Whenever we give some responsibility to an employee, we also give them the Authority to make their own decisions, but how much of authority do we give how we make sure the employee reach out to us at the right time and not just in time before everything is a mess. Either employees reach out for help very late or too soon, this is when Waterline principle can help.
Waterline principle is simple and it says that the organization is a like a boat and if any damage happens to the boat above the waterline, the boat will still float and if any damage happens below the waterline the boat will sink. In a similar manner whenever authority is provided to people, the waterline must be clearly communicated. Employees can make their decisions using their authority basis the defined waterline.
I have heard that at Ritz-Carlton hotel, every employee can spend up to $2000 to solve customer problems and the employee need not get any approval from anybody and can make their own decision on how it can be used. But, if it involves more that the set waterline of $2,000, then the appropriate manager needs to be informed and involved.
The key is communicating the waterline clearly.
stickyideas 
It can sure make a mess of the company when the waterline and expectation is not defined. -something too many bosses fail to do..our health system is one!
Hi,
I thought health system was much more organized and waterline principle was well implemented as it involves decision on life. This is a eye opener.
Regards,
Mouli