Here's a lesson for small businesses struggling to keep good workers in the tightest labor market in decades: Cut them slack so they can cope with personal needs, and they'll reward you. Their appreciation will show up on the bottom line.

That's what three experts in work-life issues concluded after interviewing more than 100 people at several dozen companies of varying sizes. Stewart D. Friedman, a professor at the University of Pennsylvania's Wharton School; Perry Christensen, a consultant at WFD Consulting; and Jessica DeGroot, founder of Third Path, an agency devoted to work-family issues, published their research in an article entitled "Work and Life: The End of the Zero-Sum Game" in Harvard Business Review's November-December, 1998, issue.

It sounds like common sense, but "most executives still believe that every time an employee's personal interests 'win,' the organization pays the price at its bottom line," the researchers wrote. So the researchers spoke to managers who were "flying under the radar," making extraordinary accommodations for subordinates that went beyond official policies. In each of the cases, the workers responded with profound loyalty -- and the flexibility also enabled the managers to solve other business problems.

LOYAL LABOR. The examples include a hard-driving bank manager who had an epiphany about work-family balance after Jim, an equally hard-driving subordinate, asked to work less. Jim's son was rejecting him because he was never around. The banker reluctantly gave Jim the time he needed. The result: They both became more efficient, and Jim's performance soared. In another case, giving an employee, a loyal alumna of a university, work time to recruit at her old school brought the company valuable new hires -- and created a deeply committed employee.

Most of examples are from large companies, but, insist Christensen and Friedman, the principles are applicable to small businesses. In fact, says Christensen, it's even more imperative for small businesses to find ways to balance work and family, "because the pain is more acute than in larger companies.

"This is not social welfare here," he stresses. "The issue is how can we get business done without compromising personal values."

So what can small businesses -- where people are scarce commodities -- do to accommodate such demands? "There are creative ways of getting things done if you look at things in a fresh light," says Friedman. "I hear that a lot: It has to be this way. There's a lot to get done."

Friedman says he gets feedback from entrepreneurs who tell him they're already putting his ideas into practice out of necessity. One owner said: "If I can't get one of my key employees to the doctor in the middle of the day, I'm going to lose her. So I drive her there," Friedman says. Another entrepreneur reported putting all the employees' personal commitments as well as business obligations on the company calendar, so everyone can plan around those dates, Friedman recalls.

The researchers say three principles guide managers who are good at balancing work and family issues: 1) They clarify business priorities, and they encourage workers to be clear about their personal priorities. 2) They recognize their employees as whole people, celebrate their roles outside work, and acknowledge the boundaries. 3) They continually experiment with the way work is done to enhance the company's performance, while creating time for the staff.

Of course, Friedman acknowledges, not everyone wants his boss to be so involved in his personal life. "It's a gray area," he says. Then again, with technology muddying the boundaries between what can be accomplished at home and what can be done at the office, personal life and work life are likely to become more intertwined in the future.

By Julia Lichtblau in New York
julia_lichtblau@businessweek.com