Do you know these people who cannot seem to stop working? Even after a few drinks, they still talk happily about whatever they are working on, gathering new ideas and trying to find answers? Some people think this is sad, as for some reason people should be sad about their jobs or watching endless seasons of TV shows should be more fulfilling than work. Other people on the hand are happy for them, or maybe even a bit envious. And as an employer, you should be curious, because these people even do some significant work in their free time. And depending on the line of work, this might be critical to their and hence your own success.
For instance, according to Paul Graham, a programmer needs to be able to hold a program in one's head. The same is certainly true for mathematicians and apparently also for other types of creative workers, since, paraphrasing John Cleese, one has to rest one's head against the problem, in a friendly and inviting way. Here is the problem: You absolutely cannot ever force your employee to do this. This is a bit like teaching, you can give them all the information, but you can not give them understanding. However, there are some things you can do to facilitate this, or at least stop doing some things prohibiting this process:
I have already written about reclaiming one's attention at work, so I just refer you there. If your employees are in constant firefighting mode or are being micromanaged like a squad of space marines in Korea, you can not expect that any significant problem will be solved.
Do not make them hate you
Micromanaging can be bad in one way, as it forces your employee into a schedule unfit for her. But much worse is the psychological effect: You reduce the feeling of control she has about her own schedule and work and probably make her hate you, rightfully so. And this is the real problem, as an employee holding a grudge against you is not holding the problem in his head. Even if your worker is so disciplined to still perform at least to some degree on the job, it is highly unlikely that free time will be spent in a productive way.
You know these annoying people who cannot stop _complaining_ about work? You do not want to be one of these and much less, you do not want to produce one of these. Word spreads around faster than one thinks and you are not only immediately hurting performance, but also scaring off talent. Of course there are more things you can do wrong than just micromanaging. And you will make mistakes. Better assume responsibility and apologize appropriately, then, least your reputation be tarnished.
Assume responsibility beyond the workplace
Nope, this is not going to be for bonus points. This is essential. Your employees still have a life and it will worry them. If you can help them here, it will not only make them like you better, but also allow them to perform on a higher level. And almost all worries will be some combination of time, money and security, things which you have control over. Time to spent with family, money to ensure a living, knowing to still have an income in a few years. While you cannot guarantee that your company is still in business in a few years, you can be sensible about layoffs and employee turnover in general. Adequate pay and flexibility with working hours are also non-optional. Deficits in these areas will make your employees look for other opportunities, probably looking for job offers while being on your payroll.
One common theme here is that of control: While you are large and in charge, it is important that your employees feel being in control of their own life and situation. Because only then, there is the possibility that big and hard problems can occupy their mind, in their free time, without you paying an additional dime.