Policy
The term policy has more precise definition as compared to strategy. It has been derived from the Greek word ‘politeia’ meaning citizen and latin word ‘politis’ mean-ing polished, that is, to say clear. Policy in management context is defined by Weihrich and Koontz as follows:
“Policies are general statements or undertsandings which guide or channel think-ing in decision making”.

Features of a policy can be identified
1. A policy provides guidelines to the members of the organisation for deciding a course of action and, thus, restricts their freedom of action. Policy provides and explains what a member should do rather than what he is doing. Policies, when enforced, permit prediction of roles with certainty. Since a policy provides guidelines to thinking in decision- making, it follows that it must allow some discretion, otherwise it will become a rule.

2. Policy limits an area within which a decision is to be made and assures that the decision will be consistent with and contributive to objectives. A policy tends to predecide issues, avoid rt:;peated analysis, and give a unified structure to other types of plans, thus permitting managers to delegate authority and still retaining control of action. For example, if the organisation has framed a policy that higher positions in the organisation will be filled by internal promotion, the managers concerned can deal with the situation in this light whenever a vacancy at higher level arises. Thus, organisation gets assurance that higher positions are filled by internal members without further control.

3. Policies are generally expressed in qualitative, conditional, or general way. The verbs most often used in stating policies are to maintain, to continue, to follow, to adhere, to provide, to assist, to assure, to employ, to make, to produce, or to be. Such prescriptions may be either explicit or these may be interpreted from the behaviour of organisation members, particularly at the top level. When such a behaviour is interpreted as policy guideline, it is normally known as prece- dent, that is what has happened in the past on a particular issue if there is no clearly specified declaration.

Policy formulation is a function of all managers in the organization because some form of guidelines for future course of action is required at every level. However higher is the level of a manager, more important is his role in policy making. Similarly, policies may exist in all areas of the organization from organizational policies to minor policies applicable to the smallest segment of the organization.

Policy and Strategy: A Comparison
Strategy is now the more common term for what used to be called policy, though there is no consensus on this also. For example, some writers make distinction between the two referring as the general or grand strategy as policy and competitive; srategy as the strategy used in military sense. The situation is, therefore, still confusing. Steiner has observed that for some years and after much travail, the term policy was fairly understood. Then the game theorists began to use the term strategy with re result that management literature now is thoroughly confused about its meaning and relationship to policy. How- ever, in this text, two terms have been used with fairly different meaning and based on that, the difference between the two can be identified.



The Difference between goals and objectives
Goals are broad objectives are narrow.Goals are general intentions; objectives are precise.Goals are intangible; objectives are tangible. Goals are abstract; objectives are concrete.Goals can't be validated as is; objectives can be validated.

Examples:
Goals: knows about the human body.Objectives: LWBAT name all of the bones in the human body as stated in the medical textbook "The Human Body".


OBJECTIVE
Features of Objectives
1. Each organization, or group of individuals, has some objectives. In fact, organizations or groups are created basically for certain objectives. Members in the organization or group try to achieve these objectives.
2. Objectives may be broad or they may be specifically mentioned. They may per-tain to a wide or narrow part of the organization.
3. Objectives may be clearly defined or these may not be clear and have to be interpreted by the behaviour of organizational members, particularly those at top level. However, clearly defined objectives provide clear direction for managerial action.
4. Objectives have hierarchy. At the top level, it may be broad organizational purpose which can be broken into specific objectives at the departmental level. From departmental objectives, units of the department may derive their own objectives. This is possible because organization is created by combining people into sections, departments, divisions, etc.
5. Organizational objectives have social sanction, that is, they are created within the social norms. Since organizations are social units, their objectives must conform to the general needs of the society. Various restrictions on organizational objectives are put through social norms, rules and customs.

Organizational objectives can be changed; old objectives may be replaced by new ones. It is possible because organizations are free to set their objectives within the overall social norms.

Role of Objectives
Every organisation has some objectives, either specified or unspecified. Clearly de-fined objectives govern behaviour of organization members, and as such, every or-ganisation should specify its objectives clearly. or the organisation or individual and an arena for activities.

The Major Functions and Contributions of Objectives are:

Defining an Organisation. Every organisation works in an environment con-sisting of several forces. These forces provide both opportunities and threats.
Directions for Decision-making. Objectives provide the directions for decision- making in various areas of the organisation’s operation.
Performance Standards. Objectives provide standards against which performance of the organisation, its units, sub-units and individuals can be. measured.
Basis for Decentralization. Decentralization includes assigning decision-making authority to lower-level people, thereby a subordinate is given considerable leeway in deciding to perform his work.


The Balanced Scorecard
Traditional financial performance metrics provide information about a firm's past results, but are not well-suited for predicting future performance or for implementing and controlling the firm's strategic plan. By analyzing perspectives other than the financial one, managers can better translate the organization's strategy into actionable objectives and better measure how well the strategic plan is executing.
The Balanced Scorecard is a management system that maps an organization's strategic objectives into performance metrics in four perspectives: financial, internal processes, customers, and learning and growth. These perspectives provide relevant feedback as to how well the strategic plan is executing so that adjustments can be made as necessary. The Balance Scorecard framework can be depicted as follows:

Make circles of the following and link them all to a circle in the middle of "strategy"
FinancialPerformance
Objectives; Measures; Targets; Initiatives
Customers
ObjectivesMeasuresTargetsInitiatives
InternalProcesses
ObjectivesMeasuresTargetsInitiatives
Learning& Growth
ObjectivesMeasuresTargetsInitiatives

The Balanced Scorecard (BSC) was published in 1992 by Robert Kaplan and David Norton. In addition to measuring current performance in financial terms, the Balanced Scorecard evaluates the firm's efforts for future improvement using process, customer, and learning and growth metrics. The term "scorecard" signifies quantified performance measures and "balanced" signifies that the system is balanced between:
- short-term objectives and long-term objectives
- financial measures and non-financial measures
- lagging indicators and leading indicators
- internal performance and external performance perspectives

Financial Measures Are Insufficient

While financial accounting is suited to the tracking of physical assets such as manufacturing equipment and inventory, it is less capable of providing useful reports in environments with a large intangible asset base. As intangible assets constitute an ever-increasing proportion of a company's market value, there is an increase in the need for measures that better report such assets as loyal customers, proprietary processes, and highly-skilled staff.

Consider the case of a company that is not profitable but that has a very large customer base. Such a firm could be an attractive takeover target simply because the acquiring firm wants access to those customers. It is not uncommon for a company to take over a competitor with the plan to discontinue the competing product line and convert the customer base to its own products and services. The balance sheets of such takeover targets do not reflect the value of the customers who nonetheless are worth something to the acquiring firm. Clearly, additional measures are needed for such intangibles.

Scorecard Measures are Limited in Number
The Balanced Scorecard is more than a collection of measures used to identify problems. It is a system that integrates a firm's strategy with a purposely limited number of key metrics. Simply adding new metrics to the financial ones could result in hundreds of measures and would create information overload.
To avoid this problem, the Balanced Scorecard focuses on four major areas of performance and a limited number of metrics within those areas. The objectives within the four perspectives are carefully selected and are firm specific. To avoid information overload, the total number of measures should be limited to somewhere between 15 and 20, or three to four measures for each of the four perspectives. These measures are selected as the ones deemed to be critical in achieving breakthrough competitive performance; they essentially define what is meant by "performance".

A Chain of Cause-and-Effect Relationships
Before the Balanced Scorecard, some companies already used a collection of both financial and non-financial measures of critical performance indicators. However, a well-designed Balanced Scorecard is different from such a system in that the four BSC perspectives form a chain of cause-and-effect relationships. For example, learning and growth lead to better business processes that result in higher customer loyalty and thus a higher return on capital employed (ROCE).
Effectively, the cause-and-effect relationships illustrate the hypothesis behind the organization's strategy. The measures reflect a chain of performance drivers that determine the effectiveness of the strategy implementation.

Objectives, Measures, Targets, and Initiatives
Within each of the Balanced Scorecard financial, customer, internal process, and learning perspectives, the firm must define the following:
Strategic objectives - what the strategy is to achieve in that perspective.
Measures - how progress for that particular objective will be measured.
Targets - the target value sought for each measure.
Initiatives - what will be done to facilitate the reaching of the target.

The following sections provide examples of some objectives and measures for the four perspectives.

Financial Perspective
The financial perspective addresses the question of how shareholders view the firm and which financial goals are desired from the shareholder's perspective. The specific goals depend on the company's stage in the business life cycle.
For example:
Growth stage - goal is growth, such as revenue growth rate
Sustain stage - goal is profitability, such ROE, ROCE, and EVA
Harvest stage - goal is cash flow and reduction in capital requirements
Objective Specific Measure
Growth - Revenue growth
Profitability - Return on equity
Cost - leadership Unit cost

Customer Perspective
The customer perspective addresses the question of how the firm is viewed by its customers and how well the firm is serving its targeted customers in order to meet the financial objectives. Generally, customers view the firm in terms of time, quality, performance, and cost. Most customer objectives fall into one of those four categories. The following table outlines some examples of specific customer objectives and measures:Objective Specific Measure
New products % of sales from new products
Responsive supply Ontime delivery
To be preferred supplier Share of key accounts
Customer partnerships Number of cooperative efforts

Internal Process Perspective
Internal business process objectives address the question of which processes are most critical for satisfying customers and shareholders. These are the processes in which the firm must concentrate its efforts to excel. The following table outlines some examples of process objectives and measures:Objective Specific Measure
Manufacturing excellence Cycle time, yield
Increase design productivity Engineering efficiency
Reduce product launch delays Actual launch date vs. plan

Learning and Growth Perspective
Learning and growth metrics address the question of how the firm must learn, improve, and innovate in order to meet its objectives. Much of this perspective is employee-centered. The following table outlines some examples of learning and growth measures:Objective Specific Measure
Manufacturing learning Time to new process maturity
Product focus % of products representing 80% of sales
Time to market Time compared to that of competitors

Achieving Strategic Alignment throughout the Organization
Whereas strategy is articulated in terms meaningful to top management, to be implemented it must be translated into objectives and measures that are actionable at lower levels in the organization. The Balanced Scorecard can be cascaded to make the translation of strategy possible.
While top level objectives may be expressed in terms of growth and profitability, these goals get translated into more concrete terms as they progress down the organization and each manager at the next lower level develops objectives and measures that support the next higher level. For example, increased profitability might get translated into lower unit cost, which then gets translated into better calibration of the equipment by the workers on the shop floor. Ultimately, achievement of scorecard objectives would be rewarded by the employee compensation system. The Balanced Scorecard can be cascaded in this manner to align the strategy thoughout the organization.The Process of Building a Balanced Scorecard
While there are many ways to develop a Balanced Scorecard, Kaplan and Norton defined a four-step process that has been used across a wide range of organizations.
Define the measurement architecture - When a company initially introduces the Balanced Scorecard, it is more manageable to apply it on the strategic business unit level rather than the corporate level. However, interactions must be considered in order to avoid optimizing the results of one business unit at the expense of others.
Specify strategic objectives - The top three or four objectives for each perspective are agreed upon. Potential measures are identified for each objective.
Choose strategic measures - Measures that are closely related to the actual performance drivers are selected for evaluating the progress made toward achieving the objectives.
Develop the implementation plan - Target values are assigned to the measures. An information system is developed to link the top level metrics to lower-level operational measures. The scorecard is integrated into the management system.Balanced Scorecard Benefits
Some of the benefits of the Balanced Scorecard system include:
Translation of strategy into measurable parameters.
Communication of the strategy to everybody in the firm.
Alignment of individual goals with the firm's strategic objectives - the BSC recognizes that the selected measures influence the behavior of employees.
Feedback of implementation results to the strategic planning process.
Since its beginnings as a peformance measurement system, the Balanced Scorecard has evolved into a strategy implementation system that not only measures performance but also describes, communicates, and aligns the strategy throughout the organization.Potential Pitfalls
The following are potential pitfalls that should be avoided when implementing the Balanced Scorecard:
Lack of a well-defined strategy: The Balanced Scorecard relies on a well-defined strategy and an understanding of the linkages between strategic objectives and the metrics. Without this foundation, the implementation of the Balanced Scorecard is unlikely to be successful.
Using only lagging measures: Many managers believe that they will reap the benefits of the Balanced Scorecard by using a wide range of non-financial measures. However, care should be taken to identify not only lagging measures that describe past performance, but also leading measures that can be used to plan for future performance.
Use of generic metrics: It usually is not sufficient simply to adopt the metrics used by other successful firms. Each firm should put forth the effort to identify the measures that are appropriate for its own strategy and competitive position.






CHARACTERISTICS OF STRATEGIC DECISIONS

Strategic Decision-making
Strategic management is characterized by its emphasis on strategic decision-making. As an organization grows bigger and becomes complex with higher degree of uncertainty, decision- making also becomes increasingly complicated and difficult. Strategic decisions have to deal essentially with the long-term future of the organization and have three important characteristics.
1. Rare. Strategic decisions are not common and have no precedents.
2. Consequential. Strategic decisions involve committing substantial resources of the company and hence a high degree of commitment from persons at all levels.
3. Directive. Strategic decisions can serve as precedents from less important decisions and future actions of the
organisations.

Mintzberg’s Modes
According to Mintzberg, the modes of strategic decisions- making are:
1. Entrepreneurial mode. Formulation of strategy is done by
a single person in this mode. The focus is on opportunities. Strategy is guided by the founder’s vision and is charactersied by bold decisions. In the Indian set-up, we can cite the case
of Wipro Infotech as an example of this mode of strategy formulation.

2. Adaptice mode. This mode of decisions making is referred to as “muddling through”. It is characterized by reactive solutions rather than a proactive search for new
opportunities. We can again cite the example of Wipro Infortech introducing the sale of customized Personal Computers in response to Dell Computers entering the Indian market.

3. Planning mode. This mode of decision making involves systematic information gathering for situational analysis, generating alternate strategies and selection of the appropriate strategy. As could be inferred, this mode includes both the proactive mode and the reactive solutions to current problems. For example, entry of MNCs into the automotive markets in India has made the lead player Maruti Suzuki to come out with new models and discard/slow down production of non-moving and old models.

Levels of Strategies
You can see the various levels of strategies at the Corporate, SBU and Functional level. The levels of strategy offers you a glimpse of the complexity about different levels at which strategy is formulated. The business strategy must contain wellcoordinated action programs aimed at securing a longterm competitive edge and which should be sustained by the company.
Lets take an example of Hindustan Levers,a multinational subsidiary, is in several businesses such as animal seeds, beverages,oils and dairy fat , soaps and detergents.
Similarly Sundaram Clayton and its associate companies operate in technology areas as diverse as brake and signal systems for railways, two wheelers and electrical appliance
Three types of level are depicted in the exhibit.
The first level is the corporate strategy which is an overarching plan of action covering the various functions performed by different

Corporate Level Strategies

This is the level where vision statement of the companies emerges. Exhibit shows typical levels of strategy making in an organization.
In the given exhibit you will see that various companies are organized on the basis of operating divisions. These divisions are known as profit centers or strategic business units. Generally SBU’s are involved in a single line of business

Business Level
This level consists of primarily the business managers or managers of Strategic Business units. Here strategies are about how to meet the competition in a particular product market and strategies have to be related to a unit within an organisation.

Operational Level
Planning alone cannot create massive mobilisation of resources and people and can never generate high quality of strategic thinking required in complex organisational context. For this to happen, the planning should be carefully dovetailed and integrated with significant administrative systems viz. management control, communication, information management, motivation, rewards etc.