Checking references should be part of any proper investigation. (Source.)

Why, and how, you should bother to conduct references

References are a critical part of the hiring process. To some, they’re the most critical part. An old boss of mine used to say:

The only reason I conduct interviews is to figure out who we know in common, so that I can use them to reference the candidate.

We do a lot of reference checking as investors. Deal processes move quickly, and often you don’t have the luxury of time to get to know someone as well as you’d like. References can be a substitute for better understanding the story of someone’s career, in short order. They are equally useful for operating hires, as well as personal workers in whom you’re placing a lot of trust (e.g. contractors, nannies, etc.).

Despite the importance of conducting references in almost any scenario, I’ve found that many shy away from it. Others take a “check the box” approach that does little but confirm previously held beliefs. In both cases, there’s a missed opportunity to gather insight into a person with whom you will spend a considerable amount of time (and probably money).

Why do references at all?

I’m not a cynic, but I do think there is some truth in what I call “the Dr. Gregory House Framework,” or simply:

“Everybody lies” doesn’t mean that everyone is lying to you all the time. It simply means that you should believe the evidence before the person, or be empirically biased. The evidence, in this case, is the testimony of the person giving the reference. In the words of the good doctor:

I’ve found that, when you want to know the truth about someone, that someone is probably the last person you should ask. (Episode #105)

Again, I don’t think people lie that often. But, they do omit a lot — intentionally, or unintentionally. The biggest danger is that you don’t know what you don’t know. It’s those darn “unknown unknowns” that elude the interview process. This is why you must do references — they are the only real way to understand what you’re missing and complete the picture on a candidate.

A few tips for high quality references

There are two types of references: on- and off-list. An on-list reference is provided by the candidate, while the off-list reference is a connection you make yourself.

On-list references are simple: they should either be positive…

…or really positive.

Aside from specific issues you’re already aware of, if an on-list reference isn’t supremely positive, it’s a bad sign. On-list references don’t tell you a lot on their own, but in aggregate if they should tell a consistent story. You can occasionally spot inconsistencies in on-list references, which can lead to more questions on where to dig deeper.

Conducting and evaluating off-list references can be more subtle. Here are a few tips:

1. Do at least 2–3 off-list references on each candidate. Every now and then, you’ll come across someone with an axe to grind. Most candidates have pissed off someone in their careers, often for good reason, so you don’t want to be overly biased by one bad call.
2. Proactively build a question list and be consistent with it. Know the key issues ahead of time, and ask the same questions to different people. Working from a list makes it easier to spot inconsistencies.
3. Start with a friendly tone. Save the tough stuff for the end. I recommend you begin by thanking the reference for participating, and ask what her relationship is to the candidate. Ask her to walk through her history with the candidate in chronological order. This establishes a report and gets the reference in a less defensive frame of mind, which can often be the default when you’re on the receiving end of a reference call. Save the tough questions for the end, but don’t be afraid to ask them. Believe it or not, the reference is expecting them. If you only seek platitudes, you’re going to miss the entire point of the reference.
4. Don’t lead the witness. Your questions should not bias the reference one way or the other. If you do ask a question like, “What is Julie’s greatest strength?” follow it up sequentially with the opposite question to create a sense of balance in the conversation.
5. Watch for hedging, hesitation, or evasiveness. The vast majority of people will find it difficult to give a bad reference, even if they want to. Hedging is often a sign of unspoken conflict. If you choose to press deeper, do so carefully.
6. Always respect confidentiality. Many candidates are still employed when they are talking to you. Don’t blow up someone’s job because you need to check them out off-list. If you decide you need to do certain references that might be uncomfortable for the candidate, ask her for permission first.

Hopefully, I’ve convinced those of you who hesitate to do references that they are worthwhile. I assure you — the more you do them, the better you get at them, and the more value you’ll find in them. Happy referencing!

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