In order to ensure the smooth operations of the organization, the managers have to formulate and implement a number of policies in the organization. Mainly these policies can be classified as:-

Major policies: the major policies of the organization can be described as the policies that are used for providing a unified direction to the organization and which require the commitment of significant resources of the organization. In this way, the major policies provide direction to the organization in its efforts to achieve its objectives. Therefore it is very important that the major policies are capable of supporting the goals of the organization.

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The policies are created by managers to make sure that the operations of the business runs smoothly. However there are certain factors, internal as well as external, that have an impact on these policies. These factors include:-

1. The objectives and strategies: the policies are created with a view to help the organization in achieving its objectives. Therefore the objectives and the strategies adopted by the organization provide the limitations within which the policies of the organization have to operate. At the same time, it is also very significant that the policies adopted by the organization are consistent with the goals and strategies of the organization.

2. Structure of the organization: the structure of the organization decides the level of positions of the employees and also decides the authority and the responsibility that has to be provided to the employees. Therefore the process of implementing a policy in the organization is also impacted by the nature of the structure that has been adopted by the organization. A policy implemented in the organization has to be consistent with various positions as well as the roles of authority in the organization. In the same way, the process of policy determination is also significantly impacted by the structure of the organization.

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Policy formulation process: creating policies for the organization is an integral part of the process of planning. In order to ensure that the operations of the organization run smoothly, proper policies have to be formulated by the managers. However, a comprehensive process is involved in creating the most suitable policies for an organization. Therefore, the below mentioned process needs to be followed by the managers while creating policies for their organization:-

1. Identifying the policy area: first of all the managers are required to identify the particular field for which they are going to formulate the policy. At the same time, the managers are also required to consider the objectives as well as the demands of the organization. For example, when the managers are formulating policy related with marketing, they should keep in mind the expectations and the thrust areas of marketing for the organization. In the same way, the scope of the policy formulated by them depends on the area that such policy is going to cover. Therefore, it is a very important that first of all the managers identify the particular area that is going to be covered by the policy that they’re going to create.

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Every organization has to make a number of decisions. Some of these decisions have long-term orientation and some decisions are related with the day-to-day operations of the organization. The long-term decisions also help in further decision-making. In this regard, policy and strategy are the parts of planning that provide guidance for further decision-making. Generally, the terms policy and strategy are used interchangeably but in reality, the orientation and significance of these two terms is different.

What is Policy?
Policy can be described as a general statement that has been formulated by an organization to provide guidance for the managers. First of all, objectives are formulated and then policies are created to achieve these objectives. Policies can be described as the mode of thought and the principles underlying the activities of the organization. It needs to be noted that policies do not need any action but the purpose of the policies is to guide the managers in their decision-making commitments when decisions are not made by them. At the same time, both policies and objectives are used for achieving the goals of the organization but both of them are different. Objectives can be described as the goals and policies are the methods that are used to achieve these goals. While the objectives are the endpoints of planning, policies provide the general methods to achieve these objectives. A policy provides the basic guidelines and the person implementing these policies have the scope of interpreting them. This means that a policy has to be flexible and on the other hand, a rigid policy turns into a rule.

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It is very important that the management of the organization always takes the correct decisions. The reason is that if a wrong decision has been taken at any level, it can create problems for the whole organization. However it is also true that despite the best efforts of the management, there are certain problems that may arise during the process of decision-making. These problems related with decision making can be described as follows:-

1. The Timing of Decision: A difficulty that is generally faced by the management while taking a decision is related with the timing of the decision. The reason is that it is very important that the decision should be made at the most opportune time. Therefore, deciding the most appropriate time for taking the decision is a problem in itself. The decision will not be effective if it is not taken at the appropriate time.

2. Need for Correct Decisions: The managers are required to decide if the decision taken by them is correct or not. In case the decision is not correct, a lot of time and money will be wasted. It needs to be mentioned that the correctness of the decision depends on the capabilities of the person making the decision as well as on the information available regarding the problem and the analysis of such information. For example if correct facts are not available with the managers, the decision may be based on incorrect premises. Therefore, the premises should be based on the correct problem and they should also be properly analyzed so that a correct decision can be made.

3. Effective Communication: After a decision has been taken by the management of the organization, it is also required that the decision should be properly communicated to all the persons for whom the decision has been taken. For this purpose, the decision needs to be communicated in such a way that it can be easily understood by these persons. On the other hand, if the decision taken by the management has not been properly communicated to all the persons who have the responsibility to implement the decision, the decision will not be implemented effectively and as a result, it will remain on paper only. Therefore, the management has to deal with various communication barriers and communicate the decision properly.

4. Participating in Decision Making: It is considered that the best way to take an important decision is to hear the views of all the persons that are concerned with the decision before making the final decision. By receiving the views of different persons concerned with the decision, a wider viewpoint regarding the problem can be achieved. However, it has been seen that the top level management of the organization takes all the important decisions at its own level and other persons are not allowed to take part in this process. In this way, the authority of taking significant decisions is confined to a few persons only. However, such a situation can create problems in the effective implementation of the decision. While taking a decision, the views of the persons who are going to be directly impacted by the decision should also be considered. Therefore, in order to avoid such a situation, the management should allow all the concerned persons to participate in the decision-making.

5. Decision Environment: The physical and organizational environment also has an impact on the process of decision-making in an organization. In case favorable environment exists for decision-making, mutual understanding and cooperation are also present. The result is that all the decisions are accepted by others in good spirit and in the same way, these decisions are also implemented effectively. At the same time, such atmosphere also allows the scope for creative thinking and research.

6. Implementing Decisions: Sometimes, the management of the organization may also face problems in implementing a particular decision. Therefore, after a decision has been made by the management, it is also equally important that sincere efforts should be made to implement the decision. The managers and their subordinates play an important role in the implementation of the decisions. Therefore, the managers can consult their subordinates or they may also take advice from specialists but the final decision has to be made by the managers themselves. At the same time, it is also the responsibility of the manager to ensure that the decision is being implemented properly. On the other hand, if a decision proves to be unsuccessful, the manager has to face criticism. In this way, the implementation of a decision may also create problems that have to be handled by the managers.