Unhealthy Reference Checking Practices:The Silent Killer of Your Bottom Line

The failure rate of executives coming into new companies is nearly 50% typically stay on board between 12-18 months. Hire Slow, Fire Fast, is not the rule of thumb followed by the majority today. The costs of failure rates are mind blowing yet they run rampant. A mid-range hire costs at least 15x the base salary and the higher the level, the worse it gets. Costs include duplicated recruiting fees, repeat hiring processes, training and on-boarding, total compensation paid, severance, and possible litigation fees. Those costs are nothing compared to the opportunity loss, and it is virtually impossible to quantify the disruption. To reduce your exposure and increase profitability, you must lose the ineffective and inefficient standard of reference checking.

11 THINGS TO CONSIDER

1. A HEALTHY Reference Checking process is the most valuable component of the hiring process yet the most shockingly underutilized. Reference checking, in most organizations, is ineffective, inefficient, and broken.

Performing reference checking to elicit feedback from the most relevant and credible professionals who know the prospective hire best, and have worked closest with them in the past, is one of the most critical components of the hiring process yet the most shockingly underutilized. Hiring professionals who do not have a healthy reference checking process in place believe it is a waste of time and treat it as perfunctory, or a mere formality at the end of the interview process, and some never even bother. In this case, they are right…it is a waste of time.

2. A successful Reference Checking process is only as good as the person driving it.

When you consider the extensive costs associated with a bad hire, this is one area where reference checking and expertise in driving it go hand and hand. There is no substitute for experience and emotional intelligence when it comes to reference checking. A successful process requires the individual driving it have a solid understanding of the role, culture of your organization, and most importantly, the big vision. In addition, they must have the appropriate savvy and personality to probe, interpret tone, and interject when necessary. The key is to get people to open up, and it’s not that difficult when you have emotional intelligence. The more comfortable you can make someone feel, the more they will share. Not everyone has the knack for this, and when the process is delegated to someone lacking experience and/or EQ, it may very well be a waste of time.

3. The investment of time to perform high caliber Reference Checking far outweighs the ripple effect of a bad hire.

My theory on why reference checking is often minimized and treated as cursory is that the people who are most qualified to manage it typically do not have the time to invest. They are already at full capacity and typically in reactive mode. As a result, reference checking, if done at all, gets delegated to individuals or departments lacking the requisite expertise to manage it, and ends up slipping through the cracks, ultimately killing the bottom line. When weighing the investment of time to ensure a prospective hire is fully aligned with your culture and best suited for a role, against the ripple effect of a costly and disruptive hire, it’s shocking how many professionals don’t take the time to think about it. One bad hire can easily end up costing millions of dollars.

4. Waiting until the end of a hiring process to perform Reference Checking is a huge mistake.

The cause of many hiring mistakes can be attributed to performing the reference checking after a decision to hire has been made. It should be the opposite: a decision to hire should not be made until after the reference checking is finalized. You must be mentally prepared to eliminate a candidate and go back to the drawing board if the result of the reference checking is less than stellar. If you are not in this mindset, you will only hear what you want to hear, and you will be flirting with disaster.

5. Healthy Reference Checking is performed from a 360 perspective.

This approach allows you to identify individuals who can provide different viewpoints and perspectives from people who have first-hand knowledge and experience working with the candidate in a variety of professional relationships. It is important to secure current and previous managers, direct reports, colleagues, clients, if applicable, and high level constituents and/or board members. There should be at least 8-10 references called.

6. Hiring based on a resume, interview, and instincts is flirting with disaster.

Listening to that inner voice or gut feeling can be powerful, and let’s face it, some people are masterful at interviewing. They can fool even the most skilled interviewers. When it comes to hiring decisions, a resume, interview and instinct is not enough. Don’t skip the reference check. The greatest indicator of what someone WILL do is what they HAVE done and when you weigh the risks of a bad hire, going with instincts alone is incredibly risky. When Marissa Mayer was CEO of Yahoo! and hired COO Henriqe De Castro from Google without performing a reference check, it ended up costing Yahoo! $109M. (that’s more than 1/10th of a billion dollars on ONE SINGLE hiring mistake).

7. Culture fit.

This is critically important because candidates who meet all of the job requirements may not be a good match in terms of culture fit. It is essential to invest the time to probe in this area. You should be able to effectively communicate what your organizations culture is to establish whether the core values of the prospective hire are in alignment. Consider putting concrete limits on how much fit can influence your hiring decision.

8. The individual performing the Reference Check should be objective and unbiased with no skin in the game.

Many candidates come through external recruiters, and you assume that since they are receiving a fee on anyone you hire through them, they should be accountable for this process. They should. However, to completely eliminate any and all conflict from the equation, it’s a good idea to manage this process in-house or delegate it to a neutral party with no skin in the game. This will eliminate the potential for conflict of interest.

9. Most hiring professionals accept names provided by the prospective hire with no questions asked.

I’ve rarely seen a prospective hire challenged on the names they’ve provided. This is one key area that can uncover red flags even before the reference checking begins. As an example, the prospective hire has ten years of experience and has worked for three different companies, yet the names they’ve provided do not include direct reports from any. If the subject of relationships with previous managers hasn’t come up during the interview process, now is the time to bring it up and it’s well worth asking the question. If something doesn’t make sense, there’s usually good reason.

10. Top reasons for hiring mistakes.

Sense of Urgency to Fill Seat

Settling Due to Poor Talent Selection – Choosing the Best of the Worst

Unhealthy Reference Checking, or Skipping it Altogether

Unclear Job Specifications

Ill Prepared or Unstructured Interviews

11. Speaking live with individuals has huge advantages over a web/email Reference Checking process.

An email or web based Reference Checking process is convenient, however you lose the valuable opportunity a live conversation offers. This includes the ability to probe, interpret tone, and interject. Again, the more comfortable you make someone feel, the more likely they are to open up. The ability to gauge enthusiasm in someone’s voice, interpret tone, listen for pauses, are like gold when eliciting feedback. An email or web based solution can never compete or replace this.

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