As mentioned earlier, the basic intention of policies is to help executive thinking in decision-making.
Policy Formulation
As mentioned earlier, the basic
intention of policies is to help executive thinking in decision-making.
Policies are formulated for all the key functional areas of business like
production, marketing, finance, personnel and so on. Effectiveness and
consistency of decisions in all these areas depend on how well the policies are
formulated and understood. A policy is a plan. Therefore, the steps involved in
policy formulation are similar to the steps in planning. Though policies vary
in respect of scope, the process of policy formulation usually involves the
following steps.
Corporate
Mission
Corporate mission specifies the
purpose for which the organisation exists. It relates the organisation to the
environment in which it operates. It is natural, therefore that all the activities
of the organisation are geared towards the achievement of the mission. The
mission statement provides the direction to the organisation. As such, thorough
understanding of the corporate mission is the starting point for policy
formulation.
Appraisal
of the Environment
Environment appraisal in a
systematic way is the key for successful formulation of the policies. Correct
appraisal of the environment enables the organisation to integrate its
activities with the needs of the society. As such, the nature of the
environment, the various dynamics of it have to be analysed. It includes
collection of relevant information from the environment and interpreting its
impact on the future of organisation.
Corporate
Analysis
While the focus in environmental appraisal
is on the internal factors of the business, corporate analysis takes into
account the internal factors. Corporate analysis discloses strengths and
weaknesses of the organisation and points out the areas that have potential.
This is an inward looking exercise.
Identification
of Alternatives
The above two steps –
environmental appraisal and corporate analysis popularly known as SWOT
(Strengths, Weaknesses, Opportunities and Threats) analysis will help
identifying the alternative policies. For example, the objective of the
organisation is expansion. This may be achieved by several ways,
diversification of the activities, acquisition of existing businesses, and
establishment of subsidiaries abroad and so on. Again, if diversification is
chosen, it has to be decided whether it is into related or unrelated business.
The alternative policies thus identified have to be evaluated in the light of
the organizational mission and objectives.
Choice of the Right Policy
This stage involves choosing the
right policy from among the several policy options that suits the
organizational objectives. The Corporate history, personal values and attitude
of the management and the compulsions in the environment, if any, influence the
choice of the policy.
Policy Implementation
Effective implementation of the
policy requires designing suitable organisational structure, developing and
motivating people to contribute their best, designing effective control and
information systems, allocation of resources, etc. At times, polices may have
to be revised in line with the changes in the environment. Further, Polices
need to be monitored constantly during the implementation stage so that
inadequacies if any, may be corrected at the appropriate time.
Tags : Management Concepts & Organisational Behaviour - Policies
Last 30 days 650 views