Business Policy: Meaning, Nature and Importance

22/05/2020 2 By indiafreenotes

Every business has a way in which it operates and does things. Businesses and company leaders without clear business policies often have subordinates making decisions that don’t mesh with what leadership really wants to see. Clear, concise and written business policy plans help any business maintain consistency in operations and relieve leadership from the need to micromanage. When business policies are created and used, there is a standardization of how the company delivers products or services to consumers.

Business Policy

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions.

Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Nature of Business Policy

A business policy must be specific, clear, uniform, appropriate, simple, inclusive and stable.

  • Specific: If a policy is not specific, implementation becomes inconsistent and unreliable. For example, “Employees may not park in the guest parking lot.”
  • Clear: A business policy has no ambiguity. It is written in easy-to-understand language. For example, “Immediate release of employment is the result of company drivers having two points on their driving record.”
  • Uniform: The policy should be a standard that everyone can follow from the top management to the plant workers. For example, “Anyone entering the construction site must have a protective hat, shoes and glasses on at all times.”
  • Appropriate: Business policies should be relevant to organizational goals and needs. For example, “Discrimination and sexual harassment accusations are investigated with disciplinary action applicable based on investigation findings.”
  • Simple: Policy must be understood by all that it applies to within the business. For example, “No smoking within 100 feet of welding operations designated by the painted yellow floor lines.”
  • Inclusive: A business policy isn’t something relevant to a small group in the business, it must cover the wide scope and include everyone. For example, “Business attire is required at all times in the office or meeting with clients.”
  • Stable: This refers to implementation. If an incident arises, the policy should be stable such that there is no indecisiveness about following it. For example, “Cell phones are not permitted in the conference room.”

A business policy can be flexible in changing parameters in the business, the industry or the marketplace. Using these features as a guide to creating any business policy helps business leaders maintain a congruent structure in the company. Being nimble in business and adjusting to an employee, consumer and market feedback is what keeps great companies successful.

Importance of Business Policy

Business policies are important and affect everything from legal liabilities to employee satisfaction and a positive public image. Policies make sure everyone is on the same page when it comes to expectations of certain things. A business might have policies pertinent to different aspects of the company. There may be safety policies, human resources hiring policies and anti-discrimination policies. There may also be policies that pertain to employees’ dress code, lunch schedules, time off and holidays. Other policies are relevant to the customer experience including greeting customers, phone call management and product delivery specifics.

All of these policies create a positive work environment. Employees who feel safe at work from injury or discrimination are happier and more productive. This is an important aspect of productivity that every business owner must consider. When employees have specific directives on dress code, scheduling and requesting time off, it levels the field and shields employees from favoritism. It sets the tone of the office dynamic and the foundation for teamwork. Simply organizing schedules requires working as a team, or at least considering others on the team.

When it comes to policies on operations and the customer experience, this is imperative to consistent operations and being able to troubleshoot potential problems. If the policy is to follow up after a product is delivered, and that doesn’t happen, managers can target that segment of the process to higher returns.

  1. Establishing a Corporate Culture

When policies are clearly laid out in a written plan, expectations are set. This starts to establish a corporate culture of what to do, what not to do and how to act. Employees who are given expectations in a clearly outlined format, are better able to perform those duties and tend to veer less often from the “script” than employees who are employed in businesses that do not have clearly written policies.

Of course, policies mean nothing if management is not going to implement the policies. Some policies, such as safety and discrimination, have legal ramifications, and directly affect productivity and customer satisfaction. If a manager isn’t going to require that employees adhere to the policy of a six-month review after purchase, then the company might lose business and the manager will find it harder to start the enforcement policy.

For example, Google has a corporate culture that is very employee-driven, meaning that parents can adjust schedules around child-care hours; dog owners can bring Fido to work, and employees are allowed to spend part of their time on personal projects they’d like to develop, not only on what project was assigned. This is a lot of flexibility that’s outlined with very clear parameters by the company, so that employees know where the boundaries are. As a result, Google is a place where people like to work, and this policy has resulted in Google becoming a global leader in technology.

  1. Employee Business Policy Training

Business leaders must train employees on business policy. Every employee should receive an employee handbook outlining all policies in one central document. Updates should be disseminated in writing as amendments to the handbook. Should the handbook become outdated, it should be revised so the newly implemented changes are integrated into the employee handbook.

Employers should also keep the handbook accessible via the cloud or online portals so employees are able to access it if there is a question. Additionally, by having it online, there is no excuse for any employee to say they didn’t know.

But this isn’t enough. Employers should hold training sessions to review key policies. Many businesses are holding inclusivity training, helping employees better understand what type of language or actions could be perceived as harassment or discrimination. Don’t assume employees know right from wrong. Train them to understand it. This helps keep the business and the employee out of legal trouble.

The same is true when it comes to operations. If you need employees to follow a specific script on the phone, the review it with them and role play. This holds true for personal interactions as well. Don’t just review sales processes. Take the time to review potential customer service issues so that employees are better trained to address potential problems during the day. The more an employee can deal with customer problems, the less is redirected up the chain of command to leadership. That frees up business leaders to focus on growth and development strategies.

  1. Violations of Business Policy

It is important to be consistent with any business policy. Even something as simple as “every off-site worker will have the shirt tucked in” requires management. As already discussed, you can’t pick and choose when to implement a policy. This creates confusion and animosity among employees who don’t know what version of the boss will be coming in on any given day.

If a business policy is implemented and consistently managed, then you need to hold employees accountable for violations. There should be a process or protocol for management to follow that is appropriate for the action. This helps you document what is going on with employees and determine if anyone employee needs to be released.

For example, if the policy is for all men to wear a tie and for all women to wear pantyhose, the process for violation might be a verbal warning followed by a write-up in the employee’s file. Repeat violations would result in a further disciplinary action such as probation or even suspension. On the other hand, if the policy is that a hard hat must be worn on site at all times, a violation becomes a safety issue and requires immediate action, including being written up and removed from the site.

Policies revolving around legalities such as harassment and discrimination should require involving legal experts, law enforcement if necessary and performing an investigation to determine the truth. Individuals may be separated and job duties may be adjusted pending the investigation but firing rarely is appropriate prior to an investigation’s conclusion.

  1. Importance of Your Business Policy

The policies and methods of implementation you choose as a business leader to adopt will directly affect how your employees perform. Some business leaders don’t want to have everything in a rigid format while others like to implement specific processes at every stage of the company operational process. This is a business owner’s decision.

Keep in mind that some policies and procedures are designed to prevent legal issues while others are designed to build a company image, experience and culture. A business leader should be aware of how policies are affecting his team. If a dress code is becoming a problem for the majority of employees, a new policy such as a casual Friday policy could change the office dynamic in a positive direction. If no cell phone policy exists but employees are spending hours on personal calls, texts and social media then a new policy with training should be implemented and managed to improve productivity. Managers should regularly evaluate company policies and their effectiveness to the business’ success.

  1. Building Business Policies

Establishing policies generally starts with a business owner or his initial leadership team writing an employee handbook and business plan with mission and vision. The team must consider what are standard policies regulated by federal and state regulations. Some regulated policies include privacy policies, anti-discrimination rules, overtime and holiday pay and even healthcare programs.

Most businesses will find these regulated rules are similar among many companies though some companies decided to go beyond the required policies. Then there are the operations and cultural policies. These include the image that leaders want the company to have and the internal corporate culture they are working to establish. Everything from dress code to smoking at work might be defined by a business policy.

Once the main policies are created, business leaders must keep a pulse on how employees and customers respond to the policies. If a policy is having a negative impact on the overall productivity of the company, feedback must be sought and adjustments considered. Every business leader must have this as his own policy for success. Businesses are fluid entities that are always changing. Being too rigid can result in negative performance and negative results. Troubleshooting production problems sometimes start with troubleshooting business policies.