Management Concepts & Organisational Behaviour - Policies

Importance of Policies

   Posted On :  17.05.2018 10:24 pm

Policies provide the broad framework within which decisions are made.

Importance of Policies

Provide the Framework for decisions

 
 
Policies provide the broad framework within which decisions are made. In the absence of appropriate policies, managerial decision-making may be analogous to “reinventing the wheel” every time. For example: a policy on internal promotions greatly helps the manager in filling the vacancies. Whenever vacancies arise, he simply goes by the existing promotion policy of the organisation. Sound policies thus save lot of time in decision-making and avoid confusion.
 

Ensure Consistency in Operations

 
 
Policies specify the boundary conditions of decisions. When decisions are actually made, they conform to the policy relevant to the decision. If the policy of an organisation is to face competition with quality products, the emphasis naturally will be on issues related to improving the quality of the product. All the decisions that affect the product quality are normally taken in the light of the explicit policy. Policies developed carefully and understood perfectly results in consistency in planning.
 

Principles of Policy Making

 
 
Policies help to ensure that all units of an organisation operate under the same ground rules. They facilitate coordination and communication between various organizational units. This is possible because policies make consistency in action. In view of the importance of policies in guiding executive behaviour, they need to be formulated carefully. In fact, policy formulation is one of the important executive responsibilities. Effectiveness of policies, therefore, lie in understanding the following principles.
 

Define the Business

 
 
The two fundamental questions to be asked in this regard are what is our business? What should it be? Many businesses have failed because they did not attempt to seek answers to these simple and basic questions. Gramophone record companies for long did not realize that they are in the entertainment business. Hence they are now here in the corporate history. In contrast, Hallmark Incorporation of USA defines its business as “social expression” and not as greeting cards. Such a definition helped the company a lot in expanding operations in the related fields like personal accessories and women’s jewellery, etc. To define the business, a company must take a close look at its basic operations and analyze it’s major strengths and weaknesses in all the functional areas like marketing, product development, finance and public relations. Such an exercise enables the enterprise to capitalize on its strengths while overcoming the weaknesses.
 
 
 

Assess Future Environment

 
 
A realistic estimate of the future trends in matters related to technology, economic and market conditions, political stability, etc., is essential for policy formulation. Instances are not rare, where the best of the forecasts turned out to be just intentions. That is why for some managers, forecasting is a highly unpleasant task. It is interesting to note that sometimes products which were predicted to be instant failures by the so called market surveys proved to be run away successes. The ‘sintex’ water tank is a classic example where the product defied the gloom predicted by the experts. However, examples of this sort are few and far between. On the other hand, quite the opposite is also possible.
 

Ensure availability of Resources

 
 
While formulating policies the resources required to implement the policies have to be assessed. If policies are formulated without regard to the ground realities, you would encounter too many problems while implementing the policies. As a result, policies do not serve the intended purpose. For example, if the policy of the organisation is to cash in on the new opportunities, it does not mean that you can enter any field thrown open by the government. You have to assess yourself as to how strong you are in terms of resources required. Otherwise it amounts to overstretching. That is how, “close to the knitting”, building on “core – competencies” are very much talked about these days.
 

Communicate the Policies

 
 
If policies are to serve the desired purpose, they have to be communicated to all those who are to implement them. The policy of the organisation towards competition, for instance, has to be communicated to the people in the marketing department. Otherwise there will not be proper synchronization between the policy and action.

 

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