Donald Fay, operations manager for the Payne Firm, a Cincinnati environmental consulting firm with 1998 revenues of $4million, has begun to tap an underused labor source: stay-at-home parents of small children. Fay now allows theseemployees to telecommute while working part-time. "Seven years ago," says Fay, "it would have been hard for me to get pastthe idea of paying someone who's not in the office." But after spending thousands in recruiters' fees, he realized that offeringthe flexibility of telecommuting and part-time work enabled him to keep valuable employees. "In today's labor market, youneed to be flexible to keep good people," Fay says.

Payne's part-time at-home workers submit time sheets electronically and get their work assignments via voice mail ande-mail. Some other Payne employees, Fay says, also periodically work at home to increase productivity. "That's somethingwe encourage," he says.