RIVERS STATE UNIVERSITY OF SCIENCE AND TECHNOLOGY

NKPOLU/OROWURUKWO, PORT-HARCOURT.

DEPARTMENT OF MANAGEMENT

NAME/MATRIC NO.
IBIASO ORMSLEY ADAJAMES
DE.2006/1686

COURSE/CODE
BUSINESS POLICY 1 / BUS 461

SEMESTER
FIRST SEMESTER

LECTURER
DR. HAMILTON DONALD IBAMA
19th May 2011

TERM PAPER
ON

POLICY MAKING: WHO’s RESPONSIBILITY

Abstract

Policy making is concerned with the formulation of general statements or understandings that

guide or channel managerial decisions. Policies, whether written or implied, are essential

components of a company's planning framework because they simplify the making of

recurring decisions and facilitate the delegation of these decisions. Successive delegations

tend to result in a hierarchy of policies within traditional organizations. In organizations where

empowerment is practiced, the principal function of policies is to provide essential limits to

otherwise broad employee discretion.

It is not overly far-fetched to suggest that without policies, because of excessive analysis and

the concentration of decisions at the top, corporate decision making in the hierarchical firm

could be slowed to the point of bringing operations to a virtual standstill. Conversely, in the

empowered organization, there would be the potential for complete lack of control and chaos.

Yet, in today's fast-moving business world there is also the great danger of policies becoming

rapidly outmoded. For this reason, audits and ongoing reviews are a must if a company's

policies are to remain effective decision guides

INTRODUCTION

THE NATURE OF POLICIES

Very simply, policies are standing plans that provide guidelines for decision making. They are

guides to thinking that establish the boundaries or limits within which decisions are to be

made. Within these boundaries, judgment must be exercised. The degree of discretion

permitted will vary from policy to policy. Some policies are quite broad and allow much

latitude, whereas others are narrowly constructed and leave little room for judgment. To

illustrate, a policy of selecting the best qualified candidate for a managerial position permits

more discretion than a policy of promoting the best qualified candidate from within the

organization. The latter is a narrower policy because it limits the choices to current

employees. A policy of promoting from within the organization based on standardized test

scores and seniority would, of course, be an even more restrictive policy.

To better comprehend the nature of policies, it is useful to differentiate them from other

standing plans—i.e., plans designed to deal with recurring issues—such as rules, standard

operating procedures, and standard methods. Rules are specific statements of what must or

must not be done in a given situation. Unlike policies, they provide no room for managerial

discretion. "No smoking in the work area" and 'Wash your hands before leaving the restroom"'

are examples of company rules. Rules by their very nature are designed to suppress thinking

whereas policies require varying degrees of judgment.

Standard operating procedures (SOPs) are detailed instructions for the execution of a

particular operation. They specify an exact chronological sequence of steps to be followed and

permit little room for discretion. Most procedures cut across departmental lines and involve
several employees. SOPs are frequently used to support the implementation of major policies.

For example, a policy of purchasing from the qualified bidder with lowest price might be

routinely implemented through a prescribed SOP.

Standard work methods are established ways of performing specific tasks. Like SOPs, they

designate an exact sequence of actions but, unlike SOPs, they are concerned only with the

task of a single worker. The prescribed set of steps in ironing and folding shirts at a

commercial laundry is an example of a standard work method.

FUNCTIONS OF POLICIES

Policies perform several important functions in organizations. First and foremost, they simplify

decision making. They delimit the area of search for possible alternatives and preclude the

need for repeated, in-depth analysis of recurring, similar problems. Consequently, they

promote efficiency in the utilization of managerial time.

Policies also permit managers to delegate to subordinates more decisions and more important

decisions than they would otherwise. Thus, if a manager establishes a policy governing a

specific class of decisions, he or she will feel more comfortable delegating these decisions to

subordinates because they will have set guidelines within which to make choices. The

delegation of decision-making authority is important because it frees up managerial time for

activities such as opportunity finding and planning that typically are put off.

Finally, policies help secure consistency and equity in organizational decisions. Thus, if several

managers make decisions in a particular policy area, their decisions will be consistent within

the limits established by the governing policy. Equity is also promoted through the policy

mechanism, especially with regard to personnel and vendors. For example, an announced

policy of permitting the company employees with the greatest seniority to have first choice of

vacation times would tend to be viewed as more equitable than allowing managers to make

these decisions without guidelines. By the same token, a policy stating that supply contracts

will be awarded to the lowest qualified bidder would normally be viewed as fair by vendors.
FORMULATION OF POLICIES

Policies can emerge in four very different ways. First, and most commonly, they may be

originated by management. Managers originate policies to ensure that decisions within the

organization will be in line with its objectives. Generally, they are written and embodied in the

company's policy manual, if it has one.

The second way policies come about is through appeal. The appeal process typically works

something like this. A situation develops where an executive is uncertain whether he or she

has the authority to make a decision. Consequently, he or she appeals to higher-level

management for the decision. Once the decision is made, it becomes precedent for similar

decisions in the future. The process is analogous to the way common law develops in the

Anglo-American judicial system. There is a danger, however, of allowing too many policies to

be made through appeal. A set of unwritten, incomplete, and uncoordinated policies may

emerge because the various appealed decisions will, in all likelihood, be made on the basis of

the individual merits of the particular situations without regard for their broader implications.

Third, policies may be implied from the decisions and actions of the company's executives. In

fact, it is not uncommon to find that some of the "real" policies of a company differ from its

stated policies. For example, a company may have a stated policy of promoting strictly on the

basis of merit whereas in reality, relatives and personal friends of top management are given

priority.

Finally, policies can be externally imposed. Not infrequently, outside institutions, such as

various departments of government, trade unions, and trade associations, impose

requirements on organizations. Labor contracts and federal regulations are familiar examples.

Consider how the equal opportunity employment laws have led to major modifications in the

personnel policies of many firms.

HIERARCHAL STRUCTURE OF POLICIES

Policies are found at all levels of organizations. At the very top, key policies may be important

elements of the company's overall strategy and help define how it differentiates itself from its

rivals and competes in the marketplace. Such policies are commonly called functional

strategies because they guide strategic decision making at the functional level. Consider

Polaroid's principal functional strategies under its founder, Edwin Land. In the financial area,

there were two atypical policies: no long-term debt and growth strictly through internal

development (i.e., no acquisitions). The company's product policy was to bring only unique,

high-tech products to the market. A key marketing policy called for very heavy initial

advertising of new products. Other strategic marketing policies emphasized the introduction of

successively less expensive camera models and the pricing of instant film as a high margin

cash cow. Production policy dictated subcontracting of high-volume, repetitive manufacturing

work and keeping technically critical, high value-added work in-house. Taken together, these

policies defined, to a large extent, Polaroid's competitive posture during its "glory years."

High-level policies typically must be interpreted and narrowed at lower organizational levels.

This reality results in a hierarchical structure of policies within organizations. To explicate, a

company might have a functional strategy of aggressive price competition. At the sales

manager level, this policy might be refined to state that the company will meet competitors'

prices on all of the firm's nonproprietary products. And, at the district level, the policy might

be narrowed again to read that district sales managers can make price concessions up to 10

percent on their own authority but, beyond that, they must get approval from above. As the

example illustrates, policies tend to be broad at higher organizational levels and become

successively more restrictive as they move down the hierarchy.

POLICY AUDITS

Organizational policies have a tendency to become obsolete. Stated policies commonly change

much more slowly than do the conditions that led to them. One approach to dealing with this

problem is to conduct periodic reviews or audits of the organization's policies. These audits

can help identify and eliminate outmoded policies. This regimen, however, tends to result in a

time lag between the actual need for policy changes and the recognition of that need. It is

therefore prudent for managers also to review policies on a more or less ongoing basis by

asking questions such as, "What is the purpose of this policy?" and "Does it still make sense?"

If the answers are negative or ambiguous, the policy may be a candidate for modification or

elimination before the next scheduled audit. The astute manager will particularly be on the

lookout for appealed and implied policies that may not be contributing to the achievement of

the firm's goals.

POLICIES AND EMPOWERMENT

Thus far, the discussion has assumed a traditional hierarchical organization. But one might

ask about the role of policies in the increasingly prevalent "empowered" organization where

employees are encouraged to take ownership of their jobs and be entrepreneurial and

innovative. In such organizations, there are typically fewer policies but those that are in place

play an important role in establishing boundaries that place broad limits on employee

behavior. Many of these policies will focus on legal and ethical behavior. For instance, a

consulting firm might have a strict policy forbidding the disclosure of information about clients

to outsiders. Establishing strategic boundaries represents a second crucial area of policy

development in empowered organizations. To illustrate, a high-tech company might limit its

product development opportunities to a defined set of technologies as a mean of reducing its

risk and focusing its research and development initiatives.

Policy Making:Who’s Responsibility
The senior management in any organization is primarily responsible for the future course of

action and for providing a sense of direction. The senior management consists of those

managers who are primarily responsible for long-term decisions such as the board of

directors, and who carry the designation of CEO, Executive Chairman, Chief Operating Officer,

Managing Director, President, General Manager, Executive Director, etc. These are persons

who are not concerned with day-to-day problems, but are expected to devote their time and

energy to thinking and deciding about the future course of action. With its concern for the

determination of the future course of action, it turns to policy which lays down long-term plan,

which the organization then follows. While determining the future course of action, the senior

management has a mental picture of the type of organization they want their company to

become and so formulates different policies to guide behaviors, actions and activities directed

to was that end. While deciding about a future course of action, the senior management are

confronted with a wide array of decisions and actions that could possibly be taken. The senior

management exercises a choice, on the basis of given circumstances and which, in their

opinion, would lead the organization in a specific direction, and by moving in predetermined

direction based on formulated policies, organization can attain its planned identity and

character. It is obvious that policy making requires highly competent individuals to formulate

and ensure organizational success, and strategic managers are executives responsible for the

overall performance of the organization, they are the one responsible for making vital long-

term policies that charts the organization future, even though politics in the organization

determines who among them makes the key policy decisions.

In some organizations, major policies are made only by the board of directors who are part of

the Senior/top management team, they make, mostly policies that affects the entire fabrics

of the organization, for instance, the choice of industry to compete in, is one of the most
fundamental of company policies written into a firms charter, and it is the prerogative of the

board to make policies within that industry limits, e.g, the board of directors might decide to

formulate the policy of seeking out the quality market and every departments in the

organization must then make its plans in accordance with this major policy.

CONCLUSION.

Every manager have policy making powers, but the exercise of this depends on the authority

given by senior management. Policy making responsibility takes a random walk depending on

the politics within the organization. Organizational politics refers to the use of power to affect

decision making in an organization or on behaviors by members that are self-serving and

organizationally non sanctioned.

REFERENCES:

1. Gray, E.R.(2010). Policies and Policy Making,

<http://www.referenceforbusiness.com/encyclopedia/per-pro/policies-and-
policy-making.html.

(21st March 2011)

2. Kazmi, A.(2006). Business Policy And Strategic Management,

(New Delhi: Tata McGraw-hill Publishing Company Limited), pp:10.

3. Portens, D.C.(2010). What Makes A Great Business Policy,

<http://www.sooperarticles.com/finance-articles/insurance-articles/what-
makes-great-business-policy-82527.html.

(22, March, 2011).

4. Thibodeaux, W.M.(2010). Stages Of Policy Making,

<http://www.uwgb.edu/furlongs/policy/outlines/policy3/policy3.ppt.

(21st March 2011).