Due to a reporting error, this information presented here does not match the data that appears in the September 2007 print edition of CFO magazine. The number of clients surveyed by SelectMinds was 60.

Social networking sites aren't just for Generation Y anymore. Increasingly, companies are finding them invaluable for recruitment, retention, and even for landing new business.

Many companies already use such popular social networks as Linked In, inCircle Pro, and QuietAgent to recruit new hires. A new twist is the rise of internal social networks designed to help employees connect with co-workers, alumni, and potential clients. Offered by vendors including SelectMinds and Visible Path, these networks are "all the rage," according to Jason Corsello, vice president of the Center of Excellence at HR consultancy Knowledge Infusion. Employees create personal profiles that include education, work history, current projects, personal interests, and other data, and can then link to those who share something in common. Such communication takes place over a closed network, ensuring that, for example, sensitive information about job openings or business plans is restricted to approved parties.

Such networks can help companies "on-board" new hires, Corsello says, by providing them with a quick way to learn about their co-workers and the company's goals and culture. Social networks can also help remote, parttime, and field workers feel more connected to the organization. And access to such networks can be expanded to include customers.

Law firm Goodwin Procter's use of SelectMind's alumni tracking network helps it stay connected to successful alumni such as Massachusetts Attorney General Martha Coakley, who recently returned to the firm to give a well-received presentation. Director of professional development Scott Westfahl says that by highlighting the subsequent careers of former associates, the network has aided new-associate retention.

Of course, former employees can do more than just return for a pep talk. One accounting firm says its use of SelectMinds to stay connected to former employees helped it pull in $180 million in new business. SelectMinds says a survey of 60 of its clients revealed an average 11.7 percent increase in new business from the use of social networks. Cost for the software varies depending on a company's size and type of network. A small company could pay a $15,000 start-up fee with an $8,000 monthly subscription.

Kate Plourd is a reporter at CFO magazine.

© CFO Publishing Corporation 2007. All rights reserved.