Reference Checks are quite possibly the original background checks! Whilst extensive background checking being undertaken on candidates is something that has developed from largely unknown to widely accepted in recent times, checking references has long been part of the assessment process for tenancy, lending, business partnerships and of course, that all-important hiring decision.
According to Google, the dictionary definition of a “reference” is “the use of a source of information in order to ascertain something”. By extension, a reference check is utilising an individual (the referee) as a “source of information” to “ascertain something” in relation to the person on which the reference check is being undertaken.
As a background checking company, PeopleCheck’s expertise is on reference checking for employment purposes, so this UpClose will focus on this particular application of reference checks. Specifically, we will look at the why, when, what, who and how of reference checking by addressing the key considerations when implementing a reference checking program in an organisation.
Why reference check?
As so aptly said by Dr. Phil, “the best predictor of future behaviour is relevant past behaviour”. The intention of most reference checks for employment purposes is generally consistent and two-pronged; seeking to confirm or identify positive traits and behaviours of the candidate (to assess potential positive impact to the employer); and seeking to identify negative traits or past behaviours of the candidate (to assess potential risks as part of the hiring decision).
However, the reasons behind references being undertaken differ significantly depending on an organisation’s approach, industry and types of roles, and vary to include:
- Confirmation that there is no “skeleton in the cupboard” that might impact making an intended offer of employment to a candidate;
- Seeking to confirm a candidate’s experience and skills in the specific role they are being recruited for. Eg questions around particular technical skills-sets the candidate needs to hold;
- Ascertaining a candidate’s cultural fit within an organisation or specific work environment;
- A focus on the candidate’s role in the context of others where they are being inserted into a team, such as managerial style and experience;
- Determining approach for hiring managers in terms of management style and optimum factors for the candidate to flourish; and
- Compliance reasons, such as the reference checks mandated by regulatory authorities like the ASX (where Directors must have their character and experience confirmed), ASIC (which requires two business references using a pro-forma template) and APRA (where the candidate must be confirmed as “fit and proper” to be appointed to a Responsible Persons role).
When should reference checks be undertaken?
A decision should be made regarding the timing and intended use of reference checks. For example, will these form part of the initial search and selection process? Or will this be undertaken once a contingent offer is made or probationary period has commenced, perhaps as part of a wider background check for the candidate that utilises other screening tools such as medicals, psychometric testing etc? There are pros and cons to both options to consider.
Undertaking references prior to a hiring decision ensures that awaiting results of reference checks does not interrupt the recruitment process and enables an objective assessment of all candidates at the same phase. However, many candidates will not be willing to provide a current manager as a referee without an employment offer in place, meaning that referees nominated at this point can often be peers or indirect supervisors, leading to references that focus more on the candidate’s character rather than professional working experience and skills.
Undertaking references once a contingent offer is made or during the candidate’s probationary period can be more cost-effective, as the number of checks required is limited to the selected individual/s as opposed to a wider pool of potential candidates. However, awaiting the results of reference checks at this point can sometimes delay the recruitment process, particularly in instances where a candidate is not responsive to providing the required information, complacency which can sometimes be a result of having an offer of employment in place or having already commenced employment.
What constitutes a referee?
There is a wide interpretation of the criteria an individual should fulfil to act as a referee and in implementing a reference checking program this is an important consideration in order to ensure consistency between references. For example, should a referee be a current/previous direct supervisor, or will a professional referee, university lecturer or peer suffice? When will exceptions be made?
The answers to these questions will depend on the industry and use of the references. In technical positions such as some financial roles, engineering and IT, the focus is often on the candidate’s skills and applications in the workplace, something where a direct manager is going to add the most value. The candidate’s background will also impact the referees available; with limited working experience, many professional referees or university lecturers will be able to provide a valuable picture of a candidate’s character and work ethics in the absence of comments from a manager.
Additionally, an organisation should consider the measures to be taken to confirm the legitimacy of a referee. For example, many candidates provide direct mobile numbers or email addresses for their referees, opening the process to risks relating to how the referee’s identity is confirmed. At PeopleCheck, we have seen our fair share of family members and friends (and even the candidate themselves) on the other end of a provided mobile number! Absolute control of this part of the process is difficult to maintain; however, there are some best practice measures that can be incorporated, such as contacting referees via company landlines and/or confirming the relationship of the referee with the candidate via external sources such as HR.
Who should undertake the reference checks?
In rolling out a reference checking program, a key component is where the responsibility for undertaking the checks will lie. For example, will this be a recruitment/HR function handled centrally or will references be undertaken by line managers? Again, there are pros and cons to both models of operation and the volume of checks undertaken and the resultant time required in the context of resourcing/budget allowances for the program will often dictate an organisation’s preference.
Having reference checks undertaken centrally by trained recruitment specialists (or in cases of bulk recruitment, employing the services of an external consultant for the task) not only brings the benefits of efficiencies around handling checks for multiple candidates, but ensures that the referees are being contacted by trained professionals. Recruitment specialists will have both a working knowledge of relevant legislation such as anti-discrimination laws and be adept at the interview process, probing questions and interpreting responses.
However, there is nothing quite like the insight that a hiring manager brings to a reference check in terms of knowing what they are looking for in a candidate; both in relation to specific skills-sets that are often outside of a recruiter’s area of expertise, and the cultural fit of the candidate’s character. Having references undertaken by the candidate’s future manager also holds advantages in them obtaining a first-hand understanding of the best way to manage the candidate in the context of their strengths and any areas of concern to monitor and manage. The risk of hiring managers undertaking reference checks can sometimes be around a limited understanding of legislation and what language can be used and questions asked in line with this. For example, without adequate training, a hiring manager could easily ask a question that breeches anti-discrimination legislation or undertake subjective research into a candidate’s social media profiles.
As the reliance on and value placed on reference checking has increased, considerations have become more complex and more organisations also look at the option of outsourcing reference checking. The advantages of outsourcing the process mainly lie in the time-savings of avoiding the management of what can be an administratively labourious process. Additionally, the involvement of trained, objective specialists that work to strict service level agreements without the competing internal deadlines that may impact employees in a recruitment or manager capacity undertaking the checks can improve timeframes and in turn hiring decisions.
If a decision is made to outsource the process, an organisation should ensure that it is comparing “apples with apples” in evaluating options for providers and that its key considerations in relation to reference checks are reflected in the selected provider’s approach. Without care, outsourcing runs the risk of reference checks becoming a “tick the box” task rather than adding real value to the recruitment and compliance processes that the program was implemented to support. The best approach is a customised reference checking program, based on the reasons behind references being undertaken and clear parameters for operational matters (such as reference questions, method for references and reporting of results).
Regardless of who undertakes the reference checks, thought needs to be given to the evaluation process and how this will be managed. For example, how will references with negative comments be handled and what is the established escalation process?
How will reference checks be undertaken?
The method of undertaking references is another area to contemplate. Practises vary to from verbal references, comments received via email, right through to completely online references via electronic surveys. Generally a mix of approaches offers referees the flexibility of providing comments in a forum they are comfortable with; however, an organisation should consider its preferred methodology and build processes around this in the first instance.
There are clear benefits to verbal references in terms of the interviewer’s opportunity to probe and explore comments provided. However, written references provide both an objectivity that can be missing in some verbal references, as well as the advantage of obtaining comments in writing, particularly important in the case of where negative feedback is received from a referee.
Careful consideration of the reference questions should also be given. Customised questionnaires based on the intended role for the candidate have the advantage of obtaining the most relevant information from the referee, particularly if there are technical aspects or the candidate is being considered for a management role.
In recent years, the dramatic development in technology has seen the introduction of automated reference checking services by external background and reference checking providers, offering the benefits of decreased costs and real-time results. Automated reference checks can provide an effective solution for high volume requirements, where budget is tight and/or where hiring deadlines require fast results. However, organisations should be aware of the potential risks of obtaining comments from referees online via purely automated means. These processes can be open to manipulation by candidates due to the absence of verification as to the origin of referee comments and may not provide the level of investigative research required by some organisations. Additional measures such as undertaking further background checks upon offer can complement reference checks and organisations should look for automated services that still provide a measure of flexibility to accommodate preferences.
As with all other aspects of its reference checking program, in making a decision about how reference checks are best facilitated, an organisation should first assess and prioritise its key requirements and aims for reference checks. Potential solutions as to the “why, when, what, who and how” can then be assessed against these priorities and it is recommended that organisations look for an outcome that both meets these needs and offers flexibility to adapt as the reference checking needs of the business and its people evolve.
For more information on how PeopleCheck can customise a program to suit your organisation’s reference checking requirements, please contact us via phone on +612 4023 0603 or email us at email@example.com.
- AUSTRAC – austrac.gov.au
- Anti-Money Laundering and Counter-Terrorism Financing Act 2006 – https://www.legislation.gov.au/Details/C2012C00915
- Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) https://www.legislation.gov.au/Details/F2018C00101