The Effects of Disorganized Operational Policies and Procedures

The Effects of Disorganized Operational Policies and Procedures

When did your organization last perform an internal audit of your policies and procedures to evaluate their effectiveness?

If you’re like most organizations, chances are the answer is never. If that’s the case, you’re putting your business at risk. If left ignored the issues created by ineffective or undocumented procedures can permeate an entire organization, from administration to clients.

Sometimes, the procedures are sound, but people either don’t know where to find them or create their own unique version. Other times, procedures were created years prior and though the company has undergone significant change, no one has revised them rendering them useless and allowing everyone to make up their own.

Whatever the situation, trying to run a business without carefully created procedures that are centrally stored for everyone’s reference creates a culture of disorganization.
Here are some of the top operational problems I have encountered, which have resulted from a lack of properly controlled procedures:

  1. Everyone has their own version of the truth: When you lack documentation of your procedures you open them up to interpretation. People who have been with the company for years do things because that’s the way they’ve always been done. Over time, slight shifts in how each person approaches a task crack the foundation of your business and create confusion. What’s worse is that when you hire new people they are left to their own devices and this inhibits growth. Unable to get a clear answer as to how or why something is done, they too make assumptions. This leads to inefficiencies and frustrations among staff and management.
  2. You never know if there is a better way: If you don’t periodically review and challenge your processes and procedures, you can’t improve them. Businesses are dynamic and things are always changing. New tools become available, vendor requirements change, and staffing matrixes are fluid. If your procedures are controlled and properly documented, you can quickly determine if something is outdated, or use it as a reference when needing to create fixes to internal problems.
  3. Purchasing Mishaps: This is big for any organization. Not having a documented procedure for making purchases is not only costly, but can also create negativity among staff. People will either take liberties by making purchases without approval and expecting to be reimbursed, or they will simply go without a tool that would improve their job efficiency. Lacking clarity in your purchasing policy also means more work for your accounting department.
  4. Travel: Without a centralized team (internal or external) to handle travel arrangements, you’re likely missing the best price and favoring the rewards program of the staff member traveling. Additionally, allowing people to search and book their own travel arrangements without clarity on the acceptable limits costs money and does not save anyone time. For example, the higher cost staff members, say sales and management, should never be tasked with their own travel as it’s not a good use of their time in terms of what they cost the organization per hour. Paying a management level salary to someone sourcing hotel deals is not productive.
  5. Redundant Tasks: When procedures are not accessible to the entire organization redundancy quickly becomes an issue. When work is done incorrectly or documentation not easily accessible, tasks are either duplicated or needs to be corrected. This creates additional work for your accounting and administration groups, and can lead to unhappy clients or misperceptions about your organization.
  6. Contracts: When your contracts aren’t handled correctly it creates several challenges. Not only can things be miscommunicated to your clients but also to accounting, which leads to confusion over payment terms or even final costs. What’s more, when it comes time for an audit and you’re unable to provide the auditors with the contracts they request, you create additional work for both auditors and staff, and risk extending the audit further into your organization.

This is just the tip of the iceberg when it comes to the issues that occur when you allow your policies and procedures to go unchecked. Every organization wants to run as efficiently as possible, and maintain a culture conducive to productive work. While the process of evaluating and reorganizing your policies can seem daunting, the business risks associated with procedural chaos demand action. People cannot be held accountable for going outside a policy if the policy was neither clearly communicated nor easily accessible.

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