The 100 Best Companies to Work For 2006
By treating employees well, these firms are thriving.
by Geoff Colvin

(FORTUNE Magazine) - It had to happen: Globalization's pressure is turning the screws on even the best U.S. companies, making it tougher than ever for them to treat employees well. The good news is that some companies are doing it anyway. Extraordinary by definition, America's 100 Best Companies to Work for have pushed their employee-pleasing ways further than ever in the past year, blazing a trail for all organizations wanting to thrive in today's economic world.

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It's obvious why being a great employer is getting so hard. Globalizing everything creates merciless cost pressures no one can avoid. So, yes, Delta and United are cutting pensions, and General Motors is reducing medical benefits. But so are America's very best employers. Back in 2001, 33 companies on our list paid 100% of employees' health-care premiums. Today only 14 do. Just since last year, 27 companies on the list have reduced what they pay in health-care premiums. Pensions are a similar story: The number of companies on the list offering a defined-benefit pension to new employees has dropped from 40 to 27 in only three years. Sorry, the expectations of even a great employer have to be recalibrated.

But for the best, that's an opportunity. They're still finding ways to differentiate themselves. Many of them have the good fortune to be in businesses that can escape at least some of globalization's pressures. Peruse the list, and you'll be struck by the clumping of firms into certain industries. Most notable: 17 health-care and child-care companies. Those businesses have to be conducted in a specific place and thus are less susceptible to global competition. It's true that radiologists in India are reading U.S. X-rays, but in general we need our doctors where we are. The other most heavily represented industries are also place-based. The list includes 16 retailers and 16 financial services firms. Some of their back-office work is being offshored, but the essence of their business demands physical presence. Heartland brokerages Edward Jones and A.G. Edwards built their business models on meeting clients face-to-face.That's nearly half the list (49 companies) in just three place-based industries; add the five construction firms, and you've got a majority.

But while those companies may largely escape global competition, they still have to beat hundreds of domestic competitors in attracting the best employees. How do they do it? Partly it's skill at finding staff-friendly ideas that don't cost much. Back in 1999 only 18 companies on the list allowed telecommuting; now 79 do. Today 81 companies offer compressed workweeks, such as four ten-hour days with Fridays off; in 1999 only 25 did. More companies are offering personal-concierge services, take-home meals, and free or subsidized lunches. Such benefits do make a difference, and they're a lot less expensive than health insurance. But those are tactics anyone can match. Winning requires something more: a sense of purpose. Employees get deep satisfaction, and become devoted to their employer, from feeling that what they do is good and right. It's easy to understand how workers at Genentech (No. 1 on the list; see "The Best Place to Work Now") or the Mayo Clinic feel they're serving a noble cause. More instructive are the companies where the connection isn't obvious. Lots of companies sell mutual funds, but at Vanguard, helping people pay for retirement is a mission. Timberland (see page 116) is about more than boots: It's about outdoors and the environment; that's why it gives employees $3,000 to buy a hybrid vehicle.

It isn't the nature of the business that makes a company purpose-driven. It's the management. When Coca-Cola was flying high in the '90s, CEO Roberto Goizueta used to say, "Coca-Cola is a religion." He was referring to more than the company's growth fervor; he talked often about its charitable work and the millions of small merchants who could make a living because they sold Coke. That's why his successor called Coke "the most noble business on earth." If Coca-Cola can have a noble purpose, so can any enterprise.

here's one thing that we know from experience does not qualify as a noble purpose: trying to make the stock go up. It's the foundation of shareholder capitalism, but it doesn't make people get out of bed in the morning. One of the striking features of our list is the number of companies that are not-for-profit enterprises or privately owned. When we published our first 100 Best list in 1998, 71 of the firms were public; this year, 50. Nonpublic ownership can be a simple economic advantage. Not-for-profits receive tax breaks and don't have to earn a return on capital for owners. Employee-owned firms can reward shareholders and employees simultaneously. The nonfinancial advantages may be greater. At PCL Construction, an employee-owned builder, a worker says, "Working here is like being with a group of old friends who look out for each other." A "we're all in this together" culture gives meaning to work that money never can. The list includes many publicly traded companies. But even among those, amazingly, many are still run by the founder or the founder's family: Fred Smith at FedEx, the Nordstroms at Nordstrom, the Smuckers at J.M. Smucker, John Macke at Whole Foods Market, for example.

Powerful as those factors are, they aren't the only elements in a great place to work. Two that have never changed and never will are worth citing: trust and recognition. Employees treasure the freedom to do their job as they think best, and great employers trust them. That's the message in comments by employees of the list's firms. Will workers screw up? Yes. It's worth it. As for recognition, it's probably the fattest pitch managers miss. Telling employees they're doing a great job costs nothing but counts big. And it's so easy to do more. Give them free bagels and doughnuts twice a week (CDW). Wash their cars (General Mills). Take them to a movie on Friday (Yahoo). The cost is insignificant. More generous rewards like taking everybody to Maui (David Weekley Homes) cost little in the scheme of things yet pay off immeasurably. One last observation: These firms are highly successful. The average American business lasts less than 20 years before it fails or gets bought. The 100 Best companies, on average, are an incredible 85 years old. Bottom line: Being a great place to work pays.

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