How to Start A Business Course – Growing Your Business: Policies & Principles – Part 25/27

Even though a new business, launched in the modern age, should maintain an agile strategic approach and the capacity/capability to adapt to impactful change drivers and trends, various fundamental elements should be solidified to strengthen the foundation of your business. This foundation relates to the business practices and policies on which your business is built – the very core elements that ensure the efficient and successful governance of your business.

"Good governance should be like air. Its existence need not be discussed, but its absence would make a huge difference." - Pras Hanth

Good management, leadership, and overall governance serve at the core of every successful business – it serves as the foundation on which decisions and behaviors within and without the business are built. Any business needs to achieve its overall vision, goals, and objectives, as well as drive continuous improvement throughout its business lifecycle. It’s also vital to ensure the business maintains legal and ethical standing in the eyes of its industry, regulators, partners, customers, shareholders, and other vital stakeholders such as the wider community.

OBJECTIVES:

• Role & Characteristics of Good Governance
• Importance & Criteria of Sound Business Policies
• Typical Business Policies for Good Governance
• Benefits of Business Policies & Good Governance

Good Governance

Defining Governance

In the most basic terms, governance refers to the action or manner in which a business is run, ruled, managed, led, or controlled. It refers to the structures embedded within the business to ensure efficient, effective, lawful, and ethical decisions and actions – toward the achievement of the business vision, goals, and objectives, as well as for the greater good of the business, its stakeholders, and the wider community. It’s essentially the act or set of rules a business follows to ensure continuous improvement and overall success of the business.

There are predominantly 8 characteristics of good business governance: (1) Participation, (2) Rule of Law, (3) Transparency, (4) Responsiveness, (5) Equity and Inclusivity, (6) Effectiveness and Efficiency, (7) Consensus-Oriented, as well as (8) Accountability.

Participation

Collective decisions & actions
Effective policies & procedures
Internal & external application
Communicated regulations
Governance is an act of participation and requires the collective decision-making and actions of all crucial stakeholders of the business. Governance, ensured through effective policies and procedures, should apply to all internal and external stakeholders of the business, as well as encourage active participation and outputs following the regulations shared.

Rule of Law

Legal framework foundation
Specific actions & outcomes
Impartial policy enforcement
Protecting every human right
Good governance is typically built on legal frameworks. This ensures that decisions, actions, and ramifications of those decisions and actions are enforced impartially and protect human rights, particularly those of minorities.

Transparency

Legal & ethical enforcement
Accessible policy information
Sufficient rules & regulations
Understandable policy jargon
Transparency refers to decisions and actions undertaken, as well as their enforcement, in a manner that follows efficient, effective, legal, and ethical rules and regulations. It also refers to providing stakeholders affected by certain enforcement, especially employees, direct access to crucial information. It also requires governance policies and procedures, as well as the information, rules, and regulations within, to be sufficient and written/communicated in an understandable fashion.

Responsiveness

Holistic stakeholder approach
Timely response strategies
Agile enforcement approach
Situation-based adaptation
Good governance, enforced through business policies and procedures, requires a business to serve all stakeholders involved in a timely manner. This requires governance-related policies and principles to be responsive when enforcement is required, as well as agile enough to apply to various situations.

Equity & Inclusivity

Business & societal well-being
Balanced & inclusive process
Vulnerability considerations
Safe & inclusive environment
Both a business’s and society’s well-being depend on inclusive governance through legal and ethical policies and procedures. All involved stakeholders should feel they have a say, they have a stake in it, and don’t feel excluded for whichever reason from the business, decisions, and activities. This requires that these stakeholders, especially employees and those most vulnerable, feel safe and included within your business environment.

Effectiveness & Efficiency

Business vision & objectives
Stakeholder growth goals
Needs analysis & satisfaction
Sustainable resource usage
Governance should not only be legal and ethical, but effective and efficient. This requires policies and procedures to keep the overall vision, goals, and objectives of the business in mind, as well as the developmental/improvement goals of stakeholders in mind. This refers to rules and regulations, as well as processes, systems, and controls that meet the needs of both the business and its stakeholders, whilst utilizing resources effectively and efficiently. The effectiveness and efficiency of governance also cover the sustainable use of business and environmental resources, as well as protecting the environment and basic human rights.

Consensus-Oriented

Stakeholder & business needs
Communicate & create buy-in
Long-term benefit perception
Holistic growth outcomes
Good governance requires the consideration of the business and its stakeholders’ interests/needs/rights to reach a broad consensus within the business itself regarding what’s best for the business as a whole, its stakeholders, and the wider community, and how this can be achieved. It also requires a business to communicate and create buy-in of a long-term perspective of how good governance could benefit the business and those involved, as well as positively affect human development and overall business success.

Accountability & Ownership

Macro & micro-level ownership
Various accountability levels
Direct & indirect outcomes
Transparency & rule of law
Accountability and ownership are crucial elements of good governance. Good governance requires all involved stakeholders to remain accountable for their decisions and actions, not only for their own good and the good of other stakeholders but also for the good of the overall business and the wider community of that business. Dependent on the governance policies and procedures in place, varying levels of accountability and ownership would be enforced for various decisions and actions – either internal or external to the business. In general, a business/individual is accountable to those directly and indirectly affected by its / their decisions and actions. Accountability and ownership, however, can’t be enforced without transparency and rule of law.

Good governance deals with the nature and limits of the business and its stakeholders’ power – ensuring sufficient rules, regulations and ramifications are implemented to ensure, and not hinder, the growth and success of the business and its stakeholders. It also serves as a vital attractor of crucial stakeholders for the business – including skilled employees, active customers, and valuable partners. Other than sound overall business management, good governance serves as the cornerstone of business success and is enforced through various policies and procedures throughout the business.

Sound Business Policies

Defining Business Policy
A business policy is defined as a combination of rules and regulations designed and defined by the owner/partner of the business. Some policies are referred to as regulations, such as federal privacy laws, whilst others are created by leaders and managers to ensure adherence to certain standards. Business policies usually take the form of an operations manual or are embedded within an employee handbook. Although business policies differ in various industries and businesses, there are predominantly seven key features that have to be considered.

Specific
If a policy is not specific, training and implementation become inconsistent and unreliable.

Clear
A business policy should be written in understandable language and hold no ambiguity.

Uniform
The policy should be standardized and applicable to every employee within the business.

Appropriate
The policy should also align with the vision, objectives, and culture of the business.

Simple
A policy should also be clearly understood by those impacted by the policy.

Inclusive
The policy should also apply to all employees, and not just a small group.

Stable
Should there be an incident, the policy should be able to provide clear guidelines.

Business Policy vs. Strategy

To further clarify the concept of a business policy, it’s important to understand the differences between a policy and a strategy: A policy is considered a blueprint of the business activities/task, which are repetitive/routine, whilst a strategy focuses on untapped business decisions/prospects. However, both are implemented to aid and ensure the growth and success of the business. The policy of the business is typically designed by top-level leaders and managers, whilst strategy creation is usually completed by middle-level management – dependent on the hierarchy of your business.

Business Policy Outcomes
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Although a business policy includes a strict set of rules and regulations to ensure good governance, it could be flexible – especially based on changing parameters, industry trends, and volatile marketplaces. Keeping these uncontrollable factors in mind, business leaders/entrepreneurs are armed with the ability to mold the policy into a harmonious foundation for the business. This also enables a business to embed an agile and responsive approach, one of the characteristics of good governance, to managing the daily operations /activities /tasks/outputs /performance of the business – enabling the business to adjust to the employee, customer, and market feedback/trends, which could strengthen the business’s competitive position.

Business policies form a crucial foundation for your business, as it guides everything from legal capacity and power to employee and customer satisfaction, as well as reputation / public perception/ image. Business policies not only create a secure structure for the business but ensure every stakeholder impacted by the policy, is considered and on the same page when referring to expectations provided by the business. These policies could include human resources policies, operational policies, sales, and marketing policies, and so forth.

By carefully crafting and embedding these policies, you can ensure a safe, inclusive, efficient, effective, and positive working environment – crucial aspects of productivity and performance that should be considered. These policies also set the tone within the working environment and shield (1) employees from favoritism, (2) the business from reputational damage, and (3) enable excellent customer service – at a minimum.

Establishing a Culture
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When policies adhere to the aforementioned business policy criteria and good governance characteristics, certain expectations are established and enforced. These policies then ultimately shape the culture of the business, in terms of (1) what to do, (2) what not to do, (3) how to act, and (4) various consequences for those actions. Employees who are provided with clear expectations and instructions are enabled to perform their duties better and work towards certain standards. As mentioned earlier, transparency is an important characteristic of good governance. Ambiguity is the cornerstone of chaos – so make sure you create and clearly communicate policies that enable structure, even in a fun/transformational working environment.

Policies are redundant if they aren’t enforced, so you have to ensure that these policies serve as the backbone of your business. Some policies have legal consequences, including (1) discrimination, (2) sexual harassment, (3) health and safety, and (4) reputation and customer satisfaction – rightfully so. If these, and other policies aren’t taken seriously, governance will remain chaotic and relationships between the business leaders/entrepreneur, its employees, customers, and other stakeholders will be damaged.

Business Policy Training
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To ensure that business policies are understood and adhered to, business leaders/entrepreneurs must train their employees on these policies. Every employee should receive an employee handbook, typically provided during the onboarding process of the business – serving as the central document of the business. Employees should also be allowed to ask crucial questions, to further aid clarification. When creating a policy for the first time, or should your policies be outdated, there’s no harm in gathering feedback and suggestions from employees – which could result in increasing morale, creativity, productivity, and performance. Again, transparent, participative, inclusive, and consensus-oriented approaches.

Every employee should also keep these policies/handbooks on hand or have quick access to these updated documents when required. By training employees on these policies and enabling 24-hour access, employees wouldn’t be able to say they didn’t know or understand the applicable rules/standards. Training sessions are thus key, not only to discuss and review the content but to clarify the location of the document. These training sessions should be inclusive, and ensure employees understand the requirements and consequences described within these policies.

Apart from internal policies, the same applies to policies that directly affect other stakeholders – including business partners and customers/clients / end-users. These policies could also include various Standard Operating Procedures (SOPs) or protocols, as to when / how to deal with other stakeholders and customers/clients / end-users. This will assist employees in dealing with customer challenges, and address customer service issues in the appropriate manner – aiding brand and reputation management.

Types of Business Policies
So, given this knowledge, let’s take a look at some of the most important policies required for good governance within a typical business. Remember, some policies will differ in various industries and also businesses, especially on a micro-level, so whilst we discuss each, determine whether that policy would apply to your business, specifically. However, some remain universal and could result in legal consequences if not adhered to. Let’s explore.

Governance Policies

Governance policies, typically enforced through a Board of Directors / Advisors and various management committees, are referred to as the general and overarching policies that ensure the business is run in a transparent, legal, and ethical manner – promoting good business practices throughout each department/business unit. These policies would ideally address the following, at a minimum: (1) Requirements, (2) Authority, (3) Responsibilities, and (4) Accountability of the various leadership levels, as well as various actionable intra- and inter-departmental decision-making frameworks for the overall business. Essentially, the overall governance policy of the business ensures that all decisions and actions of the business and its stakeholders adhere to the characteristics of good governance.

Management Policies

Typically, a management policy is created and authorized by the owner / CEO of the business. This policy sets the nature of how the operations of the business will / should be managed, and by which stakeholders – set clear parameters for those departments/individuals involved. This policy would typically include procedure policies – guiding employees and other stakeholders as to the required decisions and actions, as well as the processes, systems, and controls required to perform those actions – ultimately aiding the daily operations of the business. This policy would also include various other internal policies, such as employee rights – at a minimum.

Quality Assurance Policies

The purpose of a quality assurance policy is to ensure continuous improvement throughout the business. This policy would include (1) a range of criteria, typically for daily tasks/outputs/activities, (2) those responsible for the QA process and clear descriptions of the QA process itself, as well as (1) various self-evaluation and action-planning frameworks. This policy ideally also includes protocols on product/service quality and sets the foundation for positive and meaningful exchanges with stakeholders such as customers/clients / end-users. This policy is crucial as it sets the foundation for every decision and action throughout the business – from micro internal tasks to macro external endeavors.

Stakeholder Relations Policies

A stakeholder relations policy, typically applicable to all stakeholders of the business, serves as a crucial document that reflects both the needs and rights of stakeholders – including customers/clients / end-users, partners, investors, and the wider community. This policy ideally includes statements of commitment and various actionable frameworks that ensure those commitments are adhered to. This policy thus essentially serves as the promise of outputs/delivery to those involved with the business, as well as how those involved engage in various exchanges with these stakeholders. Examples of stakeholder relations policies include (1) customer service policies, (2) partner and investor policies, (3) project partners, and so forth – to create an optimal experience for those involved.

Human Resource Policies

Customers/clients / end-users, partners, and investors are typically served by front-line employees and indirectly by other employees within the business. The business must thus develop sound human resource policies that address both business and employee concerns, needs, and rights. This policy not only includes rules and regulations regarding leave and dress codes but general employee conduct. It also includes various rules, regulations, and guidelines regarding employee productivity and performance, as well as the related frameworks, disciplinary processes, systems, and controls.

This policy is crucial, as it sets the foundation for employee output and must adhere to all the good governance and policy criteria mentioned, to ensure employees (1) understand expectations, (2) receive reasonable compensation/incentives for good performance, (3) could maintain a good work-life balance, and ultimately (4) serve the business and its stakeholders to the best of their abilities.

Non-Discrimination Policies

A non-discrimination policy is crucial to the overall success of your business. Employees and other stakeholders value a business that’s inclusive and doesn’t discriminate based on gender, race, religion, and other crucial elements. This policy would ideally include rules, regulations, and legal ramifications for (1) sexual harassment, (2) racism, (3) cultural bias, and so forth. Included in this policy is an Equal Opportunity Employment scheme, as well as clear rules and regulations regarding (1) disabilities, (2) pregnancy, and (3) overall diversity.

Privacy & Security Policies

Given that we’re in the digital or internet age, data privacy and security concerns are prevalent. To streamline and ensure successful exchanges with stakeholders, especially employees and customers, businesses must implement a data privacy and security policy throughout. This would include rules and regulations as to how stakeholder data is sourced, captured, stored, utilized, and shared throughout and outside of the business itself. This policy is ideally met with strict privacy and security software, as well as processes, systems, and controls – to protect the privacy rights of the business stakeholders.

This policy could also safeguard the business against any possible privacy and security threats and breaches, including various theft-based situations. This would ideally include rules and regulations regarding business and product/service / solution-based information – typically dubbed trade secrets. Usually, the latter would also be included in employment contracts and partnership agreements – accompanied by various non-disclosure and non-compete agreements.

Health & Safety Policies

Also included in your list of policy considerations, is your health and safety policy. Workplace safety is crucial in any given situation and forms an essential part of major regulatory bodies’ workplace requirements across the globe. This policy would ideally include parameters and prohibitions on (1) basic working conditions, (2) safety-ensured clothing, and (3) the use of equipment. This policy would also include various protocols in the case of both natural disasters and disasters brought on by individuals within the workplace environment.

Sustainability Policies

Lastly, every business should ideally create and implement a sustainability policy – specifically geared towards (1) lean business activities and (2) environmentally- and society-friendly endeavors. This policy ideally addresses environmental and societal challenges and ensures the business doesn’t contribute to major environmental threats such as global warming, carbon emissions, and general waste overload – to name a few. This policy not only ensures the business has a positive and uplifting impact on the environment and wider community but ensures that all stakeholders involved only engage in lean activities that reduce waste in all contexts.

We’ve now discussed the most important policies required for good governance. Developing and enforcing these policies according to the characteristics of good governance and criteria of sound business policies, would set standards throughout your business and motivate employees to reach/exceed these standards. Your business policies drive home what’s most important to your business and ensure delivery of promises/ commitments to stakeholders involved. However, as mentioned, sound business policy creation is only the beginning – good governance stems from how you create, communicate, enforce, and utilize your policies in general – for good or bad.

Business Policy Benefits

The policies and methods of enforcement you select as the leader of your business will directly affect how your employees perform, as well as directly affect your other stakeholders. Although it’s ultimately your decision as to the nature of these policies, there should be a clear set of rules, regulations, and ramifications for the most important decisions and activities throughout your business. The nature of the policies you select, create, and enforce will ultimately be determined by (1) your leadership style, (2) business vision, goals, and objectives, (3) stakeholder needs and rights, as well as (4) the overall rights and needs of your business.

Business policies are not only enforced to provide optimal service and prevent legal challenges but are also implemented to build and aid the business image, experience, and culture. As the leader of your business, you should remain abreast as to the implications of your policies and how your stakeholders, especially employees and customers, respond to these policies. Your policies should thus be monitored, evaluated, and adapted continuously – to support the growth and success of your overall business and stakeholder relations. There’s thus a fine balance between management and leadership.

Good overall governance, aided through sound business policies and procedures, streamline the entire business – as it assists leadership and employees in understanding the parameters in which decisions can be made and actions can be pursued. This ultimately reduces uncertainty across the board and creates clear expectations throughout the business – contributing to the overall performance and productivity of the business.

Given that policies provide specific routes for involved stakeholders, they guide decisions and actions toward selected visions, goals, and objectives – improving the overall working environment. As a result, sound business policies clarify the vision, goals, and objectives of the business, as well as provide clear rules, regulations, and guidelines for future operations. In turn, (1) enables the continuous monitoring and evaluation of performance, (2) facilitates overall coordination, (3) provides standards of quality, and (4) guides general decision-making processes and actions within the business.

Effective and efficient management and leadership throughout your business lifecycle will certainly aid the growth and scaling of your business. Through sound business practices and good governance, you can achieve respect, trust, productivity, and performance among your employees – aiding the success of your business.

Irrespective of the nature of your business, and specifically, the nature of your working environment, make sure to embed sound business practices throughout. This will not only aid relations with your stakeholders but add to your competitive advantage. So, value the role and importance of sound business policies and good governance – to make sure your business reaches, and employees reach its full potential.