An Introduction to Planning Premises
The anticipated context in which plans are projected to operate is referred to as Planning Premises. They include future assumptions or forecasts, as well as known factors that will influence the path of plans, such as current policies and existing firm plans, which govern the fundamental character of supporting plans.
Let us now know in detail about this important study in this article. We will study the meaning, types, and importance of Planning Premises. First, let us briefly discuss what is ‘Planning’.
Meaning of Planning
The process of conceptualising and specifying an action step by step is known as Planning. This allows you to objectively assess how and when the objectives can be met. As a result, Planning entails determining your intended aim or objective and considering the tasks and activities required to reach that goal. It is a necessary step to take before embarking on any new personal or professional endeavour.
Planning - A Fundamental of Business
Planning is a part of everything that we do or intend to do. We do planning in our everyday life, whether we have to plan for going to a movie or organising 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 Linked with Forecasting
Planning is a very specialised procedure. It is an essential tool in a variety of industries, including management, manufacturing, and business. To fulfil its objectives successfully, each field necessitates a distinct form of plan.
The link between Planning and forecasting is a crucial, yet frequently overlooked, part of Planning. Forecasting is to forecast the company's future while taking into account an external element. Planning, on the other hand, forecasts how a company's future should look in numerous circumstances.
An overview of Planning Premises
The Planning process is based on projections about the future. Though the past influences present plans, plans are designed to attain future objectives. As a result, forecasting future events leads to effective Planning. Because future occurrences cannot be predicted with certainty, assumptions are made about them. These occurrences could be known facts (tax law changes announced in the budget) or expected events that may or may not occur (entry of competitors in the same market with the same product).
Planning is a Scientific and Intellectual Process
Though these assumptions are generally based on scientific analysis and models, managers also make assumptions about future occurrences based on their intuition and judgement. The process of identifying the factors (assumptions) that influence plans is known as premising, and the tools for doing so are known as forecasting. 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.
What is Planning Premises?
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 organisation 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.
Importance of Planning Premises
The premise 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-organised 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.
Types of Planning Premises
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:
Internal and External Premises
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 centred around the market like money market, product market, government policies, growth in population, etc.
Tangible and Intangible Premises
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.
Controllable, Semi-Controllable, and Uncontrollable Premises
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 organisation come under uncontrollable planning premises. Some examples are weather conditions, natural disasters, etc.
Constant and Variable Premises
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.
Establishment of Planning Premises
Developing Planning Premises needs the planners to do realistic forecasting. Determining planning premises involves
Calculating the probability of events.
Analysing changes in consumer behaviour, 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 organisational plans.
Reviewing Limitations - Several practical factors limit the abilities of an organisation to achieve its goals. Such limitations should be anticipated and provided for. A few examples of such limitations are power, labour, money, and material.
Developing Alternative Premises - Since it is not possible to predict all the factors that can affect organisational 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 organisation, there are different departments and planning happens at different levels as per the judgement 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.
Quick Links
Hope the students have benefitted from this study. We have discussed planning and planning premises in business studies in detail. We have attached other links for the beneficial study, students will surely benefit from the same. Now check out these Frequently Asked Questions in order to have a clear understanding of the topic.
FAQs on Planning Premises
1. What are Planning Premises?
The Planning process is based on projections and forecasts of the future. Plans in the present are guided by the past, but plans in the future realise the aims. As a result, forecasting future events leads to effective plans. Because future events are unknown, assumptions are made regarding these events.
These events could be existing conditions (such as tax law changes announced in the budget) or predicted occurrences that may or may not occur (entry of a competitor in the same market with the same product).
Though these assumptions are generally based on scientific analysis and models, managers also make assumptions about future occurrences based on their intuition and judgement. Premises are established by identifying the factors (assumptions) that influence plans, and forecasting is the process of establishing Premises.
2. What are the types of Planning Premises?
There are two types of Planning Premises-
1. Premises (internal and external)
Internal Premises are provided by the company. It covers labour force skills, firm investment strategies, managerial style, and sales forecasts, among other things.
External Premises are derived from the outside world. That is, the environment is economic, technological, social, political, and even cultural. The business has no control over the external environment.
2. Premises that are controllable, semi-controllable, and uncontrollable
The management has complete control over the controllable Premises. Materials, machines, and money are only a few examples.
Premises that are partially controlled are known as semi-controllable. Marketing strategy is one of them.
As the term implies, uncontrollable Premises are ones over which management has no control. Consider meteorological conditions, consumer behaviour, natural disasters, and conflicts, to name a few.
3. Tangible and intangible Premises
Quantifiable Premises are ones that can be measured in some way. They can be measured in terms of money, time, and manufacturing units. Intangible Premises are those that cannot be quantified in any way. Examples include a company's reputation, public relations, employee morale, and motivation. Both tangible and intangible Premises must be considered when Planning.
4. Premises that are constant and those that are variable
Constant Premises are ones that behave in the same way regardless of the action taken. They are distinct, well-known, and comprehended. The behaviour of constant Premises is unaffected by changes, and this is overlooked in Planning. Men, machines, and money are examples of such elements.
The term "variable Premises" refers to Premises that change depending on the course of action.
3. What is the importance of Planning Premises?
The importance of Planning Premises are listed below:
Choosing the Best Objectives
Planning entails deliberation and decision-making on a recommended course of action. It also entails the choice of one course of action and the rejection of other options. The preferred course of action is naturally the one that supports the overall organisational goals within the framework of the resources available and economic, social, and political considerations.
Tackling Increasing Complexities
An organisation is a diverse group of people who differ from one another in a variety of ways. It is doubtful that they will collaborate efficiently and harmoniously in the organisation's best interests. As a result, Planning is critical to every goal-oriented action.
Unity of Action
Planning allows workers in a company to work together successfully and harmoniously to achieve similar goals. It gives individuals a stake in their own future, motivating them to do everything possible to achieve the challenge.
Defend Your Company From Failure
Cutthroat competition, the unpredictability of consumer tastes and preferences, quick technology advances, and abrupt economic and political development are all blamed for business failures. In general, business failure is driven by hasty and irrational decision-making, which is a direct outcome of a lack of effective Planning.
4. What are the strategies and policies of Planning?
Planning Techniques
The term "strategic" dates back to circa 400 BC in Greece, and it relates to the tactic of directing a military force in light of the enemy's actions. It has the same competitive ramifications in management. It's also known as interpretive Planning. The environment and its impact on the organisation are central to strategy.
Policies relating to Planning
Management policies should be acceptable and stable, flexible, based on proper and precise information and competent judgement, and communicated to achieve their goals. Policies should be written down. The policy statement must be precise, unambiguous, and simple to comprehend.
5. How to successfully implement Planning?
You must be able to implement your strategy in order to oversee the performance of your firm. There is a great deal of effort put into it, such as:
Having a plan in place that takes into account both short- and long-term objectives. Having a strategy also implies you're prepared for what's next. It can also assist you in making adjustments if and when the action items require it. By designing a calendar, you may properly implement your strategy.
After you’ve developed a calendar, your objective should be to track your goals and action items. Weekly or monthly strategy meetings are required to bring everyone on the same page and ensure that everyone is on the same page. In such cases, having a checklist is beneficial.
While keeping track of your progress is important, it's also critical to revisit your plan and make any necessary revisions or changes. Getting feedback from your team is critical to ensuring that all of your needs are satisfied and that the strategy has been assessed from various angles. Long-term plans, for example, frequently encounter unanticipated adjustments (can be internal or external). You can make changes on the fly and stay up with new trends if you are flexible and eager to adapt.
6. What are some of the limitations of Planning Premises?
Planning premises are built on assumptions about future events; thus, they have their limitations. Some of the limitations of planning premises are listed below:
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.
7. What are the aspects that affect the development of the Premises?
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.