The type of organization influences the type of policies muted out for compliance. The regulations which guide decisions which guide decisions and actions vary considerably and cut across the hierarchical structure of the organization depending on the nature and magnitude of objective. There are many types of policies – marketing policies, financial policies, production policies, personnel policies to name a few in every organization. Within each of these areas more specific policies are developed. For example, personnel policies may cover recruitment training promotion and retirement policies. Viewed from a systems angle, policies form a hierarchy of guides to managerial thinking. At the top of level policy statements are broad. The management is responsible for developing and approving major comprehensive company policies. Middle managers usually establish less critical policies relating to the operation of their sub units.
Policies tend to be more specific at lower levels. The manager’s job is to ensure the consonance of these policies, each must contribute to the objectives of the firms and there should be no conflict between sub system policies.
Although it is customary to think of policies as written statements it is not necessarily the case.
For example a firm may simply decline to consider handicapped employees in the selection of new personnel. In effect, this becomes an effective policy even though the company has never verbalized its position.
There are many types of policies. Examples include:
hiring university-trained engineers;
encouraging employees suggestions for improved cooperation;
promoting from within, conforming strictly to a high standards of business ethics;
setting competitive prices; and
insisting on fixed, rather than cost-plus, pricing.
Hicks and Gullett (1985) expressed the opinion that every operating areas ranging from sales, procurement, manufacturing, personnel (human resources) and finance need a hierarchy of supporting policies to drive the business. This move enhances policies as guide to decision define the boundaries within the organization and they direct decisions toward accomplishing objectives thereof. In the progression from objectives to policies to procedures to rules, the limits become increasingly narrow.
Steiner (1969) stated that the regulations which guide decisions and actions very considerably and cut across the hierarchical structure of the organisation depend on the nature and magnitude of mission to be accomplished. He therefore developed a pyramid to demonstrat e the relationship among various types of business policies will be used as a model as discussed below:
Figure 3.1 Steiner’s Pyramid of Business Policies
MAJOR POLICIES Lines of business, code of conduct
SECONDARY POLICIES Selecting of geographical area, major
customers, major customers FUNCTIONAL POLICIES Marketing, Production, Research, Finance
MINOR POLICIES
Merchandise display, Plant layout, maintenance, absenteeism, etc.
PROCEDURE
Handing income orders, servicing customers’ complaints, shipping, smoking, etc.
RULES
Delivery of paychecks, loitering around, plant, security, smoking, etc.
Source: Steiner, G. (1969 quoted in Kalejaye, A., 1998).
Top Management Planning, Macmillan, New York.
Major policies
Secondary (corporate) policies
Functional policies
Minor policies
Procedure
Rules
3.2.1 Major Policies
Major policies are formulated at the top of the organization and relate to the company’s ma in purpose. They provide guide line pertaining to such things as the line of business and ethical conduct of organization.
3.2.2 Secondary or Corporate Policies
These policies are broad and general policies formulated at the upper levels of management o f the organization. These policies apply to the entire organization and deal with business facets such as the selection of major products and services and the selection of marketing areas. Much of the information generated in the proper formulation of major policies can be used in determining secondary policies, which are more specific than major policies.
3.2.3 Functional Policies
These deal with specific functional areas of the organization. They involve policies that specifically related to marketing production, finance, and other functional areas. For instance, the ABC Transport Company will accept customer exchanges or returns made within one month after purchase is an example of functional policy related to marketing.
3.2.4 Minor Policies
They are subordinate to functional policies and define in details such matters as maintenance of equipments, schedules, plant layout, absenteeism etc.
3.2.5 Procedure
This is a series of related steps or related steps or tasks expressed in chronological order to achieve a specified purpose. Procedure defines in step-by-step fashions the method by which policies are achieved. They outline precisely the manner in which an activity must be accomplished. Procedure generally permits little flexibility and deviation.
3.2.6 Rules
This is a statement of what may, must or must not be done in a particular situation or when playing a game. It explains in a lucid manner what an employee should do or is advised to do in a particular situation. You can also describe rules as the habits, the normal state of things, or
what is true in most cases. Finally, a rule is a statement of what is possible according to a particular system.
Rules permit the use of discretion in performing a particular task.
Self-Assessment Exercise 3.2
What is the main characteristic of functional policy?