Formulation of policy

Policy formulation may begin at any level of management and may flow upwards or downwards along the levels of organization. Policy usually is formed by:

§ The board of directors and senior management, who determine the main policies;

§ Being passed up the chain of command until someone takes responsibility for making a decision;

§ External influences, e.g. government legislation, may force a policy change.

Policy formulated by executives is usually on broad lines and subordinates have scope in applying it. Any policy should be as specific as possible.

Examples of policy:

§ Product policy involves deciding upon the products to make and depends upon many factors, particularly upon market conditions, such a policy in turn generates other policies, e.g. marketing, finance and research.

§ Production policy deals with, for example: What proportions of plant should be devoted to flow or job batch production? What items to make or to buy? What use should be made of by-products?

§ Market policy involves determining distribution channels, pricing structure of products, volume and type of advertising, credit policy, method of subdividing territory and remuneration of salesmen.

§ Purchasing policy involves what organizations buy and to what extent, and what are alternative sources of supply.

§ Human resources policyinvolves methods of training, education, pension schemes, incentive plans, management succession and development, benefits, union relations.

Rules and procedures are often confused with policies.

Rules are more specific than policies and they usually entail penalties for misuse. Policy establishes a guiding framework for rules. Policies are broader than rules and are usually stated in more general language.

Procedures reflect policy and provide a standard method by which work is performed and provide a check when events do not occur. They are subordinate to policy and are a useful aid to training.

Reading tasks

A. Understanding main points. Answer these questions:

1. What is policy?

2. Who defines the policy of business?

3. What do policies reflect?

4. What forms policy?

5. What are major types of policy?

6. What is the difference between policy and rules; policy and procedures?

B. Understanding details. Mark these statements T (true) or F (false) according to the information in the text:

1. Planning and company objectives depend on policy form.

2. Policy is provided by the authority.

3. Policies must be basically sound and well administered.

4. Policies should not be flexible and allow executives discretion in their application.

5. Policies and rules are the same.

Vocabulary tasks

A. Match these terms with their definitions:

B. Collocations.

Match the verbs with nouns:

C. Word families

Talking point

Discuss these policies in groups:

1. Production policy

2. Market policy

3. Purchasing policy

4. Human resources policy.

Unit 13

Date: 2016-04-22; view: 869