Policies and procedures remain vital to business management because they prevent each employee from having to reinvent the wheel and provide a standard against which individual performance can be judged. Policies and procedures are living documents that can and should be updated as circumstances deem necessary.
TL;DR (Too Long; Didn't Read)
Policies are the rules that a business implements to help it reach its long-term goals, and procedures are the specific methods for how employees should go about their daily duties. Both are designed to make sure the company achieves the desired outcome in the most efficient way.
Difference Between a Policy and a Procedure
In the simplest terms, a policy defines an outcome, while a procedure defines the means to the end. For example, it might be company policy that all employee purchases be rung up by another employee, while the procedure to achieve that might be that receipts must include both the name of the employee who made the purchase and the name of the employee who rang it up.
Another policy might state that employees need to submit a request for time off at least one week in advance. The procedure to do so explains the specific form that needs to be filled out and to whom it should be submitted.
Company policies might even be dictated by law, such as laws that state how often breaks must be given and how long they must last. The company procedure is flexible, however, and tells employees how you expect them to clock in and out for breaks and any other important information that makes sure things run smoothly while employees cycle through their breaks.
Developing Company Policies
It would be nice if you could make up a complete set of company policies when you first open your business and never have to revisit them. However, your policy and procedure book should be thought of as a living document, with new policies added as the need arises. One of the best examples of when a policy might need to be updated is when a business converts from a manual system to one managed electronically.
Importance of Policies and Procedures
Keeping all policies and procedures in written form improves the chances that they will be fairly and impartially applied to every employee in the company. For example, if a manager disciplines an employee for eating potato chips off of the conveyor belt, the employee could claim to be ignorant of the policy if he has not been given a copy of an employee handbook stating the "no eating" policy in advance.
Use in Performance Appraisals
The concept of policies and procedures enables each employee to know how she will be judged, and each manager can objectively compare individual performance. For example, if the policy is that each employee performs five quality checks per hour and documents her checks in a log book, it is very easy for a manager to sit down at the end of the day and see who is meeting the standard and who is not.
Using Policy and Performance Standards
On a daily basis, managers can utilize policy and procedure examples as coaching moments, showing an employee where his performance needs to improve or where his performance is stellar. At the end of a certain period of time, each employee can be shown his average performance as compared to the standard, and decisions such as merit increases, promotions or even employee retention can be made on an objective, fair and impartial basis.