Workstyle

A growing number of business owners are adopting a whole new approach to managing their people.

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Back in the glory days of Silicon Valley, companies like Data Design Associates Inc. seemed to be the wave of the future. It was one of those high-flying, high-tech, high-touch outfits -- a software developer in Sunnyvale, Calif., to be exact -- and, for more than a decade, it sailed along with revenues and profits growing at a rapid pace, rising to $11 million and $2 million, respectively, in fiscal 1985.

Nobody benefited from this growth more than the company's 100 employees. In fact, it often seemed that founder and president David Lowry was intent on giving away his own share of the corporate riches. He offered all of the employees stock and bought memberships in fancy health clubs. He set up a bonus system and let the employees determine the size of the bonus pool. They settled on 20% of pretax profits -- whereupon Lowry boosted the total, adding 50% of all profits above the stated goal. The employees seemed delighted with all of this, as well they might, but Lowry was still not satisfied. He continually sought their advice on ways to make the work environment even better.

Which is how it came to pass that Data Design's managers found themselves jumping out of airplanes, plunging over waterfalls, scaling mountains, and sleeping in the snow.

The idea originated with the managers themselves, who felt that the company's growth was making it more and more difficult to maintain their esprit de corps. Meetings over lunch, they said, just didn't do the trick anymore. Someone suggested that they try going away together, maybe spend a little time out in the wilderness. The next thing they knew, they were barreling down the Yuba River on white-water rafts, one of which shot out over a 10-foot waterfall and capsized, nearly drowning Lowry's 33-year-old assistant, Ola Harris.

Then there was the grueling, 10-day trek through the Rocky Mountains, under the auspices of Outward Bound. Before it was over, the managers had to climb a 13,000-foot mountain with 40-pound packs strapped to their backs and camp out in the snow. The director of marketing, an IBM Corp. veteran named Desmond Crain, proved to be a source of inspiration, often hoisting the weight that others couldn't carry. But when Crain declined to participate in the six-mile run at the end of the expedition, he was denied his Outward Bound diploma. Lowry broke down and wept. So did Crain.

Next, they took up skydiving.

Oddly enough, this stuff seemed to work. To a person, the managers swore that they had never felt closer or worked together more effectively. Meanwhile, sales and profits continued to soar. And at a time when turnover rates among small technology companies often approached 50%, Data Design's was less than 5%.

To be sure, Data Design wasn't the only high-tech company with a slightly bizarre corporate culture back then. The Valley was filled with legends about companies doing extraordinary things to promote a better, more productive work environment. Rolm Corp. had its steam rooms and saunas. Tandem Computer Inc. held Friday afternoon beer busts. Activision Inc. sponsored ski trips to Lake Tahoe and took its entire staff to Hawaii. At one point, Apple Computer Inc. even hired masseurs for the workers in its Macintosh division. That idea appealed so much to Apple Computer president and chief executive officer (and former PepsiCo senior vice-president) John Sculley that he started getting massaged, too. "I'm a cerebral person," he explained. "This lets me meditate and clear my head."

Clearing heads was only one of the goals of such programs, however. The real payoff, proponents argued, lay in high productivity, low turnover, and soaring profits.This stuff wasn't just fun; it was smart business. Even if you couldn't measure the benefits of, say, having your chief financial officer take a roll on the rapids, the results eventually showed up where they counted: on the bottom line.

And smart business it may have been, but not smart enough to protect technology companies from the realities of the marketplace. Data Design may still be doing well, but Rolm's steam now comes courtesy of IBM; Tandem's bar tab is being subsidized out of somewhat watered-down profits; and Activision's employees travel to local college football games rather than the playgrounds of Tahoe and Hawaii. As for Sculley, once his heard cleared, he proceeded to dissolve the Macintosh division and get rid of both the massage program and the company's founder and chairman, Steven Jobs.

In retrospect, it's hard not to wonder whether this notion of being nice to workers was just a passing fad -- a brief moment in the history of a very young industry. Granted, it was a neat idea, and one that may even have made sense during a period when markets were booming, competition for labor was fierce, and skilled workers were in short supply. But times change, and in business, like baseball, nice guys finish last, right?

So how do you explain a company like Fel-Pro Inc.?

Fel-Pro is a 68-year-old, family-held company located in Skokie, Ill., and no one will ever accuse it of being high tech. Its busiless is the manufacture of gaskets and sealants for internal-combustion engines. Highly profitable, with sales of about $170 million, it is renowned for the productivity of its work force. It is also renowned for some other things, such as the converted horse farm where employees can garden on weekends, or send their children to summer camp, or get married. Then there is the company-subsidized daycare center, not to mention the gym. At Fel-Pro, no holiday goes by without a gift for each worker: a box of chocolates on Valentine's Day, a canned ham on Easter, a tin of pistachio nuts on Thanksgiving, a turkey on Christmas. There are monetary gifts, too, for practically every event in the human life cycle: $100 for a birth, $500 for an adoption, and up to $5,000 for a child's college tuition. And, lest the spirit need elevating as well, the company has a half-time sculptor on the payroll, whose sole job is to create gasket art.

To outsiders, all of this may sound a bit excessive, but Fel-Pro's co-chief executives -- Lewis Weinberg, 70, and Elliot Lehman, 66 -- heartily disagree. "You know, you get out of a relationship what you put into it," says Weinberg. "It's like a marriage. If you don't pay attention to the important things, you won't have a good thing going. But if you bend over backward, you will. We bend over backward at Fel-Pro, and everybody is happy."

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Bo Burlingham: Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome. @boburlingham