About This Handbook
Welcome to Inc.'s handbook on handbooks!

Other than maybe your tax returns, you can't prepare a more important document than your employee manual. Here you can create chapter and verse on your company. You can say exactly who you are and what you do. (One handbook we've seen refers to itself as a "sort of yearly corporate manifesto.") Most important, your handbook tells employees why they should work for your company; it should detail your expectations of them and answer their expectations of you.

In the next few pages we'll let you in on some of the whys and wherefores of producing a handbook, along with some ideas of what such a booklet should look (and sound) like, who ought to write it, how long it should be, what it must contain, and what it can leave out. We hope that you find them useful and that you'll feel free to respond with comments.

Mission Statement
A great handbook should, well...let's try this. Because the point of this exercise is to help you write a handbook -- which ideally contains a mission statement -- let's put the mission of handbooks into just such a proclamation:

An employee handbook's mission is to

communicate indispensable company policies and practices;

make explicit the mutual agreements between employee and employer without being an actual contract;

state and express a company's philosophy;

excite and motivate the employee about his or her job;

convey a broader sense of the company mission.

And what does an actual mission statement look like? Well, the best ones tread the tightrope between the world of ideas and the world of reality. They do more than simply give a sense of what the company aspires to do in the world; they also say exactly how it intends to do it. There's a good example in the employee guide at Seattle-based Starbucks Coffee Co., which states the company's charter as follows:

"To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.

"The following five principles will help us measure the appropriateness of our decisions:

" -- Provide a great work environment and treat each other with respect and dignity.

" -- Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee.

" -- Develop enthusiastically satisfied customers all of the time.

" -- Contribute positively to our communities and our environment.

" -- Recognize that profitability is essential to our future success."

* * *

Handbooks are more popular today than ever, for both formal and informal reasons. First of all, the creeping hand of regulation is forcing companies to publish them simply to cover legal requirements and avoid lawsuits. But more than that, says Wendy Rhodes, a partner with Hewitt Associates, a benefits and compensation consulting firm based in Lincolnshire, Ill., many cash-tight companies are choosing to write down relevant policies and practices and package them in one document as a convenient and cost-effective way of orienting and motivating employees, and explaining company terminology.

One informal gauge of the burgeoning interest in handbooks comes from Whole Foods Market Inc., headquartered in Austin, Tex. Four years ago Inc. published an article that billed the company's handbook as a paradigm of excellence. ( See "The Best Little Handbook in Texas," Managing People, February 1989.) The natural-foods retailer subsequently received 500 requests for copies from companies eager to get a benchmark for their own handbook ideas. A sign of the sorry state of the nation's employee manuals: Whole Foods asked the recipients of its booklet for theirs in return, but the blizzard of handbooks Whole Foods received yielded no ideas that Whole Foods staffers believed they could borrow.

But enough handbook history. As for your story: when you set about writing your company's saga, go beyond reciting SIC code, company address, and founder's birthplace. Try to personalize the place; bring the primary characters to life. Here's a terrific for-instance: In its staff handbook, Wild Oats Markets Inc., based in Boulder, Colo., kicks off with a history titled "A Long, Strange Trip." In it president Mike Gilliland recounts (in what sounds like a letter to a friend) the haphazard process by which he and his partners grew the company into today's multimillion-dollar natural-foods retailing venture.

Interestingly, Gilliland candidly includes a description of the company's greatest failure:

"In 1986, thinking we were infallible, we opened a gourmet/natural foods/convenience store called The French Market (after the New Orleans market of the same name) in the Basemar Center in Boulder. The store lacked any focus, was terribly mismanaged (by me), and was a disaster for two years. Fortunately, Stella's and Lolita's [the company's first two stores] were profitable enough to keep us afloat."

And in another display of openness, Gilliland specifies who holds Wild Oats' equity: "Libby and I each own 32.3% of the stock. Randy [a friend] owns 31.3%, Bennett Bertoli, the company's legal counsel, owns 3% and David Wilkinson [a private investor] owns the remaining 1%."

More important, Gilliland has a good rationale for incorporating such nervy material. "Even though we are getting larger, Wild Oats is still pretty much a mom-and-pop store. We wanted people to know it is still owned by the first three people who bought it," he explains. As for the flop story, he says the company video used to imply that everyone who worked there went straight to heaven, until the owners realized it made more sense to "be a little more realistic about how we work here. We're a good company -- but our execution is not always up to par."

Philosophy and identity are inexorably tied together for any company. What you do defines who you are, and what you believe in should be a basis for how you act. So your handbook is the place to walk the talk. All the philosophy in the world doesn't mean a thing unless the employee manual's tenets are firmly embedded in the company's human-resources policy and evidenced by its practices.

And though your entire handbook will manifest your philosophy, great companies take a stab at explicitly telling employees what they believe in. "You need the basics of the nitty-gritty stuff, but the place where your handbook has an opportunity to shine is in its philosophy. The handbook helps perpetuate the culture and serves as a keeper of the flame," says Joseph Mansueto, president of Morningstar Inc., a publisher of financial information in Chicago whose employee handbook lives up to that credo.

Strong corporate philosophies shine out of the first few pages of great companies' employee manuals. Take Ashton Photo Co., a 110-employee photo-image printer in Salem, Oreg. The company has spent a great deal of time working out what it considers to be its operating philosophy. Its handbook includes succinct charts that reveal its take on the social contract between the company and its workers, because, says vice-president Alan White, "we use the handbook as a common tool to communicate our values to our employees." You'll see some of Ashton Photo's charts on page five.

There are two "elements of style" you need to be aware of: voice and look. Let's talk about voice first.

You will be sending out a message about the company simply by the choices you make in telling its story. So do you really want to get all wordy and formal here?

Probably not. Good handbooks strike a tone that is welcoming and authoritative yet are written in language that's crystal clear. (Bad ones make free with intimidating discourses on policy and lists of thou-shalt-nots, in unintelligible and uninviting legalese.) In fact, "all the guidelines for good writing apply to handbooks," advises Hewitt Associates' Rhodes, who stresses that handbooks must be easily understood. So...write short sentences. Use small words. Think clarity.

But of course, don't lose sight of the "voice" in a larger sense.

"I want the handbook to feel like the advice of somebody who has worked here for 10 years telling me what it's like to work here," says Morningstar's Mansueto. The 200-employee company's guide has a collegial, informal tone consistent with the company culture. This section, for instance, sports a breezy, direct tone that speaks volumes:

"Chill out! It's very hard, if not impossible, to provide great service if you are stressed out, so be good to yourself. Find ways to ease the tension and stress of daily work. Bring some toys to the office, get out for a short walk, listen to some favorite music, take the time to eat a good meal or even just spend a few minutes breathing deeply."

One nice way of thinking about the tone of the book is nicely put by Susan Winters, executive vice-president of Bulbtronics, a distributor of specialty light bulbs in Farmingdale, N.Y.: "You can go to a park and see the signs saying, 'No running -- no food -- no walking on the grass,' but you also want to know, Well, what can I do? By reading a handbook, employees should know what kind of company they are working for."

Now to the look of the thing. Not only should the writing be clear, but good handbooks ought to be designed to be read. It should be as easy as possible for the reader to know what is going on. Rhodes, who has helped write countless handbooks, advises people to stick to a few organizing principles:

Pay attention to the visual aspect of the handbook: include a lot of charts and tables, and use other graphic methods such as breaking out long sentences as lists rather than printing heavy blocks of text.

Make handbooks user-friendly -- that is, include a table of contents, question-and-answer sections, an index, and even cross-referencing -- anything to provide direction and guidance.

Make the handbooks easy to handle. No huge notebooks, for instance, or lightweight paper. Stick with a paper stock that's substantial enough to prevent light from going through it.

Finally, Rhodes recommends that handbook authors don't get carried away with "attitude." "After all, this is a consumer's guide to the policies offered," she says, "and while it should be a showpiece, I wouldn't let the show get in the way."

What to Include
While a section that describes the company's policies and practices may not be the heart of the book, it certainly does comprise the guts of it. The basic principle here: think about what employees want or need to know. Rhodes calls good handbooks "event driven," meaning that employees refer to them when events -- such as sickness, vacation, or other incidents -- stir up a question for them. The essentials include sections on --

Employment Policies

Basic information on issues such as equal employment opportunity, job postings, work hours, regular and overtime pay, performance reviews, vacations and holidays, personal and sick days, leaves of absence, jury duty, and so on.


The fundamentals on issues such as health, dental, and life insurance, short-term and long-term disability, workers' compensation, retirement programs, tuition reimbursement, and employee-assistance programs.

Employee Conduct

Information on themes as specific as employee hygiene or the company's dress code and as broad as individual development.

There are optional sections, too:


"All companies have their own words and meanings for words," says Alan White of Ashton Photo, which publishes a four-page glossary in the back of its handbook "to get people up to speed on the language of the organization." There's a difference at Ashton between late ("not completed on time in a given department"), delayed ("production of a job has been suspended, awaiting information from the customer"), and on hold ("production of a job has been suspended for accounting reasons").

Organization Chart

Ashton also includes what by now has become almost a clichÉ: an upside-down chart showing how the company is organized, with the customer at the top. White says the company's handbook also contains other charts and tables with job descriptions and explanations of the production process that are designed to give people a sense of where they fit in the organization.

Some handbooks give the names of company officers, departments, and so on; others may provide a map of the premises. Others list the phone numbers (sometimes home numbers as well) of every employee.

What to Leave Out
When you think about what to put in, don't forget about what to keep out. You see, the best handbooks don't spell out everything; instead, they serve as menus for action, leaving plenty of room for individual discretion.

When Ann Rhoades, vice-president of people at Southwest Airlines Co., in Dallas, came to the company, in 1989, its handbook was 380 pages and bloating toward 450 in a new draft. Horrified, she threw it out and replaced it with Guidelines for Leaders. This 50-page book contains plenty of material on company policy but is far more in line with Southwest's credo that employees have the right to make individual decisions. Rather than spelling out what employees should do in every situation, Rhoades says, the handbook advises that "very few decisions are black and white and, as managers, it is important that we make decisions that are good business decisions and make sense given each specific situation."

Concludes Mansueto of Morningstar: "It's important to communicate the broader principles of how you want people to perform -- and then let them apply those principles to everyday life."

There comes a time in every company's growth when an employee manual really is essential. For Bulbtronics, that time came about five years ago, when the now 60-employee bulb distributor got to the 25-to-30-person mark and policies had to be standardized, according to executive vice-president Susan Winters. Until then, personnel policies were decided on an ad hoc basis. "But at 60, 50, even 40 employees you are better off with something that has no ambiguities," Winters says.

Winters, who runs Bulbtronics's operations, says people always had the same questions: What were the hours of operation? What was the vacation policy? When were they entitled to benefits? Finally, she realized there were too many "little things that may not have been communicated -- but I didn't want people to know after the fact."

The company is now revising its handbook. Looking back, Winters thinks that having a handbook has its pros and cons. "While it does enable you to be fair and consistent," she says, "it leaves some of the discretion out of the employer's hands. If you put things in writing, it feels like you lose the human factor."

Although contacting an expert can help in some key areas -- such as legal assurance -- there certainly is a value in writing the handbook yourself. Consider the experience of Kingston Technology Corp., in Fountain Valley, Calif., which topped the Inc. 500 list of fastest-growing private companies in 1992. It commissioned a handbook several years ago, sometime around employee number 75. According to marketing director Ron Seide, the hired hand merely took the handbook from AST Research Inc. (a competitor of Kingston's), called up the search-and-replace function on the word-processing program, and spat out a revised version.

Kingston's employees hated it. So they did something about it: they threw out the hired hand's tome and wrote their own. Listen to Carol Ruprecht, who works in international sales: "The owners thought the handbook would be something they would distribute and file in drawers. They never expected that anybody would be offended by it. But it contained all this legal butt-covering language -- which made it seem as if the company didn't trust us and we didn't trust them.

"I was hired by Kingston's president, who told me he does everything by a handshake. In fact, we 'shook hands' over the phone when I was hired. Right away, it was made clear to me that this was an environment of trust and loyalty.

"So some of us confronted the owners and said, 'The company handbook is one of the first exposures people receive to Kingston. A new employee will think this is the kind of company they're working for.' The owners' response was to ask me and my sister [who works in marketing] to rewrite it.

"We spent a lot of time talking with John and David, the two founders, about their philosophies on all our policies -- such as, 'What is the philosophy of sick leave?' And from that we wrote a handbook that is simple and straightforward. Now if I had more time to do the next employee handbook, I would change one thing: make it more simple and straightforward."

Which shows the value of creating a handbook: the mere act of writing it gathers companywide information in a central place and forces companies to make policies clear. "Whether they are explicit or not, companies already have policies in place," says lawyer Robert J. Nobile, a partner at Epstein Becker & Green, in New York City. Nobile, who has written a guide to employee handbooks, says the act of making a handbook can be a step forward in determining what a company's policies actually are.

Legal Stuff
"The handbook is the most important document a company can have," says Nobile. "I have seen companies go into court with it in hand and have cases against them thrown out of court. But it is a double-edged sword. I have seen employees be successful in their actions against companies because of poor draftsmanship."

This is where the handbook gets serious. First of all, companies can't avoid including several company statements on specific laws. The Family and Medical Leave Act policy must be in a company handbook, which must also contain a written sexual-harassment policy. And a section on dispute resolution. And, in some cases, a smoking or nonsmoking policy. The list is too great to continue here and can vary from state to state.

The central legal aspect is that a handbook is not a contract and should be identified as such explicitly. Nobile adds, "From a legal standpoint it is very important to reserve the right to make changes."

As for avoiding lawsuits, Nobile warns that the most common mistakes he sees are policies that are not drafted clearly. A handbook may refer to a policy for "all employees," he says, when such benefits may be only for full-timers.

Nobile's guide includes an all-purpose disclaimer that many companies use and ask employees to read and sign:

"This Handbook is not a contract, express or implied, guaranteeing employment for any specific duration. Although we hope that your employment relationship with us will be long-term, either you or the company may terminate this relationship at any time, for any reason, with or without cause or notice."

In addition, many company handbooks also ask employees to sign a page acknowledging receipt of the handbook and recognizing its statement that everything in it is subject to change.

How to Write Your Employee Handbook, by Stephen D. Bruce (Business & Legal Reports, 800-727-5257, extension 169, $129.95).

Guide to Employee Handbooks, by Robert J. Nobile (Warren Gorham Lamont, 800-950-1216, $98).

The Employee Handbook Audit, by the Alexander Hamilton Institute (201-587-7050, $65.95; book and computer diskette for IBM or compatible are $96.95).

Employee's Role

Typical Ashton Photo Co.

Permission to be right Permission to be wrong

Rote Conceptual

Orderly Productive

Unimaginative Creative

Quiet Communicative

Obedient Assertive

Trained Educated

Be hidden Public posted performance

Somber Wit, humor

A commodity A vital problem solver

Manager's Role

Typical Ashton Photo Co.

Hold power Give power

Authority figure Role model

Go on hunch Get hard data

Avoid blame No excuses, no blame

Quota set by manager Common goal -- customer

Be an obstacle to change Remove obstacles

Turf centered Company centered

Holder of knowledge Teacher

Do Delegate -- follow up

Status quo Experimental

Handbooks needn't cost a bundle. Alan White of Ashton Photo estimates that if he factors in the staff time taken to write his company's handbook and type it up, as well as several hundred dollars for a lawyer to review it, and the initial printing costs, the manual cost roughly $800. Now when he needs extras of the typed, plain-paper document with its thicker stock cover, White takes it to the local Kinko's. His cost: about $1.50 each.

So how long should the handbook be? There's no one true length; it's really up to you. Whole Foods' version, thorough but accessible, runs 104 pages; Kingston's runs 20 (and they are small pages). It's far more important to focus on whether or not the handbook is comprehensive. If it addresses the key questions employees have and conveys the company's basic operating beliefs, then you can say your piece and get out.

Published on: Nov 1, 1993