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CS Professional · Strategic Management and Corporate Finance · Business Policy and Formulation of Functional Strategy

A board of a manufacturing company states: 'We will recruit only from within the company for all senior positions unless no suitable internal candidate exists.' Later, a division head hires an outsider for a senior post without checking internal candidates, arguing that the policy is only a suggestion. Which analysis is most consistent with the nature of business policy?

The division head deviated from policy. Business policies are guidelines set by top management that managers are expected to follow, although they may permit limited, defined flexibility. The exception here applies only after internal candidates are considered, so skipping that step breaches the policy.

  1. AThe division head is right, because policies are optional suggestions with no binding force
  2. BThe division head is right, because policies apply only to top management
  3. CThe division head has deviated from policy, since policies are binding guidelines, though the stated exception shows policies can allow limited flexibilityCorrect
  4. DThe policy is invalid because it contains an exception

Explanation

Policies are formulated by top management and are expected to be followed by those below. The clause 'unless no suitable internal candidate exists' shows that policy can provide flexibility within limits, but the exception applies only after internal candidates are checked, which was not done. Thus the head deviated.

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