How to dig deep when hiring staff

Being swindled by a clerk out of $2 million over three years is a high price to pay for not checking someone's work references. But that's what it cost the Social Development ministry after a recruitment firm neglected to run standard checks on Lisa Clement in 2000.

If the recruitment agency had run the proper checks it would have discovered that Clement had criminal convictions for dishonesty and had been bankrupted twice.

Reference checker Rachel Railey says horror stories such as the Clement case happen when managers accept CVs at face value instead of doing their homework. But in fairness, she says New Zealand's current privacy (and possibly human rights) law can make reference checking difficult.

"It's important to work within this legislation and ensure people are aware that you're acquiring information and why," says Railey who performs thousands of reference checks every year. However, she says they're usually an invitation to hear feedback from people who'll only say nice things.

But try second-guessing these references by doing your own homework - without following correct procedure - and Privacy Commission spokesman Katherine Evans says you could end up with costly ramifications. In other words if something goes wrong, the discreet conversation a manager had about a candidate could result in the individual going to the Privacy Commission for compensation.

"It's rude and unwise to get people other than those listed as references to comment on a candidate. So just ask if the candidate minds if you check elsewhere. Unless there are valid reasons, [why not] they'll probably agree," Evans advises.

So what are your obligations under the Privacy Act? Technically you're not entitled to collect or volunteer information about a candidate unless they've agreed. And if you want to run police checks locally and overseas, you'll also need a candidate's written permission.

While the Privacy Commissioner has no remedial powers, the Human Rights Review Tribunal can award damages of up $200,000. While the highest amount awarded by the tribunal ($40,000) wasn't work-related, Evans says negative publicity can sully a company's reputation.

In addition to the fear of breaking the Privacy Act, Railey says growing paranoia of being accused of misrepresenting a former employee to another company has made managers wary of providing written or verbal references.

So what are the key ingredients of an effective reference check?

Rule number one says Railey is to get a candidate's written approval before approaching anyone for comment. Second, she says take nothing for granted by verifying established facts stated in an applicant's CV, such as former work experience and qualifications.

It's amazing, she adds, exactly how much public information managers can find out either online - using the IRD or Companies Office websites (for example, former bankruptcy) - or with a credit check if only they'd take the time.

"You can check with the Ministry of Justice for civil or criminal convictions [minor offences excluded]," says Railey, managing director with Performance Reference NZ. "But owing to the 'Clean Slate' Act, unless there's been criminal activity in the last seven years it won't come up."

Railey adds that "CV embellishment" happens all the way up the employment ladder. In fact, former surveys by Auckland search firm John Peebles & Associates suggest that almost a third of executives exaggerate their degree qualifications alone. A case in point is the debacle involving John Davy - who cheated his way into Maori TV's top job - and went to jail as a result.

She says it's equally important to focus on the results that were achieved in previous jobs. That means getting the candidate to explain their past performance record in more detail than their CV might indicate - for example how much sales volume and profit they generated, how much market share increased or what new systems they implemented.

"Try and pin candidates down to nuts and bolts on key issues - for example if they confronted a particular issue, how did they deal with it," says Railey.

The next trick she adds is to identify people - former manager, colleagues or customers - who can cross-reference these facts.

So what steps should you follow when contacting these references? First, suggests recruiter Vinod Govind, identify yourself and your job title, give the name of the candidate and the reason for your call.

What you need to quickly find out, suggests Govind, is whether this person can evaluate the candidate's capabilities adequately to get a reference. A referee who doesn't know your candidate well is a waste of time, says Govind, managing director of online recruiter Matrixjobs.

"Assuming they do, [you should] develop behavioural questions based on job competencies included in the job description."

He says too many managers reach opinions on candidates based on questions that are not valid to the job in question. And those who don't include a third party in the process, adds Govind, risk reaching conclusions that support only their initial perceptions.

"The biggest problem with managers doing their own reference-checking is they fill in the answers for references," says Govind.

"John Davy should have been caught out by open-ended questioning. It's what a candidate and their references don't say that's most illuminating."

Failure to cross-reference what the candidate is telling you can come back to bite managers and Railey cites an incident in Queensland as the classic reference-checking disaster.

A man working for the Brisbane City Council was found to have falsified his employment records by claiming he was working for an electrical company when he was in jail. His references included comments provided by an alleged managing director who could be contacted only by mobile phone. A full check of the man's history revealed criminal offences and he was told there'd be a recommendation for his dismissal. The man claimed he would be eligible for a redundancy payment if he wasn't constructively dismissed. An enquiry found the man wasn't obliged to disclose his criminal conviction without being asked before being hired. If the selection panel had done its job properly, Railey says the organisation would have saved itself from employing a convicted embezzler for more than a year.

Another trap for managers, says Railey, is "dodgy" job applicants who know their way around the law and flaunt it to their advantage. For example, one of her clients discovered that an employee who'd been caught stealing had been given a glowing reference by his former employer even though he'd been stealing there, too. The employee threatened to sully the company's good reputation if it did not provide a glowing reference. 
Steps to better checking

* Ensure the references are credible.
* Ensure references reveal weaknesses and strengths.
* Ensure these strengths are validated.
* Get a candidate's written permission to approach referees.
* Understand why you're asking questions.
* Ask referees open-ended questions.
* Don't accept CVs at face-value.
* Ask candidates to disclose all relevant information (eg police record, bankruptcy).
* Identify people who can corroborate a candidate's performance.
* Develop a gut feeling for what information is omitted.