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Chapter IV

Basic Elements of Strategy

Upon completion of this chapter you will be able to


 Define what vision, mission, objective and strategy is all about
 Describe the approach how vision, mission, objective and strategy at different level is
expressed
 Understand the characteristics of good mission and objectives and
 Differentiate the various levels of organizational strategies.

Basic strategy Elements


1. Vision
Organization vision is aspirations, expressed as strategic intent should lead to an end,
otherwise they would just be castles in the air. That end is the vision of an organization or an
individual. It is what the firm or a person would ultimately like to become. For instance, some
of you, say in 10 years, or may be even earlier, would like to become general managers
managing an SBU in a large, diversified multinational corporation. Or some others among you
would like to believe that you will be an entrepreneur or an industrialist in 10-15 years to
come of your own company dealing with IT services and employing cutting edge technology
to serve a global clientele. A firm thinks like that too.

“ A vision, there fore, articulates the position that a firm would like to attain in the distant
future. A vision is more dreamt of that it is articulated. This is the reason why it is difficult to
say what vision an organization has. Some times it is not even evident to the entrepreneur
who usually thinks of the vision. By its nature, it could be as hazy and vague as a dream that
one experienced the previous night and is not able to recall perfectly in broad daylight. Yet it
is a powerful motivator to action. And it is from the actions that a vision could often be
derived. Henry Ford wished to democratize the automobile when he visualized that an

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affordable vehicle could be available for the masses. Walt Disney an entertainment industry
known world wide probably wanted to make people happy.
A) Defining vision
Vision has defined in several different ways. Kotter (1990) defines it as a "description of
something (an organization, corporate culture, a business, a technology, an activity) in the
future" El-Namaki (1992) considers it as a "mental perception of the kind of environment an
individual, or an organization, aspires to create within a broad time horizon and the
underlying conditions for the actualization of this perception." Miller and Dess (1996) view it
simply as the "category of intentions that are broad, all inclusive, and several other available
in strategic management literature relates to 'vision' being future aspirations that lead to an
inspiration to b e the best in one's field of activity.
B) The benefits of having a vision
Parikh and Neubauer (1993) point out the several benefits accruing to an organization having
a vision. Here is what they say, good vision is
 inspiring and exhilarating
 represent a discontinuity, a step function and a jump ahead so that the company
knows what it is to be
 help in the creation of a common identity and a shared sense of purpose
 Are competitive, original and unique. They make sense in the marketplace as they are
practical
 Foster risk taking and long-term thinking.
 Represent integrity; they are truly genuine and can be used for the benefit of people.
VISION VERSUS MISSION some organizations develop both a mission statement and a
vision statement. Whereas the mission statement answers the question “what is our
business?” the vision statement answers the question “what do we want to become?”
It can be argued that profit, not mission or vision is the primary corporate motivator. But profit
alone is not enough to motivate people. Profit is perceived negatively by some employees in
companies. Employee may see profit as something that they earn and management then
uses and even gives away-to shareholders. Although this perception is undesired and
disturbing to management, it clearly indicates that both profit and vision are needed to
effectively motivate a work force.

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When employees and mangers together shape or fashion the vision or mission for a firm, the
resultant document can reflect the personal vision that mangers and employees have in their
hearts and minds about their own futures. Shared vision creates a commonality of interests
that can lift workers out of the monotony of daily work and put them into a new world of
opportunity and challenge.

2. Value
It specifies how to conduct and play the role of business in the society. it also
describes what is to be hold inviolate.
Most importantly it spells out the basic beliefs of the organization about its stakeholders.
In order to understand what the organization stands for and to provide input to strategy, it is
essential to clarify the current values upon which a business operates.
A DECLARATON OF value:
value: embrace managerial philosophy and thinking at the
highest levels of an organization. For this reason social policy affects the development of a
business mission statement. Social issues mandate that strategists consider not only what
the organization owes its various stakeholders but also what responsibilities the firm has to
consumers, environmentalists, and minorities. After decades of debate on the topic of social
responsibility, many firms still struggle to determine appropriate social policies.

Organizational values directly affect a firm’s customers, products and services, technology,
profitability, self-concept, and public image. An organization’s value should integrated into all
strategic- management activities, including the development of a mission statement.
Corporate value should be designed and articulated during strategy formulation, administered
during strategy implementation, and reaffirmed or changed during strategy evaluation. The
emerging view of social responsibility holds that social issues should be attended to both
directly and indirectly in determining strategies.
Why have Values?
 to handle the inescapable such as the legal limits’
 to Avoid bad publicity
 to act in more enlighten self interest way
 to professionalize the business

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3. Mission
Mission is the description of an organization’s reasons for its existence and its fundamental
purpose. It is the guiding principle that drives the processes of goal and action plan
formulation, “a pervasive, although general, expression of the philosophical objectives of the
enterprise.” Mission should focus on “long-range economic potentials, attitudes toward
customers, product and service quality, employee relations, and attitudes toward owners.” It
provides identity, continuity of purpose, and overall definition, and should convey the
precisely why the organization exists, its purpose, in terms of
(a) its basic product or service,
(b) its primary markets, and
(c) its major production technology.
Thus mission outlines the firm’s identity and provides a guide for shaping strategies at all
organizational levels.

The role played by mission in guiding the organization is an important one.

Mission:
 Serves as a basis for consolidation around the organization’s purpose.
 Provides impetus to and guidelines for resource allocation.
 Defines the internal atmosphere of the organization, its climate.
 Serves as a set of guidelines for the assignment of job responsibilities.
 Facilitates the design of key variables for a control system.

The mission statement must be believable in that the company’s behavior should correspond
to it over both the short and long term. In this way it can serve as the foundation for the
development of respect for and pride in the firm by management, employees, owners,
customers, suppliers, and others who interact with it.

Organizations relate their existence to satisfying a particular need of the society. They do this
in terms of their mission. Mission is a statement, which defines the role that an organization
plays in a society. It refers to the particular needs of that society, for instance, its information
needs. A book publisher and a magazine editor are both engaged in satisfying the information
needs of society buy they do it through different means. A book publisher may aim at

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producing excellent reading material while a magazine editor may strive to present news
analysis in a balanced and unbiased manner. Both have different objectives but an identical
mission.
A) Defining the organization’s mission
An organization’s mission is an overall goal of the organization that provides a sense of
direction and a guide to decision making for all levels of management. Without a clear
mission, it is virtually impossible for an organization to develop objectives and strategies.
Capmbell and Yeung also differentiate between the terms vision and mission, saying vision is
“a possible and desirable future state of an organization” that includes specific goals,
whereas mission is more associated with behavior and with the present.

Since no two organizations are exactly the same in terms resources, management or
environmental situations; the mission statement is personal to each organization.

Defining an organization’s mission starts with a clear description of its customers. To


determine the mission the organization should ask the following fundamental questions
need to be answered:
1. Who is the customer?
 Where is the customer located
 How does the customer buy?
 How can the customer be reached?
 What does the customer buy?
2. What is the 1 st value of the customer?
What do the customer look for when a customer buy a product.
3. What will our business be?
4. What should our business be?

B) THE PROCESS OF DEVELOPING A MISSION STATEMENT


As indicated in the strategic- management process model, a clear mission statement is
needed before alternative strategies can be formulated and implemented. It is important to
involve as many mangers as possible in the process of developing a mission statement,
because through involvement, people become committed to an organization.

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A widely used approach to developing a mission statement is first to select several articles
about mission statements and ask all managers to read these as background information.
Then ask managers themselves to prepare a mission statement for the organization. A
facilitator, or committee of top managers, then should merge these statements into a single
document and distribute this draft mission statement to all managers. A request for
modifications, additions, and deletions is needed next, along with a meeting to revise the
document.

Employees and external constituencies of an organization are needed when the document is
in final form. Some organizations even develop a videotape to explain the mission statement
and how it was developed.

C) Components of Ideal Mission Statement

Mission statements can and do vary in length, content format and specificity. Most
practitioners’ academicians of strategic management consider an effective statement to
exhibit nine ideal components. Because a mission statement is often the most visible and
public part of the strategic-management process, it is important that it includes all of these
essential components. Components and corresponding questions that a mission statement
should answer are given here.
i. CUSTOMERS: who are the firm’s customers: for example,
- We believe our first responsibility is to the doctors, nurses, and patients, to mothers
and all others who use our products and services. (Johnson & Johnson)

ii. PRODUCTS OR SERVICES: What are the major products or services? For example,
“ Standard Oil Company (Indiana) is in business to find and produce crude oil, natural gas,
and natural gas liquids: to manufacture high-quality products useful to society from these raw
materials: and to distribute and market those products and to provide dependable related
service to the consuming public at reasonable prices. (Standard Oil Company)”

iii. MARKETS: Where does the firm compete? Geographically? For example

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“ We are dedicated to the total success for Corning Glass Works as a worldwide competitor.
(Corning Glass Works) our emphasis is on North American markets, although global
opportunities will be explored. (Block Way)

TECHNOLOGY: Is the firm technologically strong? For example


iv. TECHNOLOGY:
Control Data is in the business of applying micro- electronics and computer technology in two
general areas: computer-related hardware: and computing-enhancing services, which include
computation, information, education, and finance. (Control Data) the common technology in
these areas is discrete particle coatings. (Nashua).
v. CONCERN FOR SURVIVAL, GROWTH, AND PROFITABILITY : Is the firm
committed to growth and financially soundness. For example,
“ To serve the worldwide need for knowledge at a fair profit by gathering, evaluating,
producing, and distributing valuable information in a way that benefits our customers,
employees, authors, investors and our society. (McGraw-Hill)”

vi. PHILOSOPHY: What are the basic beliefs involves aspirations and ethical priority of
the firm? It May be necessary to briefly reflect the issue value of the organization. For
example.” We believe human development to be the worthiest of the goals of civilization and
independence to be the superior condition for nurturing growth in the capabilities of people.
(Sun Company)”
“ It is all part of the Mary Kay philosophy- a philosophy based on the golden rule. A spirit of
sharing and caring where people give cheerfully of their time, knowledge, and experience.
(Mary Kay Cosmetics)”

vii. SELF-CONCEPT:
SELF-CONCEPT: heat is the firm’s distinct competence or major competitive
advantage for example,
“ Crown Zellerbach is committed to leapfrogging competition within 1.000 days by unleashing
the constructive and creative abilities and energies of each of its employees. (Crown
Zellerbach)

Viii CONCERN FOR PUBLIC IMAGE: is the firm responsive to social, community and
environment the concern? For example,

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“ To share the world’s obligation for the protection of the environment. (Dow Chemical)”
“ To contribute to the economic strength of society and function as a good corporate citizen on
a local, state, and national basis in all countries in which we do business. (Pfizer)”
ix CONCERN FOR EMPLOYEES: are employee a valuable assets of the firm?
For example: “to recruit, develop, motivate, reward, and retain personnel of exceptional
ability, character, and dedication by providing good working conditions, superior leadership,
compensation on the basis of performance. Attractive benefit program, opportunity for growth,
and a high degree of employment security. (The Wachovia Corporation)”
D) The Importance of a Good Mission
The importance of a mission statement to effective strategic management is well documented
in a literature. A recent study comparing mission statements of Fortune 500 terms performing
well and firms performing poorly concluded that high performers have more comprehensive
mission statements than low performers. King and Cleland recommend that organizations
carefully develop a written mission statement for the following reasons:
1. To ensure unanimity of purpose within the organization.
2. To provide a basis or standard for allocating organizational resources.
3. To establish a general tone or organizational climate.
4. To serve as a focal point for individuals to identify with the organization’s purpose and
direction, and to deter those who cannot from participating further in the
organization’s activities.
5. To facilitate the translation of objectives into a work structure involving the
assignment of tasks to responsible elements within the organization.
6. To specify organizational purposes and the translation of these purposes into
objectives in such a way that cost, time, and performance parameters can be
assessed and controlled.
E) The Nature of Good Mission
Organizational mission should define the organization’s line or lines of business, identify its
products and services, and specify the markets it serves at present and within a time frame of
three to five years. An effective mission should be challenging to the organization, but should
be achievable. It should be in writing and should also have a time frame for achievement.
Mission should process the following desirable quality

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i) A DECLARATION OF ATTITUDE A mission statement is a declaration of attitude


and outlook more than a statement of specific details. It usually is broad in scope for at least
two major reasons. First, a good mission statement allows for the generation and
consideration of a range of a feasible alternative objectives and strategies without unduly
stifling management creativity. Excess specificity would limit the potential of creative growth
for the organization mission statements.

Second, a mission statement needs to be broad to effectively reconcile differences among


and appeal to an organization’s diverse stakeholders, the individuals and groups of persons
who have a special stake or claim on the company. Stakeholders include employees;
managers; stockholders; boards of directors; customers; suppliers; distributors; creditors
governments (local, state, federal, and foreign); unions; competitors; environmental groups;
and the general public.
Reaching the fine balance between specificity and generality is difficult to achieve but is well
worth the effort. George Steiner offers the following insight on the need for a mission
statement to be broad in scope:

Most business statements of mission are expressed at high levels of abstraction. Vagueness
nevertheless has its virtues. Mission statements are not designed to express concrete ends.
But

An effective mission statement arouses positive feelings and emotions about an organization:
it is inspiring in the sense that it motivates reader’s action. An effective mission statement
generates the impression that a firm is successful, has direction, and is worthy of time,
support, and investment.
ii) Customer ORIENTATION A good mission statement reflects the anticipations of
customer. Rather than developing a product and then trying to find a market, the operating
philosophy of organizations should be to identify customers’ needs and then provide a
product or service to fulfill those needs. Good mission statements identify the utility of a
firm’s products to its customers.
The company does not offer things rather offer value or benefit,
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Hence a company;
o Offers attractive looks not cloth
o Offers energy not fuel
o Offers comfort for the feet and the pleasure of walking not shoes
o Offers security, Comfort, and a place that is clean not house
o Offers hours of pleasure and the benefit of knowledge not book
o Offers leisure and the sound of music not records
o Offers the benefit and the pleasure of making beautiful things not tools
o Offers ideas, emotions, ambience, feelings, and benefits etc.
A major reason for developing a business mission is to attract customers who give meaning
to an organization. Meaning what a product or service does for him or her. The customer is
the foundation of a business and keeps it in existence.

iii. A RESOLUTION OF DIVERGENT VIEWS What are the reasons some strategists
are reluctant to develop a statement of their business mission? First, the question “what is
our business?” can create controversy. Raising the question often reveals differences among
strategists in the organization. Individuals who have worked together for a long time and who
think they know each other suddenly may realize that they are in fundamental disagreement.
For example, in a college or university, divergent views regarding the relative importance of
teaching, research and service often are expressed during the mission statement
development process. Negotiation, compromise, and eventual agreement on important issues
are needed before focusing on more specific strategy formulation activities.

f) Characteristics of good mission statement


Organizations legitimize themselves by performing some function that is valued by society. A
mission statement defines the basic reason for the existence of that organization. In order to
be effective, a mission statement should possess the following seven characteristics.
1. It should be feasible . A mission should always aim high but it should not be an
impossible statement. It should be realistic and achievable its followers must find it to
be credible. But feasibility depends on the resources available to work towards a
mission.

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2. It should be precise . A mission statement should not be so narrow as to restrict the


organization's activities nor should it be too broad to make itself meaning less.
3. It should be clear. A mission should be clear enough to lead to action it should
organizations do adopt such statements but probably they do so for emphasizing their
identity and character.
4. It should be motivating. A mission statement should be motivating for members of
the organization and of society, and they should feel it worthwhile working for such an
organization or being its customers.
5. It should be distinctive. A mission statement which is indiscriminate is likely to
have little impact.
6. It should indicate major and relevant components of strategy . A mission
statement, along with the organizational purpose should indicate the major
components of the strategy to be adopted.
7. It should indicate how objectives are to be accomplished. Besides indicating
the broad strategies to be adopted. Mission statement should also provide clues
regarding the manner in which the objectives are to be accomplished.
8. It should be expressed in market oriented terms.
G) Changing AND Review of Mission statement
Mission must not only be defined at its inception but also must be reexamined regularly.
Several factors can signal a need for a reexamination.

Factors that influence in changing or reviewing the mission are several. Hence some of that
signal that need for reexamination of mission are:
 Decline profit and market share
 Changes in competitive position
 Changes in top-level management
 Changes new technologies
 Decreased availability or increased cost of resources
 Changes in market demographics
 Changes in government regulations

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 Changes in consumer demand

4. Objectives
Objectives are the end results of planned activity. They state what is to be accomplished by
when and should be quantified if possible. The achievement of corporate objectives should
result in the fulfillment of a corporation does a good job of fulfilling its mission

An objective is a statement of what is to be achieved. It is also a statement of end result,


desired outcome and specific future conditions that hope to achieve. Objectives are stated in
terms of a desired level of attainment within a specific time frame
Some of the areas in which a corporation might establish its goals and objectives are:
 Profitability (net profits)
 Efficiency (low costs, etc)
 Growth (increase in total assets, sales, etc)
 Shareholder wealth (in dividends plus stock price appreciation
 Utilization of resources (return on investment or enquiry)
 Reputation (being considered a "top" firm)
 Contributions to employees (employment security, wages, diversity)
 Contributions to society (taxes paid, participation in charities, providing a needed
product or service)
 Market leadership (market share)
 Technological leadership (innovations, creativity)
 Survival (avoiding bankruptcy)
 Personal needs of top management (suing the firm for personal purposes, such as
providing jobs for relatives
A) Categories of Objectives
Objectives can be classified as either short range or long range. Normally, objectives with a
time span of one year or less are classified as short range; objectives spanning more than
one year are classified as long range. While many managers use only short-range and long-
range objectives, some also utilize intermediate objectives. In this context, intermediate
arrange usually means one to three years, and long range means anything over three years.

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Objectives also can be classified according to their breadth of influence in the organization.
For example, objectives that apply to the entire organization are called corporate or
organizational objectives. Objectives that apply only to a certain division within an
organization are referred to as divisional objectives; those that apply to a certain function or
department within an organization are referred to as functional or departmental objectives.

Organizational long-range objectives should sport the organization's mission, and they need
to be established for every area of the organization where performance directly influences its
survival and success

An organization's objective depends on the particular organization and its mission. Although
objective can vary widely form organization to organization, normally they can be categorized
as follows:
1. Profitability
2. Service to customers, clients, or other recipients
3. Employee needs and well-being; and
4. Social responsibility
B) Result areas
Objectives should be expressed as clearly as possible and in quantities terms whenever
possible. The following items provide potential areas and examples for establishing
objectives for most organizations:
 Customer service.
 Financial resources
 Human resources.
 Markets.
 Organizational Structure.
 Physical Facilities.
Facilities.
 Product.
 Productivity.
 Profitability.
 Research and development.
 Social responsibility.

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Unfortunately, not all objectives lead themselves to quantification. In such cases, a


subjective is used. A subjective or objective is expressed in terms of a number of specific
and verifiable activities, which, when they will be accomplished, leads to the desired future
state or condition.

C) Characteristics of effective objectives


The following characteristics pertain to organizational objectives as the strategic corporate,
business, and function levels
 Specific and measurable - the objective should be expressed in quantitative
terms if possible. No all objectives can be expressed in numerical terms, but vague
objectives have little. Motivating power for employees.
 Challenging but realistic objectives should be challenging but to
unreasonably difficult
 Conover key result areas.
areas. Objectives cannot be let for every aspect of
employee behavior or organizational performance if they were sheet number would
render then mean ingles. Instead, managers should identify a few key result areas
perhaps up to four or five for any organizational department or job. Key result area
are those activities that contribute most to company performance
 Defined time period Specially the time period over which they will be
achieved. A time period is a deadline specifying the date on which objective
attainment will be measured an objective of revising an organization's job
classification system could have a deadline

5. Strategy
A. Corporate- Level Strategy
It describes a company's overall direction in terms of its general attitude toward growth and
the management of it s various business and product lines.

A corporation's portfolio by business units (SBU's) can vary in at desirability just a financial
manger's portfolio of investment can. The acceptability of a particular business portfolio is
determined by factoring corporate purpose, mission into the present portfolio's acceptable or
expected strength; weakness threat and opportunity to generate a desired portfolio for a
stated planning horizon
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The content of corporate level strategy is a set of action plans and corresponding corporate
level objective.
A corporate level objective expresses a desired portfolio of business units by the end of the
firms planning period
A corporate level action plan defines how to get form the present portfolio to that targeted in
terms of
a. business unit strategies to be remained
b. Additional of business units expressed as either growth strategy. Parameters (for
"none grown" units) or merger acquisition strategy
c. business units to be divested
Decisions made at this level establishing priorities and the se of resource of buying new
businesses assets, developing new ideas liquidating assets, making joint venture, or merges
and so on. In the case of the small business the owner makes their decisions. Congruency
and synergy are important in making the decision that the whole greater than the sum of its
parts.
B) Business-Level Strategy
Business level strategic mangers must determine the bases on which company can complete
in the selected product/market area business level strategy usually occurs at business unit
or product level and it emphasizes improvement the competitive position of corporations'
products or services in the specific industry or market segment served by the business unit.

Business strategy may fit with in two overall category of competitive or cooperative strategy.
 Competitive approach: gain advantage through battling against competitor for
example
o Apple computer uses a differentiation competitive strategy that
emphasizes innovative product with creative design
 Cooperative approach: gain advantage by working together with one more
competitors or others. For example, Forming an alliance with different
organizations for example works in coloration Kenya airway with KLM air line

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The aim of the business strategy is


 To compete successfully and gain competitive advantage
 To respond to environmental change
 To unify the strategies of the functional area and
 To mange the business successfully and develop the capability of the
organization
C. Functional-level Strategy
In contrast with the other levels of strategy, functional strategies serve as guidelines for the
employees of each of the firm’s subdivisions. Which ones of these segments or functional
areas are included in a firm's functional strategy set is itself a matter of strategy. For
example, whether to have an R & D department or not in the first place is functional goals
and action plans are developed for each of the functional parts of the firm to guide the
behavior of people in a way that would put the other strategies into motion. If part of a firm's
business-level strategy were a target of a 10 percent increase in sales to be brought about by
market penetration, for example, marketing strategy might include a change in compensation
policy for salespersons and a specified increase in the advertising budget. In that way
marketing strategy would provide some detail about how the marketing aspects of the market
penetration action plan would be implemented. Similarly, financial strategy would consist of a
set of guidelines on how the financial elements of the firm would be put into effect. Personal
strategy, production strategy, research and development strategy, and appropriate other
functional strategy areas would do the same.

6. Developing policy
The selection of the best strategic alternatives at all level is not the end of strategy
formulation. The organization must now engage in developing policies. Polices define the
broad guidelines for implementation.
Policies let both employees and mangers know what is expected of them, thereby increasing
the likelihood that strategies will be implemented successfully. They provide a basis for
management control. Allow coordination across organizational units. And reduce the amount
of time mangers spend making decisions. Policies also clarify what work is to be done by
whom. They promote delegation of decision making to appropriate managerial levels where

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various problems usually arise. Many organizations have a policy manual that serves to guide
and direct behavior .
A) Characteristics of an effective policy
Simply because a firm has a set of written or implied policies does not mean the policies
always achieve the desired result. Some of the characteristics of an effective policy include
the following:
o Effective policies are action oriented guidelines-they
guidelines-they provide
enough detail to direct behavior toward a specific goal or objective, but are not so
detailed that they discourage personnel form following the policy
o Effective policies are pertinent (applicable) and concise a
concise policy states a position with a minimum number of words while a pertinent
policy avoids trivial or unimportant issues.
o Effective policies are unambiguous-personnel
unambiguous-personnel should have little doubt
as to how to interpret the policy's intent and direction policies subject to different
interpretations will, over a period of time, result in several possible outcomes.
Ambiguous policies lead to a number of divergent behaviors within a firm as a result
of the ambiguity or personnel ignoring the policy altogether because of the difficulty
interpreting its content.
o A policy should be reviewed for clarity and conformanc e . All
employees should understand organization's polices. A policy is ineffective if it is
conducing, ignored, or outdated. Policy formation and review is a dynamic activity.
A policy is a timely directive that guides behavior and action through all levels of the
organizational hierarchy. An organization must review its policies to determine if
employees understand and follow directives. A firm must also determine if it
requires a written policy where none currently exists. This review should further
identify policies and procedures that no longer support a firm's objectives.
B) The Policy Hierarchy
Organizational policies exist within a hierarchy. Different levels of policy exist that
when taken together guide the actions of an entire organization. Policies procedures, and
rules and regulations must be consistent and compatible throughout each level of an
organization. A hierarchy implies that upper-level directives work downward trough an
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organization. Different departments or functions should not create policies and procedures
that are inconsistent with the policy objectives of executive management.
Policies range from the highest directives of executive management to the basic rules and
regulations governing day-to day operations.

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