Question

Carefully checking suppliers’ references is one form of risk management. What risks does reference checking protect against?

Answer 1

In business making decisions without evaluating all the facts can generally lead to expensive mistakes. There is a balance between undertaking core profit making tasks and following an often costly recruitment process. It is the responsibility of the hiring manager to ensure the information surrounding a candidate has been sufficiently acquired and vetted prior to making a job offer.

Time and time again businesses will fail and make bad hiring decisions on the basis of something that was overlooked in the recruitment process. Usually the first quality measure that is left out is the reference check.

One of the primary reasons for undertaking a reference check is to avoid being blind-sided by an employee that is not willing or capable of doing the job that they applied for, but their application suggested otherwise and they were interviewed for for the role.

Information Gathering

If you have worked in sales or ever done a presentation then no doubt you have walked out of a meeting after doing very well and suddenly realised that you missed parts of your pitch out. What makes you think that it is any different for even the best candidates at interview?

Employment reference checks are not witch hunts – you should never approach them to see if you can dig up dirt (more on that further down). Often candidates in their eagerness to present themselves might omit details about key experiences that a skilled reference checker might pick up.

Reference checking is an objective evaluation of an applicant's past job performance based on information collected from key individuals (e.g., supervisors, peers, subordinates) who have known and worked with the applicant. Reference checking is primarily used to:

• Verify the accuracy of information given by job applicants through other selection processes (e.g., résumés, occupational questionnaires, interviews)
• Predict the success of job applicants by comparing their experience to the competencies required by the job
• Uncover background information on applicants that may not have been identified by other selection procedures

Job applicants may attempt to enhance their chances of obtaining a job offer by distorting their training and work history information. While résumés summarize what applicants claim to have accomplished, reference checking is meant to assess how well those claims are backed up by others. Verifying critical employment information can significantly cut down on selection errors. Information provided by former peers, direct reports, and supervisors can also be used to forecast how applicants will perform in the job being filled. Reference data used in this way is based on the behavioral consistency principle that past performance is a good predictor of future performance.

As a practical matter, reference checking is usually conducted near the end of the selection process after the field of applicants has been narrowed to only a few competitors. Most reference checks are conducted by phone. Compared to written requests, phone interviews allow the checker to collect reference data immediately and to probe for more detailed information when clarification is needed. Phone interviews also require less time and effort on the part of the contact person and allow for more candid responses about applicants.

Reference checking has been shown to be a useful predictor of job performance (as measured by supervisory ratings), training success, promotion potential, and employee turnover. As with employment interviews, adding structure to the reference checking process can greatly enhance its validity and usefulness as an employee selection procedure. Strategies for structuring reference checking include basing questions on a job analysis, asking applicants the same set of questions, and providing interviewers with standardized data collection and rating procedures.

Conducting reference checks can reduce the risk of lawsuits for negligent hiring - the failure to exercise reasonable care when selecting new employees. Providing accurate information when called as a reference for a former employee is equally important, but many employers refuse to give negative information about former employees, fearing a lawsuit for defamation. This is generally not deemed a serious problem for Federal reference providers and reference checkers because of legal protections provided under the Federal Tort Claims Act.

Considerations

• Validity - Reference checks are useful for predicting applicant job performance, better than years of education or job experience, but not as effective as cognitive ability tests; Reference checks can add incremental validity when used with other selection procedures, such as cognitive ability and self-report measures of personality; Adding structure (as is done with employment interviews) can enhance their effectiveness
• Face Validity/Applicant Reactions - Some applicants may view reference checks as invasive
• Administration Method - Reference checks are typically collected by phone using a structured interview format; Written requests for work histories typically result in low response rates and less useful information
• Subgroup Differences - Generally little or no score differences are found between men and women or applicants of different races; Employers should be especially careful to avoid asking questions not directly related to the job
• Development Costs - Costs are generally low and depend on the complexity of the job, the number of questions needed, competencies measured, and development and administration of checker/interviewer training
• Administration Costs - Generally inexpensive, structured telephone reference checks take about 20 minutes to conduct per contact, a minimum of three contacts is recommended
• Utility/ROI - Used properly, reference checks can reduce selection errors and enhance the quality of new hires at a minimal cost to the agency
• Common Uses - Best used in the final stages of a multiple-hurdle selection process when deciding among a handful of finalists