(FORTUNE Magazine) – If lately you've been thinking that work stinks--say, you're up for a lateral "promotion" (again!), your stock options have crashed, and you're generally feeling like a mercenary wretch--this story may be just the thing to rouse you. Why? Because right now you can bet there's a happy, validated employee at JM Family Enterprises in Deerfield Beach, Fla., who is turning these very pages with the delicacy of someone who has just had a manicure. At the office, that is, and on company time. As her nails were being filed and glossed, gratis, she probably took a moment to daydream about a Bahamian cruise aboard the company yacht. Or maybe she pondered what to do with the 15% profit-sharing bonus that JM, a large car distributorship, will soon park in her retirement account.

Call it the lush life, and you don't have to call Bill Gates boss to achieve it. FORTUNE, with the Great Place to Work Institute and Hewitt Associates, culled 206 of more than 1,000 large and midsized firms, and polled some 27,000 of their employees, to identify the very best places to work and how they got that way. They definitely win points by doling out stock options like raffle tickets, but it takes a lot more than a rising share price to place a company among the elite. "Compensation is still certainly key," says Milton Moskowitz, a compiler of the list. "But the list also reflects the level of trust, pride, and camaraderie that employees share with management and their peers, as well as what practices the company has in place to support those things." The results of our research appear across the following 12 pages (for a detailed methodology, see box, "How the 100 Best Were Chosen").

Since our inaugural ranking, published last January, the corporate talent drought has only grown more severe. With unemployment hovering near 30-year lows, companies are doing everything they can to attract and keep good workers at all levels. One popular technique is to offer the chance of a rich payoff through stock options; 28 companies on the list award them to every category of employee, from president to parking attendant. But another approach--extensive training and development--is emerging as important because it offers valuable benefits to both employer and worker.

So the 100 Best are making major investments in employee education at multimillion-dollar facilities and through generous tuition-reimbursement programs. On average, the 100 Best lavished 43 hours of training on each employee in 1998--that's almost a full day more than last year. Some companies have begun to advertise these learning labs in their recruitment materials. At brokerage firm Edward Jones (No. 11), new brokers are immersed in 17 weeks of classes and study sessions at a cost of $50,000 to $70,000 per head. "We consider training an investment rather than an expense," explains Dan Timm, a principal at the St. Louis company. "If we don't prepare our people well, we have not served the firm." At many companies, the best employees are clamoring for education and training because they realize it's a prerequisite to promotion--at their present company or some other.

But there's a problem: Education is a sensible investment for employers only if they can hold on to the minds they have expensively trained. A partial but obvious remedy is a policy, or at least a strong bias, against layoffs. While conventional wisdom holds that job security is a thing of the past, it's a recurring perk among the 100 Best Companies. More than a third of them are whispering that employment is for keeps. Three--Southwest Airlines (No. 4), Harley-Davidson (No. 77), and FedEx (No. 79)--have adopted official no-layoff policies. "These companies aren't being charitable," says Fred Reichheld, a consultant at Bain & Co. and author of The Loyalty Effect. "Their employees are much more likely to dig in and commit, even in tough times." Such promises therefore can serve as a retention tool.

On the principle that it takes many attractions to hold the best, dozens of companies on the list are also generously distributing so-called soft benefits--comforts promoting the elusive work/life balance that is every bit as important to hard-working employees as the nature of the job itself, according to human resources surveys. Hence the proliferation of such apparently frivolous perks as on-site haircuts and shoe repair, concierge services, and free breakfasts. In reality, they allow time formerly squandered on errands and chores to be devoted to family--and work. And having an inexpensive but Cadillac-quality child-care facility like SAS Institute's means the inevitable choice between the two doesn't have to be quite so painful or stark.

Benefits like these give corporations a human face, something the survey's respondents often said they cherish. They also allow prospective employees to tell one corporate face from another. When companies set out to recruit today's stars, they're not only offering a job and some knockout benefits; they're also selling an identity. "There are plenty of very good places to work," says Ray Baumruk, a consultant with Hewitt Associates. "But the best organizations are taking a differentiation tack, much as a brand would do in a consumer market. The message has to be, 'We stand for something that others don't. We're special. We're relevant.' " Adds George Bailey, a workplace consultant in Silicon Valley: "These people don't just want to be plugged into some large machine. They want the chance to be innovative in their positions and to work in environments that can totally captivate. Companies can't fake that."

Amid all this differentiation, standards are rising across the board. "Frankly, our job in picking the 100 Best was a lot tougher this year," says Robert Levering, co-founder of the Great Place to Work Institute. "So many more companies are bending over backward at least to appear employee-friendly." In fact, 37 of last year's stars fell off the list--not, for the most part, because their scores went down, but because newcomers surpassed them. In order to slide into the No. 100 spot this year, L.L. Bean had to score 20 points higher than its counterpart last year. One veteran--Alagasco, a Birmingham utility--was able not only to hang on but also to move from No. 93 to No. 72 by adding several family-friendly benefits, such as $5,000 in aid to adoptive parents. However groovy your company may be today, keeping up with the best requires constant improvement.

Companies don't appear to be either handicapped or helped by their size, sector, or celebrity. While many of the new arrivals are in high-tech and finance--mega-growth fields dueling for top talent--underdog industries, including two airlines, an oil company, and a hospital, are also better represented this time around. Speaking of long shots, a law firm, Fenwick & West (No. 39), appears on the 100 in lieu of last year's Morrison & Foerster, thanks to a raft of family-friendly benefits. And have you ever heard of Scitor, a systems-engineering consulting firm? The Sunnyvale, Calif., company came from nowhere to command the No. 5 spot--in part because it tells its managers their overriding mission is "not to make money" but "to capitalize on the creativity of the individual."

In dozens of interviews, people articulated, often with humor, what working for the best means to them. "Being at a good company is like having a good wife," says Floyd Williams, a senior production manager at sports gear maker K2 (No. 52), who gushes about the opportunity to work on as many as 25 projects at a time. "When you get used to a certain level of freedom and excitement, you don't want to leave." In fact, none of Williams' three marriages has lasted as long as his 28-year career with the company. "One wife told me it was either K2 or me. And I said, 'Well, I'm not leaving K2!'"

Susie Burkhart, 30, has a few decades of professional life ahead of her, yet she feels the same way. This product manager for J.M. Smucker (No. 22) talks about being hounded by headhunters with calls she doesn't care to return. And why should she? In her seven years with the firm she's racked up a company-paid MBA and three promotions. And, she swears, she's never bored. "I'm growing in this position," she says. "The fact that people come to me for answers and decisions and I don't have to go to my superior is very empowering."

While top management at the 100 Best Companies are doing more delegating than ever, they do see the value in schmoozing with the rank and file. Lawrence Bossidy, AlliedSignal's chairman, gets close to his people each month by sending a two-page communique about issues such as medical insurance and diversity. These "Larry letters" have a 99% readership rate. And to soak up ideas from the field, he holds breakfast meetings several times a month with employees selected at random by computer. At Ingram Micro (No. 68), Chairman Jerre Stead maintains his own 24-hour 800-number phone line--yes, he really answers it--to take calls from employees. "If we are doing something right, I love to hear about it," says Stead, who has also supplied his home number to all 13,000 IMers. "If there's something we should be doing differently, I want to know that too."

To build morale, communication has to be two-way. At the 100 Best Companies, it's frequently positive. "Within these companies there is a culture of celebration," says Moskowitz. For instance, Great Plains (No. 30) holds an annual Pioneer Day to tout the accomplishments of its employees. The pat-on-the-back culture is so entrenched at Synovus Financial that the bricks of a river walk at the company's new $100 million facility will feature the names of all employees of subsidiary Total System Services. Haven't heard of Synovus, the Columbus, Ga., firm that displaced Southwest as the best of the best? That doesn't faze the folks at the bank holding and credit-card-processing company, where the relationship between employee and employer is so close people refer to its "culture of the heart." That might seem a bit squishy, except that Synovus doesn't skimp on such tangibles as topnotch training, which attracts Gen Xers from all over the country, and primo benefits such as the 20 hours that employees are paid to spend in class with their kids or grandkids. What employees talk about most, though, is how Synovus promotes a sense of community both inside and outside the office.

Becky Rumer, a group vice president, recalls being gently approached to join the firm by a member of her church. When she signed on, she didn't expect vice presidents to lope up to her and say, "Welcome to the family!" But they did. "The message here is, 'We're not going to abandon you,'" says Rumer. "Yes, we recognize that we probably have cliques and pockets of old-boy networks, but our tolerance for that is minimal. We're going to find your strengths and allow you to succeed."

It all sounds so...utopian. But investors might like to know whether a corporate culture of mutual respect also provides a competitive advantage. Last year we determined that the publicly traded companies on the list did in fact deliver higher average annual returns to shareholders than the companies making up the Russell 3000, the index that best mirrors our list. This year's group demonstrates much the same: The stock of the 55 companies on our list that have been publicly traded for at least five years had an average annual appreciation of 25% in that period, compared with a gain by the Russell index of 19%. Firms that have been public for a decade maintained about the same margin of outperformance. "Companies that align their reward strategy to their business strategy have superior results," says Ira Kay, a director at Watson Wyatt.

It's an inexact science, to be sure. But employers are so interested in the link between rewards and performance that the consulting firm is designing a "human capital index" to tease out how much of a company's returns derive from its ability to attract, engage, and reward the right employees. Don't be surprised, then, when companies such as JM Family Enterprises start citing things like EPM: earnings per manicure.

REPORTER ASSOCIATES Mark Borden, Tyler Maroney, Natasha Tarpley