InformationWeek

"We felt more like we were fomenting revolution over beer, rather than making a snap decision," Dolch says. "I felt that we could do it better. Not with hubris, that we wouldn't make mistakes, but we wouldn't make those mistakes."

Specifically, the three co-founders of Thaumaturgix set out to create a company that employees would never want to leave. Dolch wanted a workplace in which the people who built the firm would be around when it was making money and handing out the rewards.

How to hand out those rewards was Dolch's first challenge when he started hiring people in 1995. "It felt like when you're in a foreign country and don't know what the tipping policy is," he says.

He decided on profit-sharing. Every six months, Thaumaturgix divides 40% of its net profit among employees, not including senior management and owners. The average annual payout for the past two years has been 35% of base pay. "It seemed to tie together a lot of what the company stands for," he says. "The important thing is it reflects our values as a meritocracy."

The company has opened a second office in Atlanta and plans to start a San Francisco office. Clients range from the Internet gift-certificate startup Flooz.com Inc. to the American Stock Exchange.

Dolch has begun to consider an IPO sometime in the next year or two and how that might affect the culture he and his partners have built. They have sold job candidates on the idea that there's no outside group of investors with a different agenda-something that could change if public shareholders are invited in.

Dunn, the University of Virginia professor, says an IPO brings new management challenges, such as the time and cost spent to communicate with shareholders and the pressure to perform on a schedule. "An IPO creates a new class of problems at the same time it solves others," he says.

Dolch says Thaumaturgix's culture could survive those changes and that the challenge is to maintain communication with employees as it grows. He also says he could make the argument to public shareholders to continue giving employees the first cut of profits, since lower turnover means lower costs and better service.

After all, the firm's compensation structure is working. Thaumaturgix has had 7% turnover the last three years in the 100-employee company-a very small number in an industry in which some companies have to deal with a turnover rate of more than 30% each year. And Dolch's goal for the company remains the same.

"Every time I lose a person," he says, "I feel bad about it."

Brindala Ananthram and her husband, Kishan, had good jobs in the early 1990s as telecommunications software engineers at Sprint Corp. But they noticed that the top salaries went to the stars of sales and marketing.