Differences between Policy and Strategy

What is a Policy?

Policies are the formal rules of an organization that inform employees about decision-making. In politics, policy can also refer to an agency’s written goals that have not yet been made law. Policies are designed by upper-level managers to help standardize the internal decisions of their organization, and are therefore relatively inflexible and universal.

What is Strategy?

Strategies can take many forms within a single organization. Formal strategies like strategic plans are institutionalized at the highest level of the organization, and assist all employees in reacting to uncertain situations and changing markets. Individuals and teams may also use their own informal strategies for work like sales. Strategies need to be adaptable, and not everybody within an organization will follow the same strategies. 

Differences between Policy and Strategy 

1. When It’s Formulated

Policy is usually formulated as early on in an organization or process as possible, because it is needed to inform employees or the public how to act. Policies regarding hiring and employee behaviour are nearly always created as one of the first steps of a new organization. However, policy should be able to be amended or added as necessary in order to improve the policy’s language or adapt to changing conditions. If employees begin to encounter a new and continuing problem, for instance, management can implement a new policy to give them a standardized response.

Strategy is most effective when an organization is able to develop it before beginning a new project. However, strategies are a broad and flexible category, and many forms of strategy are modified on the fly as markets or environments change. A strategic plan, for example, is designed before an organization begins a new venture or phase of development, but a team within that organization may implement or eliminate individual strategies once the venture is actually underway.

2. Formality

Policies are formal and typically institutionalized within an organization. In a government, policy is considered a step before law. It’s a formal indication of what the government wants to do but hasn’t yet passed a law regulating, or doesn’t need to pass a law to start doing. For private organizations and businesses, policies can include various contracts, and provide a record of business practices. Policies therefore can be considered formal legal documents.

Strategies can range widely in formality. Strategic plans or official strategies can often supersede policy as the most important formal goal or outline of an organization. Other strategies, like a sales team’s cold-calling strategies, can be informal but still important to the organization. An organization may choose to use various strategies like SWOT analyses that can be helpful but have no legal bearing on the organization, unlike human resources policies or privacy policies with clients.

3. Level of Flexibility

Because policy is similar or identical to written law, it can often seem inflexible. It is designed in response to set circumstances and therefore only needs a certain level of flexibility; managers or employees need to be able to depend upon stable policy to inform their decisions. However, effective policy systems leave room for feedback, amendment, and repeal of unfair or inefficient policies.

Just as strategy can vary in formality, it can also vary in flexibility. Strategy needs to be able to adjust to new opportunities and changing demands. Even formal strategic plans and core business strategies evolve over time. Each team or agency in an organization may have their own core strategies that adapt to changes in upper management or shifts in the market.

4. Uncertainty

Policy is not optimal for dealing with highly uncertain situations. While managers writing policy should attempt to predict potential problems and externalities, policy is generally a reaction to known issues. Although policy can be highly technical, like a privacy policy or terms-of-service document, it is often instead a broad framework that sets a precedent for how employees should make decisions. It therefore does not predict or acknowledge new situations, and simply tries to leave room in its language for uncertainty.

Strategy allows users to deal with uncertainty in the most advantageous method possible. Because strategy is flexible and at least somewhat informal, it can be quickly adapted as situations change. Most strategies are essentially ways to deal with uncertainty or maximize new opportunities, although a few strategies are retrospective and require an organization to improve existing conditions.

5. Who Creates It

Policy is typically created by upper-level management in the private sector, or by agency heads and policymakers in the political sector. Because it will affect the decision-making processes of the entire organization, management is nearly always involved.

Strategy can theoretically be created by anyone at an organization, and individuals and teams may have their own strategies and plans. However, an organization’s true strategic plan and mission statement will most likely be created by upper-level management with the input of all departments. All strategic plans and analyses should include members from every level of the organization in order to be effective. 

6. Who Can Implement It

Policy is easy to delegate and implement. Like rules or laws, it is meant to be universal. Any member of an organization should be able to look to policy to make a decision.

Informal strategies are not easy to delegate to other employees. Strategies must be used and adapted as situations arise, and cannot be predicted accurately in advance. While a formal strategic plan can help guide an organization, individuals and teams must decide for themselves what strategies to employ. 

Table of Differences between Policy and Strategy

Summary of Policy vs. Strategy

• Policy and strategy are both methods organizations use in decision-making.
• Policies are formal, fairly inflexible, and guide employees regarding known problems. Strategies are relatively informal and inflexible, and help employees handle uncertain situations.
• Once written, policies are meant to be used by everyone in an organization. Strategies are hard to delegate to another employee because they require reacting instantly to new information.

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