Posted by Bill Dann

Questions from managers during a workshop delivered last week on developing sound policy and procedure prompt me to share some considerations about when to set policy.

Life at the extremes

My first management position was with a government agency, and I learned how setting too much policy stifles creativity, innovation, building of sound judgment and morale. It can sap the energy out of an organization.

At the other extreme is Nordstrom, whose early success was built on two policies. Number one, “do whatever it takes to please the customer” and, number two, “when in doubt, consult policy number one”. Obviously it worked for them, and their approach transformed the retail industry who had to alter its policies to emulate the Nordstrom commitment to customer. This minimalist approach worked because Nordstrom coupled it with aggressive incentives for all their salesman and supervision practice that weeded out the faint of heart. Likely this model would be tough to execute for most organizations.

Additional risk of tight policy

There is a fair body of research that finds that performance that is outside the bell curve, i.e. is extraordinary and innovative, is often based in practices that actually violate policy. The practices are not known because those employing the practices don’t want to expose their shortcuts and be forced to curtail them. In such an instance, policy has stifled innovation and improved performance.

So then, what is sound policy?

policyPolicy should be a set of general principles that guide the planning and programming of managers in the organization. As you go lower in the organization, policy becomes more specific until it becomes orders for specific action. For example, a general policy for a clinic might be “services to patients shall be maintained throughout all posted office hours”. Within a department then, policy or orders might require that lunches be staggered in a certain fashion such that the flow of patients through the clinic not be disrupted during lunch hours.

When should you set policy?

There are no “one size fits all” answers here, but there are some principles you can apply. Consider using policy in the following instances:

  • When the cost of a mistake is high.
  • When how you want something handled is outside of common sense and must be prescribed.
  • When there is a record of somewhat consistent poor results across a number of departments or employees, i.e. not an isolated section or employee having difficulty.

When not to set policy

Well, obviously, it is the converse of what is listed above. However, there is one common practice in policy setting that, in my experience, is most damaging. Namely, using policy to replace supervision, i.e., the evaluation and management of performance of employees. Commonly, supervisors don’t like confronting employees regarding their performance. An example? An individual employee’s misuse of a company vehicle. Rather than deal with the individual, the supervisor will mandate that all employees park their vehicles at the end of the day. All employees are negatively impacted because of the behavior of a single employee that the supervisor won’t confront.

Why is this done? Because supervisors believe they need a rule in place to enable them to be successful with “gotcha”, and only a “gotcha” can get either the behavior you want or provide grounds for termination.

Another example might be a policy in a chain of retail stores mandating that regional managers visit each store once every three months. This policy is in place because management doesn’t believe or trust that regional managers have good judgment about when to visit stores or that they will slack off on their visits to stores. But the impact of such a policy may well be that high performance stores are visited needlessly and underperforming stores aren’t getting the training/support they need to get to high performance.

In my view, the retail chain should rather say that the regional managers shall have the authority to make the judgment on when and how often stores should be visited but will be evaluated based on the performance of the stores, providing an incentive for good judgment.

A closing word

If you are interested in supporting your management team or supervisors in setting sound policy, contact us about a workshop on principles and tools for setting sound policy and procedures.