Professional Documents
Culture Documents
Policy
A policy is a principle or protocol to guide decisions and achieve rational outcomes.
A policy is a statement of intent, and it is implemented as a procedure or protocol.
Policies are generally adopted by the Board of Directors or senior governance body
within an organization whereas procedures or protocols would be developed and
adopted by senior executive officers.
Policies can assist in both subjective and objective decision making. (Subjective-e.g.
work-life balance policy, objective e.g. password policy)
The term may apply to government, private organizations, groups and individuals.
Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law
requiring the payment of taxes on income), policy merely guides actions towards
achieving desired outcome. Policy may also refer to the process of making important
organizational decisions, including the identification of different alternatives such as
programs or setting priorities, and choosing them on the basis of the impact they will
have. Policies can be understood as political, management, financial, and
administrative mechanisms arranged to reach explicit goals.
Business policy basically deals with decisions regarding the future of an ongoing
enterprise. Such policy decisions are taken at the top level after carefully evaluating the
organizational strengths and weaknesses in terms of product price, quality, leadership
position, resources etc., in relation to its environment.
Once established, the policy decisions shape the future of a company. In a way,
business policy implies the choice of purposes, the shaping of organizational identity
and character, the continuous definition of what is to be achieved and the deployment
of resources for achieving corporate goals.
Some useful definitions of Business Policy
A business policy is an implied overall guide setting up boundaries that supply the general limit
and direction in which managerial action will take place.
A business policy is one, which focuses attention on the strategic allocation of scarce resources.
Conceptually speaking strategy is the direction of such resource allocation while planning is the
limit of allocation
A business policy represents the best thinking of the company management as to how the
objectives may be achieved in the prevailing economic and social conditions
A business policy is the study of the nature and process of choice about the future of
independent enterprises by those responsible for decisions and their implementation
The purpose of a business policy is to enable the management to relate properly the
organizations work to its environment. Business policies are guides to action or channels to
thinking.
Business Policy defines the scope or spheres within which decisions can be taken by the
subordinates in an organization.
It permits the lower level management to deal with the problems and issues without consulting
top level management every time for decisions.
Business policies are the guidelines developed by an organization to govern its actions. They
define the limits within which decisions must be made.
Deals with acquisition of resources with which organizational goals can be achieved.
Business policy is the study of the roles and responsibilities of top level management, the
significant issues affecting organizational success and the decisions affecting organization in
long-run.
B. In terms of skills:
Attainment of knowledge leads to the development of skills.
Develop an analytical ability and use it to understand the situation
Develops the skills of identifying factors relevant in decision-making.
Increases the mental ability of learners and enables learners to link theory with practice.
Leads to the development of oral as well as written communication skills.
C. In terms of attitude:
Development of generalist attitudes enables the learner to approach and assess a situation from all
possible angles.
A generalist is able to function under conditions of partial ignorance by using his judgement.
Necessity to possess a liberal attitude and be receptive to new ideas, information and suggestions
is important for a professional manager.
An important attitudes is to go beyond and think when faced a problematic situation. It
develops a creative and innovative attitude which is the hall mark of a general manager.
Classification of Policies Policies may be classified as follows:
A. On the Basis of Source:(Origin, Appealed, Imposed)
B. On the Basis of Functions:(HR, Finance, Production, etc)
C. On the basis of Expression: Oral, Written, Implied
D. Based on Scope: Basic, General
E. Based on Levels of Mgmt: Top Mgmt Policy, Middle Mgmt Policy & Operating Mgmt Policies
F. Based on Situation and Contingency: Normal, Contingency, Administrative or Major,
Departmental or Minor
On the Basis of Source
According to source, origin or emergence, policies may be of the following kinds:
Originated Policy
It is also known as formulated policy. It is formulated by top management to guide
decision making at lower levels. Such policies are broad in scope and affect usually the
whole organization or its major segments. These policies are often written ones, typically
in the form of a policy manual of the organization.
Appealed Policy
It is a policy formulated on the appeal or request of subordinates for filling the gaps left
by originated policies. In other words, when a subordinates refers an exceptional problem
of frequent nature not covered by existing policies, to his superior and appeals for a
policy decision. When the superior makes decision in such a case, it becomes a precedent
(policy) for future action. Such policies may be formulated at any level and are in the
nature of flowing upward policies. Imposed Policy. It is a policy, which an organisation
is compelled to adopt due to some outside forces, such as the government and its
regulatory agencies, trade association, trade unions.
3. Marketing Policy
Capital structure policy, packaging policy, distribution policy, advertising policy,
customer service policy, credit policy, market research policy and important examples in
this category. Customers complaint must be responded within the next day is an example
of Customer Service Policy.
4. Finance Policy
Capital structure policy, fixed capital policy, working capital policy, investment policy,
research policy, divident policy are some examples in this category. Excess capital, if any
should be invested for short term only, preferably in limited company shares registered in
stock exchange is an example of Investment Policy.
5. Accounting Policy
Inventory valuation policy, depreciation policy, provisions policy (for bad debts etc)
deferred revenue expenditure policy etc. are examples in this category. Deferred revenue
expenditure (e.g., a huge amount spent on advertisment) should be spread over the years
of its benefit generation and written off every year accordingly, is an example of
Deferred Revenue Expenditure Policy.
Your foremost concern should be how that policy will affect your business's daily
operations. In any policy change, there is always someone who is unhappy. While the
majority of the time this unhappiness is irrelevant to the policy's necessity, it can
sometimes make the policy more of a problem than a benefit. If a policy will unduly
burden yourself or your employees, you might want to consider making changes to the
policy or to scrap the policy altogether. Many business partners prefer to discuss and
mutually agree on instituting a new policy. If you believe that your partner would consult
rather than be told the new policy, consider setting a private meeting to discuss the topic.