Company policy determines decisions that employees should make, and is used as a guide to the organisational decision making process. Company policy is also used to make rules such as a no smoking policy, policy against drinking, or work attire policies. Employee policy governs workplace rules used to implement your management principles.
A company policy can also act as a mission statement, forming part of a business procedure such as an accounting policy and procedure manual. A policy in a procedure can be seen as a mini-mission statement that informs customers of the policy, its purpose, and key performance indicators to determine the success of the policy. For example, in an accounts procedure policy, accounts staff must ensure that all outstanding customer invoices are paid in a timely manner. In this example, the purpose is to ensure that outstanding customer invoices are paid on time. The procedure needs to define a timely manner. This could be 30 days today (net 30) and 20 days next quarter (net 20), providing a process improvement objective of 33%.
Company procedures assist companies in improving quality management by improving consistency within the company. Procedures determine a series of steps, actions or methods that are followed according to a consistent and repetitive approach in order to achieve a desired result. An example of an Accounts Procedure would be as follows:
- Send the first notice invoice immediately (same day) as the sale.
- Produce a receivables aging report.
- Send a second notice to all invoices outstanding for 30 days.
- Call all invoices outstanding for 45 days.
- Send a third notice to all invoices outstanding for 60 days.
- Call all invoices outstanding for 75 days.
- Send all invoices outstanding for 90 days to collections.
A quality management procedure could be as simple as a checklist or as complex as a 10 page document, as long as it is consistent. Using checklists however is the simplest way to ensure consistency while saving time.
How Policy and Procedure Differs
A policy puts your company’s principles into a communicated document. A procedure helps you to build consistency. The primary difference between a policy and procedure is that policy focuses on a specific direction, while procedure focuses on the steps that are required to reach that direction. Both are essential as part of your quality management strategies.