Sometimes you need to throw the rulebook out the window. That's what many of the top firms are doing to get the most out of their workers in an increasingly knowledge based economy. Traditional ideas like Henry Ford's five-day 40-hour work week are falling by the wayside, and being replaced by more flexible work arrangements and a results-oriented approach.


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  • Strategy: Paying Higher Salaries than You Need To
    If properly managed, paying higher salaries can attract the best talent and set an expectation that employees will deliver top-notch results.

    The old management logic held that achieving higher profits meant paying as little as possible for qualified labor. For today's firms, underpaying can be counterproductive. Underpaying often means gradually losing your best employees, who take with them their valuable skills and organizational memory.

    Netflix (Nasdaq: NFLX) intentionally pays its employees at the top of the market salary range for their positions. The company is just as quick to point out, however, that merely adequate performance earns only a generous severance package. In other words, expectations are high, and poor employees are quickly terminated.

    Does this approach work? If stock price performance is any indicator, it does. Netflix is up over 600% over the last five years, versus near 0% growth in the market as a whole. (Looking for a job? Check out the options. Read 6 Sectors That Are Creating Jobs.)

  • Strategy: Stop Tracking Hours Worked
    In his essay, "On the Folly of Rewarding A, While Hoping for B," Steven Kerr points out that, "numerous examples exist of reward systems that are fouled up in that the types of behavior rewarded are those which the rewarder is trying to discourage, while the behavior desired is not being rewarded at all."

    Organizations want their employees to achieve certain goals. However, it is often the case that instead of focusing purely on results, companies either require or reward "face time," that is, time spent in the office. In particular, employees often jockey for time in front of the boss.

    Nowadays, if employees are accomplishing their work well, there is often no reason to require employees to be chained to their cubicles from 9 to 5. Many organizations have begun experimenting with unlimited vacation time, for instance. Others allow flexible working arrangements where workers can telecommute one or more days per week. Although nothing will replace face to face meetings in certain situations, it is often possible for employees to get their work done effectively and to realize greater work-life balance.

    Employers must be careful to avoid overburdening employees, however. The Boston Globe reports that, "Because of technology's reach, some activists rightly worry that 'unlimited vacation' is nothing more than corporate-speak for 'no vacation at all.'" The lack of a defined work day or set vacation policy should not be used as an opportunity to expand workloads. Managers should be aware that a flexible work policy can quickly backfire when used improperly, leading to greater employee burn out.

  • Strategy: Give Employees Free Reign
    In knowledge-based jobs, workers are often highly trained and difficult to supervise. From a management point of view, it can be difficult to have enough of a detailed knowledge of each person's work in order to most effectively direct their efforts.

    Google's (Nasdaq: GOOG) solution is to give employees 20% of their time to work on any idea which will help the company. The most visible results of this policy include Gmail and Google News. Of course, many other projects were less successful, but there are often lessons to be learned from failures too.

    A commonly reported downside to this approach is that employees may let their regular tasks slip in favor of more interesting side projects. Reportedly, Google has gradually begun to be more selective with the types of 20% project ideas that are approved, and managers are more careful to ensure that employees stay focused on their core jobs. (For more info on finding that perfect job, read 4 New Job-Search Trends.)

The Bottom Line
As the economy shifts more toward knowledge work, it is necessary for management strategies to evolve as well. The old management strategies that worked in the past may not work in the future. As a manager, you should clearly define the key goals and guide progress, but you must also give workers the freedom to innovate and allow them to do their best work.

Still feeling uninformed? Check out last week's Water Cooler Finance to see what's been happening in financial news.

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