In a bureaucratic enterprise, company policy can kill innovation and prevent quick adaptation and actions. On the other hand, absence of widely understood policies can lead to a chaotic scenario in organizations with more than a few decision makers. Policy making has to strive not only to provide clear guidelines for decision-making, but also to lead the organization towards its goals.
What are Business Policies?
The term "policy" means a general practice established within an organization for dealing with an issue or situation. Such general practices can be written down in policy manuals or come to be established through unwritten observance. In fact, unwritten but consistent practices can often override policies specified in written policy statements.
Policies start at the very top level. Founders of businesses typically have specific ideas not only on what they want to achieve, but also on how these should, or can, be achieved. The question of what needs to be achieved is answered in terms of goals and objectives. The question of "how" is answered partly in the form of relevant policies.
One thing to notice is that the "how" question has two distinct dimensions: a "should" and a "can" dimension. The former incorporates the normative beliefs of the policy maker on how people should go about achieving specific results. The latter tends to reflect beliefs of how in the practical world one can achieve those results.
Vision statements tend to incorporate values that the top decision makers of the company consider important. These values can come from a belief that by following certain norms the company can enhance its potential for success. Or it can come from a deeply held belief that things should be done in a certain way, irrespective of practical (particularly short-term practical) considerations.
Mission statements tend to be more strategic documents focusing on business results to be achieved and the broad strategies to be adopted for achieving them.
In everyday use, business policies signify guidelines for lower level managers. If the guidelines are specific and clearly articulated, it can help these managers make quick decisions in different situations without having to consult their seniors every time. And if clear and consistent policies have been established across different functions and departments, the organization as a whole can operate more speedily.
Policy Statement Templates
How do you develop written policies?
A written policy statement should answer the following questions.
- What is the policy about? For example, a policy might deal with procurement of supplies with an order size of more than $10,000 in value.
- What is the purpose of the policy? The objective might be to ensure that higher value purchases are made in a manner that ensures economic procurement from quality suppliers.
- Who is covered by the policy? All persons who make procurement decisions for supplies valued at above $10,000 per order might be covered by the policy. Or the policy might allow a specified level of manager to authorize such purchases, up to another ceiling limit, overriding the usual procedure (which also becomes part of the policy).
- What will be the consequence of non-compliance with the policy? This can be spelt out both in terms of the organizational perspective, e.g. uncontrolled costs, and decision-maker perspective, e.g. warning on first instance, and removal of decision-making power if repeated.
The Employee Handbook Page of Small Business Administration (SBA) of USA provides a good example with templates and guidelines on how to spell out policies.
The Policy-Making Exercise
Any area where things can be done in different ways, and the way they are done can affect either business results or the core values of the organization, is a potential area for policy making. Areas such as the following are popular areas for clear policies:
- Human Resources: Selection, training, development, evaluation, and other employee relations issues
- Procurement: Purchases of equipment, materials, and supplies are typically covered by clearly spelt out policies, with different policies for different value purchases
- Customer Relations: Being a critical contributor to the success of the business, customers need to be handled in a manner that brings more business and clear policy guidelines can help customer-facing personnel to manage their interactions appropriately
- Public Relations: Clear policies can help concerned personnel communicate with the public and government in a manner that enhances its public image
The above is a very limited look at the areas for policy making. There are numerous other areas under technology, financing, accounting, and other functions where clear policies need to be established.
Policy making will involve identifying the issues involved in each specific area and how these issues should be handled. If policies are developed in the format mentioned above, clearly spelling out their scope, purpose, applicability, and consequences of non-compliance, meaningful and beneficial results can be expected.
The DIY Committee has a page on How to Develop Policies and Procedures.
Policies also need to be reviewed and adapted to changing conditions on a regular basis. Otherwise, they can easily become bureaucratic shackles that prevent achievement of desired business results.
Implementation of Policies
Policies are typically implemented through procedures, which spell out the nature and sequence of activities to be followed. It is procedures that typically give a bureaucratic flavor to organizational functioning. How an organization manages to achieve smooth operations through policies and procedures and at the same time encourage innovation and adaptation to changing conditions can determine how successful it is.
Kenneth B. Johnston has written a book on Busting Bureaucracy that you might find useful.
Business policies spell out everything from the founder's business vision to clear and specific guidelines for lower level managers for making day-to-day decisions. Policies are typically implemented through established procedures that list the sequence of activities to be followed. Policies and procedures can make for smooth operations of organizations, and can also lead to bureaucratization with outdated and irrelevant policies that hinder rather than help operations. To avoid this fate, they need to be reviewed and revised to adapt to changing environments on a regular basis.
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