When the COVID-19 pandemic scattered workers and ushered in an era of remote work, even the most centralized companies were compelled to trust people to make their own decisions and get their jobs done on their own time and in their own way. Lucky for them, it turns out that increased employee empowerment actually improves job performance.
What is employee empowerment?
Employee empowerment is the practice of entrusting your employees with as much flexibility and autonomy as possible and letting them define how they can best get their work done. A famed Stanford study once found that home workers got 13% more work done than comparable office workers, and more recent research suggests that the US economy will be 5% more productive in the coming years as workers work remotely at least part of the time.
“As we’ve moved to virtual work, we haven’t just coped, we’ve actually thrived,” says Walmart CTO Suresh Kumar. “We are more focused on the things that have the greatest impact for our customers, associates and the business.”
In a hybrid working environment leaders are looking to blend the independence of remote work with the collaboration that comes from a return to office. And the evidence is convincing: empowered employees perform even better. “For most workers, some activities during a typical day lend themselves to remote work, while the rest of their tasks require their on-site physical presence,” reads this report from McKinsey.
But yet, even with the multitude of benefits, some aspects of the hybrid working model haven’t caught up with the times, leaving many decision makers frustrated and searching for solutions.
Challenge: outdated spending policies
Cultural and technological barriers to autonomy have been shattered, but one area that is still stuck in the old world is employee spending, impeding true employee empowerment. Simply put, until now we had neither the flexible expense policies nor the tools to facilitate them. Done right, empowering employees to spend what they need bolsters trust and fosters loyalty.
Expense policies were once the domain of rigid, even sprawling, finance departments. But as modern streamlined companies look to stay competitive, they can struggle to balance the desire to empower employees with the imperative of controlling spend. The changing nature of work has only exacerbated this dilemma. As one study found, expense policy violations skyrocketed 292% amid the work-from-home culture accelerated by the COVID-19 pandemic.
"Done right, empowering employees to spend what they need bolsters trust and breeds loyalty"
But smartphones, email, Slack and SMS offer new opportunities for rebalancing the equation. Just as those channels make it easier than ever before to connect with coworkers, management and clients, a centralized expense platform like Ramp uses these same channels to simplify expense reporting.
Even now, many businesses remain stuck in the past. And frankly, it’s starting to look a little ridiculous.
Employees front costs with their personal credit cards, before submitting lengthy expense reports to seek reimbursement. In a case where a business traveller pays for big-ticket purchases like flights, accommodation, food, and supplies, spending can run into the thousands of dollars and seriously impact household cash flow. Other companies persist in the opposite approach, issuing high limit corporate cards and then chasing employees to make them repay mistakes or unapproved expenses.
Rather than create trust, arrangements like this build resentment, and deputize finance teams as both police departments and collection agencies. Such adversarial relationships create ill will and mistrust between departments that are supposed to be working together. Perhaps most consequential, traditional arrangements like these cut line of business (LOB) leaders out of the expense process altogether. That means they lack contemporaneous knowledge of how their team members are spending departmental or project budgets even as employees are frustrated with filing reports.
As our Creative Director, Diego Zaks, puts it, “At the end of the day what you need is the resources to do your job and achieve your objectives."
Empower employees to make spending decisions
Leaders that empower employees are particularly effective at encouraging creativity and influencing behavior. They are more likely to be trusted by their direct reports. Giving employees the means to spend what they need, and empowering them to do so, strengthens these same bonds. Employees that feel psychologically empowered report increased job satisfaction, organizational commitment and demonstrate improved performance. They are less stressed, and the company improves retention.
Give every employee their own corporate card
This practice can liberate creativity while codifying spending policies, workflow, and financial oversight. Decisions on spending priorities devolve to individual line managers, boosting efficiency and breeding good will. Managers are closer to the work and better positioned to know exactly the justification for a given expense. They set card limits based on prior experience, and easily scale them up or down using platforms like Ramp.
Managers keep an eye on purchases and budgets in real-time. They point the way forward, and immediately review and approve costs falling outside the normal day-to-day spend. Teams feel the company trusts them to make spending decisions.
Minimize admin overhead
Leaders who empower their teams delegate authority to employees, ask for their input, and encourage autonomous decision-making processes. Freed of the administrative burden of expense reports and feelings of micromanagement, employees are able to do their jobs better. With this degree of autonomy, they show increased faith in upper management and their own LOB leader. More invested in the company, they put forth more effort and make a more positive impact.
When all spending is pre-approved, out-of-policy spending is nearly impossible. Whereas traditional corporate cards like American Express offer little by way of advanced oversight, this new class of cards, and the affiliated methods for tracking expenses, offer granular controls that prevent problems before they start. Not only does this save the company money, but it cuts out unnecessary admin work.
Everyone can dedicate their time and skills to doing what they do best. Creatives spend more time creating, and salespeople focus on selling. And isn’t that the whole point?
Our finance controller Edwine Alphonse says, “There is no conflict, there is no tension. You can see what they are spending on. Employees don’t have to use their personal card anymore. They are empowered.”
Full employee empowerment
Just as an earlier era of digital tools decentralized communication, the combination of new platforms and revised policies look poised to revolutionize expenses. When employees define the tools they need to get their job done, increased efficiency, good vibrations and improved group dynamics follow. Teams that feel empowered perform better. New expense platforms like Ramp meet employees where they already are. In a changed work environment, going back to the office looks a lot like going back to the future.
Download our e-book to learn more strategies for empowering your employees to spend what they need while keeping costs under control: