Social Networks: Execs Use Them Too

Networking technology gives companies a new set of tools for recruiting and customer service—but privacy questions remain

By Rachael King

Encover Chief Executive Officer Chip Overstreet was on the hunt for a new vice-president for sales. He had homed in on a promising candidate and dispensed with the glowing but unsurprising remarks from references. Now it was time to dig for any dirt. So he logged on to LinkedIn, an online business network. "I did 11 back-door checks on this guy and found people he had worked with at five of his last six companies," says Overstreet, whose firm sells and manages service contracts for manufacturers. "It was incredibly powerful."

So powerful, in fact, that more than a dozen sites like LinkedIn have cropped up in recent years. They're responding to a growing impulse among Web users to build ties, communities, and networks online, fueling the popularity of sites like News Corp.'s (NWS) MySpace (see BusinessWeek.com, 12/12/05 "The MySpace Generation"). As of April, the 10 biggest social-networking sites, including MySpace, reached a combined unique audience of 68.8 million users, drawing in 45% of active Web users, according to Nielsen/NetRatings.

Of course, corporations and smaller businesses haven't embraced online business networks with nearly the same abandon as teens and college students who have flocked to social sites. Yet companies are steadily overcoming reservations and using the sites and related technology to craft potentially powerful business tools.

PASSIVE SEARCH.

Recruiters at Microsoft (MSFT) and Starbucks (SBUX), for instance, troll online networks such as LinkedIn for potential job candidates. Goldman Sachs (GS) and Deloitte run their own online alumni networks for hiring back former workers and strengthening bonds with alumni-cum-possible clients. Boston Consulting Group and law firm Duane Morris deploy enterprise software that tracks employee communications to uncover useful connections in other companies. And companies such as Intuit (INTU) and MINI USA have created customer networks to build brand loyalty.

Early adopters notwithstanding, many companies are leery of online networks. Executives don't have time to field the possible influx of requests from acquaintances on business networks. Employees may be dismayed to learn their workplace uses e-mail monitoring software to help sales associates' target pitches. Companies considering building online communities for advertising, branding, or marketing will need to cede some degree of control over content.

None of those concerns are holding back Carmen Hudson, manager of enterprise staffing at Starbucks, who says she swears by LinkedIn. "It's one of the best things for finding mid-level executives," she says.

The Holy Grail in recruiting is finding so-called passive candidates, people who are happy and productive working for other companies. LinkedIn, with its 6.7 million members, is a virtual Rolodex of these types. Hudson says she has hired three or four people this year as a result of connections through LinkedIn. "We've started asking our hiring managers to sign up on LinkedIn and help introduce us to their contacts," she says. "People have concerns about privacy, but once we explain how we use it and how careful we would be with their contacts, they're usually willing to do it."

BOOMERANGS.

Headhunters and human-resources departments are taking note. "LinkedIn is a tremendous tool for recruiters," says Bill Vick, the author of LinkedIn for Recruiting.