Business Policy

Business PolicyNishant Gaur Asst. ProfessorBusiness Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Definition of Business PolicyAn effective business policy must have following features-

Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult.

Clear- Policy must be unambiguous. There should be no misunderstandings in following the policy.

Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates.

Appropriate- Policy should be appropriate to the present organizational goal.

Simple- A policy should be simple and easily understood by all in the organization.

Features of Business Policy

Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.

Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios.

Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.

The term policy should not be considered as synonymous to the term strategy. The difference between policy and strategy can be summarized as follows-

Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form.

Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management.

Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions.

Policy is concerned with both thought and actions. While strategy is concerned mostly with action.

A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.

Difference between Policy and Strategy Business policy basically deals with decisions regarding the future of an ongoing enterprise. Such policy decisions are taken at the top level after carefully evaluating the organizational strengths and weaknesses in terms of product price, quality, leadership position, resources etc., in relation to its environment. Once established the policy decisions shape the future of a company channel the available resources along desired lines and direct the energies of people working at various levels towards predetermined goals. In a way, business policy implies the choice of purposes, the shaping of organizational identity and character the continuous definition of what is to be achieved and the deployment of resources for achieving corporate goals.

Nature of Business Policy

To study the role and responsibility of top management which can convert an organization into success.It aims for the successful future of an organizationIt is responsible for building future course of action and give a sense of direction.Business policy lays down a long term plan, to be followed by the organization. While determining the future course of action , the senior management has a paradigm or scheme of the type of organization they want their company to become.Nature of Business Policy7Some useful definitions of Business Policy A business policy is an implied overall guide setting up boundaries that supply the general limit and direction in which managerial action will take place.

A business policy represents the best thinking of the company management as to how the objectives may be achieved in the prevailing economic and social conditions.

A business policy is the study of the nature and process of choice about the future of independent enterprises by those responsible for decisions and their implementation.

The purpose of a business policy is to enable the management to relate properly the organizations work to its environment. Business policies are guides to action or channels to thinking.

Business policies generally have a long life. They are established after a careful evaluation of various internal and external factors having an impact on the firms market standing As and when circumstances change in a major way the firm is naturally forced to shift gears, rethink and reorient its policies. The World Oil crisis during the 70s has forced many manufacturers all over the globe to reverse the existing practices and pursue a policy of manufacturing fuel efficient cars. Therefore, policies should be changed in response to changing environmental and internal system conditions.

Types of policies There are many types of policies marketing policies, financial policies, production policies, personnel policies to name a few in every organization. Within each of these areas more specific policies are developed. For example, personnel policies may cover recruitment, training, promotion and retirement policies. Viewed from a systems angle, policies form a hierarchy of guides to managerial thinking.

Policies are broad statements, adopted by a business, that set out what the business stands for and what its goals are. Procedures are usually implemented to support each policy explaining how to apply the policy to the business's customers, employees and products, and the instructions necessary to follow the policy. Examples of areas where businesses typically institute policies are ethics, human resources, accounting and customer service. Ethics Ethics policies address issues such as honesty, fairness, integrity and respect. For example, the long-standing ethics policy regarding honesty instituted at Levi Strauss and Co. as quoted by Inc.com reads: Honesty: We will not say things that are false. We will never deliberately mislead. We will be as candid as possible, openly and freely sharing information, as appropriate to the relationship.Human Resources Policies imposed in the area of human resources address issues such as hiring and termination, benefits, promotion and salary increase and discipline. For example, a typical human resources policy addressing hiring might read: New hires shall be subject to a three month probationary period during which employment is 'at-will.'

Types of policiesCustomer Service Customer service policies address issues such as employee attitude toward customers. A sample policy dealing with customer relations as reported by Infonet.com reads: All employees deal with our customers! No matter what your position, every employee impacts the customer in some way. Employees are reminded to promote the company just as they would represent their families. This means being friendly and courteous on the business property, while visiting our stores, driving our vehicles on roads and highways and in daily interactions. After all, you never know who knows the person you are talking to... Other ways employees can enhance customer relationships are to answer phones before three rings, transfer office calls correctly, follow through on promises, give updates if necessary, greet walk-in customers or just smile and say hello. Treating other as you expect to be treated goes a long way in customer service relationships.Accounting Accounting policies deal with how money is handled in the company, both the spending and the documenting of inflow and out-flow. An example of a typical accounting policy regarding receipt of gifts to an organization might read: Gifts of stock, bonds, manuscripts, art and antiques are recorded and such information is openly available to officers, stock holders and employees as with any other corporate asset.

Absenteeism Policy A policy that provides guidance within an organization about how to manage the state of chronic absence from work. Absenteeism is usually addressed through progressively stricter disciplinary measures that can result in the termination of the individual's employment. This is generally governed by the organizations attendance policy attendance policy . Dress Code policy Company's objective in establishing a casual dress code is to allow our employees to work comfortably. Yet, we still need our employees to project a professional image for our customers and clients who visit. Because all casual clothing is not suitable for the workplace, these guidelines will help you determine what is appropriate. Learn more about casual dress in this dress code that differentiates between clothing for industry and manufacturing and clothing for the office.

Examples of Business PoliciesBusiness Ethics: Sample PoliciesLevi Strauss & Co: Ethical Principles"Our ethical principles are the values that set the ground rules for all that we do as employees of Levi Strauss & Co. As we seek to achieve responsible commercial success, we will be challenged to balance these principles against each other, always mindful of our promise to shareholders that we will achieve responsible commercial success.The Ethical Principles Are:HONESTY: We will not say things that are false. We will never deliberately mislead. We will be as candid as possible, openly and freely sharing information, as appropriate to the relationship.PROMISE-KEEPING: We will go to great lengths to keep our commitments. We will not make promises that can't be kept and we will not make promises on behalf of the Company unless we have the authority to do so.

Company Based ExamplesFAIRNESS: We will create and follow a process and achieve outcomes that a reasonable person would call just, evenhanded and non arbitrary.RESPECT FOR OTHERS: We will be open and direct in our communication, and receptive to influence. We will honor and value the abilities and contributions of others, embracing the responsibility and accountability for our actions in this regard.COMPASSION: We will maintain an awareness of the needs of others and act to meet those needs whenever possible. We will also minimize harm whenever possible. We will act in ways that are consistent with our commitment to social responsibility.INTEGRITY: We will live up to LS & CO's ethical principles, even when confronted by personal, professional and social risks, as well as economic pressures."

NORTEL: Core Values"At Northern Telecom (Nortel), we recognize the importance of credibility, integrity and trustworthiness to our success as a business. We are committed to upholding high ethical standards in all our operations, everywhere in the world. We believe in the principles of honesty, fairness, and respect for individual and community freedoms.Living up to both the letter and the spirit of this commitment is not always an easy task. As a large and diverse corporation working globally, we recognize that while there is some level of agreement the world over on what constitutes honest and ethical business practice, there can also be valid differences of opinion.In our working lives, we often experience situations where the 'right thing to do' is not immediately apparent. Loyalties -- to our fellow employees, to managers, customers and suppliers, to our families, our communities, the environment, the corporation as a whole, and to ourselves -- may seem to conflict. When we're faced with a complicated situation, it can be difficult to decide where the ethical path lies.

A Policy is a Statement, verbal, written or Implied, of those principles and rules that are set by Managerial Leadership as guidelines & constraints for the organizations Thoughts and actions The purpose of the policy is to enable the management to relate properly the organizations work to its objectives The existence of practical and comprehensive policies tends to increase efficiency Decisions made within a policy framework have a higher probability of being synchronized with other decisions within the company Refers to decisions about future of an enterpriseGuiding Framework for repetitive decisions Top Management to Lower Management InvolvementSetting Long-Term objectives of an enterprise Study of functions & responsibilities of senior management concerning crucial problems

Characteristic Features of Business PolicyIt Provides direction to the organization and shape of future Policy refers to total enterprise or a large segment of it I.e change in organizational goals Long Term perspective & commitment Usage of critical resources vis--vis environmentContinuous process in nature Identification of opportunities & choosing the right strategy Adaptation to the Changing Environment

Policies are set at different levels of Management concerning different responsibilities:Dividend Policy: Board of DirectorsCapital Allocation for Expansion: Top Management Revenue Matters/ Sales Administration Middle Management Routine Actions: Lower Management

Business Policy Formulation at Different Levels of ManagementIt gives an Integrated view of management based knowledge & experienceComplexities of business & its constraints wrt environment Broader perspective of Management Learning Study of Top Mgmt. & Responsibilities & decision making process Conceptualization of Key Business processes A preparation for performance as a General manager and broadening of perspective of specialist Understanding & Implementation of SM Process

Business Policy as a Field of StudyObjectives in Attitudes:Generalist rather Specialist View of Practitioner Orientation of Professional Businessman More Value to Creativity & Innovation than to maintenance of Status quo Objectives in Knowledge:Knowledge of concepts Knowledge of situations Objectives in Skills:Analytical Ability Strategic Analysis Ability

Strategy is defining & achieving an organization's objectives & implementing its missions Large scale, future oriented plans for interacting with competitive environment to optimize achievement of an organizations objectives Pattern of an organization's responses to its environment over time Long Term objectives or Purposes of an organization Different from Operating decisions i.e day to day related activities

StrategySet of decisions & actions resulting in formulation & implementation of strategies designed to achieve the objectives Requirement due to complexity & sophistication of Business decision Making processEffective dealing with environmental challenges with given orgn. Resources Dimensions of Strategic Management Top Management DecisionsAllocation of Large Amount of Companys resources Significant Impact on the Long Term Prosperity of the Firm Future Oriented Major Multifunctional or Multi business consequences Consideration of factors corresponding to Firms external environment

Strategic Management Corporate ObjectivesFunctional ObjectivesGeneral Organizational ObjectivesHigh Level Long term ObjectivesScanning Internal and External EnvironmentSWOT AnalysisGuiding and Directing Organization

Scope of Business PolicyBusiness Policy has a wide scope starting fromSetting the corporate objectivesProvides guidelines to set functional objectives Provides guidelines to all activities in the organizationPolicy helps an organization in framing high level long term corporate objectives and strategies which are consistent with company's capabilities and external realitiesIt enables top management to visualize and evaluate the environment both internal as well as external environment and then to identify SWOT Posing the company. By this type of analysis it helps the management to scan the environment so that realities that exist in the global market on account of economical, technological, social and political changes can be traced.Studying business policy helps the top management to develop guiding principles for its activities

The manager require different skills for varied situation1. Technical Skills: Specific tools and techniques , their appropriate knowledge and their working process all this is core of technical skill. That is practical Knowledge of the theoretical conceptSuch skills can be developed by doing practices

2. Human Skills :How to work with people effectivelyCo-ordination and co-operation are major tools to enhance the skill

3. Conceptual Skills :

Why, What is the purpose of doing ?These skills are the basics for clarity about the varied concepts and their significant impact on overall performance of the organizationManagerial Skills required for Business PolicyImportance:

Financial BenefitsEnhanced capability of problem preventions: Improved quality of strategic decisions through group interactions: Greater Employee Motivation: Reduction of Gaps and overlaps in activities: Minimum resistance to change:

Strategic management has evolved through four phases:

Forecasting (Basic Financial Planning)

Long Range Planning (Forecast based planning)

Strategic Planning (Externally Oriented Planning)

Strategic Management

Evolution of Strategic Management:

The strategic management has evolved through four phases of strategic management:

Forecasting (Basic Financial Planning): Managers initiate serious planning when they are requested to propose the following years budget. Projects are proposed on the basis of very little analysis, with most information coming from within the firm. The sales force usually provides the small amount of environmental information and for that company activities are often suspended for weeks while managers try to cram ideas into the proposed budget. The time horizon is usually one year.

Long Range Planning (Forecast based planning) An annual budget becomes less useful at stimulating long-term planning. Therefore, managers propose to attempt to propose five year plans. At this point they consider projects that may take more than one year. In addition to internal information. Managers gather any available environmental data and extrapolate current trends five years into the future. This phase is also time consuming.

Strategic Planning (Externally Oriented Planning) Here, the top management takes control of the planning process by initiating strategic planning. The company seeks to increase its responsiveness to changing markets and competition by thinking strategically. Planning is taken out of the hands of the lower level managers and concentrated in a planning staff whose task is to develop strategic plans for the corporation.Strategic Management Realizing that even the best strategic plans are worthless without the input and commitment of lower level managers, top management forms planning groups of managers and key employees at many levels, from various departments and workgroups.