Policies and procedures are important for any business with more than 10 employees. The advantages of having formal policies and procedures cannot be underestimated.
Many small businesses don't feel that such policies help their operations and prefer to keep management flexible. Even though this argument does have some legitimacy for micro organizations, it does create problems for businesses that are moving into a larger state of existence.
Few Policies versus Many Policies Debate
One of the reasons why businesses do not want a lot of policies and procedures is because it limits management's control. With defined policies it is questionable every time a decision differs from the status quo. These decisions that vary from the policies and procedures could come under scrutiny from both the employees and the U.S. legal entities.
For example, let us assume that employee X is creating a lot of problems. Without policies and procedures a manager or owner could be creative in how he/she handles the situations. They may give the employee more help in terms of training, let the employee slide on discipline or terminate the employee. Management has complete discretion to do what they want.
However, when the organization becomes larger it becomes more difficult to manage. Regardless of whether or not you have policies and procedures all of the employer's actions can be scrutinized for its adherence to federal and state law. Let us say that employee X (minority) was terminated and employee Y (Caucasian) was given additional training . The company could be found to be discriminatory even though they don't have a policy & procedure manual.
Now let us imagine that we have well defined policies and procedures that indicate what managers and employees should do in certain situations. Employee X was terminated because he/she had accrued a number of negative disciplinary actions but employee Y was given additional training because it was his/her first infraction. Since this was outlined in the manual the company has justified its decision.
Without this policy and procedure guideline it could be assumed that the company willfully discriminated against the minority employee. They had no legal basis for the decision they made. With a policy & procedure manual they have adhered to an implied contract of terms of employment between the company and the employee.
It is also important to say that as an organization becomes larger, the need for policy and procedure development becomes greater. Not everyone shares the same values as the founders and as more levels of employees exist the more varied will be the decisions of the management team. Having a policy & procedure manual keeps everyone thinking along the same lines when making key management decisions.
