One of Russia’s richest men recently put in a bid to purchase the New York Nets professional basketball team and move it to Brooklyn. But before that can happen, according to NBA Commissioner, David Stern, NBA rules require background checks on a prospective new owner, as well as approval by 75% of the 30 NBA team owners. This interesting requirement reminded me of an incident that highlights why background checks are so important – not just for NBA owners – but for anyone assuming a position of senior-level authority within any organization.
A few years ago we were contacted by a company prepared to hire a new CEO. The candidate had been interviewed and, according to the Chair of the Search Committee, provided all the right answers to the questions that were asked, presented himself well, and seemed to be very knowledgeable about the company’s operations and products. We were retained to check his references.
The first reference I spoke with confirmed that the individual in question had, indeed, been their CEO on the dates claimed. He also said, “When the guy was interviewed by their search committee he had all the right answers to their questions, presented himself well, and appeared to be very knowledgeable about the company’s operations and products, so we hired him.”
Next, I asked the reference, “So, what do you think his main strength was?” There was a long pause and then the reply, “interviewing.” The reference added, “It took us about six months to figure out that he could only do about a third of the things he claimed he could. We had to let him go.” I asked if his references were checked before the hiring decision was made. “No, but I certainly wish we had. That hiring mistake cost our company close to $300K by the time all the expenses associated with hiring him, terminating him and finding a replacement were calculated.”
When I called the prospective employer, I could almost hear their chins drop over the phone. They were prepared to offer this candidate a base salary of $150K plus perks worth approximately another $50K. Needless to say, careful checking references proved its worth in this situation. The moral of the story seems clear: Regardless of whether it’s a prospective NBA team owner or corporate CEO, doing a background and reference check makes good sense and can save big dollars.