What Are Policies and Procedures?

Policies and procedures are structural tools that determine how a company operates and how it achieves its goals. Policies act as guidelines by determining what a company will and will not do. Procedures are the methods used to accomplish the deeds that a company commits to and uses to prevent violations of the rules it has set. These tools are generally assets to a company, but they may serve as drawbacks in some situations when immediate flexibility is needed.

To simplify matters, policies can be thought of as a company's boundaries. Policies provide companies with a means to confirm their identities and to give substance to their objectives. Individuals can use these guidelines to develop realistic expectations of an organization.

Procedures can be thought of as the vehicles used to remain within the boundaries. These tools are used to require and dictate actions and decisions. Organizations generally have policies and procedures regarding all aspects of their affairs. This can include hiring, customer relations, and accounting. Together, policies and procedures benefit companies because they provide a means for uniformity.

Without these tools, it would be difficult, if not impossible, to ensure that everyone in a large organization handled the same situations in the same manner. This lack of assurance could cause a company to face a wide range of problems, including legal issues, lack of customer confidence, and failure. Although the structure provided by these tools is generally beneficial, there are instances when policies and procedures can have negative effects.

As these tools are meant to provide structure, they often eliminate flexibility. Sometimes special situations may arise that are best handled contrary to normal practice. There may not be enough time to go through the adequate process to obtain the needed permission to deviate from a policy or procedure that is hindering optimal handling of a situation. For the sake of compliance, these issues may be poorly handled as a result.

A company's policies and procedures are often published. These may all be located within a single document, or they may be divided into various documents that are used by the individuals to whom they pertain. For example, those policies and procedures that pertain to workers may be located in an employee handbook, whereas accounting practices may be listed in an investor's relations manual. In any case, this information tends to be widely available to staff members and the public.

Although policies and procedures are chosen by each company and they may not be laws per se, they may have legal implications. If a company violates the terms that it has outlined to guide its actions, it may be sued for breach of contract. This can occur even if the party bringing the lawsuit has no history of affiliation with the company. For example, an applicant may be able to sue a company for violating its hiring policy.