(FORTUNE Magazine) – DRIVE PAST Greyhound's Phoenix headquarters on a sweltering late-summer afternoon and you will see a crowd of people standing on the sidewalk. They are all smoking, and they look a little sheepish. What's going on? Simple: On September 1 Greyhound banned smoking in its offices, so employees must step outside to light up. Not all smokeless companies put people on the street. Group Health Cooperative of Puget Sound, a big HMO, ruled out cigarettes, pipes, and cigars in all of its hospitals, clinics, and offices, but did not have the heart to drench smokers in Seattle's frequent rains. Instead the company put up bus-stop-like shelters outside. At the Seattle Times employees who want to smoke step onto an outdoor catwalk. Smokers are not only a minority, at 29% of the work force, but an increasingly unpopular one. Soon people who smoke may no longer be welcome on domestic airline flights. The Association of Flight Attendants will probably support a recent recommendation by the National Academy of Sciences that the lines ban smoking. Continental Airlines will cut fares by 10% for nonsmoking passengers. More and more, managers are faced with the question of what to do about employees who light up. Laws in ten states and nearly 150 municipalities limit smoking at work; among the states considering new regulations are New York, Massachusetts, and Rhode Island. The rules do not get besieged managers off the hook, however, since they usually forbid smoking only in hallways and other communal areas. Even in cities with the strictest laws, companies still must decide whether to allow smoking in offices. Many companies are acting voluntarily, or doing more than the laws require, either in response to protests from nonsmokers or because top executives have been zealous in taking up the cause. The Bureau of National Affairs, a private research organization, reports that only 8% of U.S. corporations restricted smoking five years ago. Today 36% do. Another 23% are considering some kind of policy governing whether, where, and when employees may light up. $ A few firms, mostly tiny, refuse to hire smokers. One is Vanguard Electronic Tool of Redmond, Washington. President Warren McPherson started the policy ten years ago after watching his mother, a heavy smoker, die a painful death from cancer. ''I was angry,'' he says. ''I just believe smoking is an avoidable risk.'' What if such a company catches a putative nonsmoker puffing away in a restaurant or on the back porch at home? Business has yet to confront that question. But a federal court last year upheld the sacking of an Oklahoma City fireman who was seen smoking off the job in defiance of the department's nonsmokers-only hiring policy. Employees who seek to fight such dismissal are likely to be out of luck: Courts have been reluctant to rule against employers, while unions have decided that they would rather not get involved. It is easy to see why. In 1984 Group Health Cooperative of Puget Sound banned smoking without consulting the local union, even though the move was a change in working conditions and arguably subject to bargaining. Among the workers, a bitter dispute ensued: Smokers demanded that a grievance be filed, but nonsmokers protested. When the matter was put to a vote, the nonsmoking majority won. Says Elliott Willman, the local's executive vice president: ''We have determined we will not take these kinds of grievances in the future.'' Nor are lawsuits the answer. Notes R. Lawrence Ashe Jr., a Washington, D.C., attorney who represents the Tobacco Institute: ''Smokers would be hard pressed to find a legal theory that gives them the right to smoke.'' Nonsmokers, he adds, do not have a constitutional right to clean air in the office. SOME MANAGERS have chosen to set a few sketchy guidelines and let staffers hash out the details among themselves. That does not always work. Texas Instruments tried to placate its antismoking contingent by cordoning off a smoking section in the company cafeteria, using the movable rope barriers seen in bank lobbies. But nonsmokers clashed with smokers, whom they accused of moving the ropes. As battle lines are drawn between smokers and their more health-minded foes, such imbroglios could become routine. So what is a manager to do? Among companies that have grappled with the problem, a few insights are emerging. The most successful antismoking programs seem to have taken hold in the West. Seattle in particular is a hospitable city for nonsmokers, due to the influence of the Smoking Policy Institute at Seattle University. It was the first organization in the U.S. to offer guidance to companies on how to rid the workplace of tobacco smoke. Robert Rosner, the Institute's executive director, notes that it cannot be done overnight. He recommends giving smokers 90 days' warning, while offering workshops to help them quit. When setting their policies, many companies use in-house statistics on smokers. Boeing chose its computer services and electronics divisions to be the first to ban smoking because fewer workers -- only about 25% -- smoked there than in other parts of the company. Boeing executives say they may have more trouble at manufacturing divisions. In some plants 40% of the employees smoke, and many work stations are a long way from the nearest exit. Obliging a worker to take a 15-minute break every time he or she wants a cigarette would hurt productivity. In any antismoking campaign the chief executive's support is essential. Greyhound Chairman John Teets is an exercise buff who uses the company's new smoking ban as part of a larger policy to promote employee health. Teets, who walks up to his 19th-floor office every morning, coaches stair-climbing contests for staffers. He is convinced that nonsmokers ''are more active and have fewer health problems.'' To encourage employees to quit, and no doubt improve their chance at a gold in stair climbing, Greyhound offers a choice of four free quit-smoking workshops to employees and dependents. Companies making progress toward a smoke-free workplace take pains not to antagonize smokers. ''You must never say that smokers are the targets,'' says Rita Addison, president of Clean Air Associates, a Boston consulting firm. ''Instead appeal to people's instincts to make changes for the good of everybody.'' Such pleas stand a better chance than skeptics might suppose. According to surveys, at least half of all smokers want to quit, and a surprisingly big majority of them claim they favor restrictions at work. If employees balk, consultants counsel patience. Says Regina Carlson, executive director of the New Jersey Group Against Smoking Pollution (GASP), a nonprofit advocacy organization: ''There are three stages in most smoking policies. Managers are very apprehensive to start. Then the program goes over more smoothly than they anticipated. And, in the end, they are flooded with positive response from their employees.'' The experience of New Jersey Bell supports Carlson's contention. The telephone company's management expected resistance when it started its antismoking program last September, since one- third of its 21,000 employees smoked. But, says G. P. Bisgeier, the company physician, ''we've had very few complaints. It's been a gradual and painless change.'' Conspicuously absent from most current discussions of corporate smoking policy is the basic question of smokers' rights. Is forbidding smoking even in a private office, where it harms no one else, a justifiable infringement of a smoker's civil liberties? Managers bent on respecting individual choice might consider following the example of PepsiCo, whose policy can be summed up in two sentences. Says James Griffith, PepsiCo's vice president for public relations: ''It is a matter of common sense. If you know somebody is particularly sensitive to smoke, don't smoke in that person's office.'' That will not be enough to satisfy militant antismokers, but a little courtesy can help clear the air.