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I think Andy has hit the nail on the head!
The reason for being unable to give Negative Reference is, because some good employees(who were leaving/had left) got Bad References from disgruntled Employers.I realise that in your case this is exactly the opposite,but the rule still applies.
As Andy says,refusing to give a reference says far more than a bad one ever could!
I agree that refusing to provide a reference says it all, but when one of my ex-bosses left the company I worked for, they made him work out his month's notice on his own in the boardroom (this was 20 years ago), then did that to him. They were so scared of losing him because he was s*** hot and he was going to a competitor that they tried to ruin his career by doing that.
So it won't always be taken in the way it's meant, but it's probably all you can do under the circumstances, unless - as MargeB suggests - you are able to show the reasons for calling a spade a spade.
Why he'd want to join the army if that's the kind of person he is, I don't know. Maybe it will be the kick up the backside he needs! Plus, once he's properly signed up, he's stuck there unless he wants to be arrested!
My partner and I have had over 30 years combined experience in recruitment and apart from having done countless reference checks, we are also references for numerous people we have supervised and employed over the years.
We have come across this one many times before, and our advice is to be honest whilst obviously protecting yourself from the dangers of saying something libellous.
Taking what info you have provided at face value, and if you believe your word is important and that the Army (or whomever) trust YOUR judgement, then really you have an ethical responsibility to be honest as possible.
So, to any question that may mean you cannot answer fully eg "Is he trustworthy?", you could answer. "I will not answer that", whilst to "Was he punctual?" You could say, "Yes, he rarely turned up late", if that was the case.
Professional recruitment staff can read between the lines pretty well and will appreciate what you are AND what you are not saying.
If in doubt of which way to go, just imagine how you would feel if you were asking the questions about someone you were thinking of employing and you got a reasonably positive ref and the person turned out to be a monster - because someone told you a load of cobblers.
Finally, ref checks are usually the final or close to it check in a sequence of methods used in recruiting and often the not-so-good staff have already bombed before then or the recruiter asks the questions and is not surprised by the non-positive responses.
Good luck!