POLICIES IN BUSINESS

Policies in Business are the general statements which are formulated by the organization for the guidance of its personnel. It is a guide to thinking and action on the part of the executives. Policies indicate the manner in which a particular situation should be handled.

ACCORDING TO EDWIN B FLIPPO

“A policy is a man –made rule or a pre-determined course of action that is established to guide the performance of work towards the organization objectives.

ACCORDING TO GEORGE A. STEINER, JOHN B MINER and EDMUND R. GRAY

“Policy is the management express or implied intent to govern action in the achievement of the company’s aims.”

ACCORDING TO JAMES B BOM

“Policies are the statements of the organization’s overall purposes and its objectives in the various areas with which its operations are concerned personnel, finance, production, marketing and so on.”

ACCORDING TO LM PRASAD

“A policy is the statement or general understanding which provides guidelines in decision-making to members of an organization in respect to any course of action.”

ACCORDING TO DALE YODER

“A policy is a pre-determined and accepted course of thought and action that is defined and established as a guide towards accepted goals and objectives.”

ACCORDING TO NEWMAN, SUMMER AND WARREN

“A policy may be specific and broad in nature, deal with one or many aspects of a problem or situation, place wider or narrow limits within which action is to be taken, specify the steps to be taken when a decision is to be made.”

ACCORDING TO KOONTZ AND O’DONNEL

“Policies were identified as a guide in thinking in decision-making. They assume that when decisions are made, these will fall within certain boundaries.”

ACCORDING TO GEORGE R TERRY

“Policy is verbal, written or implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place.”

Thus, policies in business are those principles that provide rules for action for achieving the organizations’ specific objectives.

FEATURES OF POLICY

The following are the features of the policies in business:

  • It is a standing plan which can be put into use again and again.
  • It gives guidelines to the employees for taking the decisions.
  • It restricts the freedom of the employees while making decisions as all the decisions should be taken in the purview of the policy formulated by the management.
  • It is framed on the basis of objectives of the organization.
  • These are designed and formulated by all the managers in their respective areas.
  • It is a predetermined course of action.
  • These are generally expressed in qualitative, conditional or general way.
  • These are the recognized intention of the top management.
  • These are the models of thought and principles underlying the actions of the organization.

NEED/ PURPOSE/ IMPORTANCE OF POLICIES IN BUSINESS

Policies in business are regarded as most important for the realization of objectives. They also ensure coordination of efforts and activities in the enterprise. The purpose of formulating policies and its importance is as follows:

ACHIEVEMENT OF OBJECTIVES

Policies are used as guidelines to do a work and achieve the overall objectives of an organization. So, policy enables the employees to concentrate and increase their efforts to achieve the objectives.

CLEAR THINKING

The top executives may be well aware of the gaps, contradictions and vagueness in the current policies. The identified gaps, contradictions and vagueness are to be set with the clear thinking.

UNIFORMITY

Decisions are taken uniformly by following the guidelines i.e. policy. Line managers are taking a decision by keeping in view the personnel policies uniformly in their respective departments. If a person is transferred and another person takes the charge of the office, the decisions to be taken by the new staff members are very similar to those of the previous staff due to the predetermined policies of the organization.

NO EXPLOITATION

There is no personal bias while taking a decision. So, there is no possibility of the exploitation of the employees. Policies minimizes favoritism.

CONTINUITY

Written policy transfers the heritage of the company from one generation to another. There is continuity in following the policy by more than one generation. The top executives of an organization may retire, die or resign but the policy adopted by those persons is to be continued to be adopted by their successors.

DELEGATION OF AUTHORITY

Policy enables the executives to delegate the authority. Delegation of authority is to be done without consulting the superiors every time.

STABILITY

Continuity of policy promotes stability in the organization. The succeeding employees can understand the bitter experiences and achievements of their predecessors. In this way, stability is to be maintained.

BETTER CONTROL

Policies specify the relationship between management and employees and the employees inter se. so, there is possibility of conflicts in the implementation of the policy of both management and the employees. Policies are served as standards or yardstick. Thus, policies provide better control.

ORIENTATION

Orientation is given to the new employees of the organization. The policy of the organization helps the new entrants to understand the way of functioning of the concern.

EFFICIENCY EVALUATION

The efficiency of the employees is evaluated in the light of the policies followed by them. Actual performance of the employees is assessed on the basis of results achieved. The existing policy many be amended or a new policy is to be framed by considering the extent of efficiency shown by the employees.

TEAM WORK

Well structured policies enable the employees to know the overall picture of the organization and know how their contributions are responsible for the achievement of the organizational goals. In this way, team work spirit is developed among the employees.

MOTIVATION

Policy of the organization guides the workers in achieving the objectives. Policy gives a kind of motivation to the workers. If the workers are motivated then predetermined objectives can be achieved without much effort.

LOYALTY

Participation of employees in policy formulation increases mutual understanding between management and employees. Mutual understanding stimulates the employees to work with loyalty to achieve objectives.

QUICK DECISIONS

Carefully designed and briefly defined policy enables the management to take valuable and quick decisions. This system avoids wastage of time and energy.

MERITS/ADVANTAGES OF POLICY

A well formulated policy helps an organization to be attributed with the following merits:

GUIDE TO THINKING

Policy helps the manager to take valid decisions. Thus a policy serves as a guide to think and take a decision.

UNIFORMITY

Policy ensures uniformity in the treatment of employees throughout the organization. Policy avoids favoritism and minimizes discrimination.

CONSISTENCY

Policy provides the basis to management executives to take the decisions. Following the policy regularly ensures the consistency in the decision making in the organization.

APPLICABILITY

A policy is formulated only after considering the pros and cons and evaluation. Practical problems in the implementation of policy is also taken into consideration while its formulation. Such formulated policies are practically applicable.

CONTINUITY

Well formulated written policies are used by the organization for more than one generation. Such succeeding generations can derive good experience from implementing the policy. This type of policy could be followed for long enables to maintain stability in the organization.

BUILDS CONFIDENCE

Readymade answers are made available in the well formulated policies. So the management executives can meet the challenges with confidence. Besides, if the management strictly adheres to the policies, they need not to worry about the results. All this creates confidence among the management executives.

SECURITY

Management executives have a sense of security by adhering to the policy. Nobody gets any punishment if an organization incurs a loss due to the implementation of improper policy. As a result there is sense of security among all the personnel working in the organization.

QUICK DECISION

Manager has to take decisions on routine basis and of repetitive nature. Policies once formulated provide the direction and the basis on which the repetitive issues should be settled and decisions should be taken. This helps in not wastage of time and facilitates quick decision making.       

DELEGATION OF AUTHORITY

Policy helps the manager regarding the delegation of authority. Subordinates are ready to accept responsibility and assume authority. The reason is that the policy indicates the expectation of the subordinates.

CONTROL

Policy is used as standard or yardstick to measure the performance of the activities. In case of any inefficiency, it becomes easy to identify deviation and its correction.

ORIENTATION AND TRAINING

Policy can be used as orientation and training to new employees. New employees can understand the outlook of the top management through the policies designed.

TEAM WORK

A well designed policy gives a clear picture of the organization. It stimulates the employees to extend their cooperation and it promotes mutual understanding. In this way, team work is easily built up in the organization.

LOYALTY

There is no possibility of favoritism. Management could maintain fair treatment to all employees at any cost by implementing the policy. This creates loyalty in employees for the organization.

DEMERITS/ DRAWBACKS OF POLICY

There are some demerits or drawbacks of policies which are as follows:

NO UNIVERSAL SOLUTIONS

Policies are framed under special circumstances to deal the specific problems and issues. But in the changing business world, there are rapid changes in the economic, social, political, demographic and legal framework. The implementation of proposed policies in the same structure in the changing situations may not give positive results. This hinders the utility of the policies.

NO INSTANT SOLUTIONS

Policies do not provide instant solutions to the problems. These are only the guidelines for the decision-makers. The solutions are to be found by the executives themselves. Policies cannot replace human judgment in any circumstance.

DAMPEN HUMAN INITIATION

Too many policies kill the initiative of the managers. They become habituated to work according to the policies and do not try their judgment. Policies have a little room for the individual initiative.

LACK OF FLEXIBILITY

The policies are made to make the system and functioning of the system more and more rigid and there is no flexibility in the operations. Managers at times may be required to judge things according to the prevailing environment. But policies leave no scope for such human judgment and flexibility.

LACK OF COMMUNICATION

No proper communication of policies in true terms leads to its improper implementation. Even the various employees understand the meaning of the policy as per their perceptions which make the meaning of policy different for different peoples. This becomes a serious limitation of the policies.  

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