Planning is a part of everything that we do or intent to do. We do planning in our everyday life, whether we have to plan for going to a movie or organize a family function. However, the definition of planning takes another level when it comes to business and management. Planning is the fundamental function of management, where one has to decide what to do when to do it, and how to do it. In planning, you establish goals that are backed by policies and procedures for an economic or social unit.
Planning is an intellectual process that is designed for the future by making certain assumptions about the future.
Planning premises are the assumptions one makes or the anticipated environment in which our plans are meant to execute. In this article, we will define planning premises and look at what goes into developing premises in planning.
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A planning premise is a set of assumptions that are derived from forecasting the future. It is a logical and systematic estimate of the future factors that can affect planning. Planning premises provide a background against which the estimated events take place. These are the events that affect planning. Establishing planning premises is a critical element in the planning phase, which ensures that all managers in the organization are in sync with each other. To explain planning premises, let us consider a few examples from business and government planning:
In the budget, there is an announcement of even changes in the tax laws. These are known conditions on which planning is based.
A competitor might enter the same market as yours with the same kind of product. This is an anticipated event; the possibility of that happening is not particular.
The premises of planning is the framework on which planning is based. Amid uncertainty surrounding business and management, it is these planning premises that imply not just assumptions about the future but also predictions. They are the bedrock on which managers plan the future course of action. Without proper planning premises, the planning does not have a solid foundation. If panning premises change, the plans need to change as well. Here are the primary reasons for establishing planning premises:
They help in well-organized planning.
The risk of uncertainty is reduced considerably.
There is a reduction in the risk of flexibility.
Managers can do effective coordination.
It also increases profitability.
Planning premises in management are vital in making important decisions that are based on certain predictions about the future. Managers build the superstructure of planning based on their ability to identify the crucial, strategic, or limiting factors that allow them to select the proper planning premises. Planning premises in business management can be classified based on many factors, as described below:
The premises which exist within the boundaries of the business are internal premises. Some of the internal premises are men, money, material, and methods. Your planning would be based on how competent is your workforce and how much money you have at your disposal.
External premises are derived from the environment that surrounds the business. They are centered around the market like money market, product market, government policies, growth in population, etc.
Any premise which can be quantitatively measured is a tangible premise. These premises can be quantified in terms of time, money, and units of production.
On the other hand, intangible premises cannot be quantified. Some of the intangible premises are public relations, business reputation, the morale of employees, etc.
Those premises which can be controlled by the management to a large extent come under controllable premises. Management has a lot of control over their future commitments when it comes to material, machines, and money.
The business can partially control some premises or assumptions about the future. These fall under semi-controllable premises. Few examples of such planning premises are trade union relations, product demand, etc.
Those premises which can not be controlled by the management of an organization come under uncontrollable planning premises. Some examples are weather conditions, natural disasters, etc.
These premises which do not change irrespective of actions taken are constant premises like men, money, etc. These premises behave similarly under all circumstances.
Based on the course of action taken, some premises change which is termed as Variable premises. These premises cannot be controlled or predicted, for example, the sales volume of a firm, union and management relations, etc.
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Developing Planning Premises needs the planners to do realistic forecasting. Determining planning premises involves
Calculating the probability of events.
Analyzing changes in consumer behavior, technology, government policies, etc.
Implementing systematic investigation to develop the basis for planning.
Predicting future events is a complex process; hence premises must consider limited assumptions that are most critical for the plant. A typical process of developing premises in planning is:
Selecting the premise - Not all the factors in the environment affect the operations of the business. The management must list down those premises which directly influence the development of organizational plans.
Reviewing limitations - Several practical factors limit the abilities of an organization to achieve its goals. Such limitations should be anticipated and provided for. A few examples of such limitations are power, labor, money, and material.
Developing alternative premises - Since it is not possible to predict all the factors that can affect organizational planning, managers must develop a set of alternative premises. These premises are established based on separate assumptions of future events. The alternative plans are developed since premises keep changing, some change slowly and some fast.
Verifying premises - In an organization, there are different departments and planning happens at different levels as per the judgment of people in that department. All these premises are sent to the top management for their approval. The premises developed by line managers and staff are more consistent with each other than those of the top executives.
Communicating premises - The premises developed through this process are then supported by budget and various programs. Then the premises are communicated to all those who are part of the planning process at different levels of business. Documents like ETOP (environmental threat and opportunity profile) contain planning premises.
Q1: What are Some of the Limitations of Planning Premises?
Ans: Planning premises are built on assumptions about future events; thus, they have their limitations. Some of the limitations of planning premises are:
Lack of accurate information at the time of creating planning premises.
Lack of skills on the part of the manager who is devising the planning premises.
The rapidity of change in the internal or external environment can mar the accuracy of planning premises.
Q2. What are the Aspects that Affect the Development of the Premises?
Ans: There are mainly two factors that affect the development of planning premises:
How probable is the impact of factors - This means the factors being studied for developing planning premises might affect or do not affect the premises. These factors might be high, medium, or low.
The intensity of the impact of these factors - Those factors which affect the development of planning premises can have a high, medium, or low degree of impact.
Based on the above two factors, we get the following combinations:
Critical factors - These are factors that have a highly probable impact and a high degree of impact.
High priority factors - These factors are less important than the critical ones. They have either:
Medium probability of impact and a high degree of impact OR
High probability of impact but a medium degree of impact.
Factors to be watched - These are factors that have a low probability of impact but a high degree of impact.