Objectives, strategies, policies, procedures and rules

Principles and Practice of Management · Unit II · Topic 6 of 14 · 4 min read

The upper part of the hierarchy of plans: mission and objectives with the SMART test, strategy and strategic planning with SWOT, policies and their essentials, and how procedures and rules differ from policies.

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On this page

1. Mission and objectives
2. Strategies
3. Policies
4. Procedures, methods and rules
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

The examinable core. These are the standing elements of planning that the syllabus names separately. Most marks go to clear definitions and to distinguishing the terms from each other: an objective is the end, a strategy is the broad route, a policy guides thinking, a procedure guides action, and a rule allows no discretion at all.

1. Mission and objectives

The mission or purpose states why the organisation exists and the business it is in. Objectives are the ends towards which activity is directed: the specific results the organisation wants to achieve within a stated time. Koontz and O’Donnell call them “the end points of planning”.

Features of sound objectives

The usual test is SMART: specific, measurable, achievable, relevant (realistic) and time-bound. “Increase market share” is not an objective in this sense; “increase market share in Karnataka from 12% to 15% by March 2027” is. Objectives should also be:

hierarchical — company objectives broken into divisional, departmental and individual objectives, each serving the one above (the means-ends chain);
multiple — a firm pursues profit, growth, market standing, innovation and social responsibility at the same time;
consistent with each other and with the mission;
understood and accepted by those who must achieve them, which is the argument for participation (MBO).

Drucker’s key result areas

In The Practice of Management Drucker named eight areas in which every business must set objectives: market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance and attitude, and public responsibility.

Importance

Objectives give direction and unity of purpose, provide the basis for every other plan, motivate by giving people a target, and set the standards against which performance is controlled.

2. Strategies

A strategy is a comprehensive plan for achieving the objectives, chosen in the light of the environment and of competitors’ likely moves. Alfred Chandler (Strategy and Structure, 1962): strategy is “the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”.

Features

Long-term and concerned with the organisation as a whole.
Responds to the environment, especially competition.
Involves commitment of major resources.
Formulated at the top level.
Flexible: it is revised when the environment changes.

Strategic planning

Strategic planning is the process of deciding the organisation’s long-term objectives and the strategies to achieve them. Its steps are: define the mission; analyse the environment for opportunities and threats; analyse internal strengths and weaknesses (together a SWOT analysis); set objectives; formulate alternative strategies and choose; and implement and evaluate. The usual strategy types are:

Growth or expansion — market penetration, new markets, new products, diversification, mergers and acquisitions.
Stability — continue in the same business with incremental improvement.
Retrenchment — turnaround, divestment, or closing loss-making units.
Combination of the above in different divisions.

At the business level, Michael Porter’s three generic strategies (Competitive Strategy, 1980) are cost leadership, differentiation and focus.

3. Policies

A policy is a general statement that guides thinking and decision-making by managers in recurring situations. It sets the limits within which decisions are made, but leaves discretion. Examples: “we promote from within wherever a suitable internal candidate exists”; “we sell only for cash”; “we buy from at least two suppliers for every critical component”.

Essentials of a sound policy

Related to the objectives of the organisation.
Clear and easily understood.
Stated in writing so that it is applied uniformly.
Flexible enough to meet changed conditions, yet stable enough to give certainty.
Consistent with other policies and with law (an employment policy must comply with the Labour Codes, for instance).
Communicated to everyone who must apply it.
Reviewed periodically.

Types

By source: originated (by top management), appealed (arising from appeals of exceptional cases upward), and imposed (by government or trade associations). By function: production, marketing, financial and personnel policies.

4. Procedures, methods and rules

Procedure — a chronological sequence of steps for handling a recurring activity (the steps to process a purchase requisition). It guides action, not thinking.
Method — the prescribed way of doing one step of a procedure.
Rule — a specific required action or prohibition, with no discretion (“no smoking in the plant”). Breach normally carries a penalty.

Basis	Policy	Procedure	Rule
Guides	Thinking	Action, in sequence	Action, single
Discretion	Considerable	Limited	None
Level framed	Top	Middle	Any
Example	Promote from within	Steps to fill a vacancy	Apply within 15 days

Policy and strategy are not the same. A strategy is a plan of action that responds to the environment and competitors; a policy is a guide to decisions that applies whatever the competitors do. Strategies change more often than policies.

How this is examined

“Short note on strategic planning” was set for 6 marks in April 2023. Objectives and policies are usually tested inside planning questions or as short notes; “distinguish policy and procedure” and “essentials of a good policy” are standard 6-mark forms.

For a strategic planning note, give Chandler’s definition, the steps with SWOT, and the four strategy types in a sentence each. For a policy question, define, give two examples, list the essentials, and finish with the policy-procedure-rule table.

Now try the real questions: Principles and Practice of Management past question papers.