What’s the Difference?

Being the documents nerd I am, I have found that sometimes the types of structure and documents businesses needs can be confusing.

Often times the word Policy is misunderstood… what exactly is it, what does it do, and why do I need it? Processes and Procedures get mixed up all the time. What is a Standard and when do I need to have one? How about Guidelines?

In the realm of Operations organization and structure, these terms are often used interchangeably or misunderstood. But fear not, because I'm here to clear up the confusion and shed light on the differences between these crucial components for your business.

Whether you're a seasoned business owner or new to the world of business ownership, understanding the distinctions between policies, processes, procedures, standards, and guidelines is essential for effective operations.

So, let's dive in and demystify these concepts once and for all!

In any organization, whether large or small, maintaining clarity and consistency in operations is crucial for success. This is where the hierarchy of policies, standards, processes, procedures, and guidelines comes into play. Each component serves a distinct purpose and feeds into the next, creating a cohesive framework that not only guides the organization's activities, but increases productivity and revenue, reduces risks and costs, and frees up the business owner - giving you your time and freedom back!

The Simple Differences

1. Policies

At the top of the hierarchy are policies. These are overarching principles that provide a broad framework for decision-making and behavior within the organization. Policies outline the organization's stance on various issues, ensuring alignment with its mission, compliance with laws and regulations, and operational efficiency. For example, employee policies establish a guide for behavior and expectations, while finance policies dictate how financial transactions should be conducted.

Description: Policies are the course of actions in your business. They outline your organization’s plan for tackling certain issues and drive the Process and Procedures in your business.

Use: A policy mandates, specifies, or prohibits conduct in order to enhance the business’s mission, ensure coordinated compliance with applicable laws and regulations, promote operational efficiency, and/or reduce risk.

Examples: Employee Policies, Finance Policy, Vacation Policy, Board of Directors Policy, Corporate Credit Card Policy, or Compensation Policy.

2. Standards

Wedged in between Policies and Processes are are standards, which specify uniform uses of specific technologies or configurations. Standards are not necessary for all businesses, and are often dictated by the industry your business is in. Standards provide more specific details than policies and are often referenced within them. For instance, a policy may dictate a standard format or rules of measurement.

Description: Standards specify uniform uses of specific technologies or configurations. Standards are often standalone and referenced in Policies.

Use: To set specifics of company or Industry - typically more technical or industry specific language.

Examples: “All contracts have the following typography: Font: Arial; Font Size: 8; Margin Type: Normal.”

3. Processes

Next in the hierarchy, typically informed by the Policies, are the Processes. Processes provide a high-level view or map of how tasks are to be completed. Think of processes as the roadmap that guides individuals or teams through the steps necessary to achieve a particular goal. For example, an inventory/supplies ordering process outlines the steps involved in replenishing stock, from assessing inventory levels to placing orders with suppliers.

Description: Process is the high level view or the map of the task. Like a map, the process lays out how you will achieve the goal or complete the task.

Use: Explains how something works at a high level and defines tasks to be done to achieve goal.

Examples: Inventory/Supplies Ordering Process, Project Life Cycle, Website Design Process, or Client Onboarding/Offboarding Process.

4. Procedures

The Processes then inform the Procedures. Procedures are the detailed, step-by-step instructions for performing tasks outlined in Processes. They provide clarity and consistency by breaking down tasks into manageable steps, akin to a checklist. For instance, a new hire onboarding procedure may include steps such as completing paperwork, setting up IT access, and providing an orientation to company policies and procedures.

Description: Procedures are the step-by-step instructions for how to complete the task. Provides detailed instructions (like a checklist) on how to perform a task.

Use: Define all tasks that need to be accomplished and the steps within each particular task - clarity and consistency.

Examples: New Hire Onboarding Procedure, Opening/Closing the Store, or Entering in Point-Of-Sale or Inventory System.

5. Guidelines

Lastly, we have guidelines. While optional, guidelines provide additional advice and support for Policies and Procedures. They offer general recommendations, best practices, or examples to assist in the guidance for a situation that is not black or white in nature. Guidelines serve as a valuable resource for individuals tasked with implementing Policies and Procedures, offering insights into what has worked well in the past.

Description: Guidelines provide general guidance, and additional advice and support for Policies, Standards or Procedures. Assists the small business owner in explaining the Policy or Procedure that has ambiguity.

Use: General recommendations, best practices, or use case information as to what has worked before.

Example: “Before reviewing a contract, try to gather as much relevant information about the transaction as possible. Find out what the parties believe to be the significant risks.“

REAL-LIFE EXAMPLE

What does this all mean?

More Time⏳ Reduced Costs 📈 Higher Revenues💵 and FREEDOM! 😮‍💨

By understanding how each component in the hierarchy interacts with the others, small businesses can establish a robust framework that promotes clarity, consistency, and efficiency in their operations.

Understanding and implementing Policies, Standards, Processes, Procedures, and Guidelines in your business is not just about organizational structure—it's about unlocking the potential for growth, efficiency, and success. By clearly defining how tasks are performed, setting uniform standards, and providing guidance for decision-making, you pave the way for smoother operations, reduced costs, and increased productivity.

With these documents in place, business owners gain more than just structure—they gain valuable time, reduced costs, higher revenues, and the freedom to focus on strategic initiatives that drive their business forward. So, embrace these tools as catalysts for success and watch as your business flourishes with clarity, consistency, and purpose.