The Truth About Reference Checks

Most people don’t realize that it is probably against their company’s policy to give a reference, either good or bad, on a former employee,.  Some people think it is illegal to give a negative reference, but that isn’t quite the truth.  References are legal, but giving a negative reference can leave a company, and the employee giving the reference, open to a defamation of character suit.   As a result, most large companies have a policy that their employees should not give any references at all.

This post is about personal references, not criminal and financial background checks.

We all know that most companies request a potential employee to provide the names of references.  Under federal law, SOX (Sarbanes-Oxley), companies are required to conduct due diligence on a potential hire. As a result, most companies, make reference calls to ask about experience(s) with the candidate.  They then make notes on those calls and file them away.  Nothing more.  Rarely does something negative show up on a reference call, especially since the references are generally the names provided by the potential employee. 

The best references tend people who might know the candidate and whose names have not been supplied by the candidate. However, there is a big danger in contacting these people.  Unless they have had direct experience working with the candidate, they often don’t have full information and much of what they have to say is hearsay and based on rumor or third-hand information; unfortunately these people will provide this information as absolute fact..  I have seen really good and qualified candidates get dinged because of this. I had a recent case where someone told a reference an entirely incorrect  story about a candidate being let go from a former employer (fortunately, my client sensed that something was missing from the information and asked me to check it out. I was able to uncover the full and truthful story.).  Consequently, the first question which must be asked of these people is what their working relationship is/was with the candidate; did the candidate actually work with them?

Ironically, few references deal with the issues that candidates are being asked to solve.  As a recruiter, we often do references.  I always ask my clients if there is anything specific which the company would like me to check; most times companies just ask me to get a general reference without any specifics. For instance, if a company knows that the potential hire has to deal with difficult people, a good reference should check to see how this candidate handles difficult situations and people; the reference should provide detailed specifics on this issue. 

A very senior manager recently told me that he personally rarely asks for references at all, because people don’t give names of those who would speak badly of them.  (Years ago, I actually was given a name of someone who spoke badly of a candidate who he had previously fired for cause. He was shocked that the candidate had given his name.  I must say, that with hundreds of references I have obtained, that only happened once.)  However, as a result of Sarbanes Oxley, publically held companies and their subsidiaries need to show that references have been checked.  There are some appropriate SOX applications for smaller, non-public companies so they also need to conduct reference checks.  

There is another side to this issue.  If references aren’t checked, a company can end up with a person like one I have been following for about twelve years.  In that time he has had about 14 jobs and has been fired from every one of them, for cause.  I am told he is a liar, an expense cheat and a bad account person, but he is good looking, glib, charming and interviews perfectly. He interviews so well that people trust him, like him and don't feel that references are necessary.  However, if he does supply reference names,  I can’t imagine who these people are or what their working relationship with him could possibly be.