One of the best tests of good management is seeing what happens when the manager's not around. Do employees stay focused and energized? Do they get their work done? Do they treat customers as if the business depends on them?

"Management isn't about doing all the work yourself or telling people everything they should do," says Amanda Lathroum, manager of software services, Netscape Communications Corp. "It's about getting your team to make decisions for themselves and to consider new angles."

Rewards for Risk-Taking To encourage employees to take risks, Richard Zimmerman, chairman and CEO of Hershey Foods of Hershey, Pa., created a special award: the Exalted Order of the Extended Neck. "We wanted to reward people who were willing to buck the system and practice a little entrepreneurship, who were willing to stand the heat for an idea they really believe in." He has given out numerous awards, such as one to a maintenance worker who devised a timesaving equipment-cleaning procedure.

At 3M in St. Paul, Minn., employees get to see their ideas come to fruition. Professional staff are encouraged to devote 15 percent of their time to developing new products, and those whose ideas are given the nod get to build their own businesses within the company. While employees who succeed are given promotions and pay raises, those who don't aren't penalized. A large portion of the company's sales now comes from products introduced through this program.

Rising to the Occasion Even companies that don't have formal incentive programs can motivate employees through good management. Take, for example, 800-CEO-READ in Milwaukee, Wis., where Kris Carmichael works as an order clerk. Kris received a book order one day from a pharmaceutical company several states away. Finding that the book was out of print, she called the author in Holland, purchased the book, and had it shipped directly to the client. Unbeknownst to Kris, the client was conducting a market test of sorts and had given the identical order to four other companies. The book she ordered arrived on the client's desk before anyone at the other organizations had even reported back that it was out of print. Thanks to Kris' responsiveness, the client now places all its orders through her company.

Jack Covert, president of 800-CEO-READ, was delighted with Kris' initiative, but it didn't surprise him. "Our employees are able to use their best judgment to act on their best intentions because they are encouraged and supported in doing so," Covert says. "[They] know that even if they make a mistake, no matter what, they always have the support of their manager."

1. Don't assume that your employees automatically know what's in the company's best interests--Teach them and involve them whenever you can.

2. Recognize people who take the initiative--Notice and thank employees when they make an extra effort or do something without being asked. Consider on-the-spot rewards for such times.

3. Don't focus on employees' mistakes--Look for the bigger picture: what they intended, what they've learned, and how they're growing. Criticism causes compliance and resentment and could discourage employees from trying something new and untested.