Материал: Management-and-Organization-Behavior

Lesson- 7 : Policies

Objectives

After reading this lesson, you should be able to:

ӹӹUnderstand The Concept And Importance Of Policies;

ӹӹExplain The Various Sources Of Policies;

ӹӹAcquaint With The Formulation Of Policies; And

ӹӹExplain The Appropriateness Of Business Strategy.

Lesson Outline

ӹӹTypes Of Policies

ӹӹPrinciples Of Policies

ӹӹPolicy Formulation

ӹӹStrategies

ӹӹReview Questions

Decision-making is the primary task of a manager. While making decisions, it is common that managers consult the existing organizational policies relevant to the decisions. Policies provide the basic frame work within which managers operate. Policies exist at all levels in the organisation. Some may be major company policies affecting the whole organisation while others may be minor in nature affecting the departments or sections within the departments. Thus, policies are, intended to provide guidance to managers in decision-making. It may be remembered that a policy is also a decision. But it is a one time standing decision in the light of which, so many routine decisions are made.

TYPES OF POLICES

Polices come into being in any organization in different ways. Koontz and O’donnel have classified policies under the following types, based on their source.

75

1. Originated Policies

Top management formulates policies for the important functional areas of business such as Production, Marketing, Finance, Personnel and so on. The objective is to help the concerned managers in decision making in their respective areas. Thus, originated policies are the result of top management initiative. These policies are formulated in the light of organizational objectives. They may be broad or specific depending on the centralization or decentralization of authority. If they are broad, they allow the subordinates some operational freedom. On the other hand, if they are specific they are implemented as they are.

2. Appealed Policies

Managers quite often confront with peculiar situations as to whether they have the authority to take a decision on a particular issue or problem. The policies regarding some issues may be unclear or may be totally absent. There may not be precedents to guide the manager. In such a case, he appeals the matter to the superiors for their thinking. Thus, appeals are taken upwards till they reach the appropriate level in the hierarchy. Depending upon the nature of issues involved, after a thorough examination, policy decision would be taken at the appropriate level. The decision taken by the higher-ups becomes a policy. For example, during festival seasons, the manager at the branch level may be in a dilemma to offer discount to the customers. There may not be any explicit policy to guide him. But to meet competition in the market management, on the basis of an appeal made by the branch manager may allow him to offer discount on such occasions. Unless otherwise stated, it becomes an unwritten policy and guides the manager’s decision making in all such future situations.

3. Implied Polices

In some cases, there may not be specific policies for all the contingencies. Managers draw meanings from the actions and behaviour of their superiors. For example, if customer service is on top of the agenda of the organisation and if such a philosophy is constantly reinforced by the actions of top management from time to time, a manager may go all out to help a customer who is in a difficult situation. There may not be any

76

objection from the top management to the stand taken by the lower level manager in support of the customer. Though there is no explicit policy, mangers may assume it in a particular way and go about in their day-to- day operations.

4. Externally Imposed Policies

These are the policies which are not deliberately conceived by the managements. They are rather imposed on the organizations by the agencies in the external environment like government, trade unions, industry associations, consumer councils, etc. These agencies, in order to protect the interests of the respective groups may lay down certain policies to be followed by the business. As the interaction of the business with external environment is increasing, one can find many policies thus coming into being. The organization has to obviously comply with them. For instance, the recruitment policy of the organisation is influenced by the government’s policy towards reservations to weaker sections. Antipollution measures, concern for the quality of the product and customer service also fall in this category.

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

77

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.

1. 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.

2. 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

78

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.

3. 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.

4. 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.

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.

79