By Polly LaBarre

While it’s fair to say that most of the world has woken up to the gravity of the contraction of our natural and financial resources, it’s all-too-often the exception when one of our leaders stands up against the squandering of a third class of resources—the human kind. Which is why it is so refreshing when you come across leaders with a powerful point of view and clever designs for unleashing and maximizing the innate imagination, energy, and passion of their people.

That should be old news by now. We’ve all scoured the “best places to work” lists year after year, read the business bestsellers, and poured over the case studies of worldclass cultures. We all get the iron-clad connection between our design for work and our designs on the marketplace. Yet, it’s still a thrill to hear about organizations that are as fully human as the human beings that populate them—from leaders who are not just intent on driving performance but driven to inspire people.

Why? I suspect it’s because so many of us have done time inside the kind of organization (from kindergarten to Fortune 500 companies) designed to dull and dampen the gifts the world needs most: our wildest imagination, eclectic passions, tingly intuition, and organic adaptability. There’s no denying those industrial-era institutions are responsible for enormous progress, it’s just that they tend to stand in the way of the kind of progress we urgently need to make right now.

When it comes to cultivating both humanity and high performance, the mantra should be: freedom is a bigger game than power. The more you free people from top-down control and bureaucratic barriers, the more of that person shows up to work every day. But that doesn’t mean chaos rules. Again and again, the leaders I spend time with emphasize replacing rules with values. When everybody knows what the organization stands for—what it will never sacrifice for expediency or in the face of prevailing winds—decision-making at all levels tends to line up and people’s productive and imaginative energy tends to show up.

Nowhere is that lesson on more striking display than in the story of Middelfart Sparekasse, a 150-year-old savings bank located on an island in Jutland, Denmark. Eighteen years ago, the bank’s managing director Hans Erik Bronserud couldn’t shake a nagging question: “Is there another way to manage a company like ours?” The bank was small but successful, and yet, Bronserud said, “I’d seen people come to work every day and thought, ‘You must have so much more inside you.’ I wanted to see people grow.”

With that conviction in mind, Bronserud staged a kind of coup in his own company. In February 1991, he called the entire staff to a meeting to talk about the business. At one point, he turned off the lights and stopped talking for several minutes (which, in Denmark in February, makes for a very dramatic moment). When he turned the lights back on, it was to introduce a completely new design for work to his colleagues.

“We stopped every form of control,” he says. No longer would employees have to apply to bosses for vacation days, punch in at a certain time, or even consult with a manager when adjusting fees or considering an unorthodox application from a customer. As Bronserud puts it, “If you get the wrong leg out of bed in the morning, it’s better to take a long walk along the sea shore rather than boring your colleagues or your customer.” In short, the bank’s people were given complete freedom (and the responsibility) to manage their own work, their own career path, and their interactions with customers.

The reaction across the board was “you’re crazy,” says Bronserud. “Banking is too serious to work this way. They thought we would run the bank over the edge.” In fact, the opposite has happened. Middelfart Sparekasse has grown from 38 people and one branch in 1991 to 170 people in 8 branches around the country. The bank has expanded into the real estate business (30 people and 6 branches), the insurance business (35 people), and a collection of small business (most launched by employees with the support of the company). It’s reputation for employee engagement, customer service, and community involvement is unparalleled (and relentlessly tracked and improved upon via an annual “Social Ethical Accounting” statement which delves into every aspect of the bank’s performance against the expectations of a range of stakeholders). Meanwhile, in the midst of the financial sector’s epic meltdown, Middelfart has avoided any liquidity issues or bad loans. The business is thriving, says Bronserud “because when our people see unethical or unsustainable business practices, they avoid them. So we haven’t had the problems that many of our colleagues in banking have had.”

What’s behind the breakout performance of this once-sleepy savings bank in the middle of Denmark? Bronserud argues it’s Middelfart’s “100% values-managed” culture. Bronserud replaced the bank’s extensive rules and controls with a simple set of values, which he determined ought to be short, in Danish, and memorable. They translate roughly into a simple but powerful formula for success: treat customers in a way that inspires them to come back and talk about the bank positively. Treat employees in a way that they look forward to coming to work every day and are proud to say where they work. Earn enough money to keep the first two promises. Beyond that, “individuals make all the decisions and once made, nobody can change them.”

The transition to the new mode of working wasn’t entirely smooth. Bronserud encountered serious resistance from leaders (“When all our employees are self-managed, what’s the job of the boss?”) and regulators. “They come every 3 years and we tell them we don’t have any rules here,” says Bronserud. “We have a manual somewhere in a cupboard if they want to see it. They don’t like that very much. But the last audit, they finished 2 days early. Everything was in order because the employees are responsible. That’s what happens when you don’t have anybody looking over your shoulder.”

The employees were another story. After offering a series of tests and audits to employees, Bronserud says, “we found our employees had so much inside them. We asked, ‘Why don’t you use that at work?’ And they said, ‘Nobody ever asked me.’” The journey since that initial discovery has been one dedicated to unearthing and leveraging the passions, talents, and insights of every single person inside the organization. Middelfart offers extensive training in self-management (from transforming bosses into coaches to NLP courses for all) and continuous opportunities to stretch. “When I see a person with certain skills, I encourage them to start a business for themselves,” says Bronserud. Most important, the bank gets out of its own way to offer each person room to grow. Bronserud’s advice is simple and striking: “You have to remove rules because you’re killing your employees—and you’re killing the business.”

Check out Polly’s video interview with Hans Erik Bronserud.

Innovation, Strategy, Customers, Culture — these are the four key drivers of business, and few thinkers have explored them as thoroughly as Polly LaBarre, first as one of the key writers and editors at Fast Company magazine, later as the co-author of the bestselling book Mavericks at Work, and now as the Innovation Correspondent for CNN.