Topic 59

Policies and Procedures

We've talked previously about various aspects of insurance and risk management.  (See Chapter 47.)  There is, however, a form of business insurance that does not come as a policy with specific coverage.  It is not only good insurance against future litigation but is also an integral part of good management.  That is a company Policy Handbook.  In today's litigious world, it's not enough to be against sexual harassment, racial preferences, and other unacceptable employee or corporate behavior.  Every company needs to have written policies defining its opposition to such behavior and setting out its corporate policies and restrictions related to such conduct.

Twenty or thirty years ago, it was almost standard to find pinups, itself an archaic word, spread among the machinery on any shop floor.  The Rigid Tool Company was even known for its annual pinup calendar that almost every machine shop and construction job site displayed in various locations.  Today, that is clearly unacceptable.

If your company doesn't have a written Policy Handbook which is given to all employees, it should.  In addition to establishing your company's positions regarding what is and is not acceptable employee behavior, that Handbook can also be used to describe employee benefits, vacation and holiday practices, paid and unpaid time off, promotion policies, how seniority is handled and its various benefits, and reasons for dismissal other than poor performance.

Once that Handbook is written and distributed, it should then become the corporate standard with a demonstrated adherence to its policies.  In the event of an employee law suit against the company for any employment related matter, that Handbook will become a valuable defense, but only if it has actually been used and not just written and distributed.

Another corporate handbook that every company should have is a collection of written procedures and guidelines.  You expect your company's employees to each know their job, but there's always some turnover of personnel.  An incoming person may not approach a job in the same way as the previous person.  In either case, your company should have established procedures describing how its principal jobs should be handled.

The best method of compiling such a Procedure Manual is to ask each person responsible for a specific task to write a short paragraph or section of the Manual describing their job, how it should be handled, and, its relationship to other jobs or procedures.  (Also see Chapter 55.)  Each manager can then review the procedures for his or her department, revise them, and submit them for incorporation in the complete Corporate Procedure Manual. 

Among other topics, the Manual should cover:

• Requisitions, purchasing, the purchasing approval process, receiving, and vendor invoice approvals;
• Inventory controls, inventory withdrawal requests, perpetual inventory methods, and periodic physical counts;
• Accounting, revenue recognition, accruals, depreciation policies, expense allocations (usually none), and other accounting procedures;
• Budgets and budgeting procedures;
• Distribution of monthly financial statements and other financial control information;
• Annual accounting audit or review procedures;
• Collection procedures and methods, invoice terms, and bad debt recognition;
• Banking, finance, bonding, credit line borrowing base calculations, check signing and signers, and the loan approval process;
• Insurance, coverage limits, deductibles, and related policy terms;
• Safety policies and procedures, risk management, and safety training;
• Employee training and apprenticeship programs;
• Human resources, employee files, non-competition agreements, employment agreements, and hiring and termination procedures;
• A corporate organization chart and procedures for the preparation and review of written job descriptions;
• Sales management, product or service pricing and approval procedures, and project pricing or bid preparation, approval, and submittals;
• Client contract provisions, standard sales order terms and conditions, and both payment and discount provisions;
• Customer, vendor, and other outside communications;
• All aspects of internal employee communications, deficiency and problem notices or notification, dispute resolution, and employee suggestions;
• Quality controls and product or service level inspections and reporting;
• Warranty requests, approvals, and related warranty work;
• Outsourcing policies and procedures;
• Confidentiality, intellectual property protection, and non-competition policies;
• Updating both the Corporate Policy Handbook and the Procedure Manual;
• And any other policies or procedures which are important to your specific business or operations.

Both the Corporate Policy Handbook and the Procedure Manual should be reviewed no less than annually and then revised, updated, reprinted, and distributed to all management personnel.  As your company grows and adds additional people, departments, and operations, its management will become both more complex and more widely disbursed.  It will be increasingly important to assure that corporate policies and procedures are uniform, well understood, and followed at all levels within your company.

Simple, concise, and published corporate policies and procedures will be invaluable in building a smoothly functioning organization in which the individuals know their jobs and approach them in a uniform and effective manner.