Bill James revolutionized the way that people look at baseball players. Sabermatricians, as his followers would later be known, felt that there was a direct correlation between a player’s past and future performance. Instead of relying on the subjective judgments of baseball scouts, James compiled objective statistics and analysis to measure a player’s performance, thus helping to predict future performance.
A great example of Bill James’ method happened in 1996, when Baltimore Orioles slugger Brady Anderson hit 50 home runs in 687 plate appearances (equivalent to one home run for every 13.7 plate appearances), while in his previous three seasons, he hit a total of 41 home runs in 1,846 plate appearances (one home run for every 45 plate appearances).
It’s clear that Anderson’s past performance did not correlate with his breakout 1996 season, and sure enough, he regressed back to one home run every 40 plate appearances for the remainder of his career.
Anderson was long suspected of using steroids for the 1996 season, but those reports have never been confirmed. Without analyzing historical statistics, it would be difficult to see the uniqueness of that 1996 season.
How does analyzing “past performance” in baseball relate to a background check?
Collecting and analyzing information based on a baseball player’s past performance is similar to what a private investigator does when conducting a background check. Objective information is collected about a person’s past through open sources and public records to help clients make more accurate predictions about the future. Historical bankruptcies, financial difficulties, criminal acts, a litigious past, misrepresentations and regulatory sanctions are all indicators of potential problems down the road.
Past performance issues in a background check
There were many “past performance” issues that should have been major red flags in Bernard Madoff’s Ponzi scheme, including a two-person accounting staff overseeing a $50 billion firm, a highly secretive investment strategy and investment gains that neither Wall Street professionals nor Harry Markopolos, the Madoff whistleblower, could recreate.
Other examples of “past performance” as an indicator of the future can be found in our recent post about 11 convicted Ponzi schemers who had already served jail time for other frauds or in the ACFE’s recent post about Barry Minkow’s recent criminal charges.
Just like in baseball, there is no one piece of information or statistic in a background check that can help predict the future. In fact, there are multiple layers of information over a period of time that must be analyzed to fully understand someone’s past behavior.
When trying to learn more about a person’s background, if you think that a few reference checks, Google searches, a referral from respected members of the community or a couple of face-to-face meetings are the most reliable predictor of future performance, you need to take a page from the great Bill James and evaluate past performance.
Thanks to Seth Godin’s “Bill James and you” for the brilliant idea.