you can access each other's data. It will get published into this permission blockchain. Everyone can therefore access it instantly, on-demand with the appropriate permissions and such being given, but access it instantly without having to do the legwork or the manual verification process to get. And in that instance, in there, you know, there's a reward mechanism for sharing data amongst the parties. So the more data you share the more data in fact can you know, you've
Max: Okay. So that's also very early stage. It sounds like it's more like a bank than a business at this stage.
Daniel: Yeah, it's an exciting collection of organizations in the United States. It's up and established and doing very well. But if we really think about it, blockchain is now - I don't know how old it is, they say ten or such, maybe ten - but it's only starting to reach a level of professional credibility or corporate acceptability in the last 3 to 5 years. And even still, the use case remain quite, the applied use cases remain quite limited.
Max: This makes me want to go back to where I started this discussion. I talked about LinkedIn, and you would think that LinkedIn has, you know, within professionals, the greatest network effects you can imagine. And yes, it is the land of fantasy, which is the most common attack that is thrown at them. The most common criticism is that it's just a place where people just tout their great accomplishments all day. And you would think that they've got the capability and the motivation to change that, especially now that they're going into the training and learning and certification business.
Do you think that potentially, you know, they're gonna start to apply these types of technologies to LinkedIn? And that this could move them towards your industry a little bit? Or do you think that there's too much pull towards the social media part of it?
Daniel: I think, I mean LinkedIn is -
Max: I know, you're not, you know, board member of Microsoft, but just imagining.
Daniel: No, I don’t think LinkedIn would want to get into this space, particularly. They are already, I mean, you are able already to upload certifications and accreditation to your profile on LinkedIn. You know, we would certainly love to partner with them if people wanted to verify like a blue verified Twitter account or such, the blue badge on Twitter. I think there's certainly options for that to happen. But again, it will only ever be without them working out how to, you know, there's a very big difference between social proof and then actually, you know, fundamental facts or you know, which is verified by appointed authority.
So, even if I had six people who confirmed that I used to work at Adecco and such. Is that still the same as getting the ultimate verification from the HR department within Adecco who has the pure data balance? And you know, what would an auditor or regulator accept as verification?
Max: Yeah. There’s a huge leap from where they are to even basic authentication. Hugely.
Daniel: But I think LinkedIn has always been touted as either the great partner or the great killer to pretty much every HR tech.
Max: They could take over the world if they just put their mind to it.
Daniel: Yes, they continue to do a fantastic job, but I think that there's lots of areas where they can certainly be involved in the space, but wherever they're - actually doing the full verification is probably outside of their desire.
Max: Yeah, it's probably fraught with also a bit of a public policy nightmare. If they make a mistake, it’s like, ‘you removed all of these career opportunities from me because you got my background wrong’. Those stories would start to come out. So, yeah, I can imagine it being treacherous grounds. Talking about treacherous ground, my last question, one that I ask all my guests on the podcast, is to think back to a time when they made a hiring mistake and without naming anyone in particular, but thinking back in your recent or your long, long forgotten past.
About someone you hired, that really didn't work out. And this is so that we can learn from our mistakes and in this case, from your mistake. Does something come to mind?
Daniel: For sure. And it's not a pitch for Veremark, although highly related. Right. I mean, there was a - I think it's quite, unfortunately, it was quite common to make hiring mistakes, but we hired a senior sales leader. He had all of the right logos in all of the right places. There was a time that the business was doing relatively well. We were trying to hire at speed. There was a sense of urgency to get this sort of leadership role filled, and ultimately we proceeded without doing references or background checks.
Max: You did?
Daniel: Yeah. This is not in Veremark. This is in -
Max: Okay, before. Okay. At Veremark, that would be terrible.
Daniel: It would. But it certainly played a part in when we were the three founders to the business. The root cause of trying to help people hire with greater simplicity and confidence or the desire to help founders not make those or any kind of businesses, make those - the same mistakes that we made was definitely an underlying benefit and something that we got quite excited about, because doing a reference takes time. Right. I mean, you got to phone the people. It's 40 minutes in the call. You got to schedule it. Often you just say it's okay. I trusted my gut. I like the guy in the interview.
Max: Yeah. Nobody gets praise or kudos or recognition for having done a reference check. It's kind of like yeah, it's not a high-profile activity.
Daniel: So but if you don't do it and you get it - you know, if you get it wrong, then, you know, in this case, we found out, unfortunately, that had we done the references, we would have you know, we certainly wouldn't have probably made the hire in the first place, so -
Max: So what would the references have revealed in this case?
Daniel: It's not worth going into, but ultimately, all was not as it should have been.
Max: It was, you mean, like talking to the previous managers or you mean something worse? Criminal activity. Or -
Daniel: No, nothing so dark. But certainly speaking to the previous managers and investors of their last company revealed a very different success and track record than one was led to believe.
Max: Okay. So there are psychopaths out there who will tell a beautiful story completely out of fantasy land. You don't have to look very far. Just log on to LinkedIn. See for yourself. Thanks a lot, Daniel, for sharing and for coming on the show and for educating me and the audience on the beauties of Blockchain.
Daniel: My pleasure. Thanks very much for having me, and I hope everyone enjoyed the chat.
Max: That was Daniel Callaghan from Veremark giving me some level of reassurance that the world has not completely shifted to the blockchain yet. It's still a new technology and what it can do for the recruitment industry, for the most part, is still yet to come. It's a land of opportunity where we can hope that background verification will be faster and cheaper in the future. I hope you enjoyed that interview and that introduction to this technology and that you'll be back for more. Please remember to share and subscribe.
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