Here’s a dirty little secret in the job-recruiting business: All those websites that help employers and potential employees match up don’t really work that well. Despite all the bells and whistles, the automatic résumé builders, and the ability to search on keywords for specific skills and expertise, the best way to find the right candidate hasn’t changed much in the last 100 years. Word of mouth is still king, especially when a cash reward is offered.

Israeli startup Zao aims to bring the recruitment business into the 21st century. The company has built a “social recruiting” system that allows HR departments to get the word out virally about open positions, and track the results from a single user-friendly dashboard (goodbye Excel) with all the analytics you’d expect in the age of Google.

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Very often, the best source of referrals comes from a company’s vendors and business partners. Using Zao, companies can reach beyond their own staff and automatically pay the lucky referrers that cash bonus, even if they work for a third-party supplier.

Here’s how it works. If an employee doesn’t know someone who fits the job description, he or she can post it on Facebook or LinkedIn. If a friend or colleague makes a successful referral, both parties split the cash bonus. If a friend of a friend finds the right person for the job, everyone takes a piece. Zao handles the entire process, from email to pay out. Zao makes money by charging the employer an added 30 percent.

Founder and CEO Ziv Eliraz tells ISRAEL21c that he conceived of Zao after having the same troubles while recruiting for an Israeli company whose US office he was managing. Job boards, external recruiters and even Craigslist were generating too many junk résumés. How about utilizing the power of the crowd? Eliraz thought.

“We all know hundreds of people,” he says. “But there was no good tool to get to them, no way to expand the circle beyond a company’s employees.”

Targeted recommendations

On Facebook, LinkedIn and Twitter, it’s considered good manners to let your friends and colleagues know about a job opening via a generic blast to everyone you know at once. To incentivize someone to target the message, the cash bonuses come in handy.

“They’re not a must,” Eliraz says. “But they increase engagement. And they’re respectful of people’s time. If you send a request to 20 people to forward a job listing, without a reward, maybe two out of those 20 will respond. With a reward it might jump to five out of the 20.”

One more goodie: Once you let Zao access your Facebook or LinkedIn friends, Zao can scan their résumés and recommend to whom you should forward the job posting.

Eliraz, 42, was born in Israel but worked for 10 years in the United States for Israeli companies including InfoLink, Hotbar, Emblaze and Amobee – the latter of which was sold to Singapore Telecom for $320 million (Eliraz was VP of strategic alliances at the time). Zao is his first startup. He’s been programming since he was 12 but became a lawyer. After working for a big Tel Aviv law firm, he found he missed tech too much.

Zao recently announced financing of $1.3 million from Oren Zeev, the founding partner at Orens Capital and a former general partner at Apax, a venture capital firm. Other investors include executives from Audible and Time Warner.

Zao is not without competition, Jobvite being the most formidable. But that company doesn’t offer the cash rewards and bonus splitting functionality that Zao does (at least not yet). If that’s important to a customer, Zao is the go-to address for juicing up the referral process.