Business policies play an essential role in the success of the organization. If these policies are not formulated properly, these are the limitations of business policy for the organization. In the later section of the blog, you will learn the current trends of business policy.
Importance of Business Policy
The importance of business policy is as follows:
Business policies help in coordinating the organizational activities towards the business objectives. It fosters uniformity of action within the entire firm. These policies not only encourage cooperation but also stimulate initiative.
2. Quick Decision-Making
Policies facilitate the lower-level management to take immediate actions and quick decisions. It also defines the limits of the decisions. It enables the subordinates to make decisions confidently without approaching their superiors. Each policy carries a few guidelines on which a manager can tackle a particular activity or situation. A lot of time is saved by forecasting recurring issues and suggesting solutions. It is an importance of business policy.
3. Effective Control
The business Policies provide a logical basis for the evaluation of the performance of a firm. They also ensure that there is coordination between the organizational objectives and activities. They eliminate any divergence in the actions planned by the firm. If the policies are not well, then this may lead to deviations. These deviations influence the efficiency of the firm at large. Hence, Policies are derived from objectives and provide guidelines for various procedures.
Business policies clearly define the executives’ roles and responsibilities, which help decentralize activities. These policies provide guidelines for the executives to find suitable actions with certain limitations. The delegation of authority is given to the executives to follow the business policies efficiently. The business policy shows the work procedure for managers from the business policies.
5. Internal Controls
Policies also act as the internal control mechanism of the firm. It helps in controlling the behavior of a few employees and not all of them. A firm may have a policy that while counting the money, two employees must be present and sign the record where the calculated money is present. This policy must obligate under the auditing procedure, or this may be a weakness in internal control.
6. Reduces Costs
There is a need to minimize the cost of a firm. An organization can achieve it by finding the best price for the firm’s requirements, like cheap suppliers with suitable materials. A company can also do it by minimizing financial losses such as errors, employee fraud, etc. It is the importance of business policy. When a business frames policies that state possible risk factors and wants its employees to know them, this may create a need for risk management. Therefore, it is necessary to ensure that the employees abide by the business policies towards risk minimization.
7. Maintain Compliance
Business policies also look after the company’s internal and external stakeholders to maintain a degree of accountability. For this purpose, the company is responsible for handling the staff or appointing a person to do the same job. The employees must also keep proper records and follow defined policies and processes.
8. Develop a Learning Culture
Business policies encourage employees to keep learning and enhancing their job knowledge. The employees must learn and read the business policies and update the policies annually by developing a procedure.
Limitations of Business Policy
Limitations of business policy are as follows:
1. Inadequate Coverage
Business policies cannot cover specific issues, which might lead to unpredictable situations that are difficult to handle. Therefore, at times, policies prove to be pointless.
2. Limited Zone
There is only one immediate solution to every problem when following business policies. The policies have certain limitations which restrict the management from taking decisions. It is one the important limitations of business policy.
It compels the managers to abide by the guidelines and take decisions accordingly. In a dynamic world, there is no place for rigidness. But once the policies formulate, they are followed year after year.
4. Consistency in Policies
Policies of consistent nature may need to be more profitable in the ever-changing business environment. It is also possible that the present situation is totally different from the one according to which the business policies were framed as the environment’s social, economic, political and technological factors keep on changing. In such situations, policies are of no importance and are the limitations of business policy.
5. Policies are Not an End
Policies only provide specific rules and guidelines for the smooth functioning of the business. But, they do not determine the endpoint of the company. It is the limitations of business policy.
6. Policies Provide Set Rules
Policies provide a framework under which all employees must work per the set guidelines. Since there is no freedom to speech or act, the employee cannot show his own ability.
Current Trends in Business Policy
The current trends in business policy are as follows:
1. Top Management Prerogative
A lot of importance is given to the functions and responsibilities of top management by business policies. These functions and responsibilities include defining goals and objectives, determining the course of action, regulating and directing the balance between the external and internal group’s interests and ensuring that the organization accomplishes its goals.
2. General Management Bias
The main focus of business policies remains on the overall managerial view rather than specific functional elements. While analyzing the performances, the policy examines all the crucial issues with a broader perspective rather than going into specific details, i.e., determining the effect of any business decisions on the overall performance of the organization. For this purpose, it is essential to select the correct way while putting the organizational capabilities and environmental pressures in the background.
3. Resource Focus
The main focus of business policies remains on the proper allocation and mobilization of resources so that the organization can effectively achieve its objectives and compete even within intense competition or unfavourable business situations.
4. Externally Tuned
Business policies help outline the significance of environmental influence on organizational performance. It also highlights the requirement of top management to make a suitable way out. In the given situation, while determining organizational effectiveness, the most crucial factor is the capability to adapt to changing environmental challenges.
5. Covers a Large Territory
At present, vast business dimensions cover business policies and strategic management. That is why they are readily accepted by different organizations, whether public sector, non-business, or small firms.
Why is Business Policy of Great Importance to Every Business?
Business policy is essential to every business because
1. It guides its operations.
2. It sets out the company’s objectives, strategies and procedures.
3. It also helps to protect the interests of the business and its employees.
What are the Benefits of Workplace Policy?
There are many benefits to having workplace policies in place, including the following:
1. Ensuring everyone is aware of the workplace’s expectations and rules of behavior.
2. We are fostering a positive and productive work environment.
3. We minimize the risk of legal disputes or claims arising from workplace incidents.
4. They protect the employer from liability if an employee is injured at work.