Bsad 321 Lecture 3

BSAD 321
Business Policy and Strategic Management
Differences between Policy and Strategy

i. The term ‘policy’ is not synonymous to the term ‘strategy’.
ii. Policy is a blueprint of the organizational activities which are repetitive
or routine in nature.
iii. Strategy is concerned with those organizational decisions which have not
been dealt with or faced before in the same form.
iv. Policy formulation is the responsibility of top level management. While
strategy (not corporate strategy) formulation is basically done by business
level management.
v. Policy deals with routine or daily activities essential for effective and
efficient running of an organization while strategy deals with strategic
decisions.
vi. Policy is concerned with both thought and actions while strategy is
concerned mostly with actions.
vii. 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

i. 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:
ii. Efficiency and effectiveness in performance of duties.
iii. Equal provision of services and treatment of customers.
iv. Better management and provision of better quality services.
v. The utilization and application of resources.
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vi. The formulation of Mission statement.
vii. 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 should be directly related to objectives. If they cross or
oppose the objectives, collective effort 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?

Business policies are created because they:
i. add structure to the plans and efforts of managers and staff.
ii. drive strategic planning, and help set expectations and performance
objectives.
iii. lead to more efficient internal operations.
iv. engage and align with the values of the stakeholders; and build mutual
understanding of expectations and challenges.
v. ensure accountability and create transparency.
vi. promote ethical and responsible decision-making.
vii. assess and mitigate risk.
viii. streamline new staff orientation; having established written policies that
staff can refer to.
ix. creates consistency, clarity, and provides an understanding of the goals
and culture of the company.
x. Result in time-saving: 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.
xi. Meet legal requirements: Employers should adopt certain legal policies to
guide the actions of staff and management, e.g. discrimination and sexual
harassment policy.
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Characteristics of Business Policy
Most organizations produce statements and explanations on what they are
trying to achieve in particular areas. Policies are subdivided and stated in terms
of procedures i.e. series of related steps or tasks expressed in a chronological
order and rules; that is, prescribed course of actions that explicitly state what
are to be done under a given sets of circumstances. Many organizations provide
parameters within which decisions must be made. Some of these will be written
by specialists in different operational areas, like employment matters which
may focus on hiring and firing, sales and marketing departments may provide
guidelines of pricing and credit facilities; purchasing department policies may
prohibit gifts from suppliers. Some policies focus on materials/stocks and
others on capital and equipment. Some describe objectives and others means.
In general, policies may be classified in relation to personnel, capital,
objectives, means and specific organizational areas. This is an arbitrary but
convenient way to classify policies. It should be noted that these categories are
not mutually exclusive but frequently overlap.
Characteristics of Policy
Sound policies usually contain a combination of the following characteristics:
1. Destiny
A common characteristic of policy is that it denotes future action and intent. It
usually describes a goal or destiny which is there to be achieved. In addition, it
implies a conviction in a set of beliefs which is considered right for the people
in the organization. The manner a policy is expressed and the detailed
procedures which stems from it all point in the same direction and do not allow
individual actions to follow a different direction. If the actual procedures and
wordings do not imply belief in a course of action, then it is probably a wrongly
formulated policy.
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2. Top Management Approval and Commitment
In practice, making contributions and recommendations on policy issues may
be the function at the lower levels of management in the organization, but it is
the hallmark of policy that it is approved and endorsed by the top management.
This may be Board of Directors and Managing Director or the responsibility
may be delegated to a top executive committee. Directors and top managers are
primarily responsible for policy making and setting long-term objectives. Once
the series of policies are approved at the top, there is every possibility that all
segments of the organization will move to the same direction toward the set
objectives.
3. Intellectual Input
Policy requires a high level of intellectual and intelligent inputs because policies
are concerned about the future activities deemed to be just and right for the
organization. Policies must be able to withstand pressures, opposition and
challenges from all parts of the organization and its environment which may see
and treat the policies differently. Without a high degree of thorough analysis and
deep thought of reasoning during formation, a policy may be less effective and
may even fail to provide the framework for enduring decision making.
4. Consistency and Long-Term in Nature

Usually, policy makers have thought through all aspects of a particular policy
culminating into consistent and enduring policy thereby making frequent
amendments difficult. Constant changes in the course of action and direction of
an organization will surely bring about confusion, resentment and even
generally derail all things that sound policies are trying to achieve. Practically,
almost all policies are long-term in nature although for practical purposes, long-
term policies are sub-divided into short-terms.
It is worthy of note that there could be circumstances in which refinement and
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revision might be required. In essence, they are intended to create a continuum
against which day-to-day standards and decisions can be made.
5. Acceptability
The degree of acceptance of organizational policy to everyone is marked by the
persistence and understanding of employees who want to know why the policy
is made or changed. Genuine reasons must be forthcoming and management
needs to provide supervisors with sufficient information to satisfy queries
regarding a policy. There is danger in withholding information which often
leads to gossip and speculation in an organization as this can be disorganizing,
cause increased friction between management and employees, upset and strain
relationships through general suspicion and mistrust.
6. Communicated to Staff
As soon as policies are formulated and ratified, they should be communicated to
members of the organization. Everybody must be aware about the mission and
objectives of the organization. Hence, there should be no exception in
communicating policies to the members of the organization. Appropriate
channels must be used in communicating the policies throughout the
organization, so that nobody is left out. This, of course, will cement
relationships in the organization and motivate the staff to reach higher heights.
7. Genuine Intention and Application

It is not uncommon for management to declare policy for prestige purposes,
such as publicity and then fail to put the policy into practice. Management’s
intention, in these circumstances, is to ignore and dump the declared policies.
In some cases, some managers apply policies in wrong and negative ways,
hiding under one excuse or the other for not carrying out some courses of
actions. These types of policies are rarely put into writing and where it is in
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written form; they are usually wrongly worded in such vague manners that will
distort to fit in with any course of genuine action. These types of policies must
be avoided; every policy of the management must be treated with all the
seriousness it deserves and must be genuinely applied to the intended course of
action.
8. Balanced Interpretation
While correctly interpreting policies, managers do rigidly conform to principles
and procedures without due regard for the human elements of the organization
and emerging pressing issues. Something more than correctness is required in
human society and ever changing complex environment; all these factors, when
weighed carefully, might well provide a more balanced interpretation which
would relegate to the background the narrow correct ones. A bit of flexibility to
accommodate the emerging factors and balanced interpretation of policies are
the real art of managing and supervising which cannot be attributable to abuse
of policy.
9. Alignment with Objectives

All policies must follow parallel courses of action which are directly related to
the objectives. If they cross or oppose the objectives, collective effort 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. These
identified dangers highlight the need for careful checking of ambiguity in policy
so as to avoid misunderstanding especially at the lower level of management
hierarchy.

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BSAD 321

Business Policy and Strategic Management

Differences between Policy and Strategy

Objectives of Business Policy

Why Create Business Policies?

4. Consistency and Long-Term in Nature

7. Genuine Intention and Application

9. Alignment with Objectives

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