Business Policy: Features, Scopes , Importance and Purpose

Content:

1. Specific & Definite

2. Clear

3. Reliable & Uniform

4. Appropriate

5. Simple

6. Inclusive/Comprehensive

7. Flexible

8. Stable

1. Control

2. Effective Communication

3. Clarity

4. Motivation

5. Policy Review

6. Economical and Efficient

7. Coordination of Efforts

8. High Morale

Business Policy

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions.

Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business 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 the long-run.

Features of Business Policy:

An effective business policy must have following features-

1. Specific & Definite:

Policy should be specific/definite. If it is uncertain, then the implementation will become difficult.

2. Clear:

Policy must be unambiguous. It should avoid the use of jargon 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.

Scopes of Business Policy:

It should cover all the aspects of business.
It includes the functions and responsibility of senior employees.
Deal with determination of future course of action.
Involves a choice of purpose and defining the needs.
Include the resources by the help of which organization can achieve its goal.

Importance of a Business Policy:

Policies are the key for success of the business. Policies offer great advantages to the management if they are stated with clarity. It raises the confidence of the line managers. They make the decisions within a given boundary. The managers act without the need for consulting the senior managers every time which minimizes the need for close supervision. It also builds the confidence of the managers. The importance of business policies are discussed as follows:

1. Control:

Policy facilitates effective control on the working of the organization. It indirectly controls the managers at different levels without directly interfering in their routine working.

2. Effective Communication:

Generally policies are written and well drafted statements. Hence there is not a remote chance of confusion or miscommunication. By setting policies the management ensures that decisions made will be consistent and in the best interest of the organization. Clearly laid down policies try to eliminate personal hunch and biasness.

3. Clarity:

Policies clarify the viewpoint of the management for the purpose of running a particular activity / activities.

4. Motivation:

Policy enables the line managers to be self reliant. They take the decision on their own in the confined border of the policy. This raises their confidence and motivates them. A well drafted policy provides a pattern within which delegation of authority is possible.

5. Policy Review:

Regular review of policy is must to see to it that the existing policies are relevant in the given situation. If required policy may be modified or altered depending on the business environment. Review of policy at regular intervals provides a method of anticipating future conditions and situations and helps to resolve how to deal with them.

6. Economical and Efficient:

Policy enables the management to carry out its operations effectively and efficiently. It enhances the working of the organization.

7. Coordination of Efforts:

Policies ensure coordination of efforts and activities at different levels in the organization. Activities and duties are assigned in such a way that all activities in the organization are integrated effectively. Policy coordinates with individual efforts.

8. High Morale:

A well crafted policy can raise the overall morale of an enterprise. Policy enables the managers to understand the intention of the management.

Purpose of Business policy:

To integrate the knowledge gained in various functional areas of management
To adopt a generalist approach to problem-solving.
To understand the complex inter-linkages operating within an organization through the use of systems approach to decision making and relating them to changes taking place in the external environment.