Integration of Functional Policies

When various functional policies have been developed for implementation of the strategy, implementation is not necessarily complete; if these policies are not properly integrated, they may not contribute properly towards strategy implementation. Integration in functional policies is necessary because they are interdependent; a particular policy affects other policies and, in turn, is affected by other policies. Functional policies may be considered like horses in a chariot. A chariot may have very good horses but it may not move forward even by an inch if some of the horses are pulling it forward and others are pulling it backward. The chariot may move forward at a high speed if all horses pull it forward at the same time. The considerations that guide strategists in the integration of functional policies may be as follows:

• Need for internal consistency;
• Relevance to developing organisational capabilities;
• Making trade-off decisions;
• Intensity of linkages; and
• Timing of implementation of policies.

Internal Consistency: There is a need to be sure that there is internal consistency in the policies developed for various functions. Since various functions are interdependent, a decision for functionally dependent factors cannot be made without regard to their impact on other areas of business. Otherwise, sub optimization is likely to result. For example, a major production decision variable is that of plant capacity. This decision depends heavily on, besides other things long-range sales forecast and the structure of distribution channel (marketing function), cost of capital and sources of funds (finance function) and availability of relevant human resources (personnel function). Thus, plant capacity decision cannot be made in isolation of other factors.

Relevance to Organizational Capabilities: Integration of various functional policies should focus on developer organisational capabilities to implement the strategy effectively. For synergistic effects occur across functional areas and distinctive competence emerges as a result of deploying resources to the areas where the organisation wishes to build up .its strategic advantages. This can be observed in the case of companies which intend to be a market leader, low cost  or technologically superior competitor, or the largest organisation. In all these alternative cases or a combination there of integration of various functional policies would be necessary, though there may be difference in emphasis. For instance, the company which wants to become a market leader would have to offer products of the best possible quality at competitive prices through an efficient distribution system supported by aggressive promotional efforts, as is the case with Hindustan Lever. For Reliance Industries which is to be the largest company in petrochemical sector, the emphasis has to be on high technology, mobilization of large resources but not necessarily emphasizing distribution and promotion. Thus, integration of policies should aim at developing competencies relevant to the company’s objectives as defined through strategy formulation.

Making Trade-off Decisions: In integrating various functional policies, the organisation faces the situation of trade-off decisions because of the inherent nature of each organisational function. The demand for optimizing a particular function may be in one way, for another function, in another way which may be conflicting to each other. For example, production function’s optimization may lie in the most modern technology, a costly affair; finance function’s optimization may be least cost technology. Both are contradictory. Similar contradictions may be observed in other functional areas also. Therefore, there has to be a trade-off among various functional areas which may suboptimise some functional areas but may optimize the organisation. It is based on the maxim ‘if you want to get something, you have’ to lose something.’ In applying this maxim in trade-off decision, the principle is what you get is more important than what you lose. This is true in the case of integration of policies.

Intensity of Linkages: All functions of an organisation are interdependent and interlinked; some directly, others indirectly. Types of linkage determine the level of integration of various functions. For instance. If the strategy is built on offering newer products, there would be greater linkage between R&D and production function; if the strategy is built on low-cost mass consumption items, there would be close linkage between production and marketing. Thus, intensity of linkages is not constant but moves according to the strategy.

Timing of Implementation of Policies: There should be integration in timing in putting different policies into action. This may bring better result for the organisation as a whole. For instance, if a company is facing resource crunch, it may be better to put off those plans and actions which may have long-term effect on it like R&D. Similarly, if the company is moving into high-tech area, more emphasis has to be placed on training and development.