Nature and Importance of Business Policy

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Nature & Importance of Business Policy

Business policies are crucial for guiding, directing, and facilitating the actions of various functional executives to ensure the best contribution towards corporate objectives and goals. These policies can be formal or informal, applied, implied, or imposed, and originate from top management. They serve to guide both the top management and subordinates in making the most effective use of operational tools.

Key Functions of Business Policy

According to Edmund, business policy encompasses:

  • Shaping High-Level Objectives: Formulating long-range corporate objectives and strategies that align with company capabilities and external realities.
  • Developing General Policies: Creating a set of general policies to pursue the chosen strategy.
  • Guiding the Organization: Ensuring the organization follows the strategy effectively.

Influences on Top Management

Business policy influences the top management in various ways:

  • Perception of Trends: Understanding industry and economic trends affecting the company.
  • Needs and Opportunities: Recognizing opportunities, threats, strengths, weaknesses, and problems.
  • Opportunity Selection: Choosing the best opportunities that align with the company's capacity.
  • Strategy Formulation: Developing strategies based on opportunities and available resources.
  • Operating Plans: Creating plans to pursue the chosen strategy and policies.
  • Organizational Climate: Establishing relationships and an environment conducive to policy implementation.
  • Performance Evaluation: Regularly assessing performance and progress.
  • Re-evaluation: Periodically reviewing positions in light of internal and external developments.

Parameters of Policy

  • Identifiable and Clear: Policies should be clearly defined.
  • Well-Defined Objectives: Objectives should be fully identified.
  • Non-Conflicting: Policies should not conflict with other company policies.
  • Opportunity Exploitation: Capable of exploiting opportunities.
  • Fair and Honest: Should align with organizational values and philosophy.
  • Social Contribution: Should contribute positively to society.
  • Acceptance: Should be acceptable to all concerned.
  • Stimulus to Effort: Should motivate organizational effort.
  • Realistic: Must be practical and achievable.

Features of Effective Business Policy

  • Specific: Clearly defined to avoid ambiguity.
  • Clear: Unambiguous and easy to understand.
  • Reliable/Uniform: Consistent and uniformly applicable.
  • Appropriate: Suitable for the organizational goals.
  • Simple: Easily comprehensible.
  • Inclusive/Comprehensive: Broad in scope.
  • Flexible: Adaptable to different situations.
  • Stable: Consistent over time.

Difference between Policy and Strategy

  • Policy: Deals with routine, repetitive activities and is formulated by top management. It guides both thoughts and actions and is a blueprint for organizational activities.
  • Strategy: Deals with unique, non-repetitive decisions, primarily formulated by middle management. It is action-oriented and focuses on achieving targets set by policies.

Importance of Business Policy

Employee Satisfaction and Public Image

  • Consistency: Ensures everyone is on the same page regarding expectations.
  • Positive Work Environment: Creates a safe and fair workplace, leading to higher productivity.
  • Legal Compliance: Helps prevent legal issues related to discrimination, safety, and other regulations.

Establishing Corporate Culture

  • Clear Expectations: Establishes what is expected of employees, fostering a cohesive corporate culture.
  • Management Implementation: Policies must be consistently implemented to be effective.

Employee Business Policy Training

  • Handbook: Every employee should receive a comprehensive employee handbook.
  • Training Sessions: Regular training sessions should be held to review key policies.
  • Accessibility: Handbooks should be accessible online for easy reference.

Violations of Business Policy

  • Consistency in Enforcement: Policies must be consistently managed and enforced.
  • Documentation: Violations should be documented, and appropriate disciplinary actions taken.

Importance of Your Business Policy

The choice and implementation of business policies directly impact employee performance and company culture. Policies should be regularly evaluated and adjusted to ensure they contribute positively to the organization’s success.

Building Business Policies

  • Initial Creation: Start with an employee handbook and a business plan outlining mission and vision.
  • Standard Regulations: Include policies regulated by federal and state laws.
  • Operations and Culture: Define operational and cultural policies that reflect the company’s desired image and internal culture.
  • Feedback and Adjustments: Regularly seek feedback and make necessary adjustments to policies to maintain productivity and employee satisfaction.

Conclusion

Business policies are essential for setting clear guidelines and expectations, ensuring legal compliance, and fostering a positive work environment. They help align organizational activities with corporate goals and create a cohesive and productive corporate culture. Regular training, consistent enforcement, and periodic evaluation are key to effective policy implementation.