I often speak to small-business owners concerning employee relations and various challenges they may face with their staff.

A common question that is presented is, "Why do I need policies?" Some think that because they have a small staff it is not necessary. A common thought is that talking things through and having an understanding is enough. I am an advocate of having an "open-door" policy and fostering a relationship with your team so that they feel they can have honest conversations with you, but that shouldn't be all there is.

Putting your expectations in writing in the form of a policy is very important to your business' bottom line. Am I saying that it affects you financially? Yes, I am. Here's how:

--Written policies provide clear direction for employees and put them "in the know." This provides both parties with a clear expectation that can minimize turnover. This affects the business financially because the general rule of thumb is that the replacement cost is approximately three months' average salary and the advertising cost if incurred.

--Policies also protect you legally. Signed policies are going to help you in proving that the employee was aware of the rules and parameters in place. It's difficult to say what the savings could be should an employee lodge a complaint. It would depend on the dispute. It is nearly impossible to prove a conversation or a handshake agreement.

If you have taken the steps to create a firm foundation for your business, kudos to you. This will prove to be invaluable. Your next step is to review your policies and employee manual annually for possible updates, additions and changes. Also, you may need to revisit your policies to determine if you've addressed everything in your business.

Today's employees have new needs, and in some cases, society dictates new demands such as "flex time," home office work, ad hoc committees or work teams where they are representing your company to meet organizational objectives.

I recently read an article in HR Magazine published by the Society for Human Resources Management that describes policies as living documents. "Policies need to become more fluid. The reality of today's rapidly changing workplace requires organizations to build policy structures that allow for change with the operational needs of the business. ... Rigid policies rooted in historical operating procedures or dated company culture strangle the organizations ability to rapidly adapt to the marketplace. Overbearing, highly structured policies that permeate an organization become a crutch for weak managers and stifles leadership."

Policies are indeed the foundation of a business and can protect the company. While that is a function, they also should offer flexibility and propel the business and the employees.

Employee manuals and policies should be customized to your business. There are many online resources, and those may be a good start in trying to determine what you would like your policies to be centered around. Ultimately, you should seek out a professional to assist you in creating the foundation for your business.

Pat Eardley is a human resources adviser with more than 16 years' experience in human resources management. She supports small-business owners, allowing them to have more time by focusing on creating a successful business environment for them and their employees. You can find out more about Pat and the services she offers at www.pateardley.com.

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