(FORTUNE Small Business) – The conventional way to start a story about management is to conjure up the scene of a leader's decisive moment. Prompted by crisis or inspiration, the impassioned boss speaks to his flock. His listeners are moved by his vision and become fervent believers. Together they triumph and--pick one--survive a plane crash, win a battle, or save a company.

But that's only one way to manage--and not always the right way. For every fire-breathing orator like General George Patton, you can find a leader like Mahatma Gandhi, who led with compassion, or like Martin Luther King Jr., whose moral convictions inspired his followers. Savvy leaders know that there is no single map for effective leadership; the rules change depending on whom you're guiding and the conditions around you. "Those who can lead not just in one environment but in multiple, changing environments over time are the really spectacular leaders," says Roger Conway, a program manager at the Center for Creative Leadership in Greensboro, N.C.

So which bosses have been best able to adapt to the current era--a time of economic insecurity, job-loss fears, and workplace anxiety? To find out, FSB partnered with Winning Workplaces, a not-for-profit organization in Evanston, Ill., that helps small businesses adopt successful workforce practices, to compile our first Best Bosses list. Starting in the summer of 2002, we gathered nominations from dozens of companies, employees, and consultants. Our panel of FSB editors, Winning Workplaces executives, a human relations expert, and a former entrepreneur narrowed the field by reviewing employees' on-the-job tenure and turnover, as well as management participation and other leadership practices at each company, emerging with a group of 17 standouts. Those companies answered a second round of questions about financial incentives (including ownership positions) for employees, annual investment in training, and sharing of financial information. We also conducted random interviews with employees.

In the end we found six leaders who have created dynamic corporate cultures that we think can stand up to anything this unstable economic environment throws at them. "These businessmen and -women show that you can build exceptional work environments even if you're not a giant corporation with deep pockets and huge critical mass," says Ken Lehman, chairman of Winning Workplaces and a former co-owner of Fel-Pro Inc., an auto-parts manufacturer that was picked as No. 4 on the 100 Best Places to Work list by Fortune, FSB's sister publication, in 1998.

Small business owners have a distinct advantage over large companies in one crucial respect. It's easier for them to do what managers everywhere have been told they should do--care about their employees. Entrepreneurs are surrounded by their workers every single day; CEOs of larger firms simply can't feel the same connection with hundreds of people scattered around the world. And empathy doesn't just sound nice--it can yield bottom-line results. "In all of the research on behavior, effective human relations has always boiled down to the same thing: The more convinced people are that you care about them, the more demanding you can be," says Ed Gubman, president of Gubman Consulting in Wilmette, Ill., and author of The Engaging Leader (2003, Dearborn Trade).

That's vitally important, particularly in today's work environment. Some bosses might be tempted to take advantage of the tight job market and push their employees to the breaking point. But in a service economy, it's not enough to ensure that your workers put in long hours. You have to get them to care about doing a good job. And yes, sometimes that means exhibiting behavior that embarrasses most business types: sharing your feelings. Why should workers get emotionally involved in their work if their boss refuses to show any passion? "We're living in an era of discretionary effort. Employees have the choice of how much quality they put into their work," says Gubman. "If you can't bring your emotions into engaging workers, you're going to be lost."

To that end, we looked for managers who find novel ways to demonstrate how deeply they value their employees. Sure, our bosses shower loads of enviable perks on their workers. But on-site child-care centers, concierge services, and workplace massages aren't tools of effective leaders--they're byproducts of effective leadership. More important is the feeling of trust and autonomy these managers impart. In some bosses' minds, "if you can't control it, you can't manage it," says Craig Hickman, author of Mind of a Manager, Soul of a Leader (John Wiley & Sons, 1990). "The leader, on the other hand, says, 'If you don't let go, no one else will be sufficiently empowered to make things happen.'" These bosses don't micromanage but lay out goals and assume their employees know, better than they do, the best way to reach their objectives.

That may seem soft, but it results in a quantifiable payoff in reduced turnover and efficiency gains. Even when job applicants are plentiful, it's much cheaper to retain existing workers than to hire new ones. On average it costs companies 50% to 150% of a worker's annual salary to hire someone new. Training and lost productivity ratchet up costs, but the biggest expense is the loss of momentum that exits with experienced staff. A study of Chrysler dealers found that the difference between an experienced salesman and a new one in the first three years on the job came to $140,000 in profit.

Proof that a stable workforce creates a cascade of benefits--higher profits, greater trust, improved teamwork--was evident even among companies not spotlighted in the stories that follow. For example, Peggy Finley says that a decade ago, when she became president of K40 Electronics, a radar-detector maker with 27 employees in Elgin, Ill., fear had been the main tool used to obtain sales, motivate employees, and force compliance. Turnover was high, and morale was low. She redefined the company's core values, laid off a handful of employees who could not make the transition, and replaced them using a new hiring process. She also trained everyone in effective communication and instituted a range of unusual benefits, from company-paid shopping sprees to theater outings to Cubs baseball games, all during working hours. Now the average tenure of employees is eight years. The company has gained market share and tripled profits even as the top three radar-detector manufacturers have filed for bankruptcy.

Elevating workers' interests allows some companies to break industry rules--and still prosper. Nine years ago Karen Oman decided to create a company for workers who want to "get a life." She started Certes Financial Pros, a personnel company in St. Louis Park, Minn., which places financial professionals on temporary assignments with corporate clients. Instead of working grueling hours in a corporate accounting or finance position, nearly 80% of Certes's consultants put in no more than 40 hours a week, and 20% work part-time. They can take as long as six months off without losing benefits. The company's turnover of 25%, one-third of which represents permanent placements with clients, is a fraction of the 393% experienced by the personnel-supply industry, according to a U.S. Department of Labor report in 1999. Certes's revenue has grown from $100,000 in 1994 to more than $7 million last year.

But the leaders we profile aren't the type to measure their success strictly by the numbers. Saccharine as it sounds, they also judge themselves by how much they improve their employees' lives. And though they have their share of crises, their shining moments don't occur only at dramatic junctures. Being a great boss is a day-in, day-out task requiring more humility than bravado. "Today leadership is about serving other people, not commanding them," says Gubman. It's a concept that doesn't make for gripping tales and starry-eyed converts. But real heroes don't need those kinds of fairy tales. Turn the page to get a good look at a few of them.