Talent Management Column

Management Lessons from Small Companies

Even though small companies have more barriers than large companies in creating "winning workplaces," some have managed to build in such programs -- even those employing blue-collar workers. And they have managed to prosper even during a down economy.

Monday, July 18, 2011
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Every year, the folks at Winning Workplaces, a not-for-profit organization dedicated to positive workplace practices, produce a list of the best workplaces among small employers.

What lessons can they offer other employers?

Small operations have some unique advantages that bigger ones don?t, particularly the ability of workers to establish personal connections with leaders. It may also be easier for employees to see how their efforts affect the overall goals of the organization.

On the other hand, smaller companies have some handicaps in managing people. They tend to have fewer resources per employee than their larger counterparts, less opportunity for promotion as rewards and they are more vulnerable to changes in business conditions.

It?s not that unusual to find a good workplace for companies that employ highly skilled white-collar workers where the revenues per person are typically considerable. Those jobs give people a lot of good things already, such as autonomy over how they work, interesting tasks and good wages set by market conditions.

It?s not too hard in that context to spring for some good things for employees. Can we do the same thing in low-margin businesses employing blue-collar workers, even during this recession? That?s harder to do and therefore more interesting.

The first thing to note about the 50 companies honored this year is that they are all doing very well in terms of financial performance. Even in this recessionary period, all of the companies have been making money, are growing and appear to be doing better than the competitors in their markets.

It also appears they spend more on their employees than do their competitors. They certainly have more employee-friendly practices. How can they do better financially while spending more on their workforces? The leading explanation is that they get more out of their employees. All the companies have low turnover and absenteeism, and high levels of employee engagement.

Several common themes come through across these companies.

One that applies to virtually every case is that they are committed to their people practices and stick with them, even when business softens. In this awful business environment, they continued with open door policies, training investments and development programs.

For example, Gold Eagle, an automotive-fluids company, kept its new wellness program in place and reported big savings associated with it during the downturn. A related theme is that they measure performance and costs and take them seriously.

The executives at Cal-Tex, another auto supplier, make it a priority to help employees understand key performance measures. All employees get ?scorecards? that are updated daily to track company productivity and financial performance.

Improving financial literacy seems to be another common practice. Virtually every company seems to teach their employees how to understand simple financial accounting to track company performance, and a remarkable number have open-book accounting practices.

As an example, Golden Artist Colors, a paint producer, has open-book management, financial literacy training and an employee committee that educates the workforce about the way individual performance affects overall financial results.

These companies also do their best to avoid layoffs, keeping their teams intact until business picks up. Harrell Remodeling, a "design+build" company, weathered the construction downturn without any layoffs by cutting back on expenses and benefits and forgoing paid holidays.

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Hopkins Printing accommodates variations in business conditions by cross-training employees to handle different jobs based on demands.

What is the overall takeaway from these companies? It is possible to do well by your employees and to do well in business.

Doing so requires taking a longer-term view, however. During a downturn, for example, it means taking a financial hit to keep the workforce together so that you can prosper faster when business comes back.

That longer view means having the patience to keep programs in place for enough time that they can really begin to work. It means investing in efforts to educate and develop workers, then keeping them around long enough to get the payoff.

Maybe the most important and perhaps unique attribute of these companies is that top executives actually commit the time and attention necessary to demonstrate their organizations' commitment to these goals.

So invest in employees and earn a return from that. Maybe it?s that simple.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.

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