Functional policies play important role in strategy implementation. A functional policy is formulated basically to control and reinforce implementation of functional strategies and also the corporate strategy. Control and reinforcement of strategy implementation are facilitated by functional policies in the following ways:
- Through the functional policies, top management can ensure that strategy is implemented by all parts of the organisation as policies cover almost entire activities of the organisation.
- Policies specify the manner in which things can be done and limit discretion for managerial action. Thus, the top management of the organisation can rest assured that all personnel of the organisation will direct their efforts in a way relevant for strategy implementation.
- Policies provide guidelines for managerial decisions. This aspect of the policies serves the strategy implementation in two ways. First, there will be uniformity throughout the organisation in managerial action. Second, there will be considerable time savings in decision making as managers are well aware what kind of actions are required in a given situation.
- Functional policies provide basis for control in respective areas as policies lead to consistent pattern of behaviors: This, in turn, acts as basis for controlling.
- Policies provide coordination across different functions. Coordination among different functions is very important for strategy implementation.
All functions of an organisation are interdependent and interrelated. Therefore, what is happening in one function has its relevance for other- functions. All functions can contribute positively when they are performed in a coordinated way.
Development of Functional Policies and Plans: Managers develop policies which are decision guides and make the strategy work. Therefore, the critical element involved in analytical exercise for policy making is the ability to factor the grand strategy into policies that are compatible, workable and just theoretically sound. It is not enough for the managers to decide to change the strategy. What comes next is equally important: How do we get there? When? And How efficiently?
A manager answers these questions by preparing policies to implement the strategy. For example, if an organisation chooses to go for diversification, the policy maker has to decide what to diversify into, where to diversify, how much money will be needed, from where the money will come and what changes are needed in various functions of the organisation. The decisions on all these aspects are much easier if proper policies have been formulated.
The amount of policy making in the formal sense will vary with the size and complexity of the organisation. If the organisation is small one with simple business, only a few policies will be sufficient. Moreover, the policies are generally understood and verbal. However, in large and complex organizations, large number of policies is needed, In whatever forms, the policies are developed, they must be judged on the following criteria:
- Do they exist in the areas critical to the success of the organisation?
- Do they reflect present or desired organisational practices and behavior?
- Are they clear, definite, and explicit leaving no scope for misinterpretation?
- Are they consistent with one another and do they reflect the timing needed to accomplish the goals ?
- Are they practical in given existing or expected situations?
