Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / How a Reference Check Saved One Million Dollars
Transcript
- Lucas: So let me ask you something — when was the last time you actually called a reference for a job candidate? Luna: Honestly? It's been a while. A lot of companies I work with treat it as a checkbox — if they even do it at all. Lucas: Right, and that's exactly the problem. Because a single reference check just saved a company about one point two million dollars. At least that's how the math shakes out. Luna: Wait — one reference check saved over a million? How? Lucas: Let me paint the picture. There's a mid-size tech firm — about 400 employees, growing fast, based in Austin. They were hiring a VP of Sales. The final candidate was polished, had a great track record, nailed every interview. The CEO was ready to make the offer. Luna: And then someone actually picked up the phone. Lucas: Exactly. The head of HR called one of the candidate's former bosses — a guy he'd listed as a reference. And that former boss said, quote, 'I'm surprised he listed me. I fired him for fabricating numbers.' Luna: Wow. So the candidate had been inflating his sales results. Lucas: Massively. He'd claimed he consistently hit 150 percent of quota. In reality, he'd missed quota three quarters in a row and was let go for cause. But his resume told a completely different story. Luna: And the CEO was ready to offer him a base salary of, what, two-fifty? Three hundred? Lucas: Three hundred base, plus a comp plan that could have taken him north of six hundred with bonuses. They were this close to signing. Luna: So the reference check saved them not just the salary, but all the downstream costs — ramp time, lost deals, team disruption. Lucas: That's the million-dollar part. When you factor in the first-year cost of that hire — salary, benefits, recruiting fees, training, the opportunity cost of deals he would have botched — it easily clears one point two million. And that's assuming he lasted a year before they figured it out. Luna: What's wild is that a lot of hiring managers think reference checks are useless. They say 'nobody gives a bad reference anymore because of legal fear.' Lucas: That's the conventional wisdom, yeah. But in practice? People still give real references — you just have to ask the right questions and listen between the lines. Luna: What's the right question, then? 'Would you rehire this person?' — that's the classic one. Lucas: That's a good start, but it's too binary. I like something like: 'Tell me about a time this candidate struggled — how did they handle it?' That forces the reference to give a specific example, not just a canned answer. Luna: And if they hesitate or go vague, that's a red flag. Lucas: Huge red flag. Another one I like: 'On a scale of one to ten, how would you rate this person's integrity — and why that number?' The 'why' is the key. You're looking for a real story. Luna: That's a lot more specific than 'was he a good employee?' Lucas: Exactly. And the legal stuff — people worry about getting sued for giving a bad reference. But most states have laws that protect employers who give truthful, good-faith references. The fear is overblown. Luna: Still, a lot of companies have a policy: only confirm dates of employment and job title. That's it. Lucas: And that's a problem — because it makes reference checks almost useless. But here's the thing: even with that policy, you can ask the candidate for references who will speak beyond the bare minimum. I always tell candidates: 'Give me someone who'll actually talk about your work.' Luna: So you're putting the onus on the candidate to provide useful references. Lucas: Exactly. And if they can't — or if all their references give one-word answers — that tells you something too. Luna: Let me push back a little. There's research — I think it was from Google's people analytics team — that found reference checks have almost no correlation with on-the-job performance. Why bother? Lucas: I know that study. And I think it's misleading for two reasons. First, most reference checks are done poorly — they're rushed, they use generic questions, they don't dig. Second, the study measured performance ratings, not catastrophic failures. Luna: Meaning a reference check might not predict if someone will be a star — but it can weed out the person who'll commit fraud or burn the place down. Lucas: Exactly. It's a downside protector, not an upside predictor. And for a vp level hire, the downside can be enormous. Luna: I've also seen companies skip references because they're in a hurry — 'we need someone in the seat now.' Lucas: That's the classic mistake. Speed over diligence. And ironically, hiring the wrong person slows you down way more than waiting an extra week to vet properly. Luna: So what's your practical advice? If a listener is about to make a hire, what should they do differently? Lucas: First: insist on at least two reference calls — not emails, actual phone or video calls. Second: ask for a specific example of a challenge or failure. Third: listen for hesitation, vagueness, or overly glowing answers that sound scripted. Luna: And what about timing? Before the offer or after? Lucas: Before. Always before. You want to know before you extend the offer. If a candidate balks at you checking references before they have an offer in hand, that's a yellow flag. Most good candidates will provide references early. Luna: Fair. And if a reference gives a lukewarm answer — like 'yeah, they were okay' — what do you do? Lucas: That's actually more informative than a glowing one. Lukewarm means the reference isn't willing to lie, but also isn't willing to endorse. I'd proceed very cautiously. And I'd ask for an additional reference from a different period of their career. Luna: It's interesting — we spend so much time on interviews, assessments, personality tests, but often skip the one step that could catch a fabrication. Lucas: And the cost of that skip can be huge. That Austin company? They dodged a bullet. The candidate they almost hired had done the same thing at his previous two jobs — fabricating numbers — but no one had checked. Luna: So he'd been hired and fired multiple times for the same reason. Lucas: Exactly. And he would have kept getting away with it if that one HR person hadn't made the call. Luna: It makes you wonder how many bad hires are out there right now because nobody bothered to verify. Lucas: A lot. And that's the sobering part. But the fix is simple — it just takes fifteen minutes and a willingness to ask real questions. Luna: You know, conversations like this are exactly why I love doing this show. We get to dig into the stuff that actually makes a difference in how companies run. Lucas: And if you've gotten something out of these episodes — maybe a tip that saved you time or helped you avoid a bad hire — a couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if that feels right to you. Luna: Yeah, it really does help us keep the show ad-free and focused on the practical stuff. No pressure, just if you find value. Lucas: Exactly. So back to reference checks — I want to talk about one more example. A friend of mine runs a small agency, about 30 people. He hired a marketing director based on a great interview and a stellar portfolio. Never called references. Luna: I'm guessing that didn't end well. Lucas: Within three months, they discovered the candidate had exaggerated their role in every major campaign in their portfolio. They were essentially a junior coordinator taking credit for work the agency had done. The client relationships started falling apart. Luna: So what happened? Lucas: They let them go after four months. Total cost: about $180,000 in salary, plus lost client revenue. One reference call could have stopped it. Luna: And after that, you'd think they'd never skip a reference check again. Lucas: They don't. They now have a policy: no reference check, no offer. Period. And they use a structured set of questions that are the same for every candidate. Luna: That consistency matters — you can compare answers across candidates. Lucas: Exactly. And it also protects you from bias. If you ask everyone the same questions, you're less likely to be swayed by a charming reference or a smooth talker. Luna: Alright, I'm convinced. Next time I'm hiring, I'm making those calls. And I'm asking about the struggle. Lucas: That's the right instinct. Because at the end of the day, a resume tells you what someone wants you to know. A reference call tells you what you need to know.