GUEST COMMENT: Giving references is such a nightmare, it's best avoided

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If you're fortunate enough to have got a job offer in the current environment and have even signed a contract, congratulations. You're not home safely yet though. You have one final hurdle to jump, and it may be the hardest yet. Your reference.

Most men reading this will know as an article of fact that it's much easier to get to know a pretty girl in a bar or at a party if she knows you have mutual friends already. It's a stamp of approval.

Employers are similar to attractive women. They love getting a reference. No matter how incisive their questions, how tricky their brainteasers or how well-planned their case studies, nothing, at least in their view, is as good an indicator that you can do the job you're applying for as someone else's word.

I have no idea why that is. In my view, there's an inherent conflict of interest in giving a reference.

Why should a referee give you a good reference which will allow you to float away to a competitor? For the jobs a lot of us do, there's not a very big gene pool to choose from. It's very hard to find another, say, Japanese interest rate swaption trader. Replacing someone they're already happy with could take a very long time.

Conversely, if you're given a sparkling reference, your prospective employer might suspect that your current boss is looking to ease you out painlessly. If you're not top-notch, your boss will be winning twice - she'll be crippling a competitor and avoiding a costly redundancy package or even a time-consuming performance management programme.

Written references are often forbidden by company policy since firms don't want to be involved in a legal paper trail. References have therefore become an off-the-record phone call affair.

If the referee feels that an employee is really not suited for a role he's accepted, but they like their colleague anyway, they feel torn. They can either risk their professional integrity by lying and giving their friend a good write-up or tell the truth and damage their friend's career. Often the solution is an uncomfortable fudge.

Honesty is a rare commodity in finance. Since many people couldn't care less about their professional integrity as long as their personal P&L is high, the referee-checker is likely to take any feedback with a pinch of salt. Furthermore, references are often taken after a job contract has been signed (I have no idea why - perhaps to avoid bosses finding out that candidates are shopping around) and it's hard for an employer to renege if they discover the candidate has a bad reference.

I've never been in this position and I'd love to know how one deals with it if it happens.

The author is a former corporate finance professional, now working in private equity.

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