In general, including references in your cover letter is not recommended. However, there are some key exceptions to this rule. Here are some tips to help you consider whether it is appropriate or beneficial to mention your references when you're writing a cover letter.
The primary reason to include a reference in your cover letter is because a person known to the company you're applying to — and even better, known to the hiring manager — recommended that you apply for the job. Include this kind of reference in the opening of your cover letter. When a hiring manager who knows Jane Smith well reads "Jane Smith recommended I contact you" in the first part of your cover letter, he is likely to pay special attention to your resume and application.
When you use this tactic, make sure the person whose name you are dropping really knows the people at the new company and is on good terms with them. Ask permission before using anyone's name. If your contact actually works at the company where you are applying, consider copying them on your cover letter to make it clear that you're using their name with permission. This type of reference, casual as it may seem, is actually one of the most effective ways to approach a specific job search. If you have this type of contact available, make sure to use it wisely.
You should also include references in your cover letter if the company specifically asks for them. While this is unusual, you should always comply with any specific requests made by a company in the job application process. Include the references within the body of the letter if you can do so gracefully. It is also acceptable to list them at the bottom of the letter with their contact information or to provide a separate sheet of references.
If you are not specifically asked for references, or if you do not have a relevant contact at the company, do not include any references in your cover letter. Doing so comes across as unprofessional and possibly a little needy. Since references are usually requested at the interview stage of the job application process, providing unrequested references sends a message that you expect to be asked to interview. In addition, when you provide references without being asked for them, you are handing out your references' contact information in ways which the people recommending you may not appreciate — and to which they have not agreed.
Decide whether to include references in your cover letter on a case-by-case basis. Every cover letter is different. In some cases, including your references could be exactly the right thing to do. If you have a contact at the company, get in touch with him to ask permission to include his name in your cover letter.
Photo courtesy of Stuart Miles at FreeDigitalPhotos.net