Policies are a set of rules that govern the behavior of an organization and are an important aspect of a companys culture. They are created to ensure that the organization is operating in a way that is consistent with its values and goals. Policies can be used to guide employees on how they should behave in certain situations, guide customers on what they should expect from the company, and guide suppliers on how they should interact with the company. Policies can be created for any aspect of the company, such as hiring, training, or even office hours.

Policies are generally adopted by a governance body within an organization, and they can assist in both subjective and objective decision making. Policies used in subjective decision-making usually assist senior management with decisions that must be based on the relative merits of a number of factors, and as a result, are often hard to test objectively. In contrast, policies to assist in objective decision-making are usually operational in nature and can be objectively tested.

Governments and other institutions also have policies in the form of laws, regulations, procedures, administrative actions, incentives, and voluntary practices. Policies differ from rules or law, as the law can compel or prohibit behaviors, while policy merely guides actions toward those that are consistent with the organizations values and goals.

The purpose of policies is to help organizations tie together their mission, vision, values, and culture into clearly written and easily understood guidelines. Policies set clear expectations for employees in terms of the behavior, actions, and processes they take in specific scenarios, which allows employees to know and understand how they should respond according to the mission, vision, and values the company establishes. Clear policies also allow leadership to institute and solidify best practices throughout the organization, which can reduce risk.