Developing effective policies is a top management responsibility. While developing such policies management should observe the following things:

1. Related to objectives. The use of a policy should help in achieving the enterprise objectives. It must be capable of relating objectives to functions, physical factors and company personnel.

2. Easy to understand. Policies should be stated in definite, positive, clear and understandable language. It should not defy easy interpretation and translation into practice.

3. Precise. It should be sufficiently comprehensive and prescribe limits and yardsticks for future action.

4. Stable as well as flexible. It should be stable and amenable to change. ‘It should be stable enough to assure people that there will not be drastic overnight changes. It should be flexible enough to keep the organization in tune with the times.’

5. Based on facts. Policies should be constructed on the basis of facts and sound judgment and not on personal feelings or opportunistic decisions.

6. Number. There should be as many policies as necessary to cover conditions that can be anticipated, but not so many policies as to become confusing or meaningless.

7. Thorough knowledge of internal as well as external factors. Policies should support each other and must be supplementary to superior policies. Every policy must be the result of a thorough knowledge of operations and practices covered, and the effects of the policy on employees in all departments. They should also recognize economic principles, be in line with laws of the state and be compatible with the public interest.

8. Just, fair and equitable. Policies should be just, fair and equitable to internal as well as external groups. For example, a policy of recruitment from within may limit opportunities to bright candidates from outside; and a policy of ‘recruitment from outside only’ would limit promotional avenues to internal candidates. To ensure justice it is necessary to pursue both the policies and apply them carefully. Equitability implies equal treatment to all without discrimination. Policies should not discriminate among employees and customers on the basis of religion, race, sex etc. 

9. Reasonable. Policies must be reasonable and capable of being accomplished. To gain acceptance and commitment, the policy should be ‘conditioned by the suggestions and reactions of those who will be affected by the policy’. Policies should also permit interpretation so that they can be applied with success depending on the situations. 

10. Review. Policy making is not a one shot deal. Once policies are formulated, it is the duty of managers to scrutinize them at regular internals to find out their relevance in the face of continuous changes. Periodic review of policies is essential to avoid organizational complacency or managerial stagnation.