Here, in their own words, is how some of the country's most innovative and ambitious people managers are trying to build the perfect workplace

First, a disclaimer: none of the managers whose words you'll read below would presume to be running one of the Best Small Companies to Work For. They are, every one of them, too smart for that.

They know what every experienced company builder knows: that no single company can be best for every kind of employee, and that even if in your own company you're managing to get it right -- to be comprehending and satisfying the needs your employees feel right now, today -- you can be sure your success won't last. At least not as currently constructed.

Things will change, and swiftly. Competitors will come and go; the economy will boom or bust; fortune will smile on you, or frown. Your employees -- experiencing it all -- will change their minds about what they need, want, or think they deserve. So stay loose, say the savvy. Remember that even the cleverest people-management tactics can turn sour in the heat and humidity of real workplace life. Keep trying. Take nothing for granted.

Remember, too, that a reputation for being a great place to work must be earned anew every day -- which requires a lot of juggling. "Things like job security, the work atmosphere, the focus on collaboration, the commitment people have to our mission statement, the compensation-and-benefits program -- they're all parts of the whole, and no single part predominates," says Malte von Matthiessen of YSI, a $30-million instrumentation manufacturer in Yellow Springs, Ohio. "Sometimes one element takes over, and you have to work to bring everything back into balance. That's what leadership is all about today: continually managing that balance."

To report this story, we spoke with dozens of company owners and managers like von Matthiessen across the country. Each had his or her own view about the best ways to nurture a work force. Here, in interviews with Inc. staffers Leslie Brokaw, Anne Murphy, and Jeffrey L. Seglin, is what some of them said.


Dahlin Smith White
John Dahlin, Darrell Smith, and Jon White started the advertising agency that bears their names only six years ago. It was an opportunity to strike out on their own and make some money, and also to create the kind of environment they'd enjoy working in, day in, day out. "We wanted to build the company we'd always wanted to work for," recalls president Dahlin. "Someplace rewarding, stimulating, fun." Ninety people later, Dahlin Smith White, in Salt Lake City, is a $60-million agency, a 1991 Inc. 500 company, and one of the hottest small shops in the West.

In this business we have to have an environment that's a little loose if we're going to foster creativity, new ideas, and great advertising. That means, for starters, being flexible about how and when people work. If people want to play music loud -- every office has a company-bought boom box -- or dance in the hallways, they can. If they want to go skiing or go to a movie in the middle of the day, they can. If they want to play pool, we have a poolroom right here. People have even been known to bowl down the corridors.

Sounds nuts, but that kind of crazy stuff is actually essential to our business. We want people to have fun, to be stimulated, to do something wild.

Even the physical environment -- our office space -- was designed to encourage that. None of the walls are straight; they tilt or angle in. There are two or three different door sizes and different windows. A yellow metal-and-glass staircase lights up and greets you as you enter. We want people to be stimulated as soon as they walk in. By the time I hit my desk, I'm already jazzed. Even customers respond to it. They might not know whether they like it or hate it, but they have a reaction to it. Isn't that what good advertising is supposed to do?

All employees get an art budget of $100 to $200 each to decorate their offices, which makes the decor totally eclectic: Indian tapestries, sculpted glass heads, gigantic light bulbs. Most companies try to force you into some dehumanizing group mold; there's so much pretending in business. We want people to be real, to be themselves. The motto here is "Do Something Wild." We can all do something wild, push ourselves, test our limits. We try to break as many rules as we can without losing our basic stability as a company.

There are lots of dinners, movies, retreats. We go mountain climbing, horseback riding, snowmobiling. We counted 40 parties last year -- Friday the 13th, an April Fools' bowling party -- most of them pretty spontaneous. We keep people thinking there might be something coming to them at any moment. But it's not predictable. It would get boring, become expected, if there weren't some uncertainty surrounding incentives. For instance, we share profits and award bonuses twice a year. But employees never know how much to expect. Bonuses are allocated on a totally subjective basis. Three partners sit down and decide whom to give bonuses to and how much. It might seem arbitrary, but it offends only the people who aren't producing.

It's difficult to manage only when you don't hire the right kind of people. If people take advantage of the freedom and flexibility they're given, eventually, they're going to bump into management. And we can be quick to fire people. We might be fun, but we have a certain viciousness about us, too. We'll cut weakness out right away because we want to support the talent, which is reassuring to the talented ones. They know we're not wasting resources on the wrong people.

Though we've grown so rapidly and promoted some people very quickly, we don't do a lot of training. We think training breeds and supports mediocrity. Advancement is a game of survival of the fittest. Or, as we say, survival of the inquisitive. It builds strong people.

But it's stressful. It may sound as if we're partying all the time, but that doesn't mean people aren't held accountable. We're a very demanding shop. People are working their butts off most of the time.

We have to offset the pressure we put people under, and we can't just expect them to unwind at home. They have to be mentally relaxed enough when they're here to focus on the responsibilities we give them. So we have to help reduce the stress we create right here. If that means we have people moonwalking on tables, so be it. Otherwise they'd burn out, and we'd lose them and part of our core competence with them.

What's the payoff for working so hard to create this kind of environment? Simple: better advertising. We get a more innovative, more energetic, more stimulated staff. When people are having fun, they're encouraged to work harder. And a motivated person is the difference between being able to bill 6 hours a day and 8, 9, or 10 hours. If we get people to work one more hour a day because they enjoy their work and like the environment, that's 12.5% more output.

Plus, our spirit wins us accounts. Clients tell us they can sense the unity and excitement our people project. It makes them think they'll get an exciting product. We gain a competitive advantage as a result.

Every day I think about the environment we provide and our employees. I let my partners take care of the clients. I worry whether the staff are happy. Are they motivated and compensated well enough to create great advertising for our clients? To create unique advertising, we need people having fun.


Rhino Foods
Rhino Foods, in Burlington, Vt., has fared well from its association with Ben & Jerry's ice cream; in addition to making cakes and ice-cream sandwiches, Rhino supplies the "cookie dough" that's smooshed into a hit Ben & Jerry's flavor, and as that flavor's popularity has fattened, so has Rhino, growing in the past two years from 13 people to 70, with more than $5 million in annual sales. Mark Koenigsberg, Rhino's director of sales and marketing, says the company also has grown its programs to help promote a healthy life outside the workplace for its staff.

We're kind of a work in progress as a company, and we're working really hard to be a good place for people. We have a company "list of purposes," which declares among other things that "Rhino Foods is a vehicle for people to get what they want." That's a pretty ambiguous statement, and it's unusual for a company to use the term want, but that's the way it's always been with Ted Castle, the founder and president, and his wife -- he was determined that the business wouldn't run him, that he'd still have time for sailing, golf, climbing mountains. And he figured that if the business would serve him, he wanted it to serve the other employees, too, even though they didn't start the company. Maybe that's radical, but that's the kind of company he wanted.

One of our projects is called Focus on Families. A group meets every Thursday to oversee programs for employees and for community groups like the Boys and Girls Club and the Special Olympics. The meetings last about a half hour, on company time, with anywhere from 7 to 25 people attending. We're about to start something called the Nurturing Program, a 15-weekend program that works with parents and kids to develop better parenting skills. It's run out of the Vermont Center for the Prevention of Child Abuse, which we've contributed money to. The center normally offers that program to a community, but we wanted to offer it to our employees.

Many people in our work force come from tough backgrounds -- broken homes or lousy childhood experiences. Many of the mothers here are single mothers or have a mate who's not the father of their kids. Six people from our company went to an educators' conference on children recently, and ours was the only company represented there. And those who went were the only lay people there -- people who make cheesecakes for a living. They reported back to the Focus on Families group on what they'd heard, but they also got a huge shot of self-esteem: they went representing their business. That sort of stuff works. We see people coming to the company now with incredibly great attitudes, people who are working hard, who feel they're getting something back for it. And people here work very hard; production work is not easy stuff. It's physical; you're on your feet; it's fast.

We've also hired a woman from the human-resources department at W. L. Gore & Associates, whose job is to help us create our future and be good at what we say we want to do with workers. Right now we have a staff meeting once a week, and new people sit there and say, "What, are these guys crazy? I thought I was coming here to make cookie dough, and now these people are talking about families and work environment."

On the other hand, this is still an amazingly levelheaded organization. We don't think this way out of charity; there are some very left-brain reasons. We view the things we're doing as good business. You have lower turnover; you have fewer sick days; you have people who are psyched about coming to work. It makes sense that people will be more productive if they're happier at home. It's the idea of thinking globally but acting locally: for us, "locally" is right inside this company.


White Storage and Retrieval Systems
When Donald Weiss became CEO of White Storage, in 1975, the company, an offshoot of a now-46-year-old family business, posted $4 million in sales. Seventeen years and thousands of training hours later, Weiss's company, which is based in Kenilworth, N.J., and manufactures automated retrieval systems for factories and offices, employs 400 people and reports $50 million in annual revenues.

I remember attending a seminar on quality back in 1988 and being completely inspired by it. I went back to the office inflamed with the idea of bringing quality to life in the company. But I took one look around at our work force and realized it would be impossible to instill the concept of quality in people who didn't even have basic language or math skills. So many had never been properly trained or educated. More than a hundred barely understood the language. We were going to have to start at the beginning -- with basic English.

I began by paying a couple of teachers to come in for two hours a week. Employees volunteered their time and came in after-hours. We had about 40 in the beginning. For about two years, the first classes were held for two hours a day, two days a week. We started to get some attention in the media and in government circles, and obtained state and federal grants to underwrite a full-blown workplace-literacy program. We got teacher salaries covered and started offering the classes during working hours. Soon we had 100 students in five levels of English classes. And training started to take hold of the entire company.

We started teaching other skills -- math, blueprint reading, Japanese manufacturing techniques. We started preparing people for their high-school-equivalency diplomas. We taught team building so we could implement team management in parts of the company. We began inviting other companies in to train our people. (AT&T taught a class on quality.) In 1991 we offered 7,000 hours of training, everything from English as a second language, to how to use small tools.

We did it all in-house, bringing together people from all departments. Running this kind of program in-house gives you more control over the curriculum. You know where the money you invest is going. We can use our own materials -- manuals, job specs, company newsletters -- so while people's basic reading and English skills are improved, so is their understanding of their jobs and the company. We can teach them the specific skills they need to be effective on the job.

We've seen the benefits in a number of ways. The most significant benefit is the sense of dignity people have. The training programs literally changed the company culture. People appreciated the opportunity to educate themselves and improve their skills, and they feel more confident and secure in their jobs. We used to get countless grievances through our two unions. Today we don't. We actually settle contracts early now. The old walls of distrust between management and union have fallen because of the way we treat our people.

Turnover used to be above 25%; now it's below 10%. We've seen tremendous improvement in safety. In 1988 we had 180 reported accidents. This year it'll be just over 30. The number of workers' compensation claims filed has plummeted. We now pay one-tenth of what we paid four years ago. And productivity is up. In one year alone we saw the turn-around time on orders drop from seven days to one.

As for costs, the program has been surprisingly inexpensive. We've spent a couple hundred thousand in payroll by taking people off the floor or away from their desks to train them, but we get a return on everything we spend. We get more productive people, people coming in who are not checking their brains at the door. We get better ideas out of them, better performance. A 5% improvement in productivity or quality of ideas negates the cost. Plus we get better relationships with people. The power of the people who work for you is incredible if you choose to use it. But you have to unlock it by educating them, by giving them the opportunity to develop their skills. It's at the top of my list of concerns. Satisfying your employees is not something you decide you'll budget 20% of your time for. You have to do it all the time; you've got to live it. It's got to be part of your style of doing business.

I don't think of this as some kind of heroic effort. It's a necessity. Most of our competition comes from foreign companies. And they don't have the education or language problems we have. In Japan and Germany workers tend to be better educated. So for us to invest so heavily in training is sort of playing catch-up. Many enlightened companies are doing what we're doing. There is a growing realization that if you don't empower workers, if you don't educate them, teach them to pay attention to quality, you will lose out in the long run. You've got to turn to training to compete and survive in a global economy. Maybe in some industries that haven't yet been touched by foreign competitors, managers can afford to sit back like fat cats and not worry about improving and satisfying their people. But their day will come. This is the direction all companies will have to take.


Bread Loaf Construction
At Bread Loaf, a $30-million, 150-employee full-service construction company in Middlebury, Vt., the focus on providing a good workplace grows mostly out of a natural concern for employee hopes and needs. But there's a strategic payoff, too, says executive vice-president John Leehman: the reputation for having a happy and creative work force positions Bread Loaf as the creative leader in its market -- and attracts customers.

We do a lot to build a sense of teamwork among our employees -- things that really open up communication. When there's a complaint of any kind, we address it right away. We want the negative information because only then can we do something with it.

Our employees know managers have an open door; that's just our culture. So we're always looking for ways to break the barriers in communication, like having a consultant come in and spend a half hour with each person, or doing a ropes program -- a kind of personal-adventure center, in which our employees, wearing harnesses, climb 30-foot trees, then dive into a net.

We take about 12 people at a time, for three days, on that kind of trip. It's designed for team building and to make us stretch beyond our personal limits. In the evenings we teach people how to build their personal visions and talk about how to build the company so people can use it to reach their goals.

Then there's also a lot of teamwork on a smaller scale around here. People are broken into teams so they get used to working with the same people, and communication shortcuts are developed. That teamwork even carries over into our rotating-layoff policy: our employees agree to work 33% fewer hours during off-peak seasons, so we don't have to lay anyone off totally.

There are two reasons we try to differentiate our workplace -- why we do all this stuff to build a sense of teamwork among our employees. One, we like it: we really like working in a place where there's creative energy, where people are able to feel pride. Two, it brings work to us. A lot of the more creative designing-and-building work comes to us first. And generally speaking, we negotiate a tremendous amount of our work directly, without having to go to the bid market. It just comes in the door.

We have an image in the marketplace that's much different from anyone else's. We're considered to be employee-focused, honest, of high integrity, and always giving the customer what we promise. Several years ago we came up with the slogan "Promises Made Are Promises Kept." So we're seen as trustworthy first, and second, as a very innovative company, not only in terms of our employees but also in terms of actual product ideas -- and we get a lot of those from our employees.

Customers perceive us as being different because of our employees. A couple of years ago we had a marketing consultant go out to pinpoint for us what the marketplace perception of us was and what made us different from other companies, and to help us determine what we should be focusing on. The main message we got was that people outside the company had the perception that everybody who works at Bread Loaf has high integrity, that our people are innovative and creative. That's the stuff that's made us different from competitors.


John Chuang may have been in business only six years, but already he's grown his temp agency, MacTemps, into a company that made this year's Inc. 500 and expects 1992 revenues of $19 million. With 70 full-time employees coordinating 700 to 800 temporary workers each month, the agency, based in Cambridge, Mass., is a national player. Getting and keeping good employees when you have limited resources isn't that difficult, says Chuang, if you attend to the "core" issues of job satisfaction and don't try to compete on the "peripheral" ones. There is, he says, a clear difference.

Since we are vying for full-time employees against much bigger temp agencies -- billion-dollar companies -- we can't really compete on perks and health plans. So we've thought a lot about what people really want from an employment situation, and how we could satisfy that -- what is core, and what really is peripheral.

There are four issues we think are core in making a company good to work for. The first is a voice -- that people know they have a say in a job design or in their work environment.

We don't, for instance, give people procedures to follow when they open a new office -- and we've got 20 offices nationwide, and one in the United Kingdom. We'll tell them how something was done in the past and give them a model, but they're encouraged to improve upon it.

The things you tell employees early on in a job are the most important; those leave indelible impressions in their minds. So it's very important that they have good first experiences -- which means you have to give them a fair amount of autonomy. We've never had a disaster with that, giving people so much trust. We've occasionally had people who weren't a good fit with our company, but on the whole, it's worked out very, very well.

With a voice comes responsibility. We try to make clear to every employee that even the most mundane task is extremely important for the company. And people are happier if they're totally responsible for the task and if they know how it fits into the success of the company.

If you asked someone just to stuff envelopes to get our invoices out, no one would want to do it -- it's a drag of a job. But if you explain that getting invoices out two days earlier can increase the cash flow to the company by $100,000, well, that's a big number, and it becomes clear why it's important. The idea of "empowering employees" can sound very touchy-feely when you read about it in books, but my experience is that all this stuff translates to the bottom line really well. We've found that if you give someone an open-ended challenge to, say, make collections more efficient, that employee will go for it and will like his or her job more.

The third issue is learning: If you're giving people responsibility and trusting them to take action on the company's behalf, to make a frontline decision and act the way you would normally act, you've got to have people learning all the time. If your company's culture doesn't stress learning a lot, and sharing good decisions and learning from bad ones, the responsibility really won't work.

We have a program called Back to School, in which we fly all our employees to the main office and discuss the processes they're using in their offices. We'll teach people business-school stuff like cash-flow analysis; we'll clip articles to pass around to everyone. Business isn't rocket science; it's all a matter of talking about ways of improving.

The fourth issue is compensation. I consider us small now, but we were really, really small when we first began, and we had to be able to retain employees and keep them happy without just bombarding them with money, because we didn't have any. Good pay, though, is one of the very important things that a job should provide, and now that we're bigger, we're shooting to get our compensation to be twice the industry average. We're going to do that by keeping out layers and getting rid of hierarchy.

All these issues are interrelated; you can't de-layer, and save all the money you'd give to middle managers for the frontline people, if you don't have the learning. What we're really trying to do is trade a lot of control for a lot of trust, because otherwise it's hard for a company to grow quickly. If every time you set up a new office or a new division, you had to personally oversee things and set up auditing systems and check up on everybody, you couldn't grow fast. It isn't possible.

The issues that are peripheral, by the way, are a lot of the big-company things -- the subsidized lunches, the health clubs, the outings, the beautiful office space -- and other issues, such as a traditional career path, where every few years you get a promotion and a new title. I firmly believe that the career path at our company will become equal to if not greater than the path at big companies, because people get a lot of responsibility early, and we definitely give people room to grow. But they're bigger steps and will probably happen less often.

Benefits are just side things. If you don't get the core right, the most lavish benefits and perks don't mean anything. You want the job itself to be great. That's the real prescription for small companies that want to get big.