Policy Formulation for AR Cooperatives

Formulation of Policies

1. Policies can emerge in four very different ways. First, and most commonly, they may be originated by management.

Managers originate policies to ensure

that decisions within the organization will be in line with its objectives. Generally, they are written and embodied in the cooperative 's policy manual

Objectives

Evangelista MPC Banerle CreditTimpuyog ti

Barangay MPC

Policies Policies Policies

Savings Mobilization

Lending

Marketing

Savings Mobilization

Financial Services

Lending

Trading

Marketing

Lending

2. The second way policies come about is through appeal. The appeal process typically works something like this. A situation develops where an executive is uncertain whether he or she has the authority to make a decision.

- Consequently, he or she appeals to higher-level management for the decision. There is a danger, however, of allowing too many policies to be made through appeal.

- A set of unwritten, incomplete, and uncoordinated policies may emerge because the various appealed decisions will, in all likelihood, be made on the basis of the individual merits of the particular situations without regard for their broader implications.

3. Policies may be implied from the decisions and actions of the company's executives. In fact, it is not uncommon to find that some of the "real" policies of a cooperative differ from its stated policies.

For example, a cooperative may have a stated policy of promoting strictly on the basis of merit whereas in reality, relatives and personal friends of top management are given priority.

4. Finally, policies can be externally imposed. Not infrequently, outside institutions, such as various departments of government, trade unions, and trade associations, impose requirements on organizations

Hierarchical Structure of PoliciesCooperative's

Overall Strategy

Financial Product Marketing Production

no long-term debt and growth strictly through internal development (i.e., no acquisitions).

to bring only unique, high-tech products to the market

very heavy initial advertising of new products; the introduction of successively less expensive camera models

dictated subcontracting of high-volume, repetitive manufacturing work and keeping technically critical, high value-added work in-house

High-level policies typically must be interpreted and narrowed at lower organizational levels. This reality results in a hierarchical structure of policies within the cooperatives.

To explicate, a cooperative might have a functional strategy of aggressive price competition. At the sales manager level, this policy might be refined to state that the cooperative will meet competitors' prices on all of the firm's nonproprietary products. And, at the district level, the policy might be narrowed again to read that district sales managers can make price concessions up to 10 percent on their own authority but, beyond that, they must get approval from above. As the example illustrates, policies tend to be broad at higher organizational levels and become successively more restrictive as they move down the hierarchy.

Mission

Overall Objectives &

Key Result Areas.

Branch/Satellite

Individual objectives

Functional Areas

Hierarchy of Objectives & Org. LevelsBOD

GM/CEO

B/S GM/CEO

B/S GM/CEO

Unit Head

Unit Head

Seller Seller

Mission

Overall Objectives &

Key Result Areas.

Branch/Satellite

Individual objectives

Functional Areas

Hierarchy of Objectives & Org. Levels

Top-downApproach

Bottom-upResponse:The result

Characteristics of Policy

• conforms to cooperative values, principles, vision/mission, current strategies/goals/ objectives

• should deal with a recognized need

Characteristics of Policy

• clearly indicates the conditions, to whom, and to what extent it applies

• does not contradict laws• Result from thorough consultation

& discussion

Characteristics of Policy

• clearly indicates the conditions, to whom, and to what extent it applies

• specifies who is responsible for applying it

• clear and simple

Characteristics of Policy

• covers broad or basic area of operations

• generally long-term commitments established by the Board

• does not conflict with other cooperative policies

Policy Audits Organizational policies have a tendency to become obsolete. Stated policies commonly change much more slowly than do the conditions that led to them. One approach to dealing with this problem is to conduct periodic reviews or audits of the organization's policies. These audits can help identify and eliminate outmoded policies.

It is therefore prudent for managers also to review policies on a more or less ongoing basis by asking questions such as, "What is the purpose of this policy?" and "Does it still make sense?"

If the answers are negative or ambiguous, the policy may be a candidate for modification or elimination before the next scheduled audit. The astute manager will particularly be on the lookout for appealed and implied policies that may not be contributing to the achievement of the cooperative's goals.

Policies and Empowerment

The role of policies in the increasingly prevalent "empowered" organization where employees are encouraged to take ownership of their jobs and be entrepreneurial and innovative. In such organizations, there are typically fewer policies but those that are in place play an important role in establishing boundaries that place broad limits on employee behavior

Policies and Empowerment Many of these policies will focus on legal and ethical behavior. For instance, a consulting firm might have a strict policy forbidding the disclosure of information about clients to outsiders. Establishing strategic boundaries represents a second crucial area of policy development in empowered organizations. To illustrate, a high-tech company might limit its product development opportunities to a defined set of technologies as a mean of reducing its risk and focusing its research and development initiatives.

Policy making is concerned with the formulation of general statements or understandings that guide or channel managerial decisions. Policies, whether written or implied, are essential components of a cooperative's planning framework because they simplify the making of recurring decisions and facilitate the delegation of these decisions. Successive delegations tend to result in a hierarchy of policies within traditional organizations.

Summary

In organizations where empowerment is practiced, the principal function of policies is to provide essential limits to otherwise broad employee discretion. It is not overly far-fetched to suggest that without policies, because of excessive analysis and the concentration of decisions at the top, corporate decision making in the hierarchical firm could be slowed to the point of bringing operations to a virtual standstill. Conversely, in the empowered organization, there would be the potential for complete lack of control and chaos. Yet, in today's fast-moving business world there is also the great danger of policies becoming rapidly outmoded. For this reason, audits and ongoing reviews are a must if a cooperative’s policies are to remain effective decision guides.

Summary

Membership Policies