BASICS ABOUT BUSINESS POLICY | Cheat Sheet Introduction to Business Management

UNIT 1 BUSINESS POLICY – DEFINITION AND DISCUSSION OF CONCEPT TABLE

OF CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1

Definition of Policy 3.2 Definition of Business 3.3 Nature of Policy

3.4 Characteristics of Policy 3.5 Objectives of Business Policy 4.0

Conclusion 5.0 Summary 6.0 Tutor Marked Assignment 7.0

References/Further Reading 1.0 INTRODUCTION Every organisation has a

purpose for which it was established – either for profit making or

nonprofit making, and closely allied to the purpose of an

organisation are the principles on which it is to be conducted. These

principles in business parlance are commonly called “Policy”.

Policy, according to Kalejaye (1998), denotes a future course of

action of intent towards the activities of an organisation. He opined

that there is more to the meaning of policy than an expression of

intent. To him, there is usually the connotation that policies should

express the beliefs of the organisation, the things that are right to

do and the courses of action which it ought to take in the

organisation. This explains why policies on the same subject can be

so different from one organisation to another.

Every business requires guidelines which are to be embedded in

policy. Policy is a decision rule, not a decision (Ackoff 1993).

Principles in business parlance are commonly known as policy. Policy

denotes a future course of action of intent towards the activities of

an organization. In this unit, you will be introduced to the meaning

of business policy in order to prepare you for all the associated

ideas about the concept in business management. We shall also

highlight the reasons why business policy is necessary. Finally, we

shall explain business policy implementation in an organisation. I

believe you have read the course guide and have a general

understanding of this course unit and how it fits into the course as

a whole. You will see the objectives below specify what you are

expected to learn after reading this unit.

2.0 OBJECTIVES At the end of this unit, you should be able to:

• Define business policy • State the need for business policy •

Explain business policy implementation in organization 3.0 MAIN

CONTENT The introductory unit is intended to familiarize you with

business policy. It starts with a description of business policy. It

starts with a description into the development process that evolved

before learners like you got the opportunity to study this course.

Next, we shall introduce you to the nature of business policy where

its definition is also provided. You should be convinced of the

importance of the business policy course to be motivated to learn it

better. Hence, we have to be clear about the purpose and objectives

of the course that we are learning. The objectives of the course have

been described in terms of knowledge, skills and attitudes. It is

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UNIT 1 BUSINESS POLICY – DEFINITION AND DISCUSSION OF CONCEPT TABLE

OF CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3. Definition of Policy 3.2 Definition of Business 3.3 Nature of Policy 3.4 Characteristics of Policy 3.5 Objectives of Business Policy 4. Conclusion 5.0 Summary 6.0 Tutor Marked Assignment 7. References/Further Reading 1.0 INTRODUCTION Every organisation has a purpose for which it was established – either for profit making or nonprofit making, and closely allied to the purpose of an organisation are the principles on which it is to be conducted. These principles in business parlance are commonly called “Policy”. Policy, according to Kalejaye (1998), denotes a future course of action of intent towards the activities of an organisation. He opined that there is more to the meaning of policy than an expression of intent. To him, there is usually the connotation that policies should express the beliefs of the organisation, the things that are right to do and the courses of action which it ought to take in the organisation. This explains why policies on the same subject can be so different from one organisation to another. Every business requires guidelines which are to be embedded in policy. Policy is a decision rule, not a decision (Ackoff 1993). Principles in business parlance are commonly known as policy. Policy denotes a future course of action of intent towards the activities of an organization. In this unit, you will be introduced to the meaning of business policy in order to prepare you for all the associated ideas about the concept in business management. We shall also highlight the reasons why business policy is necessary. Finally, we shall explain business policy implementation in an organisation. I believe you have read the course guide and have a general understanding of this course unit and how it fits into the course as a whole. You will see the objectives below specify what you are expected to learn after reading this unit. 2.0 OBJECTIVES At the end of this unit, you should be able to:

Define business policy • State the need for business policy • Explain business policy implementation in organization 3.0 MAIN CONTENT The introductory unit is intended to familiarize you with business policy. It starts with a description of business policy. It starts with a description into the development process that evolved before learners like you got the opportunity to study this course. Next, we shall introduce you to the nature of business policy where its definition is also provided. You should be convinced of the importance of the business policy course to be motivated to learn it better. Hence, we have to be clear about the purpose and objectives of the course that we are learning. The objectives of the course have been described in terms of knowledge, skills and attitudes. It is

essential to know what to expect from this course and in which direction the learning objectives are likely to take the students. 3.1 Definition of Policy What comes to your mind when the word policy is mentioned? As stated in the introduction earlier, policy is defined as a decision rule not a decision. For example, of a policy- Hire only professionally qualified accountants for senior accounting positions. When such a person is hired it is a decision. A policy is considered the general guideline for decision making. Kalejaye, A. (1998) defined policy as the objectives, the mode of thought and the body of principle underlying the activities of an organization. According to Fagbemi (2006) a policy refers to what an organization or a person intends to do or does. Business policy therefore is what business organization intends to do. It aims at assisting the organization to deliver services to meet the needs and expectations of the goals of the organization. Policies are plans in that they are general statements or understandings that guide or channel thinking in decision making. In actual business situation, not all policies are “statements”; they are often merely implied from the action of managers. The president of a company (organization), for example may strictly follow-perhaps for convenience rather than as policy-the practice of promoting from within; the practice may be interpreted as policy and carefully followed by subordinates. Weighrich & Koontz (2005) To be candid, it is incumbent upon the managers to ensure that subordinates do not interpret as minor managerial decisions that are not intended to serve as patterns. Business policy is a guide and roadmap to create awareness and direction to the management of any organization. It publicizes the rights and obligations of different rung of the ladder- horizontal and vertical- of the different capital be human resource engagement, finance utilization etc. It ensures that organizations deliver better end product within a framework. It encourages, promotes and improves performance attainment in an organization. Policy provides the bedrock for vision and mission statement of the business organization along the corporate objectives and goal. Policy enables the business to be assessed and given an image by the way the carry out their responsibility along with their relationship with their clients/customers. It is the ‘barometer’ of playing by the rule and gives purpose to the strategy thrust of the organization. Definition of Business Wikipedia (2012) states that a business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers.[1] Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their

policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. 2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. 3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. 4. Appropriate- Policy should be appropriate to the present organizational goal. 5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive. 7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. Rama Rao (2010) gave some useful definitions of Business Policy as follows: (1) A business policy is an implied overall guide setting up boundaries that supply the general limit and direction in which managerial action will take place. (2) A business policy is one, which focuses attention on the strategic allocation of scarce resources. Conceptually speaking strategy is the direction of such resource allocation while planning is the limit of allocation. (3) A business policy represents the best thinking of the company management as to how the objectives may be achieved in the prevailing economic and social conditions. (4) A business policy is the study of the nature and process of choice about the future of independent enterprises by those responsible for decisions and their implementation. (5) The purpose of a business policy is to enable the management to relate properly the organization’s work to its environment. Business policies are guides to action or channels to thinking. Difference between Policy and Strategy The term “policy” should not be considered as synonymous to the term “strategy”. The difference between policy and strategy can be summarized as follows: 1. Policy is a blueprint of the

organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. 2. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy. Objectives of Business Policy The main objective of business policy is performance driven which ensures delivery of service or product depending on purpose of which the business was set up-service or product oriented. Business policy specific objectives ensure: • Efficiency and effectives in performance of duties • Equal provision of services and treatment of customers • Better management and provision of better quality services • The utilization and application of resources • The formulation mission statement • The establishment of vision of the organization Policies are always aligned with the objectives of the enterprise if it is to be effective. All policies follow parallel courses and directly related to objectives. If they cross or oppose objectives, collective effect is lost and disorder would prevail. Misunderstanding and confusion are often the cause of problems and poor results rather than faults in the stated policy (Kalejaye, 1998). Why Create Business Policies? No matter what the size of the business, business policies can be simple to write and implement, while adding structure to the great things you are already doing. Specifically, business policies: • Drive strategic planning, and help set expectations and performance objectives. • Lead to more efficient internal operations. • Engage and align the values of stakeholders; and build mutual understanding of expectations and challenges. • Ensure accountability and create transparency. • Promote ethical and responsible decision-making. • Assess and mitigate risk. • Streamline new staff orientation; having established written policies that staff can refer to creates consistency, clarity, and provides an understanding of the goals and culture of the company. • Result in time savings: proactively thinking about how specific situations and issues will be handled eliminates having to discuss and debate how to handle issues every time they come to the forefront. • Meet legal requirements; some laws require employers to adopt certain policies

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UNIT 1 BUSINESS POLICY – DEFINITION AND DISCUSSION OF CONCEPT TABLE