Check Those References

After spending great time and effort to identify a top candidate and present that person with an offer of employment, many companies have a tendency to rush or forgo the last, crucial step—the reference check.  Reasons why vary, but often it’s because the hiring manager thinks (cynically) that a reference check won’t produce any useful information, so why bother?

Nothing could be farther from the truth.  Some human resources experts, such as Bradford Smart[i], think that reference checks are so important that a company should speak with every supervisor the candidate has worked for in the past ten years!   Needless to say that approach is outside the norm of most companies, who typically conduct at least three reference checks as a condition of employment.

On the flipside, you (or your colleagues) may be asked to give a reference on behalf of a former employee.  Can this create legal liability for your company?  What are best practices for giving references?

This article is a discussion of those issues, broken down into two parts:  Conducting References and Giving References.

CONDUCTING REFERENCES

What is the goal of reference checks?

The number one reason for conducting reference checks is simple:  “Hiring the wrong person is an expensive mistake,” says Claire Pressman, President of References and More Services Ltd.  Claire conducts reference checks on behalf of clients to confirm the work history, educational background and criminal record of a candidate.  She notes that people will often stretch the truth about their educational background by, for example, claiming to have an MBA, when that person is actually a couple of credits shy.   Misrepresenting your education or experience is a serious red flag that goes directly to the integrity of the candidate.  It goes without saying that it is much better to find out that your prospective employee is dishonest before you hire the person than after.   Without a reference check, it is easy to miss serious red flags.

Areas to Question

Claire Pressman notes that it is vitally important to understand the job requirements and culture of the workplace.  This means that it is important to sit down and think through both aspects and then to tailor questions that reveal whether the candidate has both the skills and the personality to thrive in your corporate environment.   If you have a hard-driving corporate culture, you might not want to hire a laid back person.

Asking questions pertaining to skills and experience is generally straight forward.  Defining your culture might be a little tougher.  Asking questions to determine whether someone will fit the culture might be even tougher.  Our suggestion is to lean on your human resources professionals to help you develop the types of questions that will provide you with the best picture of both your culture and how a specific candidate will fit with that culture.

Limitations of References

Although most people won’t put forward a referee who will say negative things about the candidate, by gently probing, the reference checker can often gain a much better understanding of the candidate.  What are the candidate’s strengths?  What are her weaknesses? In what type of culture will the candidate thrive (e.g. will he or she thrive in an intense environment)?

All of these questions are crucial to understanding whether you are hiring the right candidate.  Furthermore, after the reference check, you may decide that the candidate isn’t perfect, but with the proper coaching can become an excellent employee.   All of your questions are designed with one thing in mind: to minimize the chance that you’ll make a bad hire.

Additionally, in rare occasions, a referee might actually say something negative about a candidate.  This is obviously valuable.  But more often, a referee will simply narrow the scope of what he or she is willing to talk about.   This is a flag to heed.   You must gently probe for the reason why a referee is unwilling to answer certain questions.  It may be that the referee genuinely does not have knowledge about the particular question.  It also may be that the person would rather say nothing than say something negative.  Depending on what information you are seeking, the unwillingness of a referee to answer a question may be a huge red flag.

Using Professionals

You can also consider using a professional reference checking service to conduct your references. This may be necessary if you must conduct criminal background checks.  Additionally, a professional reference checker can help you define your culture and ask specific questions designed to determine whether the candidate is a good fit.  Although there is a cost associated with hiring a professional reference checker, this cost is usually very small compared to the cost of making a bad hire.

GIVING REFERENCES

Michael Sherrard of the employment law firm, Sherrard Kuzz LLP, says, “There are benefits to seeking and giving references.”  Most importantly, it is to your benefit to be able to ask a former employer to give you an honest assessment of a candidate that you would like to hire.  You, therefore, can’t in good conscience refuse to grant another company a reference for persons that you once employed, otherwise the whole system, a benefit to everyone, breaks down.

Yet some companies have a “no references” policy, presumably aimed at reducing their potential legal liability associated with giving references.   For starters, one would think there are thousands of references conducted every business day in Canada.  Yet, there are few, if any, reported cases of a company being sued for giving a reference.

That doesn’t mean that caution is not merited.   There is certainly the potential for liability on two fronts: first, from a candidate who loses a job opportunity based on the “poor” reference that you gave on his or her behalf; and second, from a company who hired your ex-employee only to find out that you gave a glowing reference for a candidate that didn’t deserve it.

There are a couple of simple steps that each company can take to protect itself from even remote liability of giving a reference.  First off, as Michael Sherrard cautions, in the case where you are being asked to give a reference, you should always seek consent in writing from the candidate to disclose information.   Additionally, in the case where you are conducting references, you should seek written consent from the candidate to check the candidate’s references.

As Thomas Gorsky, a partner at Sherrard Kuzz LLP, notes, getting consent is especially important when conducting criminal background, professional background and educational confirmation checks.  Again, there is only a small chance of ever being sued over references, but a written consent in the file can be of use if (in the very remote instance) a candidate tries to sue you for causing him or her to lose the opportunity.   You can point to the consent and say that the candidate authorized you to give or conduct a reference.

Second, in order to reduce potential liability vis-à-vis other companies, be honest with the person asking the questions.  This includes truthfully exposing a candidate’s warts.   To be clear, this is not about giving a qualitative assessment (i.e. the candidate was a “good” employee or an “average” employee), but rather about revealing issues that caused you terminate the employee.  For example, maybe the employee was consistently late and this factored into your decision to let the person go.  This is something you should reveal to the person asking the questions.

CONCLUSION

Openly sharing information between companies is an important risk-reduction practice aimed at preventing costly bad hires.  In order for the system to work, companies should focus on the best practices outlined above.  Always be sure to seek written consent before giving a reference on behalf of your ex-employee.  Always seek written consent before conducting reference checks on your potential candidate.  Finally, always be candid when giving a reference.