Sunday, March 15, 2015

In God we trust, all others bring references

In the last few weeks I talked to two entrepreneurs who both recently made a hire that didn't work out. In both cases I asked how the reference calls went, and in both cases the answer was that they hadn't done any before hiring the candidate. This made me almost angry, especially because the two entrepreneurs are fantastic founders who could have saved themselves from this costly mistake by following a simple rule: Don't hire people without taking references.

Bad hiring decisions are among the most expensive mistakes that you as a founder can make. According to this CareerBuilder survey, bad hires typically cost companies as much as $25,000-$50,000, but the true costs go much beyond cash. The (harder to calculate) opportunity costs – the fact that you've wasted time getting the wrong person up-to-speed and that your recruitment of the right candidate got delayed – usually weigh much stronger, not to mention the negative impact which a bad hire can have on your team, customers and partners.

Most people read test reports and customer reviews before buying a digital camera or an office printer, so how come they don't use the same level of diligence for a decision that is 100x more important? I can think of a few possible reasons:

"Based on the candidate's CV and my interviews I'm so confident that he/she is the right one, reference calls aren't necessary."

Assessing candidates in an interview is hard. Coming across as a great candidate in an interview process is one thing, being able to do the job is sometimes something different. Talking to people who have closely worked with the candidate for years gives you valuable additional data points for your decision. Even if you're a fantastic interviewer and you're right most of the time – if reference calls help you reduce the number of times you're wrong, they are worth it.

"I won't learn anything new, and the references provided by the candidate will only say great things anyway."

Even if people provided by the candidate will usually (but not always!) give a glowing reference, by asking the right questions you'll often find out, usually between the lines, if the reference-giver wants to be polite or if he really thinks that your candidate is awesome. Even more importantly, you should always try to get backdoor references, too.

"It costs so much time!"

Yes, it does. But think about the difference which the right hire vs. the wrong hire can make.

"It's awkward to ask people for references or to sniff around to get backdoor references."

Don't be afraid to ask even if it makes you feel awkward. Senior candidates expect you to ask for references anyway, and junior candidates will quickly learn that it's a standard practice. People will also understand that you need to take backdoor references. The only really problematic situation is if references from the candidate's current company are crucial for your decision and the candidate didn't give notice to his current employer yet. In that case you obviously can't simply call the candidate's boss and you need to find out carefully how you can get your references without doing harm to the candidate.

If I was able to convince you of the "why", check out this great post by Mark Suster about the "how":  "How to make better reference calls"


Christian Kaller said...

Thanks for addressing an important point there!
While I agree that reference calls are absolutely crucial, I'd like to add that in some countries there are legal limitations to the "how" and the extent of backdoor reference calls based on privacy laws. E.g. in Germany, the "informationelles Selbstbestimmungsrecht" (roughly: the right to govern personal information) of the employee and the "nachwirkende Treue- und F├╝rsorgepflicht" (roughly: the duty for continued loyalty and care) of the old employer make reference without consent of the applicant a grey area. Of course, this doesn't change that it's standard practice. But depending on your local legal framework, and whether you want to go the legally safe road, it might be a good idea to ask the respective applicant for additional references on top of those she or he provided initially (that second set should be less likely to be "filtered and coached"), or ask for permission to do additional reference calls of your own choice.

chrija said...

Thank you for your comment, Christian, that's a great point.

Alex Theuma said...

As Someone who is looking to hire, this article is a timely reminder of such an obvious requirement that is often be overlooked in the process. I for one will heed the advice and welcome timing of the article so the advice is top of mind!

Ivan Mojsilovic said...

Sometimes you make a bad hire even you did checked the references. It hurts the same tough.

Sam_Sonite said...

Anyone who can provide a valid reference can provide a good reference regardless of the quality of their work but not providing a reference is not a sign of poor quality work, e.g. you wish to leave your current position which you excel at but don't wish to inform your employer. If a reference is not good, I'd question the motives of the person who said they would be a reference. The only case I can imagine a reference providing any information is if they say they do not know or were not contacted by the candidate.

If you go out after work with your boss for drinks every Friday, you'll probably get a glowing reference but if you don't...good luck.

I've become convince that the best way to discover whether a candidate is a good fit is to put them to work. Instead of a code test, put them to work on real problem you have paired with a team member and see if it is a good fit. This is far less a crap shoot than relying on the word of someone else or programming exercising completely unrelated to the work they'll be doing. Plus the candidate gets to see if *you* pass the test.