No one at Cooley Godward was happy when Michael Jacobson gave notice in 1998. Jacobson had worked in the Palo Alto, Calif., law firm's securities practice for a dozen years and getting along without him would be difficult.

But a few months later, Cooley Godward's managers couldn't have been happier. That's because Jacobson's new job was as general counsel at a little-known online auction site called eBay. When the site needed outside counsel, Jacobson tapped his former employer. A few months later, Cooley Godward was lead counsel for eBay's record-breaking $1.3 billion initial public offering. "It's a great relationship," says Mark Pitchford, partner and chief operating officer at the firm.

Cooley Godward no longer leaves such matters to chance. Last January, it launched an alumni program to help the firm stay in touch with its former attorneys. Such programs are not particularly new to corporate America; McKinsey & Co., Ernst & Young, and Procter & Gamble have had them in place for years. But, as the partners at Cooley Godward have discovered, smaller outfits, too, can benefit from alumni initiatives. "Former employees are a resource," says John Izzo, president of Izzo Consulting, a firm based in Vancouver, Wash., that advises small businesses on employee training and retention issues.

Yet many employers treat former staff members as just another name in the Rolodex -- or, even worse, as a competitive threat. That's a big mistake, Izzo warns. In many cases, he says, former staffers can act as goodwill ambassadors for your company, helping to refer new recruits and clients. They may even return at a later point, requiring little or no training. Now, with the job market showing signs of improvement and many employees more likely to move on, alumni programs could prove key -- especially at firms that have a hard time recruiting and retaining qualified workers.

With that in mind, Cooley Godward launched its alumni program with a reception for 150 former employees at the San Francisco Marriott last spring. The cornerstone of the program is an alumni section on the firm's website that features an alumni contact directory, news and announcements, a job board, white papers, and invitations to upcoming events. The firm, which currently has 1,000 employees, also publishes a monthly online newsletter highlighting company news and alumni profiles. So far about one-third of the firm's 500 alumni have been regular visitors to the site.

Other entrepreneurs may find that they don't need a formal program at all. "If you have 10 or 20 former employees," says Izzo, "it's not a big deal to contact them every three or four months." That's what Liz Mahoney, director of people and ideas at Katzenbach Partners, a New York City consulting firm, plans to do. About 20 of Katzenbach's 104 employees have left the company since it was founded six years ago, and Mahoney expects that number to increase because of the natural course of business. To keep former staff members in the loop, she regularly sends holiday cards and invitations to office events. "We like these people," she says. "We want them to stay abreast of what we're doing."

In return, Mahoney expects Katzenbach's alumni to help out with the firm's college recruiting efforts. One former employee, for instance, left Katzenbach in 2002 to attend Harvard Business School and Harvard Law School. He recommended one of his classmates for a summer internship, and this year she came onboard full-time. Cooley Godward, for its part, recently landed three new clients who were referred by alumni and has 10 more prospects. "You're missing an opportunity if you're not doing this," Pitchford says.