We have all heard the expression: “Run it like a business.” Some church leaders try to run their organizations “like a business.” Politicians sometimes speak of running government “like a business.”
So what does it mean to “run it like a business”? When you think of a “real” business, what comes to mind? The essence of how a management team “runs” a business is found in its policies and procedures. These can be formal and written, they can be communicated, and employees can receive training in them. Or they can be informal, ad hoc, unwritten, and generally fuzzy so that employees are uncertain about the policies and procedures. Senior management gets to decide which approach to take on the question of policies and procedures.
Consider the difference between a major league baseball game and a neighborhood game on the sandlot. The stakes are higher — lots of money and pride are on the line — in the majors. The level of care and documentation for policies and procedures (rules), as well as training (for coaches, players, umpires, etc.) is staggering compared to how much thought goes in to an informal sandlot game.
Policies and procedures help set the tone for whether a business is playing in the majors or on the sandlot.
One advantage of carefully thinking through, documenting, and providing training in policies and procedures is consistency. No matter who is handling a particular matter, senior management can be confident that employees who were carefully selected and trained for their roles will reach the proper conclusions and undertake the appropriate actions that management intended.
Another great advantage of a deliberate approach to policies and procedures is not so obvious initially: perception. Employees perceive that management cares and the company is a “real” business when formal, written policies are in place. When employees perceive that management cares, employees take a greater interest in performing their roles effectively. Management sets the top at the top and should devote company resources to training employees in the policies and procedures of the business. This creates a perception of organizational soundness and stability among employees. Also, employees can confidently communicate with customers, vendors, and other stakeholders about the company policies. Employees need to know how the company does business. This sets a tone for managing business relationships.
Perhaps management wants to provide guidance and boundaries but also wants to give employees leeway to use their judgment. An employee can articulate a variation of the following: “Company policy says X, Y, and Z regarding this situation, but I have discretionary leeway built into my role so that I can use my best judgment and diverge from company policy just this one time for your benefit” (usually these are the words of a supervisor, not an entry-level customer service rep). In this scenario the customer perceives that the company is doing something thoughtful and gracious by making a one-time policy exception.
The other option is to give no guidance on policies and procedures and leave it up to the individual handling the matter to navigate through the complexity. An inexperienced employee might say, “I think a 90 day return policy for a used and abused item is reasonable.” This might avoid a conflict with an unreasonable customer, but it is not a good policy. Even when the customer gets its way in this scenario, the customer walks away with no perception that the company is a “real” business. The company has not done something thoughtful but has been manipulated by an unscrupulous customer. The scenario is a joke, not an opportunity to build customer value and loyalty. The matter could have been settled by senior management beforehand by setting sound policy and training the employee accordingly.
Again, this responsibility falls on senior management. When employees have no policies and procedures to follow and make inevitable mistakes, management has no one to blame but themselves. The tendency more often is to blame the employee that did not do it management’s way — even though management never bothered to communicate to the employees how the job should have been done.
Not only do employees, customers, and suppliers have a better perception of the business when policies are in place. Policies and procedures affect the perceptions of other stakeholders. Even regulatory agencies in certain cases can consider a company’s compliance policies, procedures, and training as mitigating factors for penalties when unintentional regulatory noncompliance takes place. Again, perception is a massive benefit for a company in this scenario, as compared to having no policies, procedures, and training — which can be expected to lead to regulatory noncompliance due to management’s negligence.
Several areas for policies and procedures include (but are not limited to) the following:
- Accounts receivable, credit, and collections
- Accounts payable
- Human resources (the subcategories here are vast)
- Customer service
- Tax and regulatory compliance
- Any other area that involves risk or requires judgment and discretion
Position your business for success by setting policies and procedures. Train your employees to comply. Drill this into them at every opportunity and set an example. This will set up your business to compete in the majors rather than on the sandlot. Every individual and organization that interacts with your business will have a better perception that your business is “run like a business” and is a “real” company rather than a joke.