Reference Checks: Don’t Jump the Gun

BV professionals are used to reaching out to each other for input and guidance.  This is a business of judgment, and one of the best ways to improve yours is to calibrate it against that of another professional.  Hundreds of phone calls and emails are exchanged every day.  Hardly anyone thinks twice about asking for, or offering, help.

Paradoxically, this casual approach with reference checks can cause problems, or worse, cost money.

The ‘grapevine’ that runs through business valuation often results in information being innocently passed along to an extent never envisioned by the initial source.  Pre-emptively picking up the phone to call someone you think would be a good reference can set ripples in motion which could too easily touch your candidate’s current employer, making life difficult for everyone.  This is too close to lawsuit territory.  Avoid it.

A completely innocent call to a former employer can set off a silent alarm about your candidate’s interest in making a move.  True, you could not have been expected to know that that former employer has always wanted to re-hire.  That’s cold comfort, however, when you discover that he has made his own offer.

Your smartest move – and best safeguard – is to extend an offer contingent upon satisfactory completion of references (and a background check if you use one).  Your attorney can help you with the best wording of this condition in an offer letter.

Your candidate’s signature of acceptance grants the necessary authorization to complete the reference checks.  The candidate will have alerted references to expect your call, minimizing the likelihood that a call will ricochet and damage the candidate’s current position.  By getting an acceptance, first, you also inoculate yourself against any re-hire attempt from a former employer.

BV really is a small world.  Mostly that’s a good thing.  Just not always.