A policy is typically described as a principle or rule to guide decisions and achieve rational outcome(s). The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol. Whereas a policy will contain the ‘what’ and the ‘why’, procedures or protocols contain the ‘what’, the ‘how’, the ‘where’, and the ‘when’. Policies are generally adopted by the Board of or senior governance body within an organisation where as procedures or protocols would be developed and adopted by senior executive officers.
A Policy can be considered as a “Statement of Intent” or a “Commitment”. For that reason at least, we can be held accountable for our “Policy”
The term may apply to government, private sector organizations and groups, and individuals. Presidential executive orders, corporate privacy policies, and parliamentaryrules of orderare all examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income), policy merely guides actions toward those that are most likely to achieve a desired outcome.
Policy or policy study may also refer to the process of making important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have. Policies can be understood as political, management, financial, and administrative mechanisms arranged to reach explicit goals.
The intended effects of a policy vary widely according to the organization and the context in which they are made. Broadly, policies are typically instituted to avoid some negative effect that has been noticed in the organization, or to seek some positive benefit.
Corporate purchasing policies provide an example of how organizations attempt to avoid negative effects. Many large companies have policies that all purchases above a certain value must be performed through a purchasing process. By requiring this standard purchasing process through policy, the organization can limit waste and standardize the way purchasing is done.
The State of California provides an example of benefit-seeking policy. In recent years, the numbers of hybrid cars in California has increased dramatically, in part because of policy changes in Federal law that provided USD $1,500 in tax credits (since phased out) as well as the use of high-occupancy vehiclelanes to hybrid owners (no longer available for new hybrid vehicles). In this case, the organization (state and/or federal government) created an effect (increased ownership and use of hybrid vehicles) through policy (tax breaks, highway lanes).
Policies frequently have side effects or unintended consequences. Because the environments that policies seek to influence or manipulate are typically complex adaptive systems (e.g. governments, societies, large companies), making a policy change can have counterintuitive results. For example, a government may make a policy decision to raise taxes, in hopes of increasing overall tax revenue. Depending on the size of the tax increase, this may have the overall effect of reducing tax revenue by causing capital flight or by creating a rate so high that citizens are deterred from earning the money that is taxed. (See the Laffer curve.)
The policy formulation process typically includes an attempt to assess as many areas of potential policy impact as possible, to lessen the chances that a given policy will have unexpected or unintended consequences. Because of the nature of some complex adaptive systems such as societies and governments, it may not be possible to assess all possible impacts of a given policy.