Before hiring the first employee, a company should formalize its policies and procedures; this is true for any company. The policies and procedures of a company form something of a foundation; the better the policies and procedures are written and the more inclusive they are, the better the business will run.
The policies of a company encompass more than just the state and federal obligatory policies that are required by law; the policies of a company embody the company’s stand on specific issues, both related to the inner workings of the company and more external workings. The policies will cover the company’s stance on time off, vacation days and holidays. They will also indicate the company’s view on how the customer should be treated, through customer service policies and policies on returns, damaged goods, etc. The company policies will dictate the way information is protected and administrative acts performed--not the actual procedure, but the general actions the company chooses to take and why.
As a complement to policies, which dictate why something is done, the company’s procedures explain how an action is done. This is especially important for large companies. A standard of performance and a commonality in how tasks are accomplished contribute to the development of a consistency that is both profitable, because it diminishes the learning curve and streamlines the tasks, and contribute to employee satisfaction, in that performance standards are clearly defined and task procedures are consistent.
The primary benefit of having established policies and procedures is greater consistency. This type of consistency, exhibited internally and externally, helps the company operate with greater efficiency and consistency. Consistency further contributes to customer perceptions of company quality and integrity. This type of consistency is so important that there exists legal mandates for larger companies, such as Sarbanes-Oxley, to guarantee consistency for stakeholders. Smaller businesses benefit from the consistency provided by policies and procedures as well. For example, having consistent books is something that a potential investor will look for. In fact, it is not uncommon for a potential investor, or loan officer, to request a copy of a company’s policies and procedures, also called the company handbook or employee handbook, for just that reason.
The company handbook/employee handbook is a formal collection of the policies and procedures of a company. Aside from the fact that the handbook is, in many cases, the first formal correspondence the company will have with an employee, and it may be requested by investors, the handbook also formalizes the operations of the business, providing a reference that a new employee can go to when unsure of a policy or procedure, as well as providing a legal basis for employee disciplinary actions. Many lawsuits have been thwarted because the company had an employee handbook, which clearly stated the company’s policies and procedures.
That said, the employee handbook (and thus the formalized policies and procedures) is not something that should be looked at as a penal tool or a legal obligation. While the handbook does serve these purposes, the companies with the best (read: most useful) employee handbooks use the handbook as an opportunity to build a foundation that helps ensure that everyone is on the same page, be it in the actual procedures or why those procedures are done that way.