The success of any business depends on a variety of factors. Chief among them are efficiency and productivity. The key to both is having a clearly defined business policy in place for your company. For any business to enjoy sustained growth and success, regardless of industry or ambition, it must operate under the umbrella of a well defined and clearly understood business policy. 

Unfortunately, a great many business owners make the cardinal mistake of ignoring this key aspect of company leadership. This is a particularly common problem for smaller businesses and start-ups. But failing to establish a clear and unambiguous business policy, and failing to effectively communicate that policy to employees and management, can very easily lead to long-term trouble for fledgling companies.

Business Policy vs. Business Strategy

Before we go any further we should take a moment to understand what is meant by a business policy. Quite often the terms ‘business policy’ and ‘business strategy’ become confused, and while they are tangentially related they represent two separate and distinct organizational concepts. 

It helps if we think of a company’s business policy as the governing intent and ethical guidelines for the enterprise itself. It outlines how a given business will operate at all levels of the organization. At its heart it lays out the guiding principles of the company, its management team, and its employees. Its purpose is to keep all members of an organization working to the same goal – improved efficiency and productivity. 

The following points will help to clarify the purpose of a company’s business policy:

  • A business policy is the blueprint that describes the day-to-day organizational activities of a company, especially as they relate to routine and repetitive tasks.
  • The business owner, usually in consultation with top-level management, should develop the company’s business policy. It is meant to govern the behavior of all company employees at every level of the organization.
  • The purpose of a business policy is to provide actionable guidelines that govern routine activities necessary to maintain an efficient and productive organization.
  • Business policies address both attitude and action.
  • A business policy defines what is, and what is not, acceptable professional behavior within the company.

In contrast, a business strategy is more specific and describes a means to a desired end. It governs specific actions by middle management and employees as they work towards a clearly defined and immediate goal. 

Consider the following characteristics that define a business strategy:

  • A business strategy is concerned with organizational decisions designed to address unique goals.
  • Creating effective business strategies is typically the responsibility of middle management.
  • A business strategy will define an actionable methodology to be used in pursuit of a specific goal. The strategy itself will be governed by the policy outlined by upper management.

Primary Features of a Business Policy

Every company will have a business policy that is unique to its owners, its industry, and its goals. Some business policies are largely guided by state and federal regulations, while others are primarily defined by the attitudes and ambitions of the company’s leadership. Regardless of the specific directives, all business policies should contain the following eight features.

  • Specificity – Policies must be specific, otherwise implementation of those policies becomes inconsistent and erratic. Inconsistency is the enemy of efficiency.
  • Clarity – Business policies should be free from ambiguity, and they should be written in a straightforward easy-to-understand language. Avoid jargon whenever possible. This is particularly important as regards penalties for infractions.
  • Uniformity – An effective policy describes a set of company standards that everyone will follow, from upper management down to office clerks and maintenance staff.
  • Appropriate – Business policies should be relevant to, and representative of, the organizational goals and needs of the company.
  • Simplicity – An effective business policy must be easy to understand and easy to follow.
  • Inclusive – Business policies must be relevant to all members of the organization, regardless of position or history of employment.
  • Stability – There should be no indecisiveness regarding the implementation of any articles of the company’s business policy. If an infraction occurs the stability of company policy is crucial to employee performance and morale.

The Importance of Sound Business Policies

Business policies affect every aspect of a company’s operations, from legal liabilities to employee morale. Having clearly defined and enforceable policies in place helps to ensure that everyone within the company is on the same page, working together towards the same goal. 

Businesses should have a variety of policies in place, each developed to address specific aspects of company culture. For example, your business might have specific policies in place covering some, or all, of the following:

  • Workplace Safety
  • Hiring and Termination of Employees
  • Anti-Discrimination
  • Sexual Harassment
  • Sprout Funding logoAlcohol and Drug Abuse
  • Whistleblower
  • Dress Codes
  • Paid Leave
  • Phone Etiquette
  • Cybersecurity

Having policies such as these in place helps to create a positive and productive work environment. Employees, who feel safe in the workplace and understand that a set of standards is in place to protect their rights and their livelihood, are happier and more productive across the board. This increase company efficiency, reduces levels of employee burnout and turnover, and supports the continued growth of your business.

Creating a Functioning Corporate Culture

The term ‘corporate culture’ often carries some unwanted baggage, and is typically used when a business is being pilloried in the press. That’s more than a little unfair. Corporate culture is neither more nor less than the system of beliefs and behaviors that determine how a company’s employees and management teams conduct their day-to-day business transactions. 

Having a set of clearly defined business policies in place lays the foundation for creating a positive corporate culture for you company. These policies act as guides for management and employees, so that everyone within the company know what, and what not, to do in any given situation. That creates a surety of action from top to bottom, ensuring that employees and management represent the best ideals of your company at all stages of engagement.

Implementing Company Policies

Of course any policy only has value if it is properly implemented. Management must be prepared to enforce company policies across the board, and that means penalties for infractions. This is an important point to take on board. Some of a company’s policies will have legal ramifications. Those that address discrimination, sexual harassment, and workplace safety must be adequately enforced to protect the business and its owners from legal action. 

More benign policies, such as dress codes or phone etiquette, may not have any legal ramifications but certainly do have an impact employee performance and morale. This not only has an effect on your business’ overall efficiency and productivity, it directly impacts your ability to hire and retain reliable staff.

Enforcing Violations

Consistency is key with any business policy. Even the most negligible violations must be handled quickly and assuredly, with penalties applied equally across all levels of employment. Even something as simple as the breach of company dress code should be addressed in a timely manner; otherwise confusion and dissent is likely to take hold within your company’s workforce. 

Penalties for any and all infractions should be clearly stated in your company’s employee handbook, and should be followed to the letter. For example, let’s say that the process for addressing a violation of the workplace dress code is as follows:

  • Fist offence – verbal warning
  • Second offence – written reprimand in the employee’s permanent file
  • Repeated offences – disciplinary action including probation, suspension, or termination


Policies that coincide with state or federal legislation, such as harassment or discrimination, typically require the assistance of legal representation. Business owners may find that they need to consult with local law enforcement and may need the advice of a company attorney. 

As always, penalties for an infraction should be equally levied regardless of employment status.

Employee Training is Critical

Business policies are only effective when there are robust employee training programs in place. When management and employees are not equally educated in company policy confusion can run rampant in the workplace. That confusion will lead inevitably to a loss in efficiency and a precipitous drop in productivity. It can also result in a toxic work environment, impacting worker morale and making it increasingly difficult to attract and retain quality personnel.

Creating and Maintaining Effective Business Policies

Establishing effective business policies is the responsibility of business owners and their leadership teams. The first step is to educate yourself and your team about any policies that may be regulated by state and federal laws. These typically address privacy concerns, anti-discrimination issues, health and safety in the workplace and worker’s compensation requirements. 

Beyond those policies that are regulated by the government are the rules that define the operational and cultural policies of your company. These are directly related to the kind of workplace environment you want to nurture, as well as the company persona you want to project to the public. Company cultural policies would include such issues as dress codes, vacation and absenteeism allowances, basic customer interaction procedures, and customer satisfaction guidelines. Remember, the image that your company projects to the public is defined by these business policies. They are powerful tools that allow you to create a brand identity that resonates with the public while supporting an efficient and productive workforce within the company.

Flexibility should be Built In

As critical as business policies are to your success, they cannot be written in stone. As the leader of your company you must always remain attentive to the needs and moods of your employees and your clientele. If you find that a policy is uniformly unpopular with your employees or with your management teams, you should take the time to reevaluate the concepts and assess the benefits of making changes to that policy. 

If a policy is having a negative impact on customer relations, it’s time to reconsider your standards and either update the policy or create a new one from scratch. And, of course, if government regulations demand the adoption or elimination of even a long standing company policy you should be quick to respond to the latest rules and regulations.

Business Policies can be Powerful Tools

Small business owners often fail to consider the importance of crafting a set of actionable business policies for their enterprise. In a way, this is understandable. A small start-up with only a few employees is more easily manageable than a larger concern. Owners and employees are usually on the same page regarding operational procedures and any changes can be dealt with on a one-to-one basis. 

However, as your business grows the importance of having a solid set of business policies in place and understood by everyone on your team becomes clear. As your company adds employees there are greater opportunities for miscommunication. Having a defined set of policies in place, set down in writing, ensures that everyone in the company understands their role and their responsibilities in the success of your business enterprise. 

The policies you articulate and enforce can be powerful tools that will support the growth and success of your business. If you have yet to consider and define the fundamental principles by which your business will be governed.

sprout-fundingThe Sprout Funding blog offers tips, reports, insights and other ideas to help small business owners learn and grow. Have a question for our team? Email us at:, and tell us how we can help you.
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