Policy is a planned method and therefore a deliberate scheme of rules to govern conduct and attain reasonable results. A policy is an official statement of purpose and is normally implemented as a formal procedure or rule. Generally, policies are normally adopted by an governance body within an organisation. In most organisations, there exists a division of labour in the form of a department responsible for specific functions. These departments are empowered with certain delegated powers to perform their functions. Some departments, however, are given authority by the company to adopt policies in order to achieve company goals and objectives.
The purpose behind policy implementation is to achieve certain desired results, which are then followed by measures or actions to take in order to realize these objectives. Policy development therefore involves careful planning, designing and debating the implications of the proposed policies. This process enables members of the organisation to take informed decisions on important issues pertaining to the business environment and thus contribute to the betterment of the organisation. Policy evaluation is also a critical component of the policy cycle. It involves assessing the effectiveness of policies in achieving the desired results.
Policy evaluation involves three components; namely, assessment, evaluation and control. The purpose of the evaluation is to know the effect of the policies in achieving the desired objectives. The second aspect consists of the control aspect which involves assessing the effectiveness of the implementation process in ensuring that the prescribed time period is met and the right decisions are taken in relation to the policies. The third aspect of the evaluation is the corrective factor and this involves the corrective measures considered necessary to ensure that the policy implementation meets the objectives.
Policy analysis provides an insight into the existing policies and their future potential effects in the business environment. Policy analysis is a key element in the entire policy cycle. This involves gathering and evaluating information relevant to the existing policies. Policy analysis helps in determining the need for changes to the current policies and the manner in which the changes should be made. Policy analysis is also a vital component of the fiscal policy implementation since it informs the management about the potential outflows and inflow of cash and tells them the implications of the policy accordingly.
Policy makers also face the daunting task of controlling the money supply. Money supply management involves planning the use of monetary resources and keeping a check on the increase or decrease in the rate of interest to adjust the interest rate on loans and credit. It is important for monetary policy to be flexible with respect to changes in the value of the national currency since the change in the money supply may have adverse implications on both long term and short term economic performance. The flexibility of monetary policy enables the policy makers to meet economic demands despite changing domestic interest rates and to counter external trade deficit.
There are various other main types of government policies. The most important of these main types of governmental policies are central economic policies, federal funds programs, tariff policies, price control policies, and foreign trade policies. All of these policies are designed to promote economic growth by maintaining the growth level of the economy. All of these policies attempt to increase employment levels, decrease unemployment, reduce inflation, and improve fiscal capacity. The main reason why all of these policies are necessary is because growth is important to maintain a sustainable and balanced economy.