Profit Minded

How to be a place everyone wants to work

What does it take to be one of the best startups to work for in America? Wharton School management professor Peter Cappelli has some ideas based on two decades’ experience studying business cultures. So the office furniture and design company turnstone invited him to weigh in as a judge for its Best Young Companies to Work For contest.

To find candidates, turnstone tapped a wide network of industry leaders and peers, partners, customers, and other professionals who had witnessed small companies’ success in building a place where “everyone wants to work.” Owners or employees could not enter their companies in the contest; instead, outsiders—consultants, venture capitalists, small business organizations, co-working spaces, and members of the media were invited to propose nominees with a “positive work culture, forward-thinking leadership, talent retention, business innovation, community outreach, and an intentionally designed workspace.” Contestants could be no older than 10 years old and have no more than 100 employees.

This week, turnstone revealed the 15 winners, selected from about 150 nominations by a panel of judged including Cappelli, turnstone’s chief anthropologist Kevin Kuske, UP Global CEO Marc Nager, and Kauffman Foundation VP Lesa Mitchell.

Winning businesses are located in cities across the nation, from Baltimore to Portland, Ore., Detroit to Austin, Texas. They include a school supplies company, a “fitness, health, and happiness” startup, a mobile parking lot app, and several innovative social media and marketing businesses. Among the practices that sets some of these businesses apart? Parking Panda offers employees quarterly Uber credits, beach retreats, and sponsored restaurant outings. Sparefoot employees enjoy a full-time chef, a no-policy vacation policy, fully paid insurance for their families, and “sake bomb” events. Groove Commerce offers 100% paid benefits and hosts “Free Friday Lunches” for one-on-one time with the CEO. SproutSocial staff indulge in frequent company-sponsored happy hours, themed parties, free daily lunches, and continuous Ping-Pong games. And Sputnik Creative gives team members exposure to outside designers, developers, and photographers by inviting guest experts to work with staff in a Collaboratory studio.

Yahoo Small Business spoke with Cappelli about what else it takes for a company to make the “best to work for” cut.

What do the “best companies to work for” have in common?

What stood out is the extent to which they talk about having a social purpose. They’re doing something not just about making money.

What I look for is the extent to which they are taking employees seriously. There are a lot of places – frankly most businesses – that are inclined to look at employees as a cost to minimize. You don’t get that sense from these companies. They are looking to tap the potential of their employees’ creativity by thinking about what they could do to make employees more engaged in the organization.

It’s one thing to be nice to a computer programmer because they’re in demand. But I’m interested in the businesses that are nice to all employees, even if they don’t necessarily have skill sets that are in demand.

Considering, like you say, that most businesses don’t think this way, where did the leaders of these winning companies learn their good management skills?

In the way they manage, these leaders are expressing something more intuitive. You don’t get any sense they’re following a playbook. They’re doing things that make sense to them.

Particularly in startup companies, it’s hard to treat employees at arm’s length because you’re with them all day. In big companies it’s well known that CEOs are really nice to their assistants, but they treat others down the organization as expenses because they don’t see them as people.

These leaders are being pretty authentic and intuitive in the way they manage. They see that their employees have interests and needs, and they see the creativity they have. In smaller companies you can’t hide that stuff; opportunities are not constrained by layers of management, and if you’re a bad manager we’re going to see it right away.

Do you see a difference in the cultures of startups of 2013 versus startups of the 1990s?

I was around when the dotcoms were starting. I think there is a difference. In the dotcom culture the big idea was to share the wealth. That was the big thing: employees could have a stake in the organization. That was a new thing. The idea that you would expect employees to give their all—that was the nature of a small business.

But small businesses are a little more sophisticated now and maybe they just have more help or people around them who can give them advice, in ergonomics, for example, or in ways to improve group dynamics.

Some of that difference may be that we’re seeing more startups that are not simply tech companies. A business that is started by engineers for engineers will have a difference culture than one that is started up for another purpose and hires different kinds of people.

What were your criteria for judging in each of the four turnstone categories: business goals and societal impact; outstanding leadership; positive culture and workspace design; and success potential?

Business goals and success are kind of straightforward. Success ought to a given. You either demonstrate that you’re going to succeed or not.

I thought what differentiated the winners were more the other things—leadership and culture and goals to the extent they’re doing positive things. My sense was that businesses got more points if they could articulate a social purpose they were serving, which might not be the mission or the business model.

For instance, one of the 15, Greatist, is a fitness company where their mission is making people’s lives better. Chalkfly is an office supply company that gives 5 percent of each purchase to support teachers in the community. Not everyone in the office supply business is doing that.

What about the winners’ workspaces? Are beanbag chairs and an open loft floor plan prerequisites for a place everyone wants to work?

No. What I saw was companies that were thoughtful about it, who said, “We thought about what we’re doing and how to organize it.” There are certain kinds of businesses where you need privacy. Does it match what they’re trying to do and how they’re trying? Good design feels comfortable, but ought to be tailored to the way people are working.

What’s the biggest takeaway lesson from these businesses for other small business leaders?

These companies are all doing really well and they’re all paying attention to their employees. If all you’re paying attention to is how to get the costs down, consider that these are all companies who seem to be able to do that because they’re getting a lot out of their employees.

There are two ways you can compete: squeeze your costs down, or get the most out of the people you have. This doesn’t imply that you have to pay the most, but you have to pay attention to what you’re doing for your people. These are companies doing well and all paying attention to their employees.

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