Extreme Referencing

Tarun Davda
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Hiring a strong team is the one of the proven ways to ensure startup success. Yet, it’s the biggest issue that founders / CEOs face when building their organization. In this episode of Matrix Moments, Tarun Davda talks about ‘Extreme Referencing’, and how this helps him go beyond the surface level interview process when trying to hire for senior executive positions.

Salonie: Hi and welcome to Matrix Moments. This is Salonie. And I am here with Tarun Davda, Managing Director, Matrix Partners India. Today’s episode is about extreme referencing. So, Tarun, why do extreme referencing and what is it about?

Tarun: So, Salonie, I think one of the biggest issues when we talk to our founders, when we talk to senior execs in some of our portfolio companies, one of the biggest issues that founders speak about is org building. And within that, there is a saying which is show me someone who has done hiring and I’ll show you someone who has made hiring mistakes. It’s as common as that.
And so, I think one of the - the reality is when you are making a hire you actually don’t know what you are getting into. There are almost always surprises down the road. And that leads to frustration, that leads to loss of time, that leads to loss of productivity. And the stakes are even higher when you hire senior talent.

Doing references for people that you are looking to invest in or doing references for people you are looking to hire at the senior level in our experience drastically reduces the chances of those error.

The second is our belief is that by definition interview process generally reveals what are most commonly known as extrinsics. It’s not a word, but again it’s think of it as extrinsics versus intrinsics. The reality is you tend to cover the person’s background, their experience, various roles that they have played, where they have studied, what they have done, what challenging projects they have been a part of, but there is very little that you can find out about somebody’s intrinsic capability. Their personality, their key strengths, their drive, their working culture, the fit with the company, these are things that are hard to glean during an interview process. That’s second.

The third is and I am sure a lot of people have faced this; one can fake a 4 to 6-hour interview process. It’s hard to fake day-to-day output that has happened over a long period time working closely with someone in the real world. And so, generally, what we have seen is picking up the phone and speaking to a few people who have closely worked with that individual that you are looking to either invest behind or to hire tends to reveal a lot more than any interview process can.
There is a saying that eventually you are the sum of the five people that you hang out with or you work with. And so, if that’s true, well, our belief is that getting to those five people and learning about them and what they think of this individual is paramount before you make the decision.

Salonie: Okay. But when going through the process of extreme referencing, what would you say are the top things to keep in mind when doing this?

Tarun: Very good question. So, I would say some of the things that obviously all of us as investors and as founders and as executives end of doing some sort of referencing. And some of the things that I have picked up over time one is who you speak with is as important as what you ask. And so, getting to the right trusted source who can tell you relevant information about the particular candidate is extremely important. I almost always skip the references that are provided. And instead I only work my network to try and get to those 3, 4, 5, 6 people who are the people who have worked with this individual directly, have had the chance to observe not only the hard skills but also the soft skills of that individual over a reasonable period of time because only then can you get a real color on that individual. So that’s number one.

Second is how you ask is as important as what you ask. And we’ll cover again some more nuance over there in terms of how you can ask certain things so that the person ends up revealing more than they would have otherwise. Third, what the person doesn’t say is as important as what the person says. And so, very often when we are doing reference calls actually reading between the lines and what the person is skipping as part of that reference call tells us a lot more about versus what is just being said.

The other thing is how the person says it is as important as what the person says. And so, there are times where I have done a reference call on an individual and the person that I have spoken to has given me a positive reference. Two days later I ended up speaking to that same individual for another candidate that we were looking to hire, and it was a positive reference again but the tone and the positivity and the body language of the person when he was giving the reference for this individual was just much more excited, much more table thumping. He said maybe the same thing, maybe 15 - 20% difference. But what made it a 100% difference in my mind was basically the fact that this person was just so excited to give a reference for this individual.

And so, I actually asked this person. I said, listen, I spoke to you a few days ago and you told me very positive things about that person also. And so how do you compare these two. And he says you can’t compare. This person is - the second one that I was talking about was just significantly higher in his mind. And I think that’s the individual that we all are trying to get to. And so, I think just reading somebody’s tonality is extremely important as much as what they say.

Third is again some tips. I think setting context and assuring mutual confidentiality is very important. I think very often you end up speaking to somebody and they aren’t sure who else is on the call, they aren’t sure where this information is going to be shared, they aren’t sure if it’s going to be put up on some internal CRM software, they aren’t sure if it’s going to be circulated in an email to your HR team.

And so, I generally start these calls saying, A) thanking them for their time, setting a little bit of a context of why I am trying to get information about this individual. What is the decision that hinges on this particular reference? And then telling them in on unequivocal terms that whatever this person says is going to stay confidential between me and that individual. And I think that really helps people open up a lot more. And I think just remembering that no one is perfect.

I think idea for a reference or a BRC as we call it, which is a blind ref check, is not to find negatives it’s as much about validating your own read of the person and reinforcing some of the positives that you picked up. But it is also actually just in terms of understanding the expectations and matching it to the role that you have in mind. Understanding that here is why I am betting on this individual. Here is why I am looking to invest in this individual. Here is why I am looking to hire this individual. And knowing what the known knowns and unknown unknowns are, I think that is really what it comes down to. Very often I think people don’t understand that the reason for doing a reference check is exactly that.

Final tip, I think as far as possible, I recommend that people do video calls and not audio calls. I just think people find it easier to lie on telephone calls and so as far as possible I do request someone to do a quick video call and I generally feel that you end up getting a lot more out of that than email would. I mean I would definitely not email because again people don’t generally want to be quoted on record, don’t want to find themselves saying something negative about an individual. They don’t know where that email will be forwarded. And so, I end up almost always doing either a video call and in the worst case a phone call.

Salonie: Okay. You also just mentioned the how you ask part, can you share some examples on that?

Tarun: Yes, I think a classic example, one of the things that when I started out, earlier on what I used to do when I used to ask someone, hey, tell me about this person’s weakness or tell me about this person’s area of development, generally people in India don’t or maybe it’s allover I don’t know, but I found it more so in India, people don’t like to say something negative about anyone because they feel like it may come in the way of the person’s career. They may feel like they owe it to this person to support them and which is fair. I think it has its space. But very often what they don’t realize is that sometimes you are doing this not because it’s going to be a ding on the person’s - your decision to hire that person or not or to invest in that person or not. But it’s also because you are trying to understand whether the person has the right skill set and certain skills are less important than others depending on what you are looking for.

And so instead of saying what is this person’s weakness, I generally say what would this person need to work on to become more effective as a leader. Or, what can I do as a manager to help this person up for success in the future. Or, what kind of person should I pair X with so that he or she is more effective in their work. And in some way, it’s telling you the same thing which are sort of certain gaps in skill set, but there is a much more positive spin to it. And so, what I found is that people will tend to open up a lot more than they would have otherwise. So that’s one thing.

Second is open-ended yet specific questions can reveal a lot more than one can think. And so, I have seen that very often some of my decisions to either invest in someone or hire someone have changed with this one single question. And I like asking this question every time which is assume I hire X and if you were to find out one year from now that things did not work out, what would be your first instinct on what went wrong. And its amazing how quickly people will say one or two things that will tell you about what is the exact concern that they have with that individual.

And again, I think like said it’s very often about how you ask that question. If you tell somebody why I should not hire this person, they may not say it. If you ask somebody tell me one negative quality about this person, they will not say it. But the moment you ask the question in another way, I think people tend to open up a lot more. And I think that’s this thing.

The other thing is I think asking them to compare with other common people like I mentioned in the other example. Very often I will speak about someone and the feedback is positive because it is positive. But all of us are here to find the absolute sort of best and hire for our companies. All of us are here to invest in the absolute best founders. And so, actually asking that same individual and hopefully if you have a network and if you have spoken to those people earlier and have some common people actually saying, hey, how would you compare X with this other person that both you and I know on sort of these three characteristics or these three traits. It really helps. The difference between a 7/10 or a 9/10 is very clear in that conversation versus both a 7/10 and 9/10 is positive, but the variance between the two becomes a lot clearer. And so, think these are some of things that I have picked up over time about how the reference is to be conducted.

Salonie: Got it. Has there ever been situation where extreme referencing has helped you make up your mind on a deal or on a person?

Tarun: Several actually. I will say one of our early deals - one of my early deals - one of my early deals where I was part of, I think Ola is probably one example that comes to mind right away. Also, because I mean the company has done excessively. But going back to when we were actually doing the diligence on the company, it was a difficult decision to make. Ride hailing was not as well-known an industry as it is today. It wasn’t anywhere as mature as it is today. This was back in 2012.

We had - there were multiple concerns that not just us, but multiple investors had on sort of regulatory environment. And the only thing that just kept us wanting to spend more time on the opportunity was just Bhavish and how good we thought he was. And that’s played out. But obviously it wasn’t as clear back then as it is today. And so, I remember speaking to several people at least 15 to 20 people that Bhavish would have touched at some point in his life either as a student or as a young early employee at Microsoft Research where he was before he started Ola. I had even spoken to his hostel wing mates and his dorm mates. I remember the one conversation that - actually two. There were two conversations that really, I think changed - I think the penny dropped on those conversations.

One was extremely well-respected entrepreneur that I know, and I don’t want to quote him because obviously his feedback was confidential. But it’s someone we at Matrix respect a lot. And he had had the good fortune of having several conversations with Bhavish in his early days when Bhavish was just starting out. And he made this one line and I still remember that line. And he said I just see a lot of myself in him. And I think there is no better sort of stamp of approval than saying that Again, for this is somebody who is very successful. This is somebody who has achieved a lot in his life and if that person says I see myself in my early days in Bhavish, I think to us that was a huge sort of positive.

The second is I had spoken to dozens if not hundreds of cab drivers and again, Bhavish was very young when he started Ola. And he had got a few hundred or a few thousand cab drivers already in his fleet then. And one of the concerns we had was is he going to be able to manage these drivers. It’s not easy to as a young techie to be able to do that. And pretty much the unequivocal feedback that we had from all the drivers that were part of the early fleet was they absolutely loved Bhavish.

I still remember the one line and this driver said, bilkul sajjan aadmi hai. And for us just hearing some of these things about the fact that here’s a young a guy out to disrupt a large traditional industry but has already got the respect of all the drivers, is seen as fair, is seen as doing good for the driver community, to us that was a big positive. And so, I think just getting that sort of 360 degree and in my view finally these were - I mean there is definitely a lot more, but these were the two that really come to mind that sort of helped us tip over into making Ola investment. And thank God we did.

Salonie: Okay. And what stage in the interviewing process would you say that it’s the right time to start doing BRCs?

Tarun: So, I would say this one is a little bit controversial. And I think different people have different ideas around it. But generally, my bias is to do at least a couple of BRCs even before we start spending any time interviewing the candidate or spending time with the candidate. And I’ll tell you why. I think interview processes tend to be long drawn out. They tend to involve multiple people in the team. Very often you can go from interview to interview and still not be able to make up your mind on a candidate. And sometimes you don’t know where to spend time when you are interviewing.

In my experience actually making that effort to message a couple of people in the network who may know this person, getting on a quick 5-minute call with that individual, being able to really understand who this individual is, what is it that makes them tick, what are the two or three things that are to watch out for that individual. In my mind if nothing else, helps you guide the interview process a lot more tightly. And it helps you actually know where to spend time and whether spend time.

In significant number of cases, after the first few references you will realize that you don’t need to interview, or you don’t need to spend more time. In other cases, like I said it just helps guide the interview process a lot more effectively. And you end up getting to an answer much faster. If your first one or two references are glowing, you know that that’s the candidate you want to accelerate through the pipeline. If your initial references are mixed, you also know again that it’s not someone that you want to spend as much time on. Or, you probably just don’t want to spend any time on.

The other thing that I think I would add over here is that doing the references yourself at least the key ones or at least all the ones for a key hire or a founder that you are looking to invest in, I found that to be extremely helpful. This is not one of things that one can delegate because again referencing is more an art, less a science. And knowing what to ask, knowing how to ask, knowing what to read into, knowing what to ignore, knowing which threads to dig deeper into, it takes some time and it takes a lot of context to know sort of what is it that the person is really trying to say. And in some cases, avoiding saying.

And so, I think the other thing that we try and do as much again at Matrix as possible is every deal lead, every partner who is on a deal will themselves get on and do at least a few key references themselves and not delegate it to the rest of the team.

Salonie: Okay. And how many people would say is the right number to speak to when you are doing a BRC? Or how deep should you go and when should you stop?

Tarun: I would say as many as you can. But generally, what I found is when there is a pattern that starts emerging, so let’s assume you do the first call, you learn something about the individual. You do a second call. You do a third call. And if you are hearing different things, you have probably not been able to get to all the key references that you need to get to.
If you are hearing pretty much the same thing in the third call and the fourth call and the fifth call and assuming you have got to the right people, I think then you are reasonably you can be assured that, yes, I think I have figured out this person. And I have figured out what I need to know.

Second, I think if you can spend at least few minutes describing this person and not what’s on the resume. Not, hey, he worked at company X and then he went to company Y and he played this role. And then he studied at A, B, C place. It’s actually about can you talk a little bit about this person’s personality. Can you talk a little bit about this person’s behavioral traits? Can you talk a little bit about what drives this individual? Can you talk a little bit about the two areas where this person is not as good today and needs help or needs to build from there? I think that’s when you feel that, okay, I think I have a good grasp of this individual and that’s probably the right time to stop.

The other thing I do is I ask the references for other key references. And if you hear the same name coming up again and again and you have spoken to those people, you know that you have got all the right people. So, if I am hiring somebody and I say, hey, who else can I speak to at your company who would have worked closely with this person? Or, who else do you think from his past career was somebody that this person worked very closely with. And if you are hearing again the same 3, 4, 5 names coming out again and again and you have spoken to all or most of them, I think that’s probably a good place to stop because then you know that you’ve hit all the key people.

How do you know if it’s too early to stop? I would say if you can’t clearly articulate a few negative. Everybody - not all of us are perfect. Everybody is some version of a work in progress. Everybody has multiple strengths. Everybody has multiple areas where they aren’t as strong, and they are working on. But knowing what those are and knowing whether those are absolute must have for what you are looking to do is important.

And so, if aren’t able to spell out at least a few things that this person needs to improve upon, you are stopping too early.

Salonie: Okay. Anything else you would like to add to this topic?

Tarun: I think just reinforcing. I think in my mind referencing is as much an art as it is a science. And I think recognizing it as such is important because there is no script that one can follow in a reference call. In fact, that’s probably one of the biggest mistakes one can make is have a standard checklist of 10 questions. Go through that checklist and say, okay, I have done my reference call. It’s the worst way to do a reference.

Actually hearing what the person is saying, following their lead, following the thread, trying to dig deeper on a particular aspect that this person is talking about, asking the next level question based on what they answered in your previous question, picking up things that they are not saying but they are trying to say or they are trying to hint at is important. And then picking up that thread and going a bit deeper. Spending time to get the person comfortable. Spending time to ask them the question in the right way such that it puts them in a zone where they are willing to open up to you, I think those are things which are important.

Secondly, I think when in doubt, trust the BRC. My experience has been if my view and the BRC view is different, I am almost always wrong. It’s been very rare if at all like I can’t remember single instance where I have felt in a particular way about an individual and the reference has been diametrically opposite, I don’t remember when I was right. It’s almost always that the reference right and I was wrong. And so actually trusting your gut is a wrong answer in most cases. And trusting the references is much more important I would say.

And there are some of the best investors in the world, I can’t remember, I think it was Fred Wilson who had said this that when his view on a particular individual is different from what he has heard from references, he over weights the references by more than 70%. And that’s allowed him to be as successful as he has been as an investor.

Salonie: Okay. So, to quickly summarize everything you’ve covered:

Firstly: Extreme Referencing comes into play when you want to gain deeper insight into a person, much more thanwhat the surface level interview process provides. Contrary to popular belief it should be done as early in the interviewing process, and ideally even before you begin interviewing.

Secondly: Who you speak to is more imp than what you ask, its imp to go beyond the references provided by the candidate, work your own network to find the right people to do a BRC with to get to the right answers. Also, how you ask again is more crucial than what you ask when conducting reference checks

Thirdly: Conveying mutual confidentiality up front is paramount in the process of referencing

Lastly: When in doubt always trust the BRC, if you have a contrarian point of view to what you’ve learned from the BRC – chances are that they are right, and you aren’t

Thank you for listening. And you can find the transcribed version of this podcast on matrixpartners.in. You can also follow us on Twitter and LinkedIn for more updates.

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