The Relationship of Policy to Strategy
Business strategy and policies have a strong relationship. A strategic vision is typically set by top management to provide an overall plan for the company moving forward. New or established policies provide a framework for decision-making and activities carried out by lower-level managers and their employees.
A key similarity between strategy and policy is that both are often set at the top-management level of an organization. A management team usually collaborates to set goals and strategy for how to operate the company in a profitable way. Going after a new customer market is a potential strategy to grow market share, for instance. Top managers, or managers in specific functional areas, then usually establish policies that help employees operate in alignment with the strategy. A new policy of expanding sales rep territories could fit with this new market strategy.
Many of the policies in an organization relate to internal activities. Human resources often directs the development of HR policies, but they do so in alignment with company strategy. This role is why many HR directors sit on company management teams. Policies that promote competitive, aggressive compensation packages for employees are often used by companies that have a strategy of attracting and retaining the most talented employees in their industry.
Product and service sellers usually have significant policies related to treatment and interaction with customers as well. This area also depicts another strong relationship between company strategy and policy. A company that employs a strategy of targeted high-end, well-to-do customers may have very liberal customer service policies to attract and retain loyal customers. A low-price, high-volume retailer may have more strict service and return policies in line with the strategy of selling low to attract a large customer base.
Policies and strategies do have different purposes. A strategy is essentially a guide, or road map, for how the company will operate. Setting a strategy at the top allows each department or business unit leader to set lower-level goals and strategies that align. Policies provide a framework for employees to make decisions in certain situations that lead to consistent activities. Consistency helps in building a brand image with the public and in developing an equitable workplace for employees.