Empowering Employees: The $200 Rule

Posted by Webmaster - June 7, 2012 - Blog - No Comments

Managers and business owners often spend far too much time micro-managing employees. Not only does this detract from time you could spend on other things, but it also causes employees to feel like they’re not being trusted.

Take the example of a coffee shop. If a barista spills coffee on a customer’s shirt, does the barista have the right to give a free cup of coffee? Or do they have to ask permission first? What if the barista wanted to pay for the customer’s dry cleaning out of the company’s pocket? Do they need to ask first?

Companies that allow employees to use their common sense often find that they have higher customer satisfaction, happier employees and surprisingly lower costs.

==> The $200 Rule

The $200 rule works like this. Instead of micro-managing what decisions your employees can and can’t make, you simply give them the ability to make the decision they think is best.

You put a cap on the amount of money the decision can cost. $200 is a common amount. The exact number you pick depends on your company and your industry.

Whenever an employee spends company money outside normal day to day operations, they simply drop a note off in a box or send an email to a specific email address. You can later review these spendings to make sure the money was warranted.

Implementing a rule like this will free up a lot of your time. The truth is, most people know what the right thing to do is most of the time. Instead of having to ask for permission, employees are usually better off just making the call.

==> The Owner Mentality

The $200 rule ties in nicely with a similar concept, the idea of ownership. Every member of your staff should think and act as if they were an owner of your company.

All your business processes should be oriented towards helping cultivate this sense of ownership.

One way you can do this is to always make sure your employees are both trusted and challenged. Trust your employees to make decision and regularly check in with them to make sure they’re learning.

Ask your employees: “What do you want to be able to do in 6 months that you can’t do today?” Structure your employees’ responsibilities and projects to help them gain experience in the areas they want to grow in.

Give your employees challenges and let them figure out solutions on their own. Even if your employees are very junior in your company, this mentality and the $200 rule can still go a long way. You’ll inspire loyalty and get more commitment out of your people.

Best of all, neither of these approaches really cost you any money. To try them out, just do a one or two month experiment to see what kind of difference they make.