Best Practices from the Best Employers

What makes these the top small companies to work for? Their No. 1 priority is good communication as part of management strategy

The nation's top 25 small business employers were named last month following a survey conducted by the Society for Human Resource Management and research and management consulting firm Great Place to Work Institute. About 350 small companies were surveyed out of 424 nominations. The companies were required to pay an administrative fee of $1,100 before they were surveyed. The companies share certain common values when it comes to their employees, says Deb Cohen, chief knowledge officer at SHRM. She and Hal Adler, president of GPWI, spoke recently with Smart Answers columnist Karen E. Klein about the best practices uncovered by the survey. Edited excerpts of their conversation follow.

How was the survey conducted?

Adler: Anyone—an employee, a client, a customer, a competitor, a founder—can nominate any company. Our "best companies" group reaches out and validates the nomination by asking specific qualifying questions. We name 25 small companies—those with 50 to 250 employees—and 25 midsize ones—251 to 999 employees.

We see 700 to 800 companies nominated each year, and after we validate the names, we send surveys out to about 90% of them. Completing the survey takes a fair amount of work, particularly for a small company. The survey is done in two parts: The first asks employees about the degree of trust, pride, and camaraderie they experience at work. The second is a kind of "culture audit"—17 questions we ask of management about their policies and practices. The employee perspective makes up two-thirds of the result, and the culture audit accounts for one-third of the total score.

How did the survey come about?

Adler: This is the fifth year we've done it. Everybody's familiar with the "Best Companies to Work For" list, put out by Fortune. But that focuses on companies with 1,000 employees and up.

Cohen: The bulk of our membership comes from smaller companies. So we decided to partner with Great Place to Work to create a list of top small and midsize employers. People think small companies are limited and can't do this or that for their employees. I disagree: Small and midsize companies can do great things that engender engagement, retention, and trust. We wanted to promote those companies.

What traits do the best smaller employers have in common?

Cohen: The top thing is full and great communication plans. These are organizations that focus not only on how they treat their employees but also how they talk with their employees and how their employees are encouraged to talk to them. The "open communication" concept tends to be found throughout all of the companies that are winners, year after year.

What kind of communication is fostered, and how?

Cohen: It's entrepreneurs who support good conversation with their employees, aimed at finding out what their needs and motivations are, why they stay, and why they leave. Employees are asked to inform their organizations on the challenges they face, what they're doing well, and what they're not doing so well. In order to do that, the small companies need to show that they trust their employees and they empower their employees.

The way they communicate ranges from regular all-hands meetings, to newsletters, to bulletin boards. The communication is from the top down and also within specific divisions where managers listen to employees and report up to the president.

What's another commonality among the winners?

Cohen: Good, strong benefit plans are certainly a common theme, including providing medical insurance, vacation time, sick leave, and retirement plans. There are hundreds of different benefits that employers can offer, from insurance to professional development opportunities to flexible work schedules.

The winners typically offer a strategic mix of benefits.

Small companies need to think about what they can afford to pay, what their employees need and want and how they can best use their financial resources.

So many small employers simply cannot afford to provide benefits, even though they badly want to. How do you advise them to handle that?

Cohen: Be frank with your employees. It's great if your company can pay all the insurance premiums, instead of making an 80-20 split. But if you can't pay 100% for benefits, pay for what you can and then communicate that. Explain what you can afford and why, then acknowledge that you can't fix everything but you're doing the best you can.

A great company could distinguish itself by telling employees it can't afford to give them insurance, but passing along a list of resources where they can purchase coverage themselves. It's not ideal, but it shows the employees that you care about them, and they'll remember that when they decide whether to stay at your firm or not.

Some things that always gets mentioned in the large corporate "best employer" lists are quirky perks and fun activities. Did those factor in at the smaller firms as well?

Cohen: Definitely. Camaraderie is always important, and so are events that are meaningful. It could be having potlucks or providing food at company meetings or sponsoring a company softball team or always having bowls of M&Ms around the office. Small employers should be creative and do things that fit their organizations are in tune with what their workforce wants.

The other great perks that small companies can provide are career development opportunities. Small employers are sometimes limited in providing benefits, but they can create succession plans and talk to their employees about where they want to be five years down the road. Even in companies with low turnover rates, the best prospects should be developed for the next step in company leadership. Firms that recognize promising employees and give them training—because they see opportunities for them—will have employees stick around to realize those opportunities.

Where can small business owners learn more about the survey process and about the companies that made the grade in 2008?

Adler: Full coverage of the award ceremony and the winners are available online at our site and at the SHRM site.

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