DISCRETION

 

Discretion can mean several different concepts in the business environment. The dictionary gives two different definitions, one that applies to the art of being discreet and another that relates to having the ability to make a judgment, a choice, or a responsible decision.

All of these apply in the business world, where executives may have the discretion to spend money, discretion to put their business up for sale or the discretion not to tell the media about the company’s staffing difficulties. The importance of discretion to the reputation of a company cannot be overstated.

Respecting Confidentiality

Most companies require employees to be discreet in their business communications. They expect employees to figure out what information can be shared freely, both internally and externally, and to be discreet about what they tell others. Written communications such as email are particularly vulnerable to improper and unauthorized distribution because they are so easy to forward to others.

Trade secrets are zealously guarded. Many companies require staff to sign confidentiality or non-disclosure agreements. Lack of discretion in communications could result in details about the company’s products, processes, and financial information getting into the wrong hands.

Exercising Sound Judgment

When people in a company or organization are responsible for deciding when or how to perform certain tasks or aspects of the work, based on their knowledge and ability to judge, the responsibility for the decision is said to be at their discretion. Professional discretion means the company expects them to be able to source and evaluate the information necessary to decide on a specific course of action.

The company also expects them to be able to take the decision that they feel is the right one, which is called acting according to their discretion. Professional discretion examples include acting within the scope and authority of their job description, such as independently making an exception to the company's return policy to satisfy a disgruntled customer.

Appropriately Managing Money

A company incurs fixed and variable costs such as the purchase of raw materials, salaries, and overhead. Some additional expenses incurred are not essential to produce the goods and services marketed by the company.

Known as discretionary expenses, these usually include costs about which management can make individual decisions, such as entertainment expenses and preventive maintenance. Discretionary costs may usually be reduced or dropped altogether without seriously affecting the company’s profitability.

Many positions in business, such as trustees, executors, and bankers, manage assets belonging to others, and make discretionary decisions on a client's behalf. Employees who hold such fiduciary responsibilities are entrusted to act as good stewards of the company or the client assets.

Abiding by the Law

Provided the business owner acts within the law, he is free to make rules that apply to his business at his discretion. For example, in a corporation, the legal business judgment rules give “broad discretion” to board members regarding the methods they use to perform their duties.

Business owners have the discretion to determine the actions that are in the best interests of their business, while also respecting their right to privacy. Lack of discretion can have serious legal ramifications if private information is leaked.

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