Ben Strohecker knows what it takes to keep his employees happy -- and it's not cash

Years before anyone talked about flextime, the "new labor force," or the"mommy track," Ben Strohecker was becoming an expert in all three. I visited his company intending to explore the answers he'd discovered -- and instead found a company full of questions about how to reconcile growth with its unusual corporate cuture. -- M.E.M.

* * *

Part of the reason this company exists is to provide a place for people like me." It's an odd way for an employee to feel about her company -- and particularly so in Billie Phillips's case. That's because, if anything, it looks to an outsider as though Phillips's employer were exploiting her, not vice versa. For $15,000 a year and no health insurance, Phillips, 39, who holds a master's degree in counseling psychology, gets the privilege of working 25 hours a week as the personnel manager for Salem, Mass.-based Harbor Sweets Inc. In that job she juggles the logistically insane hiring and scheduling of a largely part-time, seasonal work force of 150 and handles all manner of employee disputes and problems. Despite her part-time status, Phillips brings work home with her, takes calls at home, and often works overtime.

If Phillips is being exploited, it's willingly. "I feel satisfied because I also get something from this job that I can't have in another job," she says. "I can leave when my kids need me." Most of the time she doesn't need to leave unexpectedly -- and so does place the company first. At her company, she's not alone.

That's because at Harbor Sweets there is no separate "mommy track," to use the recently coined term for employees who make career trade-offs for more personal time. Or if there is, the whole company is on it, including founder and chief executive officer Benneville Strohecker. Harbor Sweets has always attracted -- and commanded loyalty from -- smart people like Phillips, for whom a flexible schedule means more than cash.

Harbor Sweets's ability to get talented people when it can't afford to pay them much is a major reason why the company has been able to grow from a basement start-up to a $2.5-million company. The only trouble is, the more Harbor Sweets grows, the harder it is for the company to stay flexible. And the more Harbor Sweets succeeds, the less flexibility it needs.

This is not something Strohecker wants to dwell on. When he looks at his company, he likes to see only the miracles. For 16 years, he has prided himself on building an organization that flouted all the rules. To him, the success of Harbor Sweets is testimony to the power of God in the human heart, a demonstration of what employees can do if they are just given trust and respect.

In his company, they are given little else. Harbor Sweets pays $5 an hour to start in a region where that's a fast-food wage, and the company does not pay for medical or other insurance for the part-time workers who make up the bulk of its work force. Part-timers get no pension plan, no 401(k), not even any paid sick days. They do get paid vacations, profit sharing that typically runs about 5% of wages, and a discount on candy. Because 60% of sales occur around Christmastime, most workers get laid off in the spring or summer.

Given that compensation package, it is no small miracle that Harbor Sweets can attract people like Phillips, who once worked there as a part-time production worker. Still, Strohecker's miracle started with some pretty pragmatic decisions. When he began cooking candy in his kitchen in 1973, Strohecker was marketing director at Schrafft's, a then-struggling Boston-based mass manufacturer of candy. But he dreamed of making and selling the best handmade candy, no matter the price. His first creation fit all his fantasies: a luscious, pecan-dipped, white- and dark-chocolate-coated triangle of almond-butter crunch he named the Sweet Sloop because it vaguely resembles a sailboat. From the start, the Sloop demanded extraordinary amounts of personal attention. To this day, a worker must run a teaspoon from the base of each white-chocolate triangle to its apex to create a ridge that suggests a sailboat mast.

As Strohecker began receiving orders from Harbor Sweets's first mailing (to his Christmas-card list), he needed help. Yet with such a labor-intensive product, he could afford to pay only minimum wage. Who could he hire at that wage to come into his house for a few hours a week while he was working in Boston? His answer was neighborhood women. In Marblehead, Mass., the affluent town where he lived, Strohecker discovered an ideal work force. Well-educated and responsible, the women next door didn't require supervision. They didn't demand benefits -- their husbands' jobs provided those -- and they didn't care that there was little work for months at a time. Joan Stephenson, 55, who's been at Harbor Sweets since 1978, is typical. "A lot of people are here not because they need the money, but because they need to be occupied," says Stephenson, who works three days a week so she can have an independent income, yet still play tennis on Wednesdays and take long weekends. "So the pay becomes irrelevant."

Even Strohecker wasn't interested in Harbor Sweets for solely business reasons. When he began to work there full-time in 1975, he had recently lost his job at Schrafft's and split up with his wife. "What I developed was my little substitute family," he says. "At a time in my life when I didn't feel I had any support, these people were nice to me." In return, Strohecker tried to make Harbor Sweets a place where they'd want to stay. "I probably would have gone out of business rather than substitute a group of machines for those employees," he admits.

Strohecker liked his unconventional work force so much that he structured his company to suit it. "We let everybody know that Harbor Sweets is not the most important thing in their lives," he says. "If your kindergartner is in a play on Friday morning, of course you can't miss it to come to work." The company's stated policy is that if you want unpaid time off, take it. Although the work force has grown far more diverse, part-time work is still the norm. Instead of two 8-hour shifts, the company has four 4-hour ones. Its 114 production employees can set any schedule that suits them, as long as it includes at least 20 hours a week.

Implementing these policies would wreak havoc in many businesses. But Strohecker set up Harbor Sweets around the idea of a fluctuating work force meeting fluctuating demand. He also tried to make the company not only flexible, but enjoyable. "If you're not having fun," he likes to joke, "you're fired." The truth is probably a little different: if you're not having fun, you'll probably quit -- because you're surely not depending on a part-time job at Harbor Sweets for survival.

That means the company must treat you with respect to keep you. So there are no time clocks. All employees are responsible for quality control, and their decisions to junk products that don't meet their standards are never questioned. Until this past year, the company never attempted to measure an average speed for any given process; managers simply assumed that employees were working as fast as they could. In addition, each month managers share a simplified version of the profit-and-loss statement.

"The first time I shared my financials," Strohecker remembers, "it was like taking a cold bath." But nothing happened except that when times were bad, his employees came up with cost-cutting suggestions to make the company profitable again. Such, Strohecker says, has been his experience ever since he founded the company. He is perennially letting go of some aspect of control and authority with great trepidation and then discovering things work better without it. "What I've learned is that these weird management ideas turned out to be damned good business," he says.

Exactly how "good business" his ideas are is hard to tell, because in a way, Strohecker never cared. Harbor Sweets is generally profitable, but its managers feel its typical pretax margins of 3% to 4% are low for a high-end, custom-manufactured candy. Then again, Strohecker and his managers have always seen profit only as a means to an end, which is running a company embodying his "weird management ideas" and making top-notch candy. That's why Harbor Sweets has never conducted a serious cost-benefit analysis of its part-time, flextime, and flexible-attendance policies.

Some of the savings in recruitment and training are apparent, however. Harbor Sweets should have been hard hit by the labor shortage that had plagued the Boston area throughout much of the 1980s, as were other local companies that depend heavily on unskilled workers. But it wasn't. While fast-food restaurants typically report annual turnover of 285% or more, some three-fourths of Harbor Sweets's employees return each year, and 40% have worked there for three or more years. To recruit, all the company does is take out a classified ad in a weekly regional newspaper each summer and one three-day ad in the Salem paper. This year the company hired only 39 of the 300 applicants. (The key: employee referrals, and a line in the ad that reads, "Schedules to fit your needs.") Until last November, the company had never gone outside to hire an officer, manager, or supervisor; there was plenty of talent in the part-time work force.

As Harbor Sweets grows, however, its flexibility becomes less crucial to attracting good employees. The seasonality of the business is gradually decreasing as the company diversifies its customer base. As a result, some 50 employees worked year-round last year. In addition, the company has a growing number of full-time workers. That means its work force is beginning to look more like everybody else's, which brings pressure to provide competitive wages and benefits.

Growth also makes it harder to coordinate the logistics of part-time scheduling. "There may come a time when part-time is not as efficient," admits Phillips, adding that Harbor Sweets is nevertheless committed to part-time as a company philosophy.

Then there are the subtle strains that growth places on the family atmosphere Strohecker and his employees prize. "We've lost a little of the friendliness," says Ruth Keyes, 71. A 10-year Harbor Sweets veteran, she holds a master's degree in education, yet in her retirement loves packing chocolates to keep from being bored and lonely. Keyes still finds Harbor Sweets a warm and fun workplace, yet now she'll sometimes see a colleague at the end of the day and not even know they had been working together.

It isn't always easy running a company where trust is as important as making money. Phyllis LeBlanc could testify to that as she prepared to begin last September's presentation on Harbor Sweets's financial performance. Unlike the year before, the news was good. The changes LeBlanc, the company's chief operating officer, had made after the previous year's losses were apparently beginning to have an effect. It looked as though it would be a good season.

Still, LeBlanc knew that didn't necessarily mean it would be a good meeting. She'd met earlier in the day with some of the people before her and listened to them complain about the repercussions of one of her changes. Now, she wanted to reassure them that she shared the company's values and wouldn't do anything to jeopardize the quality of its products.

To a visitor, it seemed an odd position for a COO. For it wasn't her boss, her investors, her managers, or even her customers to whom LeBlanc wanted to prove her commitment. Instead, she faced several dozen women (and a man or two) who had crowded into Harbor Sweets's packing area. Many were middle-aged and motherly looking, in hats or red aprons. As they chatted before the meeting began, they looked about as forbidding as the lunch ladies in an elementary school cafeteria.

Most managers don't worry about proving their loyalty to company values to part-timers making between $5 and $6.50 an hour. But it wasn't so unusual for LeBlanc. Like virtually all of Harbor Sweets's managers, she had once been a part-time employee herself. And at 31, all her adult work experience -- 13 years -- had been at Harbor Sweets. She was used to thinking of part-time temporary workers as people with whom to share management dilemmas and financials.

Today, though, the employees seemed less concerned about the financials than about the topic of the earlier meeting: a new foiling machine LeBlanc had bought. Some of the workers were upset that the machine was failing to wrap all the Sweet Sloops properly and that so much candy was being wasted. As members of the group described their problems and suggested solutions, LeBlanc listened carefully. "We've had an awful lot of changes this year," she acknowledged. "And although we are trying to produce more candy and be more efficient, we don't want to ruin our best product!"

While LeBlanc clearly had plenty of employee goodwill to draw on, not everyone was so inclined. As she described some of her cost-saving decisions, a longtime employee had one comment. Under her breath, she hissed, "factory!" Without question, it was an accusation.

Ben Strohecker wasn't there to hear it. He had put LeBlanc in charge of Harbor Sweets in July 1988 when he began preparing for a year's sabbatical. The company was making money, Strohecker reasoned when he began making his plans early in 1988, and his managers could run it without him. Besides, the company no longer occupied such a central role in his life: he was happily remarried and now, at 62, wanted to fulfill a longtime dream of public service.

Strohecker's plan was straightforward enough. He would begin cutting back his hours in July, at the start of the 1988 season, and LeBlanc would take over. By January 1, 1989, he would be working full-time on his project: raising awareness of AIDS, particularly among small businesses. When he came back a year later, he'd find some new position for himself, probably in marketing.

In reality, the transition proved a good deal trickier. "It was very difficult to be in charge with him here," LeBlanc admits today. "We were kind of in limbo for six months." It showed. Fiscal year 1988-89 was a bad one at Harbor Sweets. An expected sales increase never occurred for a variety of reasons, including an exceptionally hot summer that slowed retail sales. The losses underscored Harbor Sweets's financial vulnerability. And they scared even Ben. Yet he wasn't scared enough to put off his sabbatical. He knew there had to be changes in the company and was glad to let LeBlanc make them. "Phyllis is conscious of a job that she has to do, that I have failed to do," he says. "And that is to make a decent profit." So he left LeBlanc with that unenviable task -- in an operation that has always cared far more about decency than decent profit.

Unfortunately, one of LeBlanc's early decisions to help the bottom line did just the opposite. The problem was the Sweet Sloop, the company's flagship product. Over the years, Harbor Sweets had added five other chocolates with nautical themes and shapes to its line, but it was the Sloop that accounted for almost half of the company's retail and catalog sales. The trouble was, the Sloop typified both the best and worst of Harbor Sweets. It was delicious and unique, yet an extraordinary pain in the neck to produce. While the other candies were made in molds, the Sweet Sloop alone had to be hand-cut in butter-crunch triangles and then dipped, not once but three times. While the other candies could be wrapped by a foiling machine, the Sweet Sloops came in sizes varied enough to defy automation.

LeBlanc's solution was to buy a butter-crunch machine that, the salesman had assured her, was up to the task of cooking and slicing the Sloops. She also invested in a new foiling machine, thinking the newly uniform Sloops could be wrapped automatically. The savings would be enormous: while one person can hand-wrap 6 Sloops a minute, the machine could do 30.

That was the plan. Eligio Velez Jr., 17, remembers that when the new butter-crunch depositor was installed, he was told he would no longer need to cook Sloops by hand. But no matter how much the machine was coaxed, "it shot the candy out like rabbit messes," he recalls. Today he continues to pour and slice the candy by hand, next to the now-dormant machine. It's a job that Velez, a three-year veteran of the company, likes so much he plans to stay on after he graduates from high school this year and begins attending nearby Salem State College. The one drawback? "They invest in things like this," he says, pointing to the machine, and then he misses out on his profit-sharing bonus.

LeBlanc is trying to ensure that there will be a bonus this year. To restore the company to profitability, she made some tough decisions in the beginning of 1989. There were no annual raises and all officers, including Strohecker, took a 10% pay cut. Then came the biggest change of all. In August Harbor Sweets hired an efficiency expert to look over its operations. One big aim was to set goals for each shift so managers could quickly know if production was on target.

That may sound innocuous enough, but in a company as loosely structured as Harbor Sweets, the culture shock was substantial. Strohecker had always told employees to work at their own pace; if the company got behind, everyone would put in extra effort. So for 16 years, Harbor Sweets had been telling its employees that they were not ordinary factory workers, that they were in effect trusted artisans who worked at their own convenience and who the company knew were doing their best. Now, all of a sudden, they were given production goals, changes that caused a good bit of grumbling. "Back then, it was total quality," says Joyce Brown of the Harbor Sweets where she began working part-time 11 years ago. Now, she laments, "it's becoming more of a factory."

Despite all these internal adjustments, it's an outside event that may in the long run alter Harbor Sweets the most. Last spring USAir Group Inc.'s supplier began ordering logo-imprinted chocolate mints to serve first-class passengers. In one respect, the contract is the best thing that ever happened to the company. If demand like this continues, Harbor Sweets will have a major new source of year-round sales and profits. But it also calls into question the company's very way of operating. To meet the airline's needs, Harbor Sweets added a shift, from 8:30 p.m. to 12:30 a.m. For this small shift, the company faced steady demand for a single product, rather than fluctuating retail demand. It could offer a $2 premium to workers who would commit to five nights a week. As a result, new late-night workers are making more than the most longtime day-shift workers.

Even Strohecker admits that contracts like USAir's could change the company. Harbor Sweets, he says, had never planned to do as much business as it now does in custom chocolates. At first these customers were suitably small and chichi groups such as the Metropolitan Opera and the Boston Symphony Orchestra. But today, even without USAir, about 10% of the company's business comes from more than 100 corporate customers. For big orders like USAir's, Strohecker isn't sure Harbor Sweets's labor-intensive production method makes sense. What USAir wants is a customized version of the Marblehead Mint, the Harbor Sweets product most easily produced in volume. Strohecker wonders if he should spin off the custom chocolates into a separate, highly automated division that would offer better-paying but less flexible and fun jobs.

"The reality is that a piece of our business is not as unique as the rest," he says, acknowledging that Harbor Sweets is at a disadvantage when competing against more efficient producers like Godiva Chocolatier Inc.

But does Harbor Sweets really want to go head-to-head with Godiva, a subsidiary of Campbell Soup with estimated sales of $42 million? After all, Strohecker loves to tell cautionary tales. Many candy companies, he says, start out to serve only the best. As they grow, these companies get greedy and begin selling to more and more customers, and their products become pedestrian. Strohecker argues that that is beginning to happen to Godiva: the company, he says, is too big -- and sells in too many outlets -- for the chocolate to be seen as really special.

To retain its identity, he says, Harbor Sweets must remain true to its market: "the certain number of consumers who want the best, understand the best, and are willing to pay for it." One way the company restricts distribution is by generally not selling to candy stores or department-store candy sections (that's also because Strohecker figures it's easier to sell $25-a-pound chocolates as moderately priced gifts, rather than as extremely high-end snacks). As long as the company isn't seduced by the lure of growth and money, he thinks, it won't lose the qualities that make it and its chocolate special. "I want the company to grow as much as it wants to," Strohecker says. "I don't want to get small and I don't want to get big. What I want to do is stay conscious of the consumer need for our type of product."

Yet it's not so simple. Just as Strohecker finished explaining his philosophy of controlled growth, Harbor Sweets's one and only salesperson, part-timer Penny Wigglesworth, spotted him on the factory floor and hurried over. She hadn't seen Strohecker in a while and was eager to tell him of her latest coup. It's a project she's been working on for years. For the first time, Wigglesworth told her boss proudly, Harbor Sweets had joined Godiva on the preferred-vendor list for bedside chocolates at Marriott Corp. That means the 500 Marriott hotels have all become potential customers, a move that could mean millions in sales for Harbor Sweets.

But growth means more strain on what makes Harbor Sweets special, both in its policies and its products. Maybe that's why Strohecker himself didn't sound as if he knew the answer to the question he gently asked Wigglesworth. "Is Marriott good enough for us?"


Harbor Sweets Inc. carries flexibility to the nth degree. Even attendance is optional

How on earth can you run a factory when you're not sure who's going to show up each shift? Here's the system that works for CEO Ben Strohecker:

* No assembly line. Production is organized into work stations, where groups of employees perform the same task.

* Cross-training. Workers learn several jobs, increasing the company's flexibility.

* Few machines. Since there aren't many machines that must be kept running for efficiency, supervisors can adjust to the changing size of the work force. If the molding crew is shorthanded, for example, fewer people can work there.

* Part-time workers. If the company falls behind, it can easily add more staff hours.

* Substitute, where necessary. Most workers are simply asked to notify their supervisors of a planned absence -- or they can just not show up. But in departments such as order processing, where the staff is small and customers must always be served, employees must arrange for someone to cover their shifts.

* Seasonal layoffs. Harbor Sweets hires only for September through December -- after that, everyone is laid off. Some employees are asked to return, and that work force gradually shrinks through layoffs. Since attendance helps determine whether an employee is asked back, it's simple for Harbor Sweets to weed out unreliable workers.