What is a business policy and why is it important?

By Indeed Editorial Team

Published 8 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

All businesses work to a specific set of rules and guidelines that a company's policy for business lays out. A policy for business defines the scope and direction in which a business's employees make decisions, and a business's executive management team usually creates and defines it. An effective policy for business enables lower-level management professionals to make business decisions without consulting higher-level managers. In this article, we explore what a business policy is, what it covers and why it's important.

What is a business policy?

A business policy is a clear and concise document that sets out the rules of business operation as the owner or the manager of a business defines them. A clear policy for business helps to empower lower-level professionals to make decisions that meet company standards and ensures that a business operates consistently no matter who is making decisions. Higher-level executives are usually responsible for creating a policy for business, which they can then circulate around the company.

The kinds of rules that most companies include within a policy for business differ between companies. In some industries, business policies might include a lot of national or international regulations that the company follows, while other business policies outline the way that staff handles business operations. A good policy for business is:

  • Clear and specific: It's essential that lower management and other members of staff can read and understand a policy for business in full, with no room for ambiguity. This means that the implementation of the policy is consistent across the company.

  • Universal: When writing a policy for business, it's important that the rules set out in the policy apply to everyone in the organisation. Each rule has to be universal to all staff, from top management down to floor staff.

  • Appropriate: All areas the policy covers are appropriate to the organisation's goal and industry. This prevents a policy for business from becoming too long and irrelevant.

  • Stable: If an incident arises, a policy for business is stable enough so that all staff members can follow it without any indecisiveness.

  • Flexible: While it's important that a policy for business isn't ambiguous, the management team creating a policy for business still has to consider each rule from all perspectives and make any necessary allowances within the policy. For example, including certain allowances for staff members with disabilities or other impairments.

What does a policy for business cover?

Business policies cover a wide range of different subjects, some of which relate to operations that might have legal implications, and others that are just very important to the future and success of the business. These include:

Policies the law requires

Most companies require some policies that ensure their organisation meets legal requirements. Matters that have serious legal implications for most organisations include health and safety and employment. For example, in organisations that own warehouses or construction sites, the policy for business might include some rules relating to protective clothing that staff and visitors are to wear onsite. Not only does this policy protect a company's staff and visitors from potentially dangerous injuries, but it also protects the company from lawsuits.

Policies to protect the company legally

There are also matters business policies cover that the law does not require, but which can also help to protect a company from lawsuits and mitigate risk in advance. These policies might cover a business's approach to equal opportunities, data protection rules, and anti-corruption regulations. The law requires that most businesses take some measures on each of these subjects; how an organisation's policy for business chooses to address them can differ greatly.

Policies relating to business operations

A policy for business handbook can also include information relating to matters that do not necessarily pose any legal threat but could still affect a company's operations and brand. These rules outline how staff can deal with particular situations, and which actions are available to them under different circumstances. Some examples of rules like this are:

  • how a company handles the media

  • company policy relating to finances, including expenses

  • employment policies to follow when hiring new staff

  • dress code and uniforms

  • an organisation's use of external agents, including consultants

  • policy relating to the use of personal devices at work

  • IT And communications policy, particularly regarding data safety

Related: Dress code policy: advantages, tips, types and examples

Why is a policy for business important?

A policy for business is an essential guide for most organisations. Not only does a policy for business protect a business from potentially serious legal complications, but it also ensures consistency across all management teams within the company. A company's policy for business can affect legal liabilities, staff satisfaction and public image, which in turn, can have a significant impact on the profitability and overall success of the company.

Establish a positive corporate culture

A policy for business is one of the key elements in a business's corporate culture. An organisation's policy for business sets the expectations surrounding company culture and working environment from the moment new staff members join the team and makes it clear that management takes any breaches of these policies seriously. This is particularly relevant to rules and policies relating to sexual harassment, holiday time, sick pay, and other matters that have a serious impact on a company's employees. A policy for business is in place not just to protect the company but also to protect its staff.

Related: The importance of leadership and culture in organisations

Protects the organisation from legal liabilities

A policy for business guides staff members at every level of an organisation when they make important decisions. An effective policy for business ensures that all decisions made in line with the policy are legally sound, and protects a business from potentially serious legal implications such as lawsuits. For example, a policy for businesses that outlines key health and safety measures to keep staff and visitors safe on business premises significantly reduces the risks of a lawsuit arising due to slips and other injuries.

Improves consistency across an organisation

Senior management teams create a policy for business with a view to this policy informing the decisions of every member of an organisation. This creates consistency across the business, whether senior, mid, or lower-level staff are making decisions. If a policy for business is unambiguous, it can lead to staff making the same decisions across a business, regardless of who is making them.

Empowers a business in disciplinary hearings

Without a clear and decisive policy for business in place, companies can struggle to correctly discipline or hold employees responsible when they breach company rules. If an organisation's policy for business clearly outlines a rule, it makes it easier to back up disciplinary decisions that managers make when an employee breaks a rule. If it's ever necessary to fire or suspend a member of staff for a breach of rules, it's essential to include that rule in the policy for business.

Boosts staff satisfaction

A good policy handbook can also contribute to employee satisfaction and engagement. People feel happy to work for companies that protect their interests with staff-centric policies such as those relating to employee rights, holidays, and perks. Creating a positive work environment has a significant impact on staff satisfaction, which in turn affects productivity and performance.

Related: What is employee engagement? (And how to incorporate it)

Tips on writing and implementing a policy for business

When writing a policy for business for an organisation, it's important to take steps both to ensure that the policy is as good as it can be, but also to make sure that staff members follow the policy consistently.

Consider the policy for business a living document

Once you've written a policy for business for an organisation, this doesn't mean you can't make changes, improvements, and adaptations to it. As you implement different parts of your policy in different situations, you may find that there are rules you want to add, change or adapt within the policy. It's important to regularly update the policy for business, both to improve it and ensure that it covers new laws and legal requirements.

Deliver regular policy training

A policy for business is only effective if the employees of a company know and follow it. Delivering regular training to both existing members of staff and new hires is the only way to make sure that staff members are fully aware of the rules to follow while at work. You can also give new hires a company handbook when they start work, which includes the policy for business plus other important information about working for the company.

Be consistent when dealing with policy violations

If a member of staff does break one of the rules an organisation's policy for business includes, it's important that business leaders manage these violations consistently. The key premise of any policy for business is that it is universal and comprehensive, which means it applies to all members of staff with no exceptions. It's important to treat even small breaches of policy for business seriously to demonstrate to coworkers how important following company policy is.


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