Is It Time to Throw Out Your Employee Handbook? A New Look at PTO & Policies

Business.com / Strategy / Last Modified: February 22, 2017

Say goodbye to time-tracking and PTO accrual, and hello to more productive and loyal employees. The workplace of the future is here.

One of my best employees was raised in another country, and his parents unexpectedly had an opportunity to visit him on short-notice. But he had already used his accrued vacation time, and wouldn’t earn his next week off until the following month.

“Can I take a day off and count it against my next earned week of vacation? The employee handbook isn’t clear.”

He was right; the handbook didn’t address this situation. So I just told him to take whatever time he wanted while his family was in town. He was a star performer in a highly competitive field, and I was lucky to have him on my team. Enforcing our written policy precisely wasn’t going to make him a happier or more productive employee.

  • But what if this came up again?
  • Was it time to add some text to the employee handbook to address ‘approval procedure for advance use of earned paid-time-off in exceptional circumstances’?
  • But wasn’t the handbook already too long?
  • Wasn’t it already too detailed and too prescriptive and just as easily used against the company as to protect the company?
  • What was the point?

I work hard and am very productive. I like to hire and work with similar people. I hire people to create our products, serve our customers, and represent our company. Why wasn’t I trusting them to manage themselves and their work practices too?

So we threw out our employee handbook.

We abolished time-tracking, accruals for paid-time-off, and every rule other than ‘No smoking.’ We replaced our long, detailed handbook with a set of values we aspire to, principles that guide our behavior, and stories we tell about how we have lived out our values in the past.

We aren’t the only company to do this. Netflix provided a useful example with their Freedom & Responsibility slides, and Nordstrom famously tells employees to “Use good judgment in all situations.” Every company needs something different, but along the way, we’ve learned a few things that may help your throw out your rule-filled handbook, too.

Related Article: 9 HR Basics for Any Small Business

1. Everyone Needs to Get the Big Picture Goal

You need to start with why and ensure everyone understands why the organization exists and what you are trying to accomplish.

2. You Need to Be Clear About the Value Exchange That Underlies Employment

At our company, this is the deal: You provide time, effort and creativity, and the company provides compensation in the form of pay and benefits. We intentionally choose to have a low-tension relationship: we both presume goodwill and expect that the other party will live up to their part of the deal.

3. Some Rules Are Required by Law

The Family Medical Leave Act, wage and break and overtime laws, etc. create a baseline set of rules you need to follow and publish. Consult an attorney to learn what rules you must keep and which you can abandon. You may need certain policies for non-exempt (typically hourly) employees which aren’t required for exempt employees.

4. You Must Communicate Relentlessly

There is a power imbalance between a company and an individual employee, and it takes constant communication to remind people that the company still cares about and will live up to its values.

Without continual reinforcement people can develop fear that the deal is off, or that their autonomous behavior is putting them in a risky position. You need to keep communicating your values and you need to give people encouragement when they act independently in keeping with your values.

Related Article: What Is the Number One Trait That Makes For Employee Satisfaction?

5. There Is a Difference Between a Rule and a Guideline

We still have guidelines on practical issues like scheduling phone coverage, borrowing company equipment, spending and expense reports.

It’s easy to let these things turn into rules that employees enforce against each other, so we continually need to describe them as guidelines and look for exceptions that we can hold up as examples of how the guidelines are subordinate to our values, instead of being rules that constrain our actions.

6. Some People Won’t Fit

Not everyone is cut out for autonomy and freedom in the workplace. Some people won’t be productive without careful supervision and detailed regulations. Some people have deep-seated trust issues an employer can’t overcome. We try hard to hire people who will thrive in our low-rules, high-autonomy environment.

And, in case some people make it onboard before we discover it’s a bad fit, we took an idea from Zappos and offer new hires 10 percent of their salary to quit at 90 days if they realize our company isn’t right for them.

7. Stories Are Essential

The best way to demonstrate and teach your company’s values is to tell stories about them. People remember stories and can take lessons from them in a way they never will from a PowerPoint presentation. When we had an employee make a mistake that cost us $40,000 we had an opportunity to demonstrate our stated principle that “Mistakes are learning experiences.”

Not only did we live up to our promise, we celebrated the event (anonymously!) by writing a blog post and sharing it with our customers. Now this story is part of our company folklore, and a source of reassurance and confidence to the next employee who makes a mistake.

Throwing out your detailed employee handbook is a powerful statement about trust and responsibility. It takes courage and it isn’t for everyone, but if you want to work with people who share your values and who you can trust to work hard and make good decisions, it is a powerful statement that will help you recruit and retain great people.

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