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I think this post raises the importance of "social capital" or in other words our networks and contacts. As other editors have commented above, it is perfectly natural for an employer, when faced with a number of excellent candidates, to pick one they already know or who have worked for them, perhaps volunteering, before, because they know what they are getting. It is much harder to get, for example, a teaching job in a school where you have no history whatsoever. Certainly my first teaching post was helped because I was already working in the college doing some cover, so got to know the team and the management.
In addition to opening doors to employment, who you know as a reference can be extremely beneficial to a person who has already completed the interview process well on his/her own. If, for instance, the job applicant has the respect of a former employer or supervisor, this person can be very influential in "sealing the deal." For, their recommendations may be what one needs in order to clinch the job. With so many people being able to create sterling resumes and "sell" themselves so well in interviews, employers check references nowadays more than ever. Often, they feel reassured by the good reference of former superiors as they feel that the person be truthful (even though this is not always the case if one is related to or very chummy with such a person).
I believe that "who you know" deals more with getting your foot in the door. I have known many people throughout my lifetime that have been hired because of someone that they knew that helped them get the job.
I think this also applies to relationships that people have with their superiors in the workplace. For example, if your boss likes you more than your co-workers then chances are you are going to get the better hours, better pay, etc. This can be very beneficial in a financial sense. Having a boss that does not like you can make things a lot more difficult.
Who you know can be as important as what you know because many hiring decisions are made on the basis of personal connections. It is certainly not always the case, but it does happen. Typically, you will need to know enough to sound like you can do the job, but who you know is likely to A) help you find out about the potential job and B) make the person doing the hiring more likely to think well of you.
I have gotten at least one job based partly on who I knew. The guy I was student teaching for told the human resources person at the school district good things about me. A principal in a nearby district asked the HR person if she knew of anyone who might be good for a position that had come open. She told him about me, they called me and asked me to interview.
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