Employment Reference Checks can be Your Competitive Advantage

October 11, 2019
    

The hiring process can be incredibly precarious. A candidate’s resume is, of course, a start -- but how much can you actually learn about the true skills and employability of an applicant from just this one document? Surveys show that 84% of reviewers found exaggerations, manipulated facts, or overt lies on the resumes or applications they have screened1. This unfortunate statistic will make it difficult for anyone to discern the top talent from a mediocre job seeker.

Enter the reference check. This simple action which is so often taken for granted, even misunderstood and advocated against, is actually the golden ticket to better hiring practices. The risk of relying on a resume, your gut reaction, or a charming interviewee is mitigated the moment you corroborate and elaborate information with your candidate’s former company, colleagues and managers. Simple. Not only that but performing a thorough reference check may contribute to a higher people retention rate, and ultimately a higher ROI for your business.


People are Everything

This goes without saying, but is always worth reiterating. Quality talent are the building blocks with which successful companies are constructed. Mediocrity, high turnover, and poor recruitment processes which chase away top candidates are the metaphorical cracks in the foundation that will bring a business down.

So, hiring the right staff with the best chance of remaining under your employment (and highly productive) must be the not-so-secret weapon all executives should prioritize. It’s the simple truth. And the focus of hiring should not merely be to replace a lost asset, but to improve the existing staff base, as well as add long-term value to your company.

Too often, hiring managers over-prioritize technical skills and time spent at a previous position at the expense of other factors. A basic reference screen can confirm these elemental facets of an applicant, but all they tell you is “Yes, (applicant’s name) worked here.” You are then left without practical, cultural, or interpersonal context.

Intangibles like on-the-job performance, team player mentality, emotional intelligence, and growth potential can indicate a strong candidate worth investing in. Evidence of a good cultural fit may be just as important as previous experience when it comes to finding the right, long-lasting employee. And, these indicators may only be gleaned by an in-depth conversation with a previous employer, colleague, or subordinate. A reference check is your opportunity to ask if you have found the right candidate.

The Bad and the Ugly

Hasty hiring decisions are bad for business. The wrong employee will cost a company time, money, and energy which would have been better invested in finding the correct candidate up front. Speaking to a former employer or coworker can help you identify certain risk factors, and determine whether this applicant is one to save or skip. Here are some numbers:

  • The price of turnover, or the loss of an employee, can ultimately outweigh the expenses of an employee’s salary. Numerically, this could be anywhere between 30% and 150% of a workers wages being rerouted to replace them2. Hastily hiring the wrong employee will result in higher turnover rates, and cost any company significant unnecessary expenses.
  • Occupational fraud costs organizations an average of $140,000 a year, with small companies being the hardest hit3. Between corruption, asset misappropriation, and fraudulent statements, these red flags will be costly if passed over.
  • Workplace violence is a cost no one likes to talk about. However it is a liability which employers must consider when hiring new talent. Between lawsuits merited by negligent hiring, the expense of compensation for victims, and replacing offenders, it is estimated that these catastrophic events cost the U.S. approximately 1.3% of the GDP each year4. By employing a high standard in reference checking, businesses may be able to identify potential risk factors in applicants and avoid such disastrous events.

How to Make it Happen

The US Small Business Administration estimates that for every dollar spent on employee screening -- including on background screening, as well as thorough reference checks -- an organization can make back $5-16,5 as a result of increased productivity, higher retention rates, and lower employee litigation. To gain your competitive advantage through better employment reference checks, here are a few tips to get you started:

DO NOT

  • Forego the reference check just because an applicant’s resume looks good.
  • Use the reference check as a last minute, cursory task devoid of eliciting quality feedback.
  • Ask a reference questions which may be considered discriminatory.
  • Simply verify the information on an applicant’s resume.

DO

  • Ask open-ended job-oriented questions about the applicant’s performance; i.e, “What was it like working with (applicant’s name)?”
  • Look for inconsistencies, and take red flags seriously. However, follow-up any negative feedback with additional references and questions.
  • Use an automated reference-checking solution, such as Checkster’s Reference Insights, to streamline the reference check process and uncover deep insights about candidates..

 

Try this list of reference check questions to start.

 


A simple reference check can mean the difference between a bad hire, and a dedicated new employee who’s in it for the long haul. Making sure you’ve got the right candidate for the job will benefit your business with increased human capital and a bolstered bottom-line.

Would you like to know more about using reference checks to your advantage? Check out our other articles, How to Check References and Reference Check Best Practices for tips which will help you streamline and sharpen your reference-checking processes.

Getting the Real Picture with a Comprehensive, Digital Reference Check Solution

Asking the right questions is key, but what if you don’t get detailed, honest answers? Reference checks conducted by phone can sometimes bring you general answers or biased feedback. By using a digital reference check solution, references are able to rate the candidate, and leave much more detailed skill feedback. This information can be paramount in ensuring sure you make the right hire.

Checkster for Hiring offers solutions that will help you hire the right staff on the first try. For reference checking, you’ll find Reference Insights makes following up with top candidates simple, saving you time and providing much more valuable feedback.

To find out how Checkster can help you hire and retain employees who love their work, schedule a demo here.

1 HireRight Employment Screening Benchmark Report 2018 https://img.en25.com/Web/HireRightInc/%7B4e41d88e-c1d8-4112-9cfb-431461d4018b%7D_2018_HireRight-Employment-Screening-Benchmark-Report_12-FINAL.pdf

2,3,4,5 Proving the ROI of Background Screening https://www.proformascreening.com/blog/2012/10/04/roi-of-background-screening/