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
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.
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.
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.
Tags : Management Concepts & Organisational Behaviour - Policies
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