In 1998, media-relations specialist Cindy Nelson got a flattering offer from a small Philadelphia public-relations firm. The 20-person operation was so eager to snap her up that it let Nelson, who lives in Gaithersburg, Md., 150 miles away, become its only full-time telecommuter. It seemed like a great idea. Spared commuting and office interruptions, she became much more productive. And she loved the flexibility.

Dillusionment soon set in, though. As the lone telecommuter, Nelson wasn't linked to the office instant-mail system. She couldn't fax papers from home, and transferring files by E-mail was a headache. Worst of all, out of sight meant out of mind. Graphics staff forgot to send her materials for review, and she was the last to hear of office developments. After 11 frustrating months, she fled to an office job, where she can arrive after rush hour and work occasionally at home. "It's a happy medium," she says. "I enjoyed the opportunity to telecommute, but it's not that easy."

Telecommuting is hot among businesses small and large. The number of telecommuters is growing by 15% a year, according to a 1997 study by research firm FIND/SVP. Another study by International Data Corp./LINK found that of about 9.1 million telecommuters in the U.S., more than 65% work for companies with fewer than 100 employees. It isn't hard to find glowing claims for the virtues of avoiding the office. Jack Nilles, telecommuting pioneer and president of the consultancy JALA International, surveyed supervisors at his client companies and government agencies, who contended telecommuters are 15% to 20% more productive at home than in the office. Other advantages they cited were better employee retention and lower space requirements.

HOST OF ISSUES. Yet, Nelson's story is not atypical. GartnerGroup, an information technology consulting and research firm, estimates that half of all remote-work programs fail in some respects in the initial stages. "People think: 'What's the big problem? You just tell people to work at home,'" says Nilles. "But if you don't think out the logistics and the technology and you don't teach supervisors to manage those workers effectively, you might fail."

Getting such arrangements right from the start is especially critical for small businesses, which seldom have extra people to fill in if communication breaks down, be it for human or technical reasons. Moreover, telecommuting raises a host of other personnel and financial issues that can burden managers in small companies more than those in large ones. For example, does the company pay for equipment or phone lines an employee needs to work at home? If so, how do you recoup that investment -- or the equipment -- if the person quits? If one manager hates dealing with telecommuters, does the chief executive end up mediating disputes, something mid-level staff might handle at a large company?

Entrepreneurs need to carefully assess whether telecommuting is right for their companies -- and under what circumstances. The decision to allow it shouldn't be ad hoc. First, make sure you have a sound business reason for permitting telecommuters: Is it a way to accommodate one or two valued employees? Or will you extend it broadly to lure new staff? Is the idea to expand without moving to a bigger office? If so, where do telecommuters work when they come in? Each business reason has implications for a telecommuting policy. "Don't just do it because it's technologically trendy," says Gil Gordon, a top telecommuting consultant.

If you forge ahead, start slowly, Gordon advises, with one or two experienced and trusted workers working from home one or two days a week. Be prepared to invest in adequate technology and to suffer a shakedown period. The more complex your telecommuters' jobs, the more access they'll need to office applications and files. Their home computers have to run software that can handle that material efficiently or your telecommuter will end up creating extra work for those in the office -- hardly the idea.

COMMUNICATIONS COSTS. At a minimum, telecommuters will need an extra phone line and a modem. A company with fewer than 25 employees may be able to manage with a simple LAN and 56K modems for remote staff, allowing access to the Internet and the company system, says Nilles. Your telecommuters may need ISDN lines if they have to send a lot of data or video, he adds, while people who do computer graphics might need something as sophisticated as a T1 line. Don't assume that telecommuting will produce huge equipment savings. Few staffers will spend several thousand dollars to upgrade a low-level home system to one that can meet sophisticated business standards entirely on their own dime. And you'll need a system for reimbursing employees for phone costs.

Surprisingly, only about half of companies with telecommuters pick up the full tab for setting them up at home, some surveys show. Such stinginess may be penny wise and pound foolish. The rationale for making employees foot the bill is that it's less expensive and eliminates the risk of equipment loss, says Nilles. "This is often spurious since it ignores the cost of [technical] support for telecommuters who might have great diversity in their equipment," he adds. Employers can force workers to insure home-based equipment, he adds, but at the risk of hurting the trust between telecommuters and their distant managers -- the linchpin of a successful relationship.

The Ohio Society of CPAs is one organization that requires telecommuters to purchase their own equipment, but softens the blow with an interest-free loan program. J. Clarke Price, the society's president and CEO, embraced telecommuting two years ago because "in today's environment, all employers look for what gives them an edge." Now, 14 of his 45 employees primarily work at home.

Freedom, it isn't: Price's employees who work at home have to check their voice mail four times a day and their E-mail three times. Still, they're highly motivated. "Productivity has gone through the roof," he says. Where once he got his last E-mails at 6 p.m., now he gets them from telecommuters at midnight. "We've had to make sure they establish parameters so they don't work continuously," he says.

OFF THE RADAR. For all their hard work, telecommuters often feel underappreciated, and with reason. Price recalls that one day he realized that "my communications director had fallen off my radar screen." Price used to amble into her office to discuss what was "rumbling around" in his mind. After she went off-site, he only sought her input when he'd come to a conclusion. Now, he goes out of his way to E-mail or phone her sooner.

That's the kind of dynamic that managers can't ignore. Unfortunately, managers who would just as soon have workers close by may not care to correct such problems. "If supervisors aren't comfortable with employees being out of sight, the program will fail," says John Girard, a vice president and research director of GartnerGroup. Have your managers and telecommuters agree in advance on performance measures, schedules, and deadlines. "It becomes evident quickly how good your managers are," says consultant Gordon.

Many telecommuters feel they have to bend over backward to prove they're trustworthy. Managers must resist any inclination to paranoia with their staffs dispersed. "I felt I was overcompensating by working extra, and that put extra stress on me," says Kim Stilson, who as marketing director for a financial services firm in Salt Lake City worked at home three days a week and in the office two. Her boss demonstrated his doubts: One morning, when she was working in pajamas with uncombed hair and no makeup, he knocked unexpectedly on the front door. "I was bright red," she recalls.

Telecommuting also tests workers' ability to draw a firm line between family and work. As anyone who has ever tried to work and babysit at the same time knows, someone needs to be in full control of the children during "office hours." Working parents also require a place to work where their papers won't be disrupted after they log off.

Stilson had a nanny when she worked at home, and even so, she sometimes had to walk down the street with her portable phone to have a business conversation without baby wails in the background. She found a new job with more opportunity, and she doesn't telecommute yet. "I'm working to prove myself, and then I'll ask if I can telecommute -- so I can get more done and balance my life more," she says. As she discovered, telecommuting offers new possibilities for balance -- but it's no panacea.

By Meg Lundstrom in New York

To: MANAGEMENT