What are policies ?

• Policies are guidlines designed to guide the thinking , decisions and actions of managers
and their subordinates in implementing of organisation’s strategy .
• Policies provide a statement about how things are to be done in an organisation . They
help control decisions and the conduct of activities without direct intervention by top
management .
• Policies promote uniform handling of similar activities in an organisation .
• Since policies are written statements which ensure quicker decisions and help reduce
uncertainity in repetitive and day to day decision making .
• Policies offer a predetermined answer to routine problems .
• Policies give managers a mechanism for avoiding hasty decisions .
 Functional Policies

Every business organization is built around two basic functions : production

and marketing . To be in business, every organization has to produce goods
or services and sell these to the customers.
The resources that are used to perform and pay for these two basic
functions constitute two other significant functions-finance and personnel
( hr) .Thus, an organization has to formulate policies and plans in these
functions to implement its strategy successfully.

All functions of an organisation are interdependent and interrelated.

Therefore, what is happening in one function has its relevance for other-
functions. All functions can contribute positively when they are performed
in a coordinated way.
Objectives of Functional Policies
• Profitability : Producing at a net profit in business.
• Market share : Gaining and holding a specific share of a product market.
• Human talent : Recruiting and maintaining a high- quality workforce.
• Financial health : Acquiring financial capital and earning positive returns.
• Cost efficiency : Using resources well to operate at low cost.
• Product quality : Producing high-quality goods or services.
• Innovation : developing new products and /or processes.
• Social responsibility : Making a positive control of society.
Why do we need functional policies ?
For example, if an organisation chooses to go for diversification, the policy
maker has to decide What to diversify into, Where to diversify, How much
money will be needed, from Where the money will come and What
changes are needed in various functions of the organisation .Functional
Managers develop policies which are decision guides and make the strategy
work .

Does size of the business matter ?

The number of functional areas in which policies and plans are prepared
depends on the nature and size of the organization. In a small organization,
only a few functional policies and plans are needed. But in a large
organization, a large number of functional policies and plans are prepared.
Functional policy in strategy implementation

• Top management can guarantee that strategic decisions are

implemented by all parts of the organization .
• Functional policies identify how things are to be done and limit
direction for managerial action .
• Functional mangers can handle similar situations in different
functional areas in the consistent manner.
• Coordination among different function is guaranteed.
• Functional policies serve as bases for controlling activities in different
functional areas .
Types of Functional Policies
Production Policies
The production management and policies are needed by the
manufacturing organisations .
Production or operations function is concerned with the transformation
of inputs into outputs.
Materials, equipment , information and talent are main inputs, which
are converted into goods and services .
The main objectives are to produce the required quantity and quality at
the right time and at the lowest possible cost .
The operations manager is responsible for overseeing the day-to-day
business operations .
The primary purpose of the Production Strategy is to improve the
quality of the product and also reduce the manufacturing cost.
• Roger Schroeder suggests the production/operations management comprises
five function or decision areas:
1) process, 2) capacity, 3) inventory, 4) work force , 5) quality.

It is important to note that production/operations activities often represent the

largest part of an organization's human and capital assets.
Objectives of Production Policies

• Cost efficiency - A company that emphasizes cost efficiency will see that its
capital, labor, and other operating costs are kept low relative to those of
other, similar companies.
• Quality - A company that emphasizes quality will consistently strive to
provide a level of quality that is significantly superior to that of its
competitors, even if it has to pay extra to do so.
• Dependability - A company that stresses dependability can be relied on to
have its goods available for customers or to deliver its goods or services on
schedule, if its is at all possible.
• Flexibility - A company that develops flexibility can quickly respond to
changes in product design, product mix, or production volume.
Significance of Production Policies
• To anticipate the production activities .
• To determine the kind and quantity of the goods to be produced .
• To make provision for the raw material well in time .
• To plan and control production .
• To determine the need of the employees of the production
department and arrange for the recruitment and selection process .
• To conduct the time and motion study .
• To determine the method of production .
• To control the quality of the goods produced .