The Business Case for a Professional Reference Checking Software
Table of Contents
Reference checking is incredibly underutilized as it’s seen as a tedious and time-consuming task for busy HR teams, which is why this pre-employment check often slips through the cracks.
The truth of the matter is that many wrong hiring decisions, and business scandals that involve employee misconduct, could have been avoided if a well-orchestrated and strategic reference check was executed, and perceived as fundamental to the recruitment process.
This business case outlines the top 6 reasons why your company needs professional reference checking software.
Reason #1: Reduce the risk of hiring the wrong candidate
Have you ever hired a candidate based on their perceived value, and soon realised their self-reported skills and traits were entirely inaccurate?
It’s not only you, it’s incredibly common, with 75% of recruiters and hiring managers having admitted to making the wrong hiring decision.
Although it is true, we learn from our mistakes, it’s the collateral consequences of making the wrong hiring decision that can be detrimental to a company.
Not only does a wrong hiring decision cost between 30%-150% of the employee’s annual salary, but also negatively impacts the wellbeing and productivity of 2 out of 3 current employees. Not to mention the potential damage to the company’s operations and reputation!
This is EXACTLY WHAT WE WANT TO AVOID. (Please excuse my capitalization, I’m very passionate about the topic).
Let me run you through an example to cement the true impact of NOT conducting a reference check and how it permits candidate manipulation.
Have you heard of the Cindy White scandal?
Probably not, that’s fine… let me break it down.
Basically, Cindy White is a criminal who faked her own death to avoid going to jail, and then adopted the name of Cindy Carmen – a professional profile she found on Linkedin.
Using this name, and the real Cindy Carmen’s verifications (social security number, license, address, etc) she was employed into a Senior HR position… at 2 companies! Pretty ironic if you ask me.
Cindy was employed for one year at the first company (until they became suspicious), 8 months at the second (until they became suspicious)… and then secured a job as a Medical Practice Manager at another company!
She wasn’t even convicted of identity theft or sentenced to time in prison for her previous criminal activities until AFTER being fired from her third business of employment.
The case of Cindy White goes to show the vicious cycle and detrimental outcomes of not conducting reference checks.
If her first place of employment had simply insisted on referees and contacted them, their suspicions would have been realised before employment and saved the company a tremendous amount of time and money.
Same for the second place of employment… and third!
Do you see why I’m so passionate now?
This example clarifies just how overlooked reference checking is across all industries, globally.
Reference checking is a gateway for businesses to communicate with one another and share learnings. It is an employer’s only chance to hear objective information about the candidate, and discuss skills and attributes in a professional manner.
Let’s be real, every candidate is going to make themselves seem desirable! Between you and me, I know that’s what I would do (please don’t tell my boss).
Through conducting reference interviews, employers unearth true statements and findings of their potential candidates, therefore leading to a better assessment of their suitability.
Whilst extracting information with greater objectivity, you also eliminate the risk of being manipulated by your candidates!
This can refer to hiring a criminal, in the case of Cindy White, but more commonly can be aligned with candidates providing informal referees who are willing to lie or who haven’t even worked with them.
Reference check software eliminates the negative connotations of this pre-employment check. How? By creating a seamless process that requires minimal time and effort from HR and recruiters. You can even completely automate the process!
There’s no excuse. Set & forget your reference checks, let the candidates and referees do the work, and reap the benefits of compliant recruitment.
Reason #2: Reduce reference check execution risk
If not executed correctly, reference checking can create huge compliance risks for your company. For this reason, many HR departments steer clear of this pre-employment phase… but unknowingly heavily disadvantage themselves.
The strict laws and regulations surrounding reference checks can be broken into two segments:
- Asking appropriate and professional questions
- The storage of candidate and referee information
Let’s address these concerns chronologically.
How many people are responsible for conducting reference checks at your company? 2? 3?
Issues regarding discrimination, bias, and unprofessionalism arise when companies don’t have standard questions to ask referees. Why? It leaves room for human error and inconsistencies.
The questions you ask your referee must be appropriate and non-discriminatory in every manner.
The candidates’ colour of skin, ethnicity, marital status, and so on are all factors that must not be discussed during the pre-employment screening process. All of these factors are irrelevant and frowned upon by professionals and authoritative parties.
Your questions MUST be professional, open-ended, not intrudingly personal, and proven to be purely for the determination of a person’s capability and suitability for employment.
This is where many companies find themselves lost on direction, and are off-put partaking in this pre-employment phase.
I’ll be the first to admit, they’re tricky! And can be risky…
If you do not have customary and approved questions to ask, it leaves room for mishap and misinterpretation from both the recruiter and referee perspectives. Potentially causing serve backlash and, heck, even landing a lawsuit on the company’s doorstep.
A prime example of the consequence severity is the current allegations against Google for discrimination against Asian women.
According to the allegations, women of Asian descent were severely disadvantaged during the recruitment process and received a compensation payment of $3.8 million (AU).
Don’t be that business that has to pay millions of dollars for not adhering to compliance regulations.
Fear not, this is where reference checking software swoops in to save the day.
HR, Managers, and Executives can collaborate to create a standard template of questions based on role, department, location, etc. Once approved, each referee is asked the same questions to ensure consistency and eliminate the risk of human error…. It doesn’t matter how many employees you have conducting reference checks, they’ll all ask the same questions!
In doing so, you certify the questions asked provide the most insightful information about the candidate and adhere to internal and external regulations.
Simultaneously, you also collect comparable information to better your hiring decision! It’s a win-win situation…. ladies & gentlemen, you are welcome.
Alright, let’s move on to the second segment, which revolves around the storage of candidate and referee information (in case you have forgotten).
Data-sensitive data, such as contact details and confidential information, must be stored in a safe location that allows quick access and retrievability.
Creating excel files, desktop folders, or worse… storing paper documents, can make this compliance incredibly difficult.
Imagine this… it’s 2021, and you’ve just received a notion from an unsuccessful candidate who applied for a position in 2017… turns out they think you were discriminatory and are suing you.
What are you going to do?
If you instill best practices but don’t have the supporting evidence, well there’s not much you can do except pay a settlement and hope your employer branding isn’t damaged.
Situations like this occur regularly and are a prime example of why data storage is vital.
Your professional reference checking software stores all data collected, forever. Keywords such as date, name, and role description are all searchable within the software- empowering HR to retrieve information from years ago and use it as supporting evidence for any and all situations.
The data you collate is also safe in the hands of your enterprise-grade software and protected via cybersecurity and two-factor authentication.
Referees may be hesitant to be cooperative if they don’t believe the information they disclose and their contact details are kept confidential… your software proves to them their data security!
To summarise, reference checking software protects candidate and referee data and ensures your HR department implements compliant practices during recruitment and pre-employment checks.
Reason #3: Improve your hiring quality
Okay, I want to take a minute to clear up a common misconception.
Reference checks aren’t SOLELY useful for determining whether a candidate is who they say they are, but also work as a screening tool for HR.
Through creating standardised questions for all referees, HR is able to better determine the quality of the candidate in relation to their skill and their work ethic.
Let that sink in for a moment.
Robert Half determined that it takes a company 10 weeks of employment to be certain whether the candidate is suitable for a job. Reference checks provide HR with the chance to avoid the period of uncertainty by seeking first-hand insight from a previous employer who has already experienced their period of uncertainty.
Let’s look at an example to help cement the powerful opportunity at hand.
Do you remember the 2018 scandal with global charities, including Oxfam?
Oxfam’s sponsors withdrew their donations, and Oxfam’s reputation was destroyed due to the serious allegations of “harassment, sexual exploitation, witness intimidation, and staff bullying”.
Although the actions of a mere few employees destroyed the charity’s reputation, Oxfam claimed, “there is nothing we can do to stop individuals falsifying references or getting colleagues to provide a reference in a personal capacity”.
I’m not putting any hate on Oxfam, really this could be their sincere belief, however, I will say in my opinion this statement is WRONG.
By implementing a well-orchestrated and strategic reference check procedure Oxfam would have been able to better determine the quality of their potential hires and their personality traits, which ultimately could’ve avoided the entire scandal!
Realistically, I see where Oxfam is coming from as they have 670 employees (AU) and operate in 8 countries – it can be easily understood how their reference checking process could have flaws and be easily manipulated.
This is why HR implementing reference checking software is CRUCIAL.
Reference checking software pinpoints any candidates that may not adhere to company standards by ensuring appropriate and insightful questions are asked to referees… without the possibility of referees manipulating information and candidates providing informal referees.
CONSISTENCY. CONSISTENCY. CONSISTENCY. In order for anything in life to be executed effectively, you must have consistency! The same applies to the Oxfam scandal and reference checking.
Your reference check process must be consistent within your organisation, regardless of how many locations you have… otherwise, bad eggs slip through the cracks and are given the chance to exploit their position and damage the company!
HR software provides this consistency through cementing structure. Unlike paper processes, your software ensures each candidate goes through the appropriate phases of recruitment without the chance of any step being overlooked or missed. Nothing like a bit of technology to eliminate human error!
To address the concerns of time required to complete this – all HR has to do is move the candidate to the appropriate stage and wallah, the pre-set automations are set in motion and the reference check is on the way.
There’s no excuse, there’s only; poorly executed strategies and well-executed strategies
Reason #4: Utilizing software ensures a robust reference checking process
No matter how big or small your company is, it only takes one wrong hire to slip through the cracks and expose the company from the inside out.
On average, around 70 reference checks are performed per role with the average of 24 employees making it to the interview stage. With all the levels of management and hands that the data runs through. The number of tasks that are involved requires an online database…
Or it’s going to get messy.
Reference checking involves communication between two companies. What’s delivered is a representation of the company, for better or for worse.
Nothing slips through the cracks these days. Emails can be kept on file and phone calls can be recorded. It just takes one discriminatory comment to be the subject of many social media posts. This can then be blasted across the internet, there’s no undo button now.
Utilizing automation software for reference checking eliminates human error and ensures all employees are performing the correct tasks. Standardising processes also structures consistent training for new HR employees.
Manual Reference checking is an email inbox nightmare. It’s known for it’s high number of conversations. Referees are usually busy senior corporates. The back and forth nature of manual processes can leave you in the dark on the progress of checks. Adopting software allows access to an online database to shine light on the data. This database can be accessed anywhere by anyone with permission. Senior managers can also ensure the processes are being undertaken correctly.
Police departments have a busy role in enforcing laws within their regions to serve the citizens they represent. However, one particular police department experienced the consequences when they failed to conduct an efficient reference check.
The Tampa Police department in the US reported that the sign language interpreter in their live news announcement was fake. There was a murder report, where the mother of one of the victims happened to be deaf. The fake interpreter, identified by police as Derlyn Roberts, provided a false translation on behalf of the department. She was also found to have previously been arrested five times including three times for fraud.
Employees have the power to uproot your whole company. Especially in a situation in the case where the event was recorded live, this was a huge blow to the community. The police department held a great deal of responsibility in announcing the dire news and translating it accurately.
Even if you are a small business owner, it’s vital for your growth that you thoroughly reference check new employees to protect the wellbeing and reputation of your business. Utilize reference checking software to ensure consistency across these business processes.
Reason #5: Automation cuts time-delays and costs
We get it, reference checking is not the most exciting task in the onboarding process due to its repetition and time consuming nature.
Not to fear, reference checks can now be fully automated.
Automation eliminates unnecessary time spent going back and forth with both candidates and referees. Auto-triggered questionnaires and SMS/Emails also ensures the process continues without relying on continuous input from the HR team. This lowers labour costs and frees up time for other tasks that actually require HR’s creative minds.
Everyday menial tasks are being increasingly taken over by softwares. Which they should ! These are tasks for robots.
HR professionals specialize in important soft skills. To automate traditional processes will allow them to feel valued for their unique skills.
A bad hire can cost you 30% of their first year earnings and waste up to 4 months of your time.
The film “Operation Varsity Blues,” was released on Netflix this year. The film highlights America’s largest college cheating scam two years after its bust.
This illegal event consisted of fraudulent bribes with sport coaches from prestigious universities. The mastermind behind it all was Rick Singer. He created a network with coaches who he would bribe for his clients’ children to gain admission to schools. These children lacked the academic credentials and athletic abilities to get in by themselves
“Parents paid Singer approximately $25 million to bribe coaches and university administrators to designate their children as purported athletic recruits, thereby facilitating the children’s admission to those universities,” the Department of Justice said in a March 2019 press release.
Ivy League Universities had their reputations harmed. Stanford, redistributed the $770,000 that came to the school through the scam. University of Southern California also implemented “a number of reforms designed to safeguard the integrity of student-athlete admissions. The harm to their reputation also saw a decreased application rate for these schools for the next few years.
Many coaches who were bribed into the inner workings of Singer’s scheme kept their jobs and did not deal with repercussions. They cost the university a great deal of money, time to recover, and permanent harm to their reputation.
Yet they still walk free.
This case study shows the very extent of what can occur to even the most prestigious names of Ivy league schools admired from around the world. Efficient reference checks would avoid further employing these coaches who falsify information in exchange for bribes.
Reason #6: Comply With Insurance Policies and Industry Standards
It doesn’t matter what size of business, all businesses hold the responsibility of the wellbeing of their employees. This is why all businesses must legally purchase insurance. This safeguards your business against the event of injuries, damage and theft under your company. It is a financial product that helps provide protection against financial losses.
Insurance does not compensate for all losses, they have many regulations in place in order for companies to be financially insured. All it takes is one slip up to upturn the whole company’s safety.
One case that I think of straight away is one of my favourite movies “ Catch me if you can”. This movie details the life story of Frank Abagnale was a famous imposter famously known for posing as a Pan Am pilot.
Abagnale took full advantage of the opportunity, he flew on hundreds of flights around the US, with access to free hotel stays and meals. The specific event which relates to Insurance policies is when Abagnale was asked to steer planes, which he thankfully left on autopilot. A single reference check would make sure that lives would not be in danger.
Luckily for Pan Am, nothing fatal happened, but let’s imagine the risk if it did. The insurance would not cover a pilot who is firstly not a pilot, or even an employee. A full flight of people would have cost the company a lot of money without the aid of insurance.
Industry standards are benchmarks that are followed by fellow members in your industry. These standards are created to reduce risks and ensure consistency across the field.
An example of an industry that holds strong industry standards in aged care.
Aged care is an occupation that holds the responsibility of working with individuals who are elderly and possibly disabled. These individuals may be nonverbal and therefore cannot speak for themselves. It’s up to their workplaces to survey the employees.
Let’s look at a news story to see the dangers of Ruth Lyall, 84, died in October 2019 from sepsis (a blood infection).
For many months she had grown a reputation at the nursing home for singing in her room, but Lyall said her mother had stopped singing towards the end and looked very sad.
Employees have frequently observed distracted staff playing with their mobile phones. Her mother was left neglected which led to her early death. Even though such actions are not directly illegal, these employees should be avoided. it will be noted by the workplace. The only way to discover such information is from their previous workplace itself.
Employees are under constant scrutiny when it comes to the integrity of the individuals placed in positions of trust in aged care environments. It is important to abide by industry standards to avoid such situations.
Don’t be the next scandal, utilise reference checking to protect your business. Automating your processes with software allows you to eliminate all these risks with the click of a button! The benefits of reference checking software completely outweigh the disadvantages. With the ease applied by software, the value of reference checks is a significant step that should be a fundamental step when recruiting and onboarding.
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