Many business owners prefer to make all their decisions on a case-by-case basis, as determined by their deep understanding of individual circumstances and well-developed gut instinct. They resist creating formal policy, believing that each situation calls for unique, specialized treatment — whether it’s resolving customer complaints or dealing with employees’ problems.
An Argument on Behalf of Policy
But the one-off approach isn’t always efficient or appropriate. I’ve worked with many entrepreneurs who started out with the assumption that decisions made on a case-by-case basis would be better decisions, but learned that they could save both personal and operational wear-and-tear if they created formal policy guidelines. Here are two examples:
Example 1: A catalog owner was convinced that each customer service situation should be decided on its own merits, so he personally approved every service resolution whenever he was available to do it. That meant he constantly second-guessed employees’ decisions, and frequently made unnecessary gifts or encouraged customers to call him directly whenever they wanted something special.
But the catalog owner lacked the time to follow up with customers consistently. Customers who felt ignored became indignant, often refusing to be satisfied by solutions from mere associates or operations managers. His intermittent interventions disrupted operational efficiency, created stress and morale problems for the staff, and cost more than occasional staff mistakes and extra apology gifts would have done.
Example 2: A service company owner wanted all employees treated according to their needs, their contribution to the business, and their good intent. He counted on his employees to help him make the business successful, and wanted them to love and rely on him; he expected to love them too, so he tried to take care of whatever they needed. This subjective calculation worked while the firm was small: The owner knew each employee’s track record and personal story.
But as the company grew, the owner no longer knew most employees personally, and depending upon their work experience and personalities, the new managerial intermediaries made very different judgments about employees. Because the owner no longer had the same grasp of workplace issues, his judgment could be swayed by the intermediaries on special cases — often in error — and he often appeared arbitrary rather than generous.
The Benefits of Corporate Consistency
Both owners were surprised to learn that consistency of philosophy and approach creates less friction in the system than trying to resolve each situation individually. The majority of business problems are relatively straightforward, and can be treated in standardized ways that have been proven to work over time. Most situations can be resolved with a few basic guidelines and some ongoing training, and then everyone knows where they stand.
In the catalog company, after significant data collection, the owner was able to see that almost 90% of all their service problems fell into a few basic categories, and the vast majority of customers would be satisfied so long as resolution was prompt, fair, and conveyed with respect. Customers who believed they deserved special treatment truly were exceptions, and could be treated that way.
The same was true for the service company owner. Most employee issues occurred in areas like time off, differences of opinion with supervisors, and garden-variety conflicts with colleagues. Most could be handled by line management, or by HR.
Making the Switch to Standard Operating Procedures
Policy guidelines are the equivalent of shortcuts: They support accurate decision-making without significant data collection, analysis, discussion, or review. The ability to do the right thing is generalized and passed down by the owner to others who didn’t start the business in their basement and don’t have the experience of working through a Better Business Bureau investigation or employment lawsuit.
Shifting from total case-by-case decision-making to standard operating procedures — with guidelines for special attention to exceptions — helped the two business owners save valuable time and put their energy into the development of others to carry out their visions. In both situations, establishing generalized policies also let the employees learn their owners’ values and, therefore, how to perform in satisfactory ways.
For these two busy owners, delegating the majority of decision-making to qualified staff freed them to concentrate on new ways to build and improve the business overall, rather than feeling trapped by day-to-day details and problems. They each needed to be reminded of their own guidelines from time to time — but they took comfort in recognizing that they could always create new exceptions when circumstances warranted it.