(FORTUNE Small Business) - When four of my top employees told me in one six-week period that they were pregnant, I realized that their good news could spell disaster for my advertising agency, T3.

We had fewer than 25 employees at the time, and the soon-to-be moms were our head of publicity, a media buyer, the manager of print production, and a senior account executive. Each had client and supplier relationships that were vital to our business. Plus, conducting four executive searches at the same time would be costly.

So I decided to try something radical. A few months before they left for maternity leave, I invited the women to bring their babies to work when they returned. From my own experience as a mother of three, I know what a horrible feeling it is to leave your very small baby in the hands of someone else.

While juggling work, you're also distracted by concerns for your child: Is she safe? Who is watching her? I also knew that several of these women didn't need the paycheck; faced with leaving a child, they would probably quit. Infants sleep for much of the day, and our office space at the time, a historic home in Austin, had a large office we could equip with cribs and baby swings.

My lawyer hated the idea. He worried that we would get sued if a child got hurt at the office. And the women--all first-time moms--had a hard time imagining how they would manage breast-feeding and changing diapers while doing their jobs. But they agreed to give it a try, and it worked out even better than I expected.

The moms were so thrilled to be close to their babies that none ever dropped the ball when it came to work. When one had to run to a meeting, another babysat. We made sure employees who couldn't stand the sound of crying babies didn't sit near the "romper room."

As we grew to become the $60-million-a-year company that we are today--we now have 150 employees who fill six historic homes in Austin and an office in New York City--additional moms and even dads brought their babies to work.

We've set up formal policies about it. Parents can care for babies up to only 9 months old in the office. After the youngsters become more mobile, we arrange for them to be put on a priority list at a neighborhood day-care center.

The only unexpected hitch came when an employee told me the program wasn't fair. She never planned to have children, but her elderly dog was like a child to her. I decided to let her bring him in. Of course, once you let one dog in, it's "Who let the dogs out?"

In addition to more dogs, we also had a goat that someone's child was raising in 4-H. A flea outbreak soon followed, and with the office getting a bit chaotic, I made some rules. No more goats. Dogs have to be on flea and tick protection, and owners need to clean up after them both inside and outside.

So far, 33 babies and a small army of dogs have "grown up" at our company. I can't measure in hard numbers the impact of the goodwill that our family-friendly policies have had on productivity, but our local newspaper routinely names T3 as one of the best places to work in Austin.

And our clients--which include Dell (Research), J.C. Penney (Research), Marriott (Research), MSN (Research), and Nortel Networks (Research)--seem to love our unconventional atmosphere and commitment to family. Today the company I founded in 1989 is the largest privately held, woman-owned advertising agency in the country. I'm convinced we would never have reached this size if I hadn't found a creative way to keep our best employees--and their kids--happy.

Owner to Owner is written by entrepreneurs about lessons they have learned. Write to Gaddis at gaddis@t-3.com.

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