Chapter One Ai Bint POLICY Policy-making is one of the most important components of business planning. Policies are a guide to action. They provide broad guidelines as to how objectives of business are to be achieved. While objectives are a goal or an end to be sought, policies are a general rule of action or guideline which helps in attaining the goal. The objective sets a long -range target; a policy provides guides which assists the company in achieving this target. Policy does not tell a person exactly what to do, but it does point out the direction in which to go. Familiar policies are summed up in these statements: “We sell only for cash and allow liberal discount thereon”, “We insure all property worth more than Rs. 50,000/- against loss by fire or burglary”. “Our motto is to serve the customers in all possible ways in matters of quality, price, weight and contents.” In each instance, some important aspect of a recurting problem has been singled out, and a guide established for dealing with it. On the other hand, some policies provide only board guidelines, such as, “preference will be given to goods produced by union labour” does indicate the _ intention but leaves the purchaser to decide whether the preference comes first or whether it should be considered only when all other considerations are equal. Yet, some policies can be much more specific. For example, an investment banking firm makes the following statement about the duration of vacation to its employees: “Employees shal oral Se le_ BO a i jusiness Po! be defined as “the mode of thought and ie privei Busine y be defined as i activities of an organisation or an institutio Pola I tena ey are general starements Of principles which gui a peri 168 phe aking vd action in an organisation. They guide the a“ policiesit ‘cision-making and actic ey Bue dee of business/emterprise Oper ons; and offer a ready-made oF s| Pda ‘e conduct of business/e fT oT con headed w onesie a tecurting question. They are, therefore, sometimes const intention nswer to a recurring yerefore, Som a ntion arate for common sense. However. polic s cannot answer every poter comtnne problem situation, One ean hardly refer to all policies as s! ae oon vie implied in the actions of managers. map for A icy: in We give below some of the definitions of business policy: i | i underst Gretfy says, “A business policy is an implied overall guide set ee oundaries that sapply the general fimits and direction in which managerial ae will take place.” on ‘Thus, according to this definition, policy reveals the managed i intentions for the future. They spell out clearly the sanctioned general dire a and areas within which work has to be done. i Pas ‘According to Peters and Wotrube. “A business policy is nothing be m a well-developed statement of directions and goals. Goals im and i decis definition of precisely what the business is or should be, and the particul of company it showsld be. Direction guides the action of the firm to : these goals. These authors regard business policy as a well-developed sta directions and goals, i.e., what is to be achieved and how it is to According to Rodgers, “A business policy is one which fe on the strategic allocation of scarce resources: human, finan ah trategy is the direction oBusiness Pobiey the framework of guiding principles that facilitate delegation to lower levels and permit individual managers to select appropriate tactics or programmes... Such policies are developed by working organisations to keep them on course, headed and directed towards their organisational objectives. These define the intentions of the organisation and serve as guidelines to give consistency and continuity to total operations... They provide a base for ‘management by principle” as contrasted to ‘management by expediency’... In fact, they serve as a road map for managers.” In the opinion of Miller, “A policy is a statement or a commonly accepted understanding of decision-making criteria or formulae, prepared or evolved to achieve economy in operations by making decision relatively routine on frequently occurring problems and, consequently, facilitating the delegation of such decision to lower managerial levels.” According to this definition, a policy by providing decision-making criteria’ gives assurance that decisions made will be consistent, fair and in keeping with the objectives and interests of the business. A policy permits decisions to be made on similar problems without repetition of the closely-reasoned and expensive analysis required initially to state the policy to make the decision. a We may define besine. polite principle or a group. of ‘related principles. along with their consequent rule (s) of action that provide for the successful achievement of specific Ca aia ace aes Accordingly, 4Business Policy _ ee) PURPOSE OF BUSINESS POLICY Business policy to be effective should permanent all functional areas of management viz., production, marketing, fi and human resource management. The main purpose of business policy are discussed hereunder. @ Clarify objectives: Objectives are general and open-ended statements. They are ends towards which activity is aimed. Purpose is the fundamental activity of the business, thet links the business with the society. Thus, objectives are derived from policies: Policies provide direction to the business by clarifying the objectives. This is because, objectives are just general statements. Guide planning: Planning is deciding in advance what to do, how to do, when to do and who will do it? Therefore, these should be some guide to decide the planning process. Policy provider direction and the planning process in an organisation, Thus, policy guides planning in business organisations. Help subordinates in making operating decisions: Policies provide the direction to the business and its objectives. Objectives in their turn provide the basis for formulation of strategies as well as strategi decisions. Managers make strategic decisions, based on the pers _ formulated by the senior managers. Strategi decisions become the bases su fokgpaking routine: decisions by the subordinates at the, dawepevel in(eo asa direction for sion making: As discussed ¢ retives are general and open end fe direction tot he executives decisions. THUS. Policy acts .e direction and goals are cl productivity and achieve their highest ‘what is expected from them. Emp results, when their directions are cleat. is from employees. Employees x loyal to the organisat employee enthusiasm and loyalty. consistency and uniformity in decisis ans should be licy ensures consistency and uniformity in decisions, OBJECTIVES OF BLISINESS POLICY . alleys ger Selene cence bel ae and action of business a cians° have become the process of ‘To improve communicatio performance standar . Thus, policy enables the formulate the need for resources and allocates the resources based on. ‘the organisational priorities, which is turn are derived from the policy.2 . Clear policies encourage definite individual deci as much as each manager has a clear understanding of the range h he can make decision and thus feels less uncertain as to whether he can give answers to subordinates without “getting into trouble.’ Because they specify routes towards selected goals, policies serve as a standard or measuring yard for evaluating performance. The actual results ‘can be compared with the policies to determine how well the members of an organisation have lived upto their professed intentions and to what extent goals have been achieved. Sound Policies help build up employee enthusiasm and loyalty for the organisation, This is specially tue when they reflect established principles of fair play and justice and when they help people to know that within an ‘organisation. ‘They set the pattern of behaviour and permit participants to plan with a ‘greater degree of confidence and lead to better co-operation, Policies are ‘control guides of delegated decision-making.” They seek to ‘ensure consistency and uniformity in decisions on problems “that recurfrequently and unde nd reas’ available resources and thereby b wastage is avoided, relevance jon of scarce jons because the optimum witisat about an efficient level of operat Comporate Pol public 3 brings in more repul ‘more and more acts of social responsib: labour-management rel $ help the firm to el jon and control and act as yardstick executive decision-making and action. i cee Is through polices thatthe organisation's objectives are ‘manner, personal satisfaction iat ute feed eaens as scholars develop them in diverse ways. However, the modern igement by developing innovative Though the a currently used, we also ise with the term bus policy is a term traditionally in business schools devotedpeniowajdut aq we uuu py pouseouos st woneiauryd 8am (ULVULS 40 SN “INWDVNWWN Oland efficient strategic man: ffi ined effort, enc ic g, Strategic management requires all discuss the need for strategic management. Meo FOR STRATEGIC MANAGEMENT Some managers argue that why should fiems engage themsel ‘They argue that firms can exist, develop and contin without strategic management. Some other managers argut management is essential in this competitive era. Exhibit 2.2 p for and reactions to the value of strategic management. Exhibit 2.2 : Reasons for and Reactions to the Value of Str 1, Strategic management allows firms to ani changing conditions. 2. Strategic managemerit provide cbjechvesandcrecioneremponcey i r is.that there is a relationship between better performance and formal It is also stated that businesses which plan strategically have a higher ‘of success than those which do not have.ic management is a process Or series strategic management process are (presented in Alternative ‘Suategic choice Strategy mplemen- tation Evaluation & ControlSocial and Economie + ONP Tread + Interest Rates * Bnergy Availaiticy + CoturalFactors|individuals feel competent and secure. ‘Most part of the strategic management making. Strategic decision-making is not only crue decisions are mace by the top level managers and oth n to the organi Feedforward sions are: ‘ion or the major part of They cot organisatior © They [ product and human rel: S. ‘+ They require interweaving a number of factors. * They require trade-offs between conflicting factors.” Process of Strategic Decision-Making diffe ‘There are five steps in the making. (Figure, 2.7) They are: presce 8 ypor poGneN UH HON, Bos snodag BuOLHE 13 2121s Jo POW V: 22H or voneuoura}duyy wounjos suognps F yo.uonoajag Jo meuide ong spGo en sHT + ay sojpam «363 yastos gompoay | Kn ional ead « or sie¥1T 3 wonesuomny -uiissa fuvotain ie inl a voy AqpowoHtOd + en apoKa2 eos Sgss0 suonngos ousiw + pega we Aneiseay ‘pose oe nodées jg youeujuexg + souatiadxo ‘sneaer’ wowoeura Aungeums 20} seas vo pose, doy + sop Zujusaiog «WHIMS «agar KTeNET © SOLLSPALOVAVED worse ‘wor njosoy, woneiowiaidiyy| | wons2ja5 wardedP95 50661 9 ; ‘yi wo rorduiy wesyrUds © pey sey Bua spIMPA ‘A\ £q popeayseodssilty and Applicat ‘The Tasks of business to be affected by ‘o filtate the strateei advantages that the organisation wil [STRATEGISTS AND THEIR ROLES IN STRATEGIC MANAGEMENT precedent setting actions can be called a strategist. It is also strategist can be a eolestion of people, However, the senior general ‘oles as their perspective is broadertty and Applicat sic Management ‘The Tasks of, ic Man: Boeri Strategic Manager Manayers perform different roles as shown in Figure 2.8, As can be seen the figure, formal authority gives rise 1 three informational roles. The two of roles enable the manager fo play the fou- decisional roles.Tmrerpersonal Roles + Figurehead + Leader Liaison — Taformational Roles = Monitor + Disseminator + Spokesman Decisional Roles + Entrepreneur + Disturbance Handler Resource Allocator Strategic Utility and Application + Disseminator 1 different sources an information directly manager will play subordinates, when Spokesman | department or the the developments every developmen Directors and sha customers must | ‘maintenance, g0V Decisional Rol Information managers play @ manager can con current informatUtility and Application of Strategic Management pec HS Disseminator Role: Manager dissen different sources and through variou ‘ates the information, he collects from means. He passes some of the privileged information directly to his subordinates, who otherwise have no access to it. The manager will play an important role in disseminating the information to his subordinates, when they don’t have contact with one another. Spokesman Role: Some insiders and/or outsiders conirol the unit/ department or the organisation, The manager has to keep them informed about the developments in his unit, The manager has to keep his superior informed every development in his unit, who in turn inform the insiders and outsiders Directors and shareholders must be informed about the financial performance, customers must be informed about the new product developments, quality maintenance, government officials about implementation of law ete. Decisional Roles Information is an important and basic input to decision-making. The ‘managers play a crucial role in decision-making system of the’ unit. Only the ‘manager can commit the department to new course of action and he has full and ent information to take set of the decisions that determined the department’s or organisational strategy. The decisional roles of the manager are: Entrepreneurial Role: As an entrepreneur, the manager is a creator and movator. He’ seeks to improve his department, adapt to the changing environmental factors. The manager would like to have new ideas, initiates new srojects and initiates the developmental projects. According to Peter F, Drucker, “the manager has the task of creating a true ‘that is larger than the sum of its parts, a productive entity that turns out. than the sum of the resources put into it.” le: Entrepreneurial role describes the manager as ShStrategic Management : ci ical in the task of ei pears ee ial for improved commitment and ; coordination and integrations, with workers ployment, commitment, productivity, pansion et Negotiator i negotiations. He negotiates with [0 Joyalty, with the peers for cooperation, CO and their unions regarding conditions of emp'oy7 a with the government about providing facilities for business er’s job for only he has ve centre of information. ‘These negotiations are integral part of the mana; authority to commit organisational resources and has net Though the different roles of a. manager are discussed separately for arable. The manager has to perform these convenience, they are, infact insepi the major role of roles simultaneously by integrating one with the another. Thus, the manager is integrating all the roles while playing managerial role or performing his tasks. In fact, the manager can not play any one role isolating the other roles. As a strategist, the manager has to integrate all the roles in decision- making and performing his tasks. THE GENERAL MANAGEMENT FUNCTION Introduction Though, there are different ina isation li moi sksten, mieingsabsjtem,fnance rubereerg ae eae organisation as a whole is a slits os Sa management. General candi Of this single system rests upon enna Officers, entrepreneurs, Shia oa the board of directors, chief e eal i executives, zonal/area man: é ae ‘agers, consultants, functional heads, mi middle level executiy j : es i Rises co ane and junior level/lower level executives. | executive level, Exhibit management functi P f 2 ‘ ‘unction: Exhibit2.7 present the st 4 Presents the principal general men the policy and easement responsibilities ore a ‘es of General M: Setting objectives Monitoring the en Establishing Strategies Obtaining Resources ome