There is hardly a chief executive officer around these days who doesn't swear, often publicly, that employees are a company's most important asset. In private, however, most CEOs agonize over how to find and keep top people -- and for good reason. Recruiting and holding onto good employees may be the most difficult task the CEO of a smaller company must face. Nevertheless, I have found that there are ways to make the job more manageable -- provided you view it as part of a larger process. Let me explain.

At North American Tool & Die Inc. (NATD), our 86 employees are truly our most important asset, but that hasn't come about easily. When my partner and I acquired the company in 1978, it was a troubled metal-stamping and subassembly business. Its profits were marginal, its work force unenthusiastic, and its prospects none too bright. Rejects were about 7% of production, and employee turnover was 27% per year.

Today, with domestic job-shops dropping right and left, NATD has never been healthier. Over the past seven years, our annual revenues have grown an average of 28% and our annual profit an average of 100%. Sales are more than $10 million per year, and our return on investment is better than that of 90% of the companies in the Fortune 500.

These impressive results were achieved by our people. Our employee-turnover rate has dropped to just under 4%, and absenteeism is running less than 1%. Our on-time delivery rate is 99%. And, since 1981, our customer-reject rate has never risen above 0.1% -- all parts, all year, all customers.

How did we turn things around so dramatically? We did so by creating a climate in which the people we hired could perform well. Some of the things we do may sound corny, but they work. For instance, we have monthly meetings with employees at which we share information about company progress and hand out a Superperson of the Month plaque, along with $50 in cash. We go out of our way to give thanks and compliments. And each year, we also give company stock, at no cost, to every employee at least 21 years old who has worked for 1,000 hours and is on the payroll at year's end. Occasionally, we'll even send employees home early on a beautiful day, with a full day's wages.

Such efforts work, I believe, because they help to create an atmosphere of mutual trust. Most people, after all, want to do a good job, and they will, if given the proper encouragement. But I have also come to believe that our motivational methods are most effective with a certain type of employee -- people who care deeply not only about themselves, but about their colleagues and their employer. The challenge, of course, is to find such people. After much searching, I have come to the conclusion that there is no foolproof system. All you can really hope to do is improve the odds.

The key to finding top employees is to know in advance what kind of people are best for your company, rather than counting on recognizing them when you see them. At NATD, we're looking for people with the midwestern-Protestant ethic. I don't mean, of course, that we literally seek people who are Protestant and from the Midwest (although I admit that we automatically interview applicants from Illinois, Iowa, Nebraska, and Indiana). We do, however, want people with traditional Middle American values and the old-fashioned barn-raising spirit -- that is, people who care about their families and neighbors; who take pride in their work; and who will commit themselves to an employer who treats them with respect.

Finding people with such values takes planning and hard work. I personally get involved at every step of the process, from composing also to conducting interviews. Our success, after all, depends on having the right people, so I feel it's critical for me to be on top of the hiring process.

That process can best be envisioned as a series of screens with progressively smaller holes. For most jobs, we start out with a group of 300 applicants; we then winnow them down to about 20 prospects whom we interview. With luck, we hire one or two.

In order to be so selective, we begin the search process as early as possible -- at least a month ahead of our projected need, and preferably longer. If you need 100 employees in three weeks for a new plant or shift, you will probably be forced to take whomever you can get. Ultimately, your company will pay the price for the rush job. But starting early is not enough: if you want highly motivated employees, you have to look in the places where you're most likely to find them.

We have two primary sources. First, we turn to our employees themselves. There's much truth in the old adage, Birds of a feather flock together. If you have good employees, their friends are probably good people as well. We not only announce job specifications in group meetings, we also ask help from key employees individually. Currently, about 20% of our new hires come to us by way of employee referrals.

Second, we use newspaper advertising. As a rule, we place our ads in local newspapers, believing that even the most enthusiastic people will be easily discouraged by too long a commute. We also make sure that our notices stand out in the want-ad section. We try to get them placed at the top of the category listing, and we run them for 10 consecutive days. As for the ads themselves, we write them with great care, avoiding standard phrases such as "seeking highly motivated individual," "top opportunity," "competitive salary," and so on.Instead, we focus on the company. We'll point out, for example, that our rejects from Silicon Valley customers have averaged 0.1% over the past four years; that NATD was featured on the television program "In Search of Excellence"; that we provide free stock to our employees; and that NATD is a fun place to work. The purpose of all this isn't to toot our own horn. Rather, we hope to attract people who care about the company they work for and the opportunities they'll have to contribute to it.

Once we have a group of applicants, we begin our screening process, using various devices to spot the best prospects:

* The application screen.

First, we take a close look at the applications themselves, a process that eliminates about 90% of the candidates. I go through the applications noting, among other things, how carefully each one has been filled out. We're a highly technical business, producing hundreds of different parts with tolerances of plus-or-minus .001 of an inch -- one-quarter the thickness of a human hair. It is imperative that our people have not only the technical skills to produce to these exacting requirements, but the desire as well. If an application is crumpled and sloppy, the chances are that its author is not very attentive to detail. Poor spelling and grammar can be overlooked, however, particularly if English is not the applicant's native language.

I also check the application for previous job tenure, although I'm more lenient in this regard than I once was. The economic turbulence in Silicon Valley makes some awfully good candidates look like job-hoppers. Even so, I hesitate to interview a candidate with less than a year at any single job. For that matter, I am inclined to pass on applicants with salaries more than 20% above what we can offer. We've found that such individuals are likely to leave soon for better-paying jobs. Similarly, I avoid people who have to commute more than 45 minutes each way, since they will always be looking for an opportunity closer to home.

Beyond the job-related information, I pay close attention to outside interests noted on the application. In particular, I look for employees who are involved in Little League, the Boy Scouts, community projects, and church or synagogue affairs. To me, such activities indicate that an applicant is willing to give, to help others.

Then there was the applicant who listed his main outside interest as folk dancing. This struck me as a positive sign. For one thing, it suggested that he was active and outgoing. More important, he was willing to identify himself in a way that others might have avoided. That told me that he was the sort of person who would be willing to speak up with suggestions and criticisms, and outspokenness is a quality we value at NATD. Recently, for example, we were able to improve productivity significantly, thanks to an employee who complained about a manufacturing procedure. We were able to streamline the operation and increase productivity, and we awarded the complainer the Superperson of the Month plaque. As for the folk dancer, he has turned out to be an exceptionally good employee.

* The interview screen.

I strongly believe in the importance of having a work force that shares the same values. For that reason, I interview each candidate before other managers do. That takes time, obviously, but there are ways to make the process more efficient. I've found, for example, that it helps to interview all the candidates in one large time block -- say, a week -- rather than drag the process out. Block interviewing allows you to make immediate comparisons. If too much time goes by, I tend to confuse candidate Ann with candidate Barbara, no matter how good my notes may be.

Efficiency also comes from knowing what information you're looking for. While my interviews used to take 45 minutes to an hour each, I find that I can now limit them to 30 minutes. I interview in my office, scheduling most appointments in the late afternoon or early evening, which leaves the rest of my day free for other responsibilities and allows candidates with jobs to come in without missing work.

My technique is to make candidates as comfortable as possible, both physically and emotionally. I offer them coffee or a soft drink, and I never sit behind my desk. I take short, cryptic notes but try to be unobtrusive about it, since there's nothing more disconcerting than seeing an interviewer write down everything you say.

The goal of all this is to encourage candidates to speak frankly. That's the only way I can assess accurately whether they are right for NATD, and vice versa. By creating a comfortable atmosphere, I minimize the risk that I will miss a gem simply because the applicant holds back important clues to his or her character.

The interview itself is a two-way street. In my experience, you can learn as much about prospects by their questions as by their answers. A few months ago, for example, I was interviewing for an assembly job and invited in a man whose application had impressed me. After chatting a while, I asked, "Is there anything you want to know about us?" He said there was not. I noted, however, that his English was a bit unsteady (he was not native born), and it occurred to me that he might just have difficulty articulating his questions. I asked him about his outside interests. He smiled and talked for several minutes about his love for fishing. Clearly, his command of English wasn't a serious difficulty. So I asked once again whether he had any questions about NATD. He asked me about the pay. I answered him, and his next question was, "When do I start?"

At that point, I disqualified him in my mind. I knew he didn't listen carefully, and I also knew that his main interest was a job -- any job. He cared about fishing, but he wasn't very curious about NATD. He was just a body, and I don't want bodies. I want people who will think -- about their fellow workers, about NATD, and about their own personal development.

Aside from probing candidates' interest in NATD, I also ask about prior jobs. In particular, I want to know what they liked and didn't like. The specific answer isn't as important as the reasons. Did they prefer assembling to tooling because they'd rather work with certain kinds of machines? Would they rather work the early shift than the late shift because it enables them to spend more time with their families?

If I sense that the person might be right for NATD, I begin to convey some of our basic tenets: honesty, product quality, treating fellow employees as we would want to be treated, and respect for the person running the machine. I talk about our ESOP, our low turnover rate, our job-rotation plan, and opportunities for advancement. I explain that NATD has no policy manuals, because we don't need them: if you hire people who care, you don't have to tell them what's right and what's wrong -- they know. In effect, I'm selling NATD's strengths to the people I like during those first interviews.

* The reference screen.

I trust my gut feelings a great deal, but not completely. Experience has taught me that people who come across well in an interview sometimes have serious emotional or behavioral problems that show up later, on the job. Given our dependence on individual trust and team effort, such employees pose a real threat to our company. Nothing erodes high morale and family feeling faster than an unproductive or discontented employee.

To guard against inadvertently hiring a malcontent, we make a point of talking to a candidate's previous supervisors rather than simply checking with personnel departments. We ask the supervisors whether they would rehire the applicant, what they see as his or her greatest strength and weakness, and how they rate the person on a scale of one to 10. In some cases, the immediate supervisor doesn't remember the person, which says something negative to me.

* The on-the-job screen.

You might think that, by this point, we would surely have identified the best candidate for a job, but -- despite all our efforts -- we still make mistakes. Just a few weeks ago, for example, I hired a production worker who seemed to fit most of our criteria. His application was neatly filled out; he had spent four years at one job; he asked lots of questions about NATD; he was active in his church; and two of his previous bosses rated him highly. He failed to show up on his first day. When our office manager called his house, she learned from his wife that he had taken another job for more money and had neglected to notify us.

Unfortunately, favorable interviews and references do not guarantee that you and the new hire will live happily ever after. Recognizing that fact, I have been attempting to institute various procedures that, in effect, allow us to test the relationship in advance.

One such procedure is the half-day trial period. When hiring people for some positions, especially our most sensitive ones, we often invite a few of the strongest candidates to come in and spend half a day on the job. That way, they can see how we operate, and we can observe them. Of course, we pay them for their time.

Recently, for example, we had half-day trials for three women who had applied for a sales-service position. We quickly got the sense that two of them thought they knew the job already and didn't have much to learn. The third candidate, however, asked all kinds of questions about our approaches and procedures. Clearly, she wanted to understand the business. She was also able to handle complex tasks and seemed genuinely excited at the end of the half day. Needless to say, we hired her.

In another case, we invited a punch-press setup worker to come in for half a day. He was very enthusiastic, but he did not perform up to our standards. Without the trial, he might have left his other job to come work at NATD. In all likelihood, we would have had to fire him after a few months. So the half-day trial saved him a good deal of trauma and saved us from the poor work he would have done.

There is one other screening mechanism we use, and it, too, helps save us from potential mistakes. We tell all new hires that the first month on the job is our "engagement party." During this period, we make sure that they like us and that we like them.

In that spirit, we take care to provide each new hire with a lot of specific feedback. We have very few rules at NATD, but there is one that we observe unfailingly: all new employees get weekly reviews from their immediate supervisors. In these reviews, the supervisors tell the new hires what they have done well and what they need to improve, emphasizing our commitment to helping them.

The employee knows toward the end of the first 30 days whether or not he or she is going to make it. A few do fail the test, either because their work does not measure up or because they don't get along well enough with their co-workers. The fact that most candidates pass is, in my view, a strong validation of our selection process.

THERE ARE, UNDOUBTEDLY, EASIER ways to hire employees than the ones we use at NATD, but I can't imagine any that would produce better results. Then again, all our efforts would be wasted if we did not follow through once we have employees on board. The danger is that initial enthusiasm will fade into boring routine, which could eventually lead to misgivings and resentment. After all, we promise great things to our new employees. If we fail to deliver, they might begin to feel betrayed. Sooner or later, those feelings of betrayal would undermine our company spirit, not to mention our product quality.

To prevent such disasters, I do everything I can to build our relationship with employees. For example, I try to see every plant employee two or three times a week. With new hires, I repeatedly stress the values crucial to our continuing success. With veteran employees, I look for new ways to show I care.

We also build the relationship by rotating employees through different jobs. The practice allows us to find the best spot for each employee and allows employees to improve and expand their skills. Their versatility, in turn, provides the company with depth.

But more important, job rotation helps keep people happy. And our experience is that happy employees are productive and loyal employees. We don't want turnover at NATD. We want people to stay and grow with us. To be sure, we can't promise unlimited tenure, particularly in an industry as volatile as ours, but we can reduce the risk that we will ever have to lay people off. One of the best ways to do so is to find and hire the best employees around.