SOPs

Policy vs. Procedures and Why You Need Both

They're both useful, but when? It's time to define what's policy and what's procedure. Read on.

Introduction

Policy and procedures form the fundamentals of your company. Well-defined policies and procedures ensure smooth and effective business processes. If you haven't documented them anywhere yet, you can be in big trouble someday. Because you need them to make sure everything runs smoothly.

Leaders and founders of the company should define the policy and procedures in the initiation stage of the company. Because they protect the organization and employees from non-compliance and explain the work culture. 

But many people use policy and procedure synonymously. And that's what we call a wrong practice. This blog will clear the air of ambiguity regarding both the terms policy and procedure.

Defining Policies

Policies include a set of general guidelines. They outline your organization's goals and set a direction for achieving them. The policy consists of the organization's plan for tackling potential problems and influencing decision-making. 

They also include a guide of day-to-day actions by establishing a framework of aims, objectives, and management philosophies. Policies are driven by business philosophy, marketplace pressure, competition, and law or regulation. 

Companies include topics like social media, paid and sick leaves, codes of conduct, acceptable work behavior, employee onboarding, and termination and workplace discrimination, amongst various other things based on the industry. 

Some of the points that are taken into consideration while framing them:

  • They should be based on facts and knowledge.
  • People who will be influenced by them should actively participate while framing them.
  • The people should accept and implement them.
  • They should be versatile and have the scope of modification based on the operations.

Defining Procedures

The procedure is the next natural step after policy. It has a narrow focus as it describes the step-by-step actions for specific instances. Procedures consist of a beginning and an end that everyone should strictly follow to tackle a situation or achieve an outcome. 

These predefined systematic sequences for a task are essential for training new employees for compliance, process improvement, and auditing. 

Procedures include material ordering, emergency procedures, equipment operation, and inventory. 

Some of the points that are taken into consideration while framing them:

  • They are based on past experience and facts.
  • Procedures are created for complex tasks.
  • Any procedure should have a specific objective.
  • The procedure should help in achieving the end outcome for a task.

Difference between Policy and Procedure

Policies include guidelines for decision-making but leave room for flexibility. They explain the "why" behind an action. On the other hand, procedures show the "how." They have concise instructions. 

Some of the critical differences between policy and procedure are:

Meaning

  • Policy- It is a concise statement containing a set of guidelines for achieving a company's goals.
  • Procedure- It is a predefined systematic sequence of the tasks defined by a company.

Nature

  • Policy- They are flexible and allow changes in exceptional and unconventional situations.
  • Procedure- They are rigid and must be followed in the given series. 

Goal

  • Policy- It reflects the ultimate mission of the organization
  • Procedure- It defines the practical applicability of the policies

Implementation

  • Policy- Best implemented when thoroughly accepted by the employees.
  • Procedure- Best implemented when it follows a logical and systematic process.

Support and Involvement

  • Policy- It supports strategies and includes terms and conditions that direct a company in decision-making. 
  • Procedure- It supports programs and involves sequential steps which direct the people for any activity.

Change

  • Policy- It can be changed only through the review process
  • Procedure- It can be discretion to change at the operational level if a certain step does not seem practical based on the working environment. 

Examples of Policy and Procedures

To understand the difference between procedure and policy, let's look at an example of requesting vacation time. The vacation policy has a framework of the amount of PTO an employee is eligible to take, while the procedure includes the steps to get the approval of PTO. 

Example of Policies

Example of Procedure

If an order of materials has to be placed in a manufacturing unit, the procedure will look like this:

  • Step 1 — Stores department will send a purchase requisition to the purchasing department
  • Step 2 — Purchase department will understand the requirements and analyze the bill
  • Step 3 — The purchase department will send an advertisement requirement to suppliers
  • Step 4 — Receiving the quotations from suppliers and analyzing the price, quality, and quantity of each one of them
  • Step 5 — Choose the best quotation based on the budget and place the order
  • Step 6- Receive the materials from the supplier
  • Step 7- Check the materials thoroughly
  • Step 8 - Send a material received a note to the suppliers
  • Step 9- Send the materials to the store's department
  • Step 10- Make payment to the suppliers

Policy and Procedure

To run efficiently, a company needs both policy and procedures. Together, they guide your organization and reduce the risk of liability. They further encourage consistency across the organization for employees and customers. 

Consistency helps build a healthy reputation for your company over some time regarding employee touchpoints with customers. It protects your brand and promotes visibility too. 

Some of the reasons to create policy and procedures are:

  • Policy and procedure increase compliance
  • They improve internal processes
  • Procedures and policy help you to navigate incidents and crisis

While creating policy and procedures, it is essential to understand the goal and what problem it is solving. The company policy on meetings should not contain a specific script to follow, just like the procedure for inventory should not have "count the objects." 

Dropping the curtains

Policy and procedures are a part of the internal structure of a company and are necessary for running successful management. They improve the efficiency of the firm and stabilize the operational processes. Both of them complement and do not contradict each other. It is essential to enlist them in the initiation stage for the smooth running of an organization.