The Best Small Companies to Work for

Suddenly, for reasons to do with competitiveness if not survival, even the hardest-nosed CEOs are worried about how their companies look to employees. Are there secrets to building a great workplace? Yes

These days, you'd expect America's corporate chieftains not only to be slashing their payrolls -- as they are -- but to be putting the squeeze on the employees that remain. What's to stop them? Workers themselves, leery of further layoffs, won't squawk. Unions have seldom been feebler. A great time, you would think, for flexing the managerial muscle.

In fact, however, a lot of giant corporations seem to be moving in the exact opposite direction, courting their employees' goodwill and providing them with unprecedented benefits. Consider the following:

* General Electric Co. under chairman John F. "Neutron Jack" Welch Jr. was always known for its tough-as-nails attitude toward the lower ranks. Now Welch has told the world he wants managers who can "empower others." Worker involvement and trust would be just platitudes, he exclaims -- except that "our whole organization is, in fact, living them . . . every day!"

* IBM Corp. has been dutifully cutting costs by cutting its head count. But it has also instituted new flexible-hours and work-at-home programs, including a leave-of-absence arrangement allowing employees to work part-time while getting full company-paid benefits. NationsBank Corp., the country's fourth-largest bank, gives parents two hours of paid time off every week to take part in their children's school activities.

* PepsiCo Inc. chief executive D. Wayne Calloway has begun a program dubbed SharePower; it grants stock options (equivalent to 10% of pay) to all 300,000 of the company's employees. Wendy's International, the restaurant chain, created a similar program called WeShare. Wendy's also "improved base compensation and offered a package of topflight benefits and a cash bonus paid out each quarter," according to CEO James W. Near.

What's happening here? Not to worry -- it isn't a matter of hardheaded moguls suddenly going soft. On the contrary, they are merely borrowing from a script the best small companies have been following for years. The stage directions: learn what makes employees feel good about their jobs and the company they work for. Take steps to help those employees feel even better.

In today's marketplace, it turns out, companies of all sizes have compelling reasons for following such instructions.

At some point during the 1980s -- don't push me on when -- some of those reasons began to dawn on us here at Inc.

We've made our editorial living for the past 13 years by finding exemplary companies and teasing out their secrets. We've reported on the clever innovators, on the marketing geniuses, on the financial wizards. We've written about the imaginative ways entrepreneurs solve common problems on all those fronts. Through our annual lists, we've honored companies that registered rocketlike growth.

But once you got past the innovation and the marketing and the financial wizardry, once you looked beyond the rapid growth, the single most striking fact about the companies we singled out was that, as a group, they had the damnedest array of people-management programs you'd ever want to see. We're talking dozens of novel compensation schemes, each one different from the others. An incredible variety of perks and benefits. Hierarchies turned upside down, job descriptions expanded beyond recognition. Some of the companies ran their businesses using -- choose your buzzword -- cross-functional or self-directed or problem-solving teams. Others had training programs that would shame a business college. A few practiced what we came to call open-book management, in which employees see (and are taught to understand) the company's financials. Many shared equity -- through employee stock ownership plans, stock options, whatever. (Last year every one of our Entrepreneur of the Year finalists headed companies owned partly by employees.)

Not that there was any prescribed checklist. On the contrary: the companies Inc. profiled each seemed to have assembled or invented unique combinations of policies. W. L. Gore & Associates Inc., the Gore-Tex-fabric producer based in Newark, Del., developed a system known as the lattice; it abolished titles and hierarchies, and gave employees unprecedented leeway in defining their own jobs. ("People here manage themselves," the late Bill Gore told our reporter.) Quad/Graphics Inc., the fast-growing printing company headquartered in Pewaukee, Wis., boasted a long list of training courses, an on-site sports center, and a stock-ownership program; Quad also set up every press crew as an autonomous profit center, responsible for its own operations.

Some low-tech, no-glitz businesses were among the most creative. Mississippi Management Inc., a Jackson-based operator of 14 hotels, motels, and resorts in the Southeast, sent chambermaids, desk clerks, and cooks to overnight training seminars; provided veteran employees with cash awards, free trips, and a profit-sharing plan; and sponsored an annual "Olympic Games" for employees. And many of the innovators were still small. Prime Technology Inc., a machine-tool distributor in Grand Rapids, Mich., had fewer than 30 on the payroll when I visited the company. Yet CEO Phil Pachulski talked avidly of his company's team-based management, generous bonus programs, and open-book policies.

It wasn't hard to grasp part of the rationale behind this people-oriented approach. CEOs such as Pachulski sought to attract top-quality employees. Mississippi Management's turnover rate was maybe half that of its competitors. Still, such immediate payoffs amounted at best to half an explanation. Even in good times, most businesses can get and keep competent people just by paying high wages and providing great benefits. These companies, by contrast, threw in a host of apparently unnecessary goodies. (One company's managers regularly cooked breakfast for the employees; another's CEO sent every worker a gift on every major holiday.) They even seemed to turn conventional business thinking on its ear. Harry Quadracci, founder of Quad/Graphics, said at the outset that he wanted a company "built by employees for employees." Hal Rosenbluth, CEO of a Philadelphia travel agency that grew explosively during the 1980s, wrote a book with the heretical title The Customer Comes Second. By now you'll have guessed who came first.