Chapter 10. Company Policy
After the purpose of a company has been clearly defined and begins to be realized, a number of situations may arise. Resolving these situations correctly will determine the success of the implementation of that purpose. Company employees need to know how to act in various circumstances. They will not always make the right decisions if they rely solely on the purpose of the company. This is what company policy[1] is for.
Company policies are sets of rules to be followed by employees. If these rules don’t exist, managers will have to give many individual instructions and orders in order to keep the purpose of the company from becoming distorted. The purpose of a company can be compared to a path that leads to the main goal of the company. Company policies represent walls along the sides of this path that protect the company from deviating from its intended purpose.
For example, if in the 1980s Steve Jobs had, in order to protect Apple’s purpose, established a rule that the company would not license its operating system and would install it only on Apple computers, then Apple clones would not have been produced over a period of several years, thereby threatening Apple’s existence. As a result, Apple would not have had to bear the expense of purchasing one of these clone manufacturers, Power Computing, in order to return Apple’s operations to their intended purpose. If Geroldmaster had not established a policy of designing only medals and accepting orders for internal manufacturing only, then, from time to time, there would have been attempts to deviate from our purpose. If banking institutions didn’t have the rule “Don’t air your dirty laundry in public,” some occasions of fraud by bank employees would have been made public in the press. As a result, public confidence in the banks would have been damaged, and the harm would have been exacted not just on the particular banks involved but on the entire banking system.
Please note, the banking sector is a huge field of activity that employs a large number of people. Given the sheer number of people employed in the banking system, the occasions of larceny and fraud are inevitable. Even so, you will most likely never read about the majority of these incidents in the press, as banking institutions have strict rules concerning publicity.
When you create and grow your company, there will be many issues that will require policies. Which issues should you tackle first when making these policies? Where should you begin? The most successful action here would be to monitor the operations of your business and create policies for those deviations that actually occur. There is no need to make anything up. Your observations will tell you which aspect of the company’s operations need policies.
Other than just correcting deviations, company policies can also help to reinforce successful actions. One of our customers, an owner of a company that sells polyethylene, once asked me how to organize the preparations for an exhibition to achieve maximum results. Each year, his company participated in a trade fair and ordered a well-equipped stand that attracted a lot of attention (which, naturally, was not a minor expense). I, personally, did not have the experience on how to run this type of event, but I was able to help the company’s executives recall what had worked successfully in past years; then I put that information together and developed a plan that would regulate the operations during the exhibition. The document provided details on the times and locations where employees were supposed to be during their shifts at the stand, exactly what they were supposed do, how they should register visitors at the stand, what information they should collect, how their results would be quantitatively measured, what the stand supervisor was supposed to do, and what his authority was. Our team explained these rules to the employees who were assigned to work at the stand and conducted training sessions on their responsibilities. We spent less than two days doing this, but according to the reviews I received after the exhibition was over, it was the company’s most productive exhibition ever. Even competitors told the company’s owner how much they admired his stand’s performance. Once the exhibition was over, it was logical to conduct an analysis of the results, make adjustments to the plan, and add to it some things that were initially missed. Even in its original first-run version, it had allowed for a significant increase in returns on effort and money spent. The point I want to emphasize is that the plan consisted simply of those successful actions that the executives already knew about.
Often we find that over time some very successful processes are forgotten. For various reasons, they are discarded. Then when the situations for which the successful processes were originally created are encountered again, they are brought back to mind. If you tried right now to recollect those company processes that were successful a long time ago but have since been forgotten, you would discover lots of interesting information. Here is a classic example. When your company was small and you needed to find your first employees, where did you turn? You asked your acquaintances and friends. Very often the people you found during that period became the core of your company for a long time. This is easy to explain — “Like attracts like” when it comes to people. Your friends and acquaintances are usually congenial souls, and their friends and acquaintances are generally close to you in spirit, as well. Then your company started to expand. As time went by, the company became larger. A number of new employees began working at the company and your original, very successful method of finding employees was forgotten. When Geroldmaster grew to employ over one hundred people, we began experiencing difficulties in hiring enough blue-collar workers. Anyone who has worked in manufacturing nowadays knows that it is easier to find a good manager than a skilled machine operator. I began to recall forgotten memories of previously successful actions. At every staff meeting, I encouraged employees to recruit their friends, announcing job vacancies and offering bonuses to those who recruited a friend (the bonuses were only paid upon successful completion of a probationary period, of course). After I saw how successful this was, I created a policy for the Human Resources Department so that this tool for recruiting employees’ friends and acquaintances could be successfully applied throughout the company.
I’ve encountered a strange practice used by business consultants who help their clients formulate the main goal and purpose of their company. After formulating the main goal and purpose, they immediately try to write the main points of the company’s policies. As a result, they get something like “We always deliver what we promise,” “Our customers are always satisfied,” “We always provide customers with more than promised,” and so on. To me, this sounds flat and uninspiring, for the simple reason that it is a completely typical approach to any business. You will rarely meet a person who does not share these same principles, so why write them down? We do not list in our policies such things as “Our employees should not steal, kill, or set the office on fire,” right? If you expend your efforts to set policy, it makes sense to pay attention to the things that are truly important. Pay attention to those areas where significant mistakes are usually made. Do not write a policy statement that says “There have to be satisfied customers.” It would be much better if you analyzed what makes your customers feel satisfied or dissatisfied, then write a policy that will lead to the desired results.
Near one of our offices is a restaurant that serves its food buffet-style. You take a tray, go along the counter, on which are different dishes, and scoop the food yourself or with the help of the staff. The restaurant is not bad; the food is decent, the choice of dishes is enough for a business lunch, and the price is attractive. However, there is one but. At the end of the counter, there is only one cash register, which on most days cannot handle the flow of people. I am usually able to finish eating a salad while waiting in line before I get to the register. On several occasions, I have seen a shift manager with a pained expression on his face standing next to the cashier, strenuously trying to help her serve customers more quickly.
These guys have a problem. They lose at least 50 percent of potential revenue during lunchtime because they cannot serve customers quickly enough. Many customers, disappointed with the speed of the service, have simply stopped going there for lunch. The only thing that saves the restaurant is that there are very few alternatives nearby. If they operated like this in Manhattan, they would have gone bankrupt long ago. The fact is, the purpose of a buffet service always contains the important element of speed. This only makes sense. If an owner really watches over the company’s purpose, she or he will quickly find the obstacles to its implementation that the executives cannot handle. I am sure the owner would then come up with some “genius” idea that he could pass down to the executives, who, in turn, would offer some policy to deal with the problem.
Take a look at your company. What catches your eye as a deviation from your viewpoint on how the purpose should be implemented? Trust yourself. If something draws your attention, it is usually very important. To test how important something is, ask yourself, What does this have to do with the purpose of my company?
You do not necessarily have to write each policy yourself. Record your main ideas on tape, hand it to the executive responsible for the area the policy will cover, and tell him or her to draft a policy. Do not allow too much time for your manager to write one, since the draft will probably be written in the last three hours of the allotted time anyway. Then you just have to verify it, add your comments, and it is almost finished.
One hot summer day while one of my executives was delivering a report, I realized that my attention was not focused on what she was saying. Instead, it was fixed on how her skirt was defying gravity and staying on her hips. It was a year when low-slung skirts that displayed the wearer’s midriff were in fashion. After the meeting, I began to pay more attention to what the employees were wearing around the office. I found that many of our female employees came to work dressed in a manner that was not appropriate for a business environment. I had Human Resources write rules that would include both male and female dress codes for the office and manufacturing employees, rules for the use of makeup and perfumes, and hot weather dress codes. Then I only had to approve the rules for this policy and endorse their implementation in the company.
I chose this example because the attire worn by employees is a very common issue in small to medium-size businesses. Certainly, this won’t be the first policy issue you address. Perhaps you should begin with pricing and discount policies, or product quality–control policies, or something else that is a priority for your company. It is important for you to understand that company policies are your responsibility. The fewer rules you have, the more hands-on management you will have to perform and the more you will have to give verbal instructions and orders, and oversee their execution.
Creation of policies on really important issues forms a strong framework the entire organization can build on. As the old Buddhist proverb says, “During good times, a good man reinforces traditions so that during bad times the traditions strengthen him.”
As you begin to shape the policies of your company, you will find that it is not that easy. That is why I am giving you two pieces of advice that will help you. The first piece of advice concerns the form of company policies. Whether employees will want to follow a policy, and thus how much effort you will have to exert in order to enforce it, will depend on the form of the policy. Here are the seven basic points that should be included in a policy document:
- The source of the policy document (who issued it.)
- The title of the document and its publication date/revision date.
- The job positions to which this policy applies.
- A description of the specific issue this policy aims to address.
- Examples that demonstrate that a problem really does exist and what will result if the problem continues.
- A description of the rule or principle that employees should follow to address the issue.
- The end result of compliance with these rules.
More detail on the above points:
-
As your company grows, you, the owner, will not be the only one to create policies; divisional and departmental executives will also be involved in their creation. Naturally, however, the policies created by the owner are the “constitution” of the company, and no policies issued by executives can go against the policies of the owner. That is why it is important to indicate the source of the policy. For example, the source of the policy can refer to the “Office of the Owner” or “Chief Executive” or “Director of Human Resources.” In this way, if a contradiction arises, employees can determine which rules takes precedence.
-
The title of the document should be easy to remember and reflect its content. For example, if you publish a policy regarding a system of discounting, then simply name the document “System of Discounting.” Be sure to specify the date of initial publication and the date of the latest revision, as it is certain that particular statements and rules in policy documents will need to be revised as time goes by. In such cases, it is necessary to withdraw the old versions and provide the new ones to employees. However, during the time the older version of a policy was in use, it may have been referenced in various instructions and documents. In order not to have to reissue all of these related documents and collapse the working system, leave the title and the initial date of publication the same, but state the date of the latest revision.
-
List all of the positions or groups of positions to which this particular policy applies. If it applies to all employees (rules of conduct, dress code, etc.), then just indicate “To All Employees.”
-
Describe the issue to be addressed by the policy. This is necessary in order to show employees that there is indeed something that needs to be resolved. For example, let us look at the policy for a dress code at work. There are employees in your company who dress professionally even without any formal rules; it is natural to them. When they are handed this policy, they may be confused, since they were unaware of this dress code problem until you told them about it. These employees may even think that management simply has nothing better to do than to “fix what isn’t broken.”
-
To make the problem more vivid and real, give examples. Do not state any names in your examples, particularly if the examples are negative. There is no need to immortalize your employees’ mistakes and create a bad name for them.
-
There should be a description of the rule being instituted. Describe it in as simple language as possible. For some strange reason, when people write official documents, they often express them in some confusing or convoluted language. Instead of writing “Never press the red button,” they may write “An employee should not put the device into operation via activation of the red switch.” The simpler the language you use to describe necessary actions, the less effort will be required to execute them. An executive of a boiler-manufacturing enterprise once asked me, “Recently one of our factories was certified as ISO 9001:2008[2]-compliant, but is it really possible to make this standard work in reality, not just on paper?” I asked him to provide me with the regulatory documents that described the responsibilities of employees with regard to quality management according to the ISO standard. It took me a lot of time to read the documents, as they were written in a completely incomprehensible scientific language with heaps of technical terms. There was really no need for that. I concluded that it would be easy enough to meet the requirements set forth in the document if they were translated into plain English. Some consultants just can’t help unnecessarily complicating things. Perhaps it is because they are afraid of being unemployed. But whatever the reason, it was impossible to ensure that an industrial worker from a small village in Ukraine, where the factory was located, could understand these documents. As a result, this simple and good ISO standard did not work in spite of all the money spent on the development of documents and staff training.
Sometimes business owners ask me what qualities a person who helps them write policies should have. The first quality that comes to my mind is that he or she should be able to explain any idea in simple language. By the way, the ability to use simple language, or “dumb down” an explanation of some principle, demonstrates a person’s level of ability.
-
Describe what advantages the company would gain, what the win in operations would be, and define the benefit. If you can also manage to mention the main goal or purpose here, that would be just wonderful.
Don’t forget to sign the document. Even if it was written by one of your executives, you should, without any hesitation, remove any traces of his or her authorship and publish the document under your name. This is very important. From my personal experience, I have found that when I left the information about the real author of a policy in place, instead of executing the required rules, employees began to discuss the document from the point of view of whether the author of the document was competent enough to write it. This led to failure in implementing the policy. Policies work much better when employees know that it was established by an owner, and that is why it needs to be implemented, not discussed and assessed.
So, you’ve written (or had some executive write) the company’s policies. My second piece of advice for you is how to enforce the policies that you have approved.
We all like it when the handbooks and manuals we need to work with are within reach, instead of our having to go to another office every time we need one. The same applies to policies. If you want your employees to know and follow them, they should always be conveniently available. That is why you need to arrange it so that every employee has at their desk a folder in which to file all new policies related to their position in the company. Spare neither folders nor paper. They are not so expensive that an employee should have to run to some other location to order to find out how they should act in a particular situation. I’m amused when some owners ask me, “Why does every employee need an individual folder if I have several salespeople who fulfill the same functions?” I want to respond by asking, “Why do you need a personal computer if all the executives can use the same one?” It doesn’t matter if the person is a high-powered executive, a machine operator, or a janitor; the individual should still have a folder that contains all of the company policies related to his or her position.
As soon as a new policy statement is filed in an employee’s folder, the employee’s knowledge of it should be tested. You’ll find that most employees file their copy without reading it. It is commonplace; that is why you need to test them. Ask questions that an employee will be able to answer only if he or she has read the policy. Employees who cannot answer your questions should be given time to study and then be retested later. The only way to get people to know the policies is to test them. There are no other effective ways. I have checked.
Other than making copies of policies, distributing them to employees, and testing them, you should carefully store the originals of these documents and put together folders for new employees (when a new employee is first appointed to a position, there are some policy documents for that position already). Human Resource departments usually handle this, which is why an owner should be vitally concerned that this department functions well. Otherwise, it will be difficult to provide the company with working policies.
The greater the number of smart, targeted policies you publish to solve important issues, the thicker the employees’ folders become and the more regulated and streamlined the company’s operations will be. The orientation process for new employees becomes easier, and is easier to manage. Of course, the higher the employee is in the company’s hierarchy, the thicker his policy folder will be. A senior or middle manager should know perfectly every detail of the policies that regulate his subordinates’ actions.
[1] Company policy: a set of rules that provide general guidance for actions and decision making and contribute to the achievement of goals. A company policy makes clearer how goals need to be achieved. Within these rules, the policy allows freedom of action.
[2] ISO 9001:2008 Quality Management Systems Requirements: one of the standards developed by ISO (International Organization for Standardization). The standard itself does not regulate a product’s quality, but establishes requirements for the system governing the process control and improvement of quality. It is safe to say that the compliance with the standard’s requirements indicates a certain level of reliability of a company as a supplier of its product.
Wow, great article.Thanks Again. Fantastic. Burden
Cheers pal. I do apeiacrpte the writing.
Great article; Appreciate the insight!
Great Post, it is especially useful when the author takes the time to spell out a solution in detail!
It is good to see people take the time to spell out the problem or issue, followed by providing valuable direction as to how to dela with it. Thank You
Being in the Sales Training Business it is good to see an article written by someone who has a real grasp of the subject matter!
Being in the Sales Training Business it is good to see an article written by someone who has a real grasp of the subject matter!