You run a small company trying to zip ahead of rivals. How do you rev up your team? Conventional wisdom says offer better pay, benefits and training to treat your people right.

That’s not wrong, exactly. But a better bet is to focus on the trustworthiness of your leadership, according to new data from our research and consulting firm Great Place to Work. In producing the 2016 ranking of the Best Small and Medium Workplaces with our partner Fortune magazine, we discovered that employees at small and mid-sized businesses are 10 times more likely to call their workplace great when they say their leaders are honest and ethical. By contrast, employees are just 2 times more likely to call their employers great when they feel positive about their pay, perks, and training opportunities.

Integrity at the top helps support an engaged workforce. Confident employees, in turn, make their organizations more competitive. Our study of more than 52,000 employees at several hundred small and mid-sized businesses found that employees who rated their workplaces 3.5 or higher on a scale of 5 were 26% more likely to work in a company with above-average revenue growth. At the front of the pack, the Best Small and Medium Workplaces enjoyed roughly three times the revenue growth of their peers.


With their employees reporting the highest overall levels of trust, pride and camaraderie, these companies range from tequila maker The Patron Spirits Company to car information service Digging deeper into their organizational cultures, it’s also apparent these businesses frequently create big-hearted, highly-personal ways to show employees how much they matter. ZestFinance, for example, funds a full six months of PTO for new parents, plus an option for an additional six months of part-time work with full benefits and three months off for secondary caregivers. When consultancy Credera meets its yearly financial targets, its team shares the wealth in the form of a free trip for all 200 employees and their spouses to destinations like New Orleans and the Bahamas.

“Smaller enterprises embody the most inspiring things about business: innovation, tenacity, a family feel and pride of ownership,” said Michael Bush, our colleague and CEO of Great Place to Work. “The Best Small and Medium Workplaces consistently bring these traits to life for employees in meaningful, generous, personalized ways. As a result, they create a level of enthusiasm and trust that keeps their teams competitive.”

Staying in front of competitors in 2016 also requires the ability to attract increasingly scarce talent. Small businesses have accounted for two-thirds of new job creation in the U.S. since the 1970s. So it’s good news for the economy that a recent American Express Open survey revealed that 39% of small businesses planned to add employees in the near term. At the same time, though, polled businesses identified hiring as the most common challenge to growth for the first time since 2007.

The Best Workplaces enjoy a healthy 12% average rate of voluntary turnover among full-time employees. That’s about 15% lower than non-winners in our ranking. Part of what makes the Best Workplaces such talent magnets is that employees want a sense that their work and knowledge are valued. Not everyone can be a decision maker, but leading employers find authentic ways to keep people involved. Take technical consulting services firm Engeo: Team members can contribute their ideas for improvements, technologies or new product lines during the business planning process every year, and all of the organization’s current initiatives have come from the minds of employees.

“People who thrive in, and are drawn to, smaller and medium-sized businesses are attracted to the fact that there isn’t an extensive hierarchy,” said Paul Wolcott, a corporate culture expert and partner at Great Place to Work. “They don’t feel like just a number. They can absolutely see exactly how their work impacts the customer.”

Leading employers not only listen to their people but consistently make their shared vision a reality. Employees we surveyed who describe their managers as consistently competent were seven times more likely to describe their workplaces as great. And, again, having a standout workplace in the eyes of employees has a direct impact on the health of small and mid-sized business.

Our research found that people who report their workplace to be a high-trust environment are 11 times more likely to tell others they are proud to work at their company than those who do not describe their workplace as great. Thus, boosting trust builds positive brand ambassadorship. In addition, employees who call their workplace great overall are 17 times more likely to experience innovation-related behaviors, such as cooperation, employee involvement in decisions, and management recognizing that honest mistakes are part of doing business.

“Innovation really is a fancy word that describes the opportunity to have an impact,” Wolcott said, and consistent adaptation is critical as smaller enterprises grow. That won’t be a problem for The Best Small and Medium Workplaces. As their teams rightly expect more from their leaders when it comes to involvement, ethics and honesty, these thoughtful employers have put themselves in a position to race ahead in the future.


Kim Peters and Ann Nadeau are Executive Vice President and Chief Marketing Officer, respectively, at Great Place to Work, the longtime research partner for Fortune’s annual list of the 100 Best Companies to Work For and other best workplaces lists, including the Best Small and Medium Workplaces