The Importance of Company Policy

Explain the statement below by comparison.

CHIEF EXECUTIVE SHOULD BE LIKE A PILOT OF A PLANE.

• be familiar with the plane and the interrelationships
among its parts
• set to it that the craft operates in the most efficient
manner
-the operation of the aircraft is not an end itself
• bring the passengers to their desired destination
SAFELY
1. We must know and understand the policies and
goals of the organization.
-CENTRAL PURPOSE
2. Must have a sense of mission, character and
importance of the company as a whole

If an individual doesn’t know the larger purpose for

which he serves, he cannot serve it well.
1. Elaborate the major policies of a firm with
the help of the BODs
2. Define the objectives of the firm
3. Develop strategies and the long-range plan
for achieving these objectives
4. Develop an organization which most
efficiently carries out the company’s
strategic plan
5. Must develop the operating policies which
ease the burden of decision-making to
carry out the plan
6. Involve in controlling the operations of the
firm and in problem-solving
1. Major Policy/ Company Policy
-deals with the firm fundamental nature, its identity,
and the direction in which it is expected to move
-is it similar with rules?
2. Objectives/Goals
-specify, usually in quantitative terms, where the
firm is expected to be at some time in the future
- example: 20million sales, 10% increase
3. Strategy
-approach develop to achieve the objectives
-defines in detail how the firm is to get from where it is now
to where the objective state it should be at some time in
the future
-most critical part of a long-range planning
4. Operating Policies
-guide for decision-making
-provides a framework within which management can
make decisions that are consistent in themselves and are in
accordance with the strategic plan and objectives
-example: programmed and Nonprogrammed decisions
Often, major policies are in the form of “ statements
of purpose” and gives guidance and direction to the
firm.

Example: “ This company will be one of the leading

firms in the manufacture of all types of textiles and
eventually of ready-made clothing. Full ownership
shall remain in the hands of members of the family.”
1. Maximize profits or minimize losses
2. The products and/or services the company
will produce and sell
3. Anticipated position within the firm’s
industry
4. Concern of the geographic location
5. Product quality for which the company will
be known
6. Ownership
7. Degree and type of social responsibility
-defines the character of the firm
-arrived at only after careful study, clear thought, and
considerable discussion
-once established, they should not be changed lightly
but can’t be considered as immutable
-review it periodically (3 to 5 years)
1. Characters or personalities of the owners
2. Firms’ resources
- plant, equipment, worker’s skills,
management capability and capital
3. Possibility of changing resources
4. External environment
5. Projected changes in the external
government