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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