strategies, Policies, and Planning Premises - Review Notes

Policies - Definition and Types

Policies are guides to thinking in decision making. They reflect and interpret objectives and guide decisions to to achieve the objectives. They establish the framework for planning programs. They establish limits or boundaries to plans whereas planning premises provide the operational background.

Policies themselves are plans. They are also the result of planning and decision making. Policies also have levels. A policy can be a major as that of financing growth through retained profits.

Policies can be categorized as originated policy, appealed policy, implied policy, and externally imposed policy.

The most logical way of policy setting is that originated by managers at a certain level for the express purpose of guiding their decisions and the decisions of their subordinates in the operation of business.

The decisions made by superiors in the on problems referred to them can develop into policies and such policies are termed as appealed policy.

Many times policies develop from the actions that people see about them. If a company talks of high quality in speeches and slogans, but is frequently producing and selling shoddy goods, people working in the company assume that poort quality is the policy of the company. Implied policy emerges from instances where stated policy is not enforced.

Government, trade associations and trade unions impose certain policies on the organizations.

Guidelines for Effective Policies

Policies should reflect objectives and plans.

Policies should be consistent.

Policies should be flexible

Policies should be distinguished from rules and procedures.

Policies should be in writing.

Policies should be taught.

Policies should be controlled

Policies in Various Functional Areas of Business

In the following functional areas, policies are announced generally to guide decision making.

Product selection and development


Sales promotion

Distribution channels

Production and inventory


Personnel selection and training


Employee benefits


Principles of Management, Harold Koontz and Cyril O'Donnell, Fourth Edition, McGraw-Hill, 1968

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