25 November 2009

Policies & Procedures: a good thing or bad?

I enjoyed this post from CRG, who occasionally blogs from Imperial Valley.
(NB: I read it months ago, so some echoes appear in this post on term limits for bureaucrats.)

Point: At some point in a company's growth, there need to be policies & procedures put in place to streamline processes, and to make the organization's activities efficient, consistent and systematic.

Counterpoint: If you have to spell out to your employees precisely how to do their jobs, then first, either you have the wrong people in these jobs or you are not managing them well; and second, you are encouraging the employment of drones rather than skilled, thinking people. Too many policies and procedures stifles the best employees by not allowing them to use their skills and abilities to make decisions. Conversely it allows the lazy, untalented and unthinking to flourish as all they have to do is follow the P&P manual and meet the "core competencies" delineated in their job descriptions to skate along and appear to be model employees.

Point: When your organization reaches a certain size, to protect yourself legally and publicly (particularly for public sector and publicly traded organizations), you have to have a structured set of systems in place to ensure you are treating employees, customers and situations consistently, and to defend against outside claims of inconsistent and inefficient processes.

Counterpoint: Hire well, give your employees the tools they need and the guidance they need, and manage your employees well. If you have done that, while you will always need basic P&Ps, you can rely on your employees -- and expect your employees -- to act in accordance with your direction, as long as you hold them accountable. It's not an easy way to operate - you have to think, and defend your actions rather than just relying upon the System to tell you what to do. You will have to defend your methods when consistency and efficiency are attacked. You will have to defend your employees and you will have to hold your employees accountable. But your organization will be more streamlined, more agile, and you will be more effective in your goals.

Legally you need to have systems in place for discipline, termination and employee review. However, even in these aspects, you need to allow your managers to use their discretion, and back them up when required. Again, this requires the guts to stand up for your management team, and it requires that you hold your managers accountable for their actions, rather than relying on systematic policies and procedures over management ability and responsibility.

Bottom Line: When you create strict and detailed policies and procedures, you will end up chasing away the best and most talented/skilled employees, and promoting the unskilled drones. Eventually, it will take four people to do the work of one: one person to write the manual, one person to train the manual, one drone to read the manual and follow the steps, and one manager to breathe down the drone's neck and make sure the work gets done. And when an unforeseen issue arises, it will choke the organization because the employees who have been trained to never stray from the manual will not be able to respond to an issue that is not covered in the P&Ps.

On the other hand, when you hire well and give your employees appropriate (but not overwhelming) guidance, tools and oversight, your operation will benefit greatly. Yes, there will be times when your employees will fail you, occasionally even in a big way. But in the long run it will be worth it, even with those occasional faults.

1 comment:

W.E. Heasley said...

Interesting points.

Early “scale” versus late “scale” and the journey between the two time frames is very much associated with your discussion. The journey turns into a central planning case with associated bureaucracy. The journey between the two points goes from incremental organization to categorical organizational inflexibility.

You might even say that the center of your discussion is limited business governance. That the way to avoid central planning bureaucracy ending in categorical organizational inflexibility is to base the firm on a charter requiring limited governance. That would be pure Hayek.

The exogenous governance problem you have is : government scope. Government scope lends itself to
central planning bureaucracy ending in categorical organizational inflexibility. It would have to be consider that firms are mobile (all human capital and capital is mobile) and will seek the lowest possible level of government scope (same effect as seeking the lowest possible level of tax).