The Invisible Benefits of Policies and Procedures
Many entrepreneurs balk at the thought of writing a policy manual. In most cases, the entrepreneur makes all the decisions so policies and procedures seem to inhibit more than help. The owner-operator fails to see that the lack of rules is keeping the business from growing. Entrepreneurs are reluctant to hire because they don’t trust others to do the job. When making a decision, a hired manager should first consult the policy. If a problem arises, the owner’s first recourse is to audit whether the policy was followed. The obvious benefit of policies and procedures is to protect the owner form the incompetence or dishonesty of employees. This allows the owner to pursue other opportunities. The first invisible benefit of policies and procedures is business growth.
Business growth is normally associated with sales. Selling is a challenging profession. Customers are often suspicious of promised results because so many salespeople have promised more than they could deliver. Management should provide salespeople with parameters for discounts and delivery. Consistently providing what the customer ordered creates loyal customers and promotes referral business. Sales parameters are usually created to maintain sufficient profit margins on each sale, but consumer confidence is another invisible benefit.
Managing employees is a dubious endeavor. It’s hard enough to know what they are thinking while you are watching them, but what do they do when you’re gone? Employees have a way of self-compensating. If they feel that management is unfair, they often try to even the score. They will come in late, slow their work or skim product. Consistently adhering to written policies, removes the excuse of personality clashes. An employee can’t justify dishonesty by saying, “The boss doesn’t like me” when the boss is following policies. While reviewing a policy manual, I noticed that there was supposed to be a cash bonus offered for not using personal days. We audited that year’s results and found that the business owed a few hundred dollars in employee compensation. We prepared the checks and made a public presentation at staff meeting. This bought a lot of employee confidence. In general people are good and will respond in kind when treated fairly. The obvious purpose of rules is to control actions. When management follows the rules it unknowingly creates employee confidence and reduces self-compensation.
The last invisible benefit of policies and procedures that we will discuss in this article is the value of your business when you want to sell it. The businesses that command the highest price are those that operate without owner oversight. An investor wants an autonomous business. I have never seen one without written policies and procedures in place.