Attracting and hiring top talent remains one of the biggest concerns of CEOs in 2020, according to the Conference Board. Hiring is much different than it was 10 years ago, and with the onset of the current pandemic, different than it was even 10 weeks ago. Candidates tend to have a greater number of roles and past employers, more varied educational backgrounds and gaps in their employment histories for any number of reasons. And the cost of a bad hire can be staggering, with estimates ranging from one-half to two times the employee’s annual salary. So a 100-person company that offers an average salary of $50,000 could incur turnover and replacement costs between $660,000 to $2.6 million per year.
We all know that prehire due diligence is vital to reducing the risk and cost of a bad hire, and a key component of that diligence is the reference call. Too often, in the race to hire, companies treat referencing as a formality, or forgo the process altogether. Referencing is often neglected for any number of reasons. Internal stakeholders may want a hire completed quickly, or an HR associate may just be looking to tick the boxes. Occasionally, an executive may make an offer of employment on the spot, and the referencing process is simply ignored. In each case, employers have missed a crucial opportunity at their peril.
Effective referencing begins long before the call
First, determine what you are trying to accomplish with the call. A thorough reference call looks for information on potential fit, strengths and limitations, past performance, and any challenges faced in prior roles. Seek internal input from the hiring principal and those who interviewed the candidate. Are there any lingering questions or red flags that need further exploration?
Make sure to develop a written list of questions to ask every reference to ensure consistency. Then, check that the candidate has given a full complement of individuals to contact. The most fruitful reference list should include past employers, supervisors, clients, former colleagues and peers. And the timing of the call is critical. It should occur early enough in the process to be relevant to the decision to hire, rather than a “to do” that gets lost in the rush.
It’s all about who you know
At the outset of the call, make sure that you have enough time for a proper conversation. An effective reference call takes time, and a quick chat that ends with “He’s a great guy” or “She’s top-notch” is of little real use. Get a clear understanding of the relationship between the reference and the candidate. Ensure that they are the right person with whom to speak. Pro tip: Do not be deterred by human resources. Keep trying until you find the right person in the organization who can speak knowledgably about the candidate.
Put the reference at ease
Once you have the right person on the line, set the tone by putting the reference at ease so they are in the best frame of mind to share their honest impressions. With a bit of guidance and reassurance, even references who “stick to the script” will provide intelligence that can be illuminating and critical to making the right hiring decision.
Start by discussing the importance of the reference process — you are contacting the candidate’s references to give the candidate the best chance of success in their new role. Compliment the candidate — you are looking for a successful fit, and you believe this candidate might be it. Describe the role, and be as specific as you can about the responsibilities, expected deliverables and work environment.
Let the reference explain the kind of culture in which the candidate may be most comfortable. Often, an objectively good candidate may simply not be a good fit for your firm. Remember to use the same consistent list of questions for each reference. This will give you a good baseline to compare responses.
Make sure to use your best interviewing techniques. Be conversational. Ask open-ended questions, and use silence to your advantage. Listen patiently, and fish for something deeper when you can. Don’t only confirm positive traits or infer the answers you want to hear – this can be very tempting when a candidate appears to be the perfect fit. This is particularly true when an internal stakeholder wants to push a hire through quickly.
Everyone has both strengths and weaknesses. Explore both (e.g., if a reference is eloquent about how well a candidate follows directions, perhaps inquire about their ability to work independently or delegate). References are primed to praise, but they are not primed to lie. You’ll get the best information if you know the right questions to ask.
Hit the right end note
End your call by thanking the reference and asking if you can call back if you need anything else. If an outstanding question comes up, don’t hesitate to pick up the phone.
Don’t gamble with your most important hires
Proper referencing is crucial, and devastating results can occur when candidates are not properly vetted. As a professional in this field, I have heard just about everything from a candidate-supplied reference: “He’s one of the most talented professionals I’ve ever met, but he had real trouble handling stress” or “She was the just the nicest person you could ever meet, and she accomplished so much with us. It’s such a shame that she didn’t have better judgment.”
In my experience, about 30% of reference calls result in “red flags,” so getting it right is paramount. Referencing is a learned skill. If you don’t feel like you have the internal capabilities to effectively reference, you may consider using a professional referencing service on your next senior candidate. An independent, specialized firm can make professional reference calls and deliver the peace of mind you need when making your most important hires.
Hiring can sometimes feel like a gamble. But with effective referencing, it doesn’t have to be.
Michael Ellenhorn is CEO of Decipher Competitive Intelligence. We use business intelligence to lower talent risk/cost and empower better decision-making.