I'm going to offer the contrary advice that hiring by employee referral is not a good approach, for these reasons:<p>1. Your genius employee does not necessarily know lots of other geniuses. In fact, he might not know anybody. Yes, there are brilliant programmers and engineers who are well-connected, but there are ten times as many brilliant programmers and engineers who are solitary, independent types. If you press them for a referral, you'll get a referral to his brother-in-law who took some computer courses or the guy that was nice to him in university but hasn't found a job yet.<p>2. Friends hiring friends leads to cliques. For a startup, two or three friends working together is ideal. But for a larger enterprise, you want to avoid that. Of course, cliques will form by themselves, but why create them from day 1.<p>3. It's very cynical to say this, but chances are that your employee is not going to recommend someone smarter or harder working than he is. Why make himself look bad? (One of Paul Graham's articles says that this is true of mediocre programmers, but not of the top ones. Perhaps when you're starting out, you want to work in a room full of geniuses, but what if you are the top dog in the room? Are you going to bring in someone that can obviously show you up?)<p>Many hiring methods lead to negative quality direction. Example: Making all your hires from Monster.com would be a negative trend. But a lot of people seem to believe that hiring based on employee referral is a positive. I'm sure it's not the worst way--and it's probably much better than relying on Monster.com for instance--but I think that employee referrals lead to quality <i>loss</i> over time.