Policy formulation and implementation involves the following steps:

Identifying the need: initially important areas of personnel management (recruitment, selection, training compensating bargaining) must have a policy formulation which is clearly spelt out. Additional policy guidelines can come at any stage depending on the recurrence of ticklish issue at various levels.

Collecting data: Once priority areas are listed, steps should be taken to collect facts before formulating a policy. Various sources could be tapped for these purposes such as (1) company’s records (2) past practices (3) survey of industry practices (4) experience of personnel handling various issues (5) top management philosophy (6) organizational culture (7) employee aspirations and (8) changing economic ,social an legislative environment etc.

Specifying alternatives: Policy alternatives should emerge clearly after collecting relevant data from various sources. These have to be evaluated carefully in terms of their contribution to organizational objectives. It is always better to involve people at various levels, especially those who are going to use and live with such policies. Top management should put the stamp of approval only when everything is above board and the stated policy clearly reflects organizational priorities.

Communicating the policy: In order to gain approval at various levels the formulated policy should be communicated through out the organization. Policy manual, in house journal and discussions with people at various levels may be used to reach out to employees quickly.

Evaluating the policy: Personnel policies, to be effective must be reviewed evaluated and controlled regularly against certain established standards. Evaluation helps determine changes in existing policies. All these policies should be reviewed annually and some policies should be reviewed at specific times for example when there is collective bargaining or after strike / lock out etc. Departmental policies may be reviewed through participation of all employees. Outside consultants or experts from other organizations may be engaged to review crucial policies. Adequate care should be taken to review the policies in the following situations when (1) employees offer suggestions ; (2) employees express grievances (3) unsatisfactory reports about employees performance and behaviour (4) company plans for change like expansion, diversification , contraction, adoption of new technology and introduction of new methods. Personnel policies, to be effective should have a favourable impact on the objectives and functions of P /HRM and help the parties concerned.

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