References, Redundancies and Compromise Agreements

We place a lot of people. We take a lot of references. But when people have already left their role, whether redundancy, resignation or under a compromise agreement, it always raises questions – well one question anyway: Why?

It’s inevitable that leaving in these circumstances gets treated with suspicion. And when the person under scrutiny is perhaps the only team member leaving or one of a small number, the level of suspicion increases. 

Many firms have a restrictive reference policy and any formal reference request will be responded to with basic employment data. Many firms also have a policy of not allowing their team members to give personal references. And under most compromise agreements a reference statement is pre-agreed.

Even if you talk to the decision maker regarding the redundancy they’re going to stick to their agreed line. After all it is probably what they told the candidate. They aren’t going to say we’ve chosen you for redundancy because we couldn’t stand working with you. They might say it’s because they were in the poorest performing group, or that they were involved with an investment that went sour – but I doubt it. Would you? What would you say? You’d say that you had to reduce costs and unfortunately he or she was in a team that was of less interest in the current climate so inevitably some hard choices had to be made in that team etc etc. 

Still, there are always rumours and gossip to fill in the gaps!

From the candidate’s side, they will always have their list of referees prepared. But can these referees be trusted? Well, I would say, in general, yes. Most people in and around our industry give their honest and usually balanced view of the person – but remember it’s from the perspective that they have known the candidate. And when the referees are advisers or CEOs of investee businesses, they’ve usually been chosen because they were in a successful process. So their perspective is inevitably positive and maybe the candidate will be a source of more investment / more fees in the future if they help them get this job. Would the story be the same if the investment hadn’t happened? 

So, what can you do and what should you look out for. You should look out for consistent messages.

Before you speak to anyone, look at the CV. Is this the first time the candidate has been selected for redundancy, or does it seem to happen every couple of years? It may be bad luck, it may be something else. Find out the candidate’s story for each situation and check it out.

And when you find out the candidate’s story – ask them for it more than once. Do they tell a consistent story? Beware the story that changes in the telling.  

When taking references, talk to enough people to triangulate the story and look for consistency in the references: if three people tell you the candidate caused problems in the office then listen carefully. And if three people tell you that he or she always went the extra mile to get things done, well there’s something in it. But don’t forget the self interested perspective of the referee.  

At the end of the day, references can give pointers to likely behaviour. But you have to have your own opinion – and a probationary period. The last defence against a poor hiring decision. We hope it won’t come to that.

I’ve just interviewed Henry Pugh of Risk Advisory Group – http://www.riskadvisory.net/ a professional reference taker and investigator of buy-out teams. He reckons on average one in ten investments don’t go ahead after reference taking. The full transcript of his interview is coming up.