Just like societies need laws to create order and common understandings, organizations need policies. Often, when businesses start small, they leave things loose and create rules as they go. However, there comes a point when an organization needs to coordinate among its members and provide itself with legal protection. That's when it turns to policy-making.
Everyone has different approaches and styles. Even the best team of people, acting for the good of their organizations, will find themselves bumping up against each other without coordination. That's why business leaders have to develop rules. To develop consistency, fairness and points of reference, leaders formalize rules and guidelines into written policies. Although they can't eliminate occasional conflicts or issues from arising, policies put many issues in the past and give guidance to help handle future matters.
Inevitably, customers and clients will take issue with the way a business conducts itself. Issues can include refusing to give refunds, not allowing patrons to share meals or requiring passengers to comply with instructions. Of course, companies can't always bend to make the customer happy. That's when policies come in handy. Written, codified policies show customers and clients that a company's stance or actions aren't arbitrary and that they are applied in all situations. This can reduce frustration and support employees who are dealing with upset customers.
Policies provide businesses with important protection against legal action. For example, human resources policies can establish the rules employees must follow and consequences for ignoring them. Thus, when an organization must terminate an employee for misconduct, it can point to policies to back the termination if it must defend itself in a wrongful termination or discrimination lawsuit. Additionally, when someone sues a company for refusing to provide a service or accommodate a customer or community request, the business can show that its decisions weren't impromptu or without reason, but based on its standards of operation and conduct. Courts take policies seriously in evaluating how organizations conduct themselves.
When something new and unexpected arises, policies can provide guidance on how to handle it. Even if a policy doesn't address the issue completely, it may provide a good point of reference. For example, if a company has a policy banning employee use of illegal substances on company time, the policy may be useful in determining how to deal with an employee abusing prescription medication. A manager might say that because the company doesn't tolerate illegal substance use that using a substance outside its prescribed and legal use is also problematic. This may lead to a modification of an existing policy or a new policy to address prescription drug abuse.