A policy is a standing plan. Policies are directives providing continuous framework for executive actions on recurrent managerial problems. A policy assists decision-making but deviations may be needed, as exceptions and under some extraordinary circumstances.

Policy-making is an important part of the process of planning. Policies may be described as plans which are meant to serve as broad guides to decision making in a firm. Policies exist at various levels of the enterprise-Corporate level, divisional level and departmental level. Policies are valuable because they allow lower levels of management to handle problems without going to top management for a decision each time.

Essentials of Policy Formulation

The essentials of policy formation may be listed as below:

  • A policy should be definite, positive and clear. It should be understood by everyone in the organisation.
  • A policy should be translatable into the practices.
  • A policy should be flexible and at the same time have a high degree of permanency.
  • A policy should be formulated to cover all reasonable anticipatable conditions.
  • A policy should be founded upon facts and sound judgment.
  • A policy should conform to economic principles, statutes and regulations.
  • A policy should be a general statement of the established rule.

Importance of Policies

Policies are useful for the following reasons:

  1. They provide guides to thinking and action and provide support to the subordinates.
  2. They delimit the area within which a decision is to be made.
  3. They save time and effort by pre-deciding problems and
  4. They permit delegation of authority to mangers at the lower levels.

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Principles of Management and Organisational Behaviour Topics