As with putting goals in writing and getting agreements in writing, successful organizations follow the best practice of documenting policies and procedures in writing. Here are five reasons to put time and effort into documenting policies and procedures:
- As with writing down goals and agreements, the process of documenting policies and procedures forces senior management to step back and carefully think about how they run their business. Rather than spending days “putting out fires” that are often created by having no formal standards, management can work toward smoother operations by documenting policies and procedures for every area of the business that requires judgment and discretion or involves risk.
- New hires will quickly get up to speed on how management runs the organization. To be sure, documenting policies and procedures takes some thought and effort on the front-end. However, in today’s world of high employee turnover, the initial new hire training process will be more effective when supervisors have a standard approach to bringing employees up to speed.
- Employees will appreciate knowing what is expected of them and what they can expect from management. No one appreciates rule-makers who “make it up as they go along.” Take time to systematically document clear answers to implicit questions that every employee asks. Never assume that employee assumptions — absent clear and documented guidance — about organizational policies and procedures will align with management’s intentions.
- Employees, investors, customers, vendors, regulators, and other stakeholders will have the perception that the company is well-managed by people who care.
- Implementing consistent and predictable processes will facilitate company growth. Putting out fires all day long is not a scalable management style; the organization can only grow so far until one of the fires gets big enough to finally burn it down. Enhance scalability by standardizing processes, policies, and procedures. The constantly changing marketplace provides more than enough uncertainty for every senior manager that I know. Consistent policies and procedures provide a welcomed oasis of stability and predictability in today’s business world. This is often more than a luxury; it is a requirement for growth and survival as the organization adapts to external challenges.
I once heard a senior-level manager communicate his preference for leaving policies and procedures unwritten so as to avoid legal ramifications in case the organization diverged from them. This is a good strategy for managers who are unwilling to put thought and care into formulating good policies and procedures and maintaining effective enforcement mechanisms. However, it is a bad policy for an organization that plans to significantly scale operations over time. There are plenty of reasons why large organizations take time and exercise care to document and communicate their expectations for consistent, reliable operations and behaviors within formal, written policies and procedures. Finance professionals can contribute needed professional judgment toward every area of the policy-making process.