Hedging Your Bets

John McDonald and Marc Castellucci both started new jobs this past year-McDonald as senior director of business development for the seven-year-old Cambridge biotech company Millennium Pharmaceuticals, Castellucci in the corporate development arm of Boston insurer Liberty Mutual Group's finance training program.

McDonald's world is one of casually dressed people populating brightly lit laboratories and thrown-together office space; the fast-growing biopharmaceutical company is housed in six different places while it readies two new buildings at University Park near MIT. Castellucci works in a 63-year-old Back Bay landmark updated in muted grays with stained-wood trim, among colleagues in button-down collars and ties.

Neither company has much by way of out-of-the-ordinary amenities, gee-whiz benefits, or cutting-edge perks. Neither is particularly self-aggrandizing or high-profile. Yet both were able to attract these two people, and hundreds of others like them, in one of the tightest employment markets ever.

McDonald chose Millennium, he says, because of the company's reputation. “I had heard great things about the people who worked there and what they did, and I heard they did it in a great culture,” he says. Castellucci, who supplemented his law degree with an M.B.A. from Pennsylvania State University in May, was heavily recruited by several Fortune 100 corporations. For him, the choice was about opportunity. “I was looking for more than a job. I was looking for a place where I think I can excel and do well,” he says.

Therein lies one of the great ironies of the modern-day workplace: The more extraordinary perks and benefits are piled on, the more employees seem to focus on the basics.

“The fact that you have great benefits, that you work here in the Cambridge area-those were all great things, and they were all part of the package that attracted me,” McDonald says. “It was not the most critical factor, though. For me, the most critical factors were the people and the work.”

As for Castellucci, he thinks job seekers who make employment decisions based on all that glitters will be disappointed. “I'm assuming,” he notes dryly, “that people aren't actually going to pay you to play foosball all day.”

In the increasingly cutthroat battle for employees, benefits and perks are clearly powerful recruiting weapons. But human resource experts say they are less likely to determine the ultimate merits of a workplace than such elements as reputation, leadership, opportunities, and a willingness to help time-stressed employees balance their personal and professional lives.

Of course, this hasn't stopped employers from vying over who can offer the most dazzling array of eye-catching extras. In fact, employees increasingly expect such add-ons, along with competitive pay, considering that the labor shortage seems to get tighter with each monthly government unemployment report.

There was a time not long ago when economists considered a 5 percent jobless rate to be “full employment”; unemployment in Boston today is barely half that. The number of permanent layoffs has been declining for three years, and is now near the lowest point in the 20 years the figures have been calculated by the federal Bureau of Labor Statistics. In some high-tech fields, there is literally zero unemployment, leaving hundreds of thousands of jobs unfilled, and employers are pressuring the federal government to increase immigration quotas so they can hire workers from abroad.

In response to all this pressure, companies continue adding goodies. Many monitor the market almost daily to ensure their benefits and pay remain competitive.

A Boston Magazine survey prepared in conjunction with the human resource consultants Hewitt Associates found that many of the largest responding Boston-area employers closely matched each other's benefits. Nearly all the 115 companies surveyed allow casual dress (96 percent), offer some form of tuition reimbursement (86 percent), and pay referral bonuses for new hires (91 percent). Sixty percent provide benefits for unmarried domestic partners. Forty-four percent have on-site fitness centers, 87 percent offer dental coverage, and 61 percent have eye-care insurance.

When it comes to family-friendly benefits, new moms get up to 12 paid weeks of maternity leave, though only three in eight Boston-area companies give new dads paid leave after the baby comes-about the same proportion that offer paid leaves for adoptive parents. Forty-five percent of companies allow telecommuting, and 34 percent have job-sharing programs.

Then there are those ever-enticing stock options. Of the 63 responding employers that have employee stock-ownership programs, 43 offer them to all employees. The other 20 make shares available to varying proportions of their workforces.

Companies continue to be extraordinarily imaginative as they try to create desirable workplaces-and distinguish themselves from their competitors (see chart following page 96). In this climate, it may be hard to believe that unions rose to power only 70 years ago, fighting pitched, and sometimes lethal, battles over deplorable working conditions, or that only 10 years ago, at the height of a recession, millions were laid off and left to wonder how they would make ends meet.

Today, PTC, formerly Parametric Technology Corporation, is building a new headquarters in Needham that, when it opens in the spring, will have an on-site fitness facility, a mile-long walking and jogging path, and a full-service café with outside seating, free breakfasts, and take-home meals. Monster.com in Maynard has a whole slew of well-publicized on-site amenities, including a fitness facility, Tae-Bo and yoga classes, nutrition counseling, and a “Monster Den” break room with games and a food bar.

There are also benefits designed to save time for busy employees. The data storage company EMC, for example, has on-site M.B.A., bachelor's, and associate's programs. State Street Corporation arranges for on-site grocery delivery.

Some employers seek to solve two problems with one perk. Boston University pays employees $5,000 bonuses if they refer a new recruit to fill an information technology position. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo pays its employees $10,000 referral bonuses to bring in new lawyers.

There are also attention-getting freebies. The Boston Beer Company lets employees take home two free cases of Sam Adams beer each month. Cognex President Robert J. Shillman once drove up in a Brink's truck to deliver year-end bonuses in cash. Last May, Cognex employees arrived at work to find a bag containing water, food, a map of Boston, and $50 in cash waiting for each of them, and eight buses idling outside the Natick offices to take them on a “play day.” Jordan's Furniture heads Barry and Eliot Tatelman famously closed their stores one day last year and flew employees to Bermuda. Brooktrout President and founder Eric Giler donned a red Santa hat at Christmas and handed out Palm Pilots. Two years before, Giler gave away free Internet service for a year; it has since become a company benefit.

Perhaps the most unusual and generous workplace perk was handed out by Mercury Computer CEO Jay Bertelli. After the Chelmsford company's stock price tripled last year, Bertelli lined up 20 brand-new silver Porsche Boxsters in the parking lot, one for each of the 20 top executives.

Yet after all the casual Fridays, concierge services, game rooms, free food, margarita parties, and even free cars-what's left? It's getting tougher to keep up with the Joneses, and those hot dotcoms that got so much press for their over-the-top amenities are flaming out in record numbers. People are IPO'd that their stock options are so many scraps of worthless paper (“The Dot-Cons”, page 93). Despite all the extras, dotcom mania has so dimmed that only 13 percent of new college graduates say they want to work for one, according to a poll by the National Association of Colleges and Employers.

Sure, money still talks. Salaries and raises rank second and third behind health care benefits as the most effective tools in retaining employees, a Society for Human Resource Management survey shows. But when you get right down to it, all the bells and whistles in the world mean nothing if the boss is a jerk.

Workplace satisfaction “really has to do with relationships that exist among people, specifically between management and employees,” says Amy Lyman, cofounder of the Great Place to Work Institute. “That relationship needs to be based on trust. It's not some magic thing. It's really about being a trustworthy person and creating a culture in which trust is supported. It's what distinguishes these companies.”

The best employers, Lyman says, have an organizational culture and a sense of community that makes their employees less likely to go elsewhere. They also have a higher level of talent, since their more positive environments attract more résumés than their competitors. “You have a lot of companies that are showing great interest in this whole concept of being a great workplace, because they're having such a hard time recruiting and retaining people,” Lyman says.

Something as simple as a sense of purpose also can distinguish great employers, says Tom Flannery, who runs Arthur Andersen's human capital practice for the Northeast. The best companies know where they're going, and communicate their goals with such enthusiasm their employees get caught up in the momentum. “The pizza party in and of itself is worthless,” says Flannery. “It's the pizza party with enthusiasm that's part of the culture that makes the difference.”

Culture is a word that comes up often in discussions with human resource experts, managers, and CEOs of companies that rank highly as employers. “Creating a great place to work in your organization is part of the culture,” Lyman says. “It has to influence everything you do. It's not just what you do; it's how you do it.”

Companies accomplish this by hiring compatible employees. Given the long hours many people work these days, they're likely to know the person in the adjacent cubicle better than they know their next-door neighbors, and to spend more time with their colleagues than with their spouses. The best employers try to hire people who will get along.

At Sapient, an Internet-consulting company based in Cambridge, the first meeting with an applicant is what company cofounder and co-CEO J. Stuart Moore calls the “Sapient fit” interview. “You can be Einstein, but if you don't fit, we don't want you in the company,” Moore says bluntly. He insists he wants everyone he hires-and Sapient, which ranks 32nd on Fortune's list of fast-growing companies, is hiring at a blistering pace—to be focused on having an impact. No slackers here. If someone is not with the program, they're gone. “That's what most companies don't have the guts to follow through on to maintain a culture over time,” Moore says.

Some companies seek to foster a sense of corporate community with ice cream socials, birthday cakes, and baby showers. But what's really going on is that the workplace has become a surrogate for other social institutions, a 21st-century version of an 1800s company town. Along with a paycheck, employers now provide employees with child care and elder care. They arrange for intervention if employees abuse alcohol or drugs. They provide professional training and, in many cases, pay for college courses. They insure employees' health and life. And when employees need some time off, there's flex time, personal days, and sick days to use as desired. All driven by the fact that people spend so much time at work. “It's work hard, play hard, do it here,” says Flannery.

Still, the best employers have been paying more attention to the way employees balance work with the rest of their lives. “If we ask people to choose between their families and the company, we will lose, and we should,” says Helen Sayles, Liberty Mutual's senior vice president for human resources and administration.

A Harris survey commissioned by FleetBoston found that, by a 2-to-1 margin, employees would rather have more time off than higher pay. And a report by the international outplacement firm Challenger, Gray & Christmas found that help with balancing work and family obligations is more important to employees than signing bonuses and raises.

Balancing work and home life is what drives such perks as on-site car washes and oil changes, personal concierge services, telecommuting, take-home meals, and other perks. Says the Challenger report: “A large number of the nation's office workers are working part of the weekend, either at home or in the workplace. As they put in longer hours, married workers with children are trying to squeeze in time for routine household chores.” The best employers are providing services and resources to help.

Great companies also understand that making people work too hard can burn them out. As a result, time has become a commodity to be bought, sold, and traded. Sixteen percent of the companies we surveyed let employees buy or sell vacation days. “Everybody is looking to get more time out of their day, their week, out of their month, out of their year,” says Kristen Helmick, a consultant at Hewitt Associates. As a result, some companies are trying to differentiate themselves from dotcoms by saying, “Come work here and you'll actually have a life.”

Says Hewitt principal Martha Cochrane: “A good place to work is very much in the eye of the beholder. For the young, up-and-coming computer whiz kid, a great place to work is a high-tech that's going to beat my brains out 24/7, which has a fraternity house atmosphere with beer parties and foosball tables. And I can wear my frayed shirts and sandals and bring my dog to work if I want. Then you have the thirtysomethings and up who have different kinds of responsibilities. They still want the opportunity to grow their careers and be employable, but they also have kids to drop off at day care and grass to cut, and so on.”

Brooktrout, a 16-year-old telecommunications company in Needham, has more than its share of time-management perks, from dry-cleaning service to on-site manicures and pedicures. To president Eric Giler, it's just common sense. “For a parent, it's a constant turmoil between work and kids,” says Giler, who has three children. “I learned a long time ago that if you give people the space they need to do what they need to do with their families, we get that back so much better in commitment and loyalty and everything else.”

“I used to know so many people who basically view that eight hours they invest at work as what they had to do to get the other 16,” says Giler, who has been known to wander the hallways of the company barefoot, or send radio-controlled cars careening across the floors. “Wouldn't it be better to have a good time at work?”

Kevin Smith, a Brooktrout engineer, thinks so. He spent eight years with the company—he was its 20th employee—before leaving four years ago to chase a dotcom dream. Now he's back. It wasn't because Brooktrout offered manicures, pedicures, and massages, which it does. It came down to leadership and reputation.

“Eric Giler is a great guy,” Smith says. “They're working on the latest and greatest technology. All the people get along, and you can talk to anyone from Eric to the shipping and receiving guys. I said, You know, that's the kind of people I want to work with. That was really the motivation to come back.”

Brooktrout's bottom line hasn't suffered from its attitude toward its employees, despite the cost of all those extras. Last year, sales growth was up nearly 40 percent, and net income rose an astounding 6,300 percent. “If you're challenged by what you do, you're going to work harder, you're going to be more into what you do, and you're going to be excited by what you do,” says Giler. “If people work harder-as long as they're working on the right stuff-you'll make money.”

The hard part is not only mak-ing a company a good place to work, but making sure prospective workers know about it. This has led to a new trend in recruiting called “branding.”

Burlington-based Genuity, for instance, uses its history as a selling point. Under its old name, BBN, it built the predecessor to the Internet while Al Gore was still an army enlistee in 1969. Genuity, with four other Internet service providers, carries about 70 percent of today's Internet traffic, accounting for $750 million a year in sales. But the company, which was spun off by GTE earlier this year, is not as well known outside the industry as its competitors, AT&T, Sprint, and WorldCom's UUNET.

Genuity is hiring an average of nine people per day, and the ranks of candidates are getting thin. The company hopes that branding will help it get out the message about its history of innovation. “Companies have to sell themselves to candidates, not the other way around,” says Christiana Lancione, Genuity's human resource director. “Branding is everything from the work environment to the culture that you have here, the opportunities that you're going to offer them-how we set ourselves apart.”

Hewitt's Helmick says that's one reason companies spend all the time it takes to participate in surveys, such as Boston's and Fortune's (Only one Boston-based company, mutual fund inventor MFS, made the Fortune list last year, though other corporations with large numbers of Boston-area employees, including Four Seasons Hotels, were among the winners; four area employers—FleetBoston, MIT, Millipore, and Stride Rite-were named to Working Woman's “100 Best Companies for Working Mothers” in September.) “They're trying to get as much press as possible and get their faces out there as the best places to work,” Helmick says. “Organizations in general are fighting over mind share in order to get the type of talent they need.”

The selling point can be one of any number of things, such as what the company does, or its reputation in its industry. Hopkinton-based EMC is the number one maker of mainframe disk-memory hardware and software, and has posted 25 percent earnings growth in each of the past five years. Its reputation is so strong that 93 percent of the people to whom it offers jobs accept; by comparison, most employers these days consider themselves fortunate to have a 65-70 percent acceptance rate. EMC's turnover is 10 percent, compared to the industry average of 20 percent. And along with Microsoft, Oracle, and Cisco Systems, it's a major force in the so-called new economy. “People want to work here because they want to be a part of that,” says Jack Mollen, EMC's vice president for human resources.

While EMC offers competitive salaries and benefits-the entry fee, Mollen calls it-he says attracting and retaining people has more to do with what EMC does than what it gives as perks and add-ons. “When you get into some of the esoteric perks being offered, you need to look at what people really want out of a company-that they're working on cutting-edge technology, that they can go in and be held accountable so they can really see how they contribute to something, and that they get a big reward if they're successful,” Mollen says. “And they want a company that they're proud of.”

Sometimes that goes only so far, says Arthur Andersen's Flannery. “At the end of the day, you don't work for a company's reputation. You work with a group of people, and you've got to be comfortable within that work setting. If you see your friends becoming unhappy and disaffected and starting to leave, that will infect you, and you will probably leave.”

Which brings us back to leadership—in this case, middle management. Most employees' day-to-day dealings are not with the CEO, despite open-door policies now so much in vogue. They deal with a supervisor, and no amount of benefits or pay will make them stay if the supervisor is an idiot.

“A company will probably get a greater return doing something about fixing its leadership issues than it will by raising compensation,” says Flannery. “Companies can issue edicts, but people work for bosses.”

Companies are focusing resources, time, and effort to make sure that their mid-level managers aren't costing them employees. “It's one of the things that the research shows is very important across a number of industries in terms of what makes people want to come to an organization and what makes people want to stay,” says Liberty Mutual's Helen Sayles. “We believe that an individual's experience on a day-to-day basis has less to do with policies and things that we say we will do. It has more to do with how our managers behave on a daily basis.”

One large area employer wrestling with unlikely management issues is Harvard University, which has hired the Great Place to Work Institute to help it with its workplace culture. A survey of about 3,500 administrative employees gave Harvard high marks in some areas, but not in others, says Merry Touborg, spokeswoman for the university's human resources department. While people felt they were being treated fairly and without discrimination, the survey dug up weaknesses in the way employees and their managers communicate. “There's a growing recognition that we need a competent managerial force, and that, in this culture, frankly, management has not been highly valued,” Touborg says. “In the academic world, management is often viewed as more of a second-level activity.”

No longer. Harvard is embarking on a comprehensive management-training program focusing on such things as performance and managing a diverse workforce. One critical element is communication, because employees say they want more opportunities to be heard and to be involved in planning. “The issue here is that there are some things that we have in common that are interesting and important for everybody,” Touborg says. “And those have not been communicated well.”

In the end, what makes a great employer depends primarily on the employee. But companies that do it right share many things in common. “I think that focusing on the culture and the relationships is really what makes the difference,” says Lyman of the Great Place to Work Institute. “If there's any way to dissuade people from just panicking and running for the next benefit, I think that's the most important thing.”

Of course, a silver Porsche Boxster would also be nice.