Business Policy Background • Derived from Greek word “Politeia” meaning policy of govt. • “ A verbal, written or implied overall guide setting up boundaries that supply the general limits and directions in which managerial actions will take place.” - George R.Terry • It is the study of roles and responsibilities of top mgmt ,major issues and decisions which affect the long term working of organization. • It refers to the scope or guidelines within which the decisions can be taken in line with the objectives of the organization . • The boundaries which govern the actions of employees • Business Policy is of routine nature and permits the lower level mgmt to take decisions at their own. Examples • • • • • • • Hiring – Firing Transfers- Promotions Way of marketing Terms of payment to vendors Documentation Quality standards Checks and Controls Characteristics • • • • • • • Specific (definite / not uncertain) Clarity (not vague) Consistent( uniform for all) Appropriate (as per the organization) Simple and easy to understand Holistic (must cover all aspects) Dynamic (not static) Importance of Business policy • • • • • • Effective Control Effective Communication Creates a clarity for running the organization Motivation to the employees for being self reliant Enables economic and efficient operations Coordination of efforts and activities at different levels of mgmt • High morale of organization (due to clarity of mgmt objectives) Types of Business Policy • Basis of Business Policy :1. Nature of origin A. Originated policy B. Imposed policy C. Appealed policy 2. Organizational structure A. Internal B. External 3. Mode of expression A. Written B. Oral C. Implied 4. As per Importance a. Basic b. Major c. Minor 5. Levels of mgmt a. Top mgmt b. Upper middle level c. Middle level mgmt 6. According to Situation a. Normal policy b. Contingent Policy 7. According to functions A. Administrative Policy B. Composite Policy C. Supplementary Policy D. Departmental Policy 8. According to Scope A. General Policy (framed by middle level mgmt) B.Specific Policy (like Departmental policies) C.Directive Policy (when there is a kind of centralization in the organization) 1. Nature of origin A. Originated policy – ( created by top managers for the working in organization.) B. Imposed policy – Which are imposed by some external forces like state or central govt. , and are binding upon the organization) C. Appealed policy-( on the request of junior managers , in case of uncertain situations to decide upon a certain problem) 2. Organizational structure A. Internal – ( which are formulated by the mgmt to guide upon the working of the organization.) B. External – ( which are formulated as a response to some external factors or environmental factors.like rules made by labor ministry , accounting rules etc) 3. Mode of expression A. Written (defines the boundaries within which decisions are to be taken. They help in avoiding any kind of confusion) B. Oral (simple, easy and quick to communicate .But may lead to misinterpretations or confusions in case , lack clarity) C. Implied ( which is followed conventionally by subordinates /managers – like producing goods for middle income group ) 4. As per Importance a. Basic – (Fundamental policy of the business) b. Major – (which are concerned with the major issues and concern of the organization. LikePromotion policy , quality check policy etc) c. Minor – (which are formed by line managers to tackle the routine problems /situations. Like –Discount to be given, delivery of the goods etc) 5. Levels of mgmt a. Top mgmt (which cover long range planning and are decided by Top mgmt . Like – budgeting ,product launching etc) b. Upper middle level (Formed by Departmental heads, but are linked with the major policies of the business) c. Middle level mgmt (formed by junior managers like – related to sales, finance etc) 6. According to Situation a. Normal policy (to guide upon day to day operations ) b. Contingent Policy (to handle uncertain and abnormal situations) 7. According to functions a. Administrative Policy –( covers broad areas of administration, aims at controlling the staff) b. Composite Policy (formed as a result of combining the policies of different departments. Each dept submits their policy to the budget officer to prepare the consolidated report .when its gets approved by the Board, becomes a Composite Policy) c. Supplementary Policy (additional to composite policy) d. Departmental Policy (for routine working like – Departmental policies etc) 8. According to Scope a. General Policy (framed by middle level mgmt) b. Specific Policy (like Departmental policies) c. Directive Policy (when there is a kind of centralization in the organization)