Reference / Background Checks in Mexico

Organizations looking to hire key managers or leaders in Mexico need to approach the hiring process with the same thoroughness mandated in other markets. Mexico lacks a centralized governmental database such as the Social Security System in Canada or the United States. As such, it makes checking credit and criminal history very difficult and problematic. However, Mexico’s more liberal laws surrounding professional reference checking provide opportunities for potential employers to better vet prospective hires.

This article is a combination non-fictional narrative of a real-life scenario and an informative whitepaper relaying how the adverse organizational impacts could be avoided by others. For more information on the process of reference or background checks in Mexico, please contact Warren Carter at (619) 921-1795.

Barry Johnson learned a valuable but expensive lesson after hiring the General Manager to his multi-site manufacturing operation in Mexico. Promoted to COO for Traycor (alias for a fast growing US based manufacturer of automotive components) in 2004, he was tasked with adding an additional manufacturing facility to meet his company’s growth demands. Barry was given a much defined budget and a very narrow timeline to accomplish this task while also performing his leadership role for Traycor’s existing organization with more than $900M in sales.

As he approached the project to add a new site, he knew one of his first hurdles was to address his current lack of leadership for the Mexico facilities. Traycor had made its entry into Mexico in 1998 with one maquiladora operation led by a Plant Manager that in reality was little more than a seasoned Production Manager. With Barry’s leadership and a hard-working team in place the modest operation was considered to be one of Traycor’s most successful manufacturing sites by 2003. The economy had rebounded from the Post 9/11 era and sales growth fueled executive management’s desire to ramp up manufacturing capacity to meet the new demand.

Everything was put on fast track status to meet the new growth criteria for two new facilities at two different sites in Mexico by first quarter 2005. Time was of the essence. Early into the process, Barry was introduced to what he thought was the answer to his prayers.

A Mexico City-based vendor to the Greenfield project invited Barry to dinner to introduce him to Juan Doe (alias) as a potential General Manager for the new site. Dinner with Juan lasted four hours. Inside of the four hour meeting, Juan was able to enthrall Barry with his knowledge of Mexico’s automotive industry and his extensive repertoire of experience.

Juan explained early into the dinner meeting that he had been laid off after his former employer declared bankruptcy and closed their facilities in Mexico. The vendor vouched for Juan’s story and the conversation quickly proceeded to the pressing needs of the day – how to get the facility operational as quickly as possible. By the end of the evening, Barry felt very comfortable with Juan. Juan was able to successfully articulate how he applied a number of modern concepts such as Lean Manufacturing into the multi-site operation of his former employer.

Barry saw the introduction of Juan by the vendor as very fortuitous and would be a major time saver in not having to conduct a full-on search and screening process for the role. With the scheduling pressures facing him, he elected to quickly pull the trigger and hire Juan as the General Manager to oversee the planned expansion.

Pause for Reflection…

Rather than quickly pulling the trigger however… this may instead have been a good time for a cooling-off period and the application of wisdom about how business often works in Mexico. A vendor would naturally try to curry favor with Barry and take steps to insert a “vendor-friendly Juan” into the organization. Juan’s reputation should have been very thoroughly corroborated by multiple and unrelated sources. The circumstances surrounding bankruptcy and the lay-off should have been checked out by a lawyer and local sources to understand the context further, and whether Juan was at all responsible or derelict in the matter. And as is always advisable, two to three viable candidates should have supplemented Juan’s candidacy. However, Barry marched on and as you will observe, paid the price for his hastiness.

And then….

One of Juan’s first actions was to engage a Mexico-based contingent search firm to start the process of hiring two Plant Managers, a senior HR Manager and a Controller along with a number of other more junior roles. Barry directed the Corporate Vice President of HR to support and oversee the process with Juan. She quickly delegated her responsibility to an internal recruiter from the corporate HR staff.

Five months later, Barry received praise from the CEO for the work the Mexico team had done. Although there were a number of minor cost overruns in construction and other areas, the hiring timelines were all met inside of the targeted schedule and the Vice President of HR was particularly pleased with the fact that all mandated hires had been made at 4% below the targeted budget. (One may question in retrospect is whether cost under-runs in hiring were penny wise and pound foolish.)

However, tell-tale problems began to surface by the company’s third quarter in the new operation. Raw material costs were up and numerous other inconsistencies were pointing to an internal problem yet to be defined. When inquiring into these inconsistencies with his new General Manager, he was given vague responses. These responses ranged from “these numbers will improve after we complete XYZ phase” to “I’ll take that up with our Purchasing Manager”. Excuses for failing to follow-up became more creative and the inconsistencies continued to mount.

So What Happened?

QualiFind was finally contacted by an industry consultant and subsequently introduced to Traycor executive management. Prior to QualiFind’s introduction, Traycor had completed an internal investigation that was launched by the CFO and Traycor’s General Counsel. Their findings four months later would make incredible fodder for a crime novel. Juan was discovered to have corrupt vendor relationships with numerous maquiladora suppliers, the contingent search firm he engaged, and two of the new managers hired through the search firm were all found to be culpable in a massive embezzlement of company funds and resources. To make matters worse, it was quickly and relatively easily discovered that this was not the first time Juan had perpetuated such fraud.

Lessons Learned…

Aside from the obvious mistake of not conducting a thorough reference check on Juan prior to hiring, this problem could have been mitigated later had Barry taken the risk-management step of sending a finance and supply chain audit team to the site for an in-depth visit – accompanied by himself. Barry should have asked very direct questions of sources reporting to Juan, but did not. Testing for corroboration is key, and Barry could have avoided the many costs of management turnover by testing thoroughly for a consistent story among key leaders at the plant. Some of these costs can be recovered, such as paying too much for parts; this can be remedied relatively quickly and mechanically. However, the cost to morale and trust when site management like Juan has created a deceitful environment that lacks forthrightness is immense, and very avoidable. Barry’s eagerness and oversight cost Traycor an undetermined sum of lost/misproportioned revenue, opportunity, internal morale and trust issues, and it ultimately cost Barry his job as Traycor’s COO.

Preventative Measures…

Sometimes the Mexican business culture is misunderstood. The communication approach doesn’t seem very forthright to those from other countries, but open communication does come with time and deepened trust. Juan was deepening mistrust, not preventing it. Any culture different than, say, an American’s culture, should be given time so all parties have an opportunity to trust each other. Vetting Juan’s background more carefully would have demonstrated that he didn’t operate in a context of trust.

Organizations looking to hire managers and leaders in Mexico need to approach the hiring process with the same thoroughness mandated in other markets. Mexico lacks a centralized governmental database or system such as the Social Security System in Canada or the United States. As such, it makes checking credit and criminal history very difficult and problematic. However, Mexico’s more liberal laws surrounding professional reference checking provide opportunities for potential employers to better vet prospective hires.

In the absence of a centralized government-controlled database or reliable vendors providing criminal or background checks, potential employers are faced with having to undertake this task on their own. Typically, this means that employers have to resort to conducting reference checks on selected hires. Reference checks can be very time consuming when considering that you can sometimes wait days for a response from a reference that may be travelling outside of the country.

Additionally, as in the case of Juan Doe; many people in Mexico that have problematic issues with their professional past have learned how to build a network of “fake” professional colleagues. These fakes often have enough market and industry knowledge that allows them to masquerade as having been the person’s previous supervisor and can essentially tell the reference checker anything they want to hear to help their friend get hired. Therefore, proper vetting in Mexico may require that you check out the validity of the references listed. After all, once he/she’s hired – they all stand to benefit with their new found business connection. We have actually found cases where the fraudulent hire was found to have immediately set about hiring the references (and/or family members) and/or vendor engagements to siphon off company funds and resources.

The advent of social networks on the Internet have brought about increased opportunities for hiring managers in Mexico to more thoroughly check references on potential hires. One of the most effective forms of social media for both professional networking and reference checking is LinkedIn. LinkedIn allows hiring managers to conduct searches of people that have worked with specific companies.

Our Advertorial…

QualiFind has the increased advantage of having Mexico’s most exhaustive database of human talent. QualiFind was the first talent acquisition service provider in Mexico to begin utilizing a modern CRM type system to catalog candidate resumes and work history. The modern version of our database was started in 2000 when we transitioned ten years of previously catalogued data into the Denver-based system of Recruiting Solutions. We eventually updated our database to an even more robust system (Bullhorn), while the next service provider in the Mexico market only began adopting this technology in 2006.

Coupled with our internal database and the expertise to leverage resources in social media sites such as LinkedIn and Facebook, we are able to ensure that candidates that we present for hire consideration are who and what they are presented to be. The costs of haphazard reference checking in Mexico can be felt from the bottomline to all other areas of a business organization and the preventative measures are relatively easy and cost-effective. Whether you are conducting your own internal search or hiring process or engaging a search firm such as QualiFind, why take the chance of not properly vetting your prospective hire?

QualiFind Executive Search can be engaged to conduct background checks of prospective hires in Mexico. If you have an independently sourced candidate that you are considering to hire and would like to receive a thorough reference/background check, please contact Warren Carter to learn more at (619) 921-1795.