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INTRODUCTION TO BUSINESS POLICY

The organisation sets the objectives and works towards their achievement. Once these objectives are defined and strategies determined, certain policies have to be made to put them into action. Business policies act as a guide to action. They provide the frame work within which an organisation has to meet its business objectives. The policy points out the direction in which the company ought to go. 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 a basic framework within which managers operate. Policies exist at all level in the organization. Some may be major policies affecting the entire organization while others may be minor in nature affecting the departments or sections in the organization. It has to be remembered that a policy is also a decision. But it is an due time standing decision, in the light of which, so many routine decisions are made. Following are examples of business policies. i) "We promote employees on the basis of experience" ii) "We sell televisions only for cash" 7

From the above policies, one could understand that there is a problem and the policies help as a guide for finding the solution. Some policies are just broad guidelines while some can be more specific. According to Koontz and O'Donnell, "Policies are plans in that they are general statements of principles which guide the thinking, decision making and action in an organisation." Policies aid in decision making and are the basis for procedures. They are responsibilities of top management. Policies are applied in long range planning and are directly related to goals. They are concerned with estimating availability of resources, their procurement their augmentation and their efficient utilization. Types of Policies: Policies come into being in any orgnisation in different ways. Koontz and Odonnel have classified policies on the basis of their source under the following categories1. Original Policy: The top management formulates policies for the important functional areas of business such as production, finance, marketing etc. The objective is to help the concerned functional 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 the enterprises objectives. They may be broad or specific depending on the degree of centralization of authority. If they are broad, they allow the manager some operational freedom. On the other hand, if they are specific they are implemented as they are. 2. Appealed Policies: Managers often confront with particular 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. In such case, he appeals the matter to his superiors for thinking. Appeals are taken upwards till they reach the appropriate level in the hierarchy. After thorough examination of the issues involved, policy decision would be taken at the appropriate level. 3. Implied Policies: In some cases there may not be specific policies. Managers draw meaning from the actions and behaviour of their superiors. Though there is no explicit 8

policy, managers 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 as the organisations by the agencies in the external environment like Government Trade Unions, Industry Association, Consumer Councils etc. These agencies to protect the interest 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 in any modern business. For instance, the recruitment policy of the organization is influenced by the Govts policy towards reservation to weaker sections. Anti-pollution measures, concern for the quality of the product, customer care and service etc. come under this category. 1.2 NATURE, SCOPE AND SIGNIFICANCE OF BUSINESS POLICY Business policy is the guide post to decision making. It helps in the managerial thinking process and thus leads to the efficient and effective attainment of the objectives of any organisation. Business policy has been defined as "Management's expressed or implied intent to govern action in the pursuit of the company's objectives." Business policy clarifies the intention of management in dealing with the various problems faced. It gives the managers a transparent guideline to take their decisions by being on the safe side. Business policy helps the manager in identification of the solutions to the problem. It provides the framework in which he has to take the decisions. Following are the different view points of leading authorities as to what is business policy ? 1. The first category holds the opinion that policy and strategy are synonymous. Business policy has been defined by William Glueck as "Management policy is long range planning. For all practical purposes, management policy, long range planning and strategic managernent mean the same thing." However, this view is quite controversial as strategy and Business policy do not mean the same thing. Strategy includes awareness of the mission, purpose and objectives. It has been defined as, "the determination of basic long term goals and objectives of all enterprise, and the 9

allocation of resources necessary to carry out these goals", while policies are statements or a commonly accepted understandings of decision making and are thought oriented guidelines. Therefore, strategy and Business policy cannot be used interchangeably as there is a clear line of differentiation between the two terms. This view stress upon the assumption that business strategy and policy are more or less the same. However, this view did not receive much support from various authorities in the area of business management. 2. The second group of experts view Business policy as the process of implementing strategy in the words of Frank 1. Paine and William Naumes, "Policies guide and channel the implementation of strategy and prescribe the processes within the organisation will function and be administered. Thus the term policy refers to organisation procedures, practices and structures, concerned with implementing and executing strategy." Supporting this view, Robert Mudric has defined Business policy as "A policy establishes guidelines and limits for discretionary action by individuals responsible for implementing the overall plan." The view represents Business policy to be: Restrictive Laying stress only on the practical side and ignoring the strategic dimension. 3. The third group considers business policy to be decisions regarding the future of an organisation. Robert J. Slockler defines Business policy as, "Strategic guidelines for action and spells out what can and what cannot be done in all areas of a companys operation." According to the policy manual of General Electric Company, "Policy is definition of common purpose for organisation components of the company for benefit of those responsible for implementation, exercise discretion and good judgment in appraising and deciding among alternative courses of action." 10

The views of different management authorities differ because of following reasons: There is no clear differentiation of policy from other elements of planning. There are different policies made at different levels of management for directing executives. Business policy encompasses and relates to the entire process of planning. Thus, Business policy focusses on the guidelines used for decision making and putting them into actions. It consists of principles along with rules of action that provides for successful achievement of Business objectives.