Buddy Ed Sim just posted a useful note on the Importance of back channel reference checks. The person you are looking at hiring, or take money from, will volunteer contacts who will provide glowing reports about her/him. In order to get a more nuanced view (nobody’s perfect), you do want to find other references in or through your own network. Former colleagues are obviously the most natural sources, and in the case of a senior startup executive, former investors also fit the bill. Services helping with these “investigations” are obviously search engines, specialized databases like Zoominfo (which has an uneven quality of data and coverage) and LinkedIn (that has even developed a specific feature for that purpose).
As Ed states, it is critical to do a thorough job when going through these references, because like software bugs, fixing a mistake costs way more than avoiding one:
A wrong hiring decision for an early stage company can be a killer! All too often startup companies want to run fast and furious and hire that killer executive candidate ASAP without doing the extra work required to determine the right fit. In this particular case, through the back channel references we were able to find a number of inconsistencies about a candidate’s effectiveness at a prior startup, his reasons for leaving, and his overall management skills. While the references were balanced and fair, they were far from glowing. In fact, most of the back channel references were consistently mediocre which for me was a vote of no confidence. Sure, you should always expect to get a couple bad references if you do enough of them on someone, but if you see a consistent pattern of concerns or “areas that need to be managed” emerge from those references, it is time to move to the next candidate. In fact, let me extend this message and state that doing back channel references should be standard business practice. Why learn in 3 months that a particular executive, VC firm, or business partner was not a right fit, if you can piece together that information beforehand? Just a little more work in the diligence process can save you lots of frustration in the long run.
Whilst we are at it, I would actually go even further: whenever you are hiring an executive, directly or through a recruiter, you want to check – as in confirm – previous employment, diplomas, etc. I recently talked to an entrepreneur whose company had hired a CEO who seemed to check out during the interview and “references” but quickly fell short of expectations. It turned out that this CEO had doctored his diplomas and employment history. Whilst it is most likely a case of the recruiter doing a piss poor job (technical term), it is ultimately to the board, and investors, to make sure these checks are properly done.