Ask hiring managers if they enjoy conducting candidate reference checks and you are likely to see a lot of eye rolling. But, in a time when candidates cannot be accepted at face-value alone, the need to verify career backgrounds is critical.

Last year, HR Dive covered the growing concerns that many companies have about conducting reference checks, and the complexity of the process. Now, it's time to revisit the issue and see where things are heading.

Is reference checking still important in recruitment?

A Society for Human Resource Management survey indicated that eight in ten HR professionals regularly conduct candidate references. This study also showed that the more advanced or technical a position is, the more likely it is that a candidate reference check will take place.

For unskilled labor, and seasonal and part-time jobs, however, the reference check becomes a lower priority and is conducted hastily, at best. And then, the information gathered is limited to dates of employment, eligibility for rehire, and salary — if the former employer will even complete it. The entire process is messy and time consuming.

Introducing: automated reference checking tech

For the sake of having a better idea of what candidates may bring to the table, along with some details about their career history, automated reference checks have become a popular choice. But employers have to adopt such tech properly.

First and foremost, automated reference checks don't replace or mimic traditional reference checks done by humans, says Greg Moran, President and CEO of OutMatch, a company that helps employers perform automated checks, among other things.

“Automated checks imbed science into the process of learning more about each candidate using an assessment approach," Moran said. "In each case, candidates supply the references (who must have email address access) who then answer a set of questions that indicate the fit of each candidate for the specific job role.”

Completion rates are around 82% for automated reference checks, as compared to a 30% phone reference check completion rate, according to Moran.

But, the real value in these checks comes from the quality of the candidate, he said.

“Because there is no incentive to say anything negative or positive about a candidate, the reference has to be truthful when supplying information," he said. "There's no right or wrong answers. It’s limited to questions about candidate traits and qualities that relate to the job itself."

Each question has been developed around underlying behavioral models and candidates are benchmarked against other candidates applying for the same job types in a large secure database. 

The other advantage, says Moran, is that the entire process is branded and customized for the organization. The reference also gets a brief look at the culture and career opportunities once the assessment concludes, which may prompt them to either apply for an opportunity or refer another candidate. Opt-in rates hover around 20-30%, according to Moran.

On the administrative side of things, only authorized representatives at the hiring company have access to the data obtained by automated reference checks. This information can be shared with decision-makers for collaborative hiring efforts but never makes it into employee records or gets shared with other entities.

Compliance risks

Employers must be careful, however, to ensure that all reference checks comply with all applicable laws.

Donna Ballman, P.A., a plaintiffs' attorney and employment law author, told HR Dive that some states require employee consent for reference checks (especially if they include credit references).

"Employers need to pay particular attention to Fair Credit Reporting Act mandates," she added. “This federal law covers anything the employer is getting from a consumer reporting agency that covers personal and credit characteristics, character, general reputation, or lifestyle (but not the HR department calling references, running your name on Google, checking out your Facebook page, or reading your blog). If they are going to run a background check, they have to give you a document solely for the purpose of telling you they intend to conduct a background check, and they need your permission in writing.”

Automated reference checks have other potentials risks for both the employer and the employee, Ballman said. 

“If a former employer gets a list of questions, there is zero control over who actually fills out the form. If the former employer allows someone with improper training to answer a list of questions, that person could disclose a disability, pregnancy, race, national origin or other protected status. And then what does the potential employer do with that information?" she explained. " As an example, if they find out the applicant has a disability and then don’t hire that person, they have opened up a potential lawsuit for discrimination.”

As for OutMatch's particular product, Moran says the technology has built-in safety features that prevent the disclosure of anything forbidden by law. And the questions asked are limited to characteristics and requirements of each job, "not to specific traits that a candidate has that may reveal a protected class, or a candidate's legal or credit history."

Moran also said he believes reference checks conducted over the phone pose all those same risks — and potentially more. “The use of automated reference checks is much less risky than those conducted by phone when a reference voluntarily supplies information to a hiring manager that could introduce bias into a hiring decision,” he said; automated reference checking can better control what is shared.

The verdict

Are there pros and cons anytime human resource practitioners choose to use a technology solution? Of course.

Automated reference checks could open up an HR professional's day, leaving more time for strategic initiatives. They have a high response rate and can show how candidates stand up against each other.

On the other hand, as Ballman pointed out, the tech has limitations: there's no chance to listen to a reference's tone or ask follow-up questions.

Companies will have to decide for themselves whether automated reference checking fits into their individual hiring processes but one thing's for sure: When adopting any new tech, HR must ask vendors the right questions and understand that when it comes to legal compliance, that's still the employer's responsibility.