Policy making in Business

Strategic planning, or deciding on broad courses of action, is termed policy making, and is, in theory, performed by the legislative branch of government. In practice, however, senior public administrators from the executive branch also make policy. In the first lace, they draft legislation and press for its enactment; and secondly, they fill in gaps in legislation through administrative regulations. While such regulations are supposed merely to implement the intent of the legislation, they often create new policy, and take the agency in directions never anticipated by the legislators.

The judicial branch of government also makes policy through court decisions which strike down legislation, require modification of legislation, or even imply the need for new legislation. For example, the famous US Supreme Court Brown Vs. Board of Education decision in which racial segregation in public schools was found unconstitutional, has led to major civil rights legislation at both the national and state levels. Just as US Supreme Court decisions make policy at the national level, state high court decisions make policy for states.

The importance of policy making in the executive branch has recently led to the development of policy analysis as a high-level administrative activity. A policy analyst looks for conflicts among different policies and supplies various analytical tools to determine the impact and values to society of alternative policies. Policy impacts are often assessed through the use of sophisticated economic and social forecasting tools.

One such tool is the econometric model, a highly complex system of hundred of equation used to predict economic conditions for each of several policy alternatives and several sets of assumptions about the behavior of businesspeople and consumers. The assumptions are called exogenous variables; the variables produced by the model are called endogenous variables. For example, the effects of a tax cut policy versus a public works program on employment and Gross National Product might be forecast. Or the demands created by a national health insurance program for additional health personnel might be predicted, along with the additional needs for federal and state spending on education. These simulations provide data from which a policy decisions may be made.

The Delphi Technique is a behavioral tool in which a panel of exports is asked for a production of the implication or effects of some policy, frequently termed a scenario. Sometimes each expert develops several scenarios, based upon different assumptions about society’s behavior. The experts are kept separate from one another to eliminate group social pressures. After each expert has given a scenario, or scenarios, the results are complied and sent to the other participants, who are asked to revise or maintain their predictions in the light of the others’ opinions. The process is repeated several times until a consensus is reached. The consensus may reflect agreement on a single policy or agreement on a set of policy alternatives. An example of the use of Delphi was that by the National Institute of Drug Abuse when it commissioned a study to develop a range of policy options for drug-abuse control.

Another influence on policy making comes from lobbyists, paid representatives of business, labor, and more recently, consumer and public interest group, who attempt to influence the content of both legislation and administrative regulation. A recent and continuing example of lobbying at the federal level has been in connection with automobile air pollution standards. Environmental lobbyists have argued for more stringent standards to be applied at earlier dates, while the auto industry has pressed for relaxed standards and delays in implementation.

Planning is hierarchical in government as well as in business. The narrowest goals and polices established at one level of government become the broad goals for the next lowest level – which in turn develops its narrower goals and operational plans.