In this article we will discuss about the meaning and types of planning premises.
Meaning of Planning Premises:
Planning is made for the future. Future is uncertain the management makes certain assumptions about the future. The assumptions are not to be based on hunch or guess work. It should be developed through scientific forecasting of future events.
The assumptions derived from forecasting and used in planning are called as planning premises. According to Koontz O’Donnell.
“Planning premises are the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the course of plans such as prevailing policies and existing company plans that controls the basic nature of supporting plans.”
So planning premises provide a framework for planning and action in the midst of uncertainties in the business environment. They imply not only the assumptions about the future but also predictions. Planning premises constitute the framework with which planning is done.
They provide the bedrock upon which future course of action is based. To have effective planning, plans must be based on sound premises. Therefore premises are to be established on the basis of systematic forecasting. Effective planning is largely dependent on the correct knowledge and choice of planning premises.
For planning the planning premises are to be correctly formulated without which planning will be without proper foundation. Further change in planning premises may result in modification of plans. There are innumerable forces and factors which react on business economy.
A manager must consider these forces and factors while formulating premises. Such forces may be internal or external. The manager is to recognise the strategic, crucial and limiting factors. Based on this the manager is to select the proper and adequate premises upon which the super structure of planning are to be raised.
Types of Planning Premises:
Planning premises may be classified as:
(a) Internal and external
(b) Tangible and Intangible
(c) Controllable, semi-controllable and uncontrollable
(d) Constant and variable
(e) Foreseeable and unforeseeable
(a) Internal and External Premises:
Internal premises are those which exist within the business enterprise. This may include men, material, money and methods. Competence of managerial personnel and skill of labour force are some of the important internal premises.
External premises centre round the markets and derived from the external environment surrounding the business. Examples: Product market, money market, population growth, government policies, business cycles technological changes.
(b) Tangible and Intangible Premises:
Tangible premises are those which can be measured quantitatively. They may be quantified in terms of money, time and units of production. Intangible premises are those which cannot be measured quantitatively. Examples are: Reputation of the business, Public relations, employee morale, motivation etc. Planning is to consider both tangible and intangible premises.
(c) Controllable, Semi-Controllable and Uncontrollable Premises:
There are certain factors which are well within the control of the management to a great extent. Factors like materials, money and machines are areas where management has maximum control over their future commitments. The management can decide what policies, procedures, rules and strategies are to be followed in the organisation for achieving the objectives.
Semi-controllable premises are those assumptions about future which are under the partial control of a business. Examples of such premises are demand for the product, Trade union relations.
Non-controllable premises are entirety beyond the scope of business like government policy, international trade agreements, wars, natural calamities new discoveries and inventions etc. Such events cannot be predicted or controlled. These factors disturb all well thought-out calculations. All intangible premises also fall in this category as human behaviour also cannot be predicted accurately.
(d) Constant and Variable Premises:
Constant premises are those which behave in similar fashion irrespective of action taken. They are definite, well known and well-understood. The behaviour of constant premises is not subject to changes these are ignored in planning. Such factors are men, machine and money.
Variable premises are those which vary in relation to the course of action.
The management is to consider these factors in formulating plans as their variations are dependent on the action taken by the management. These cannot be controlled and predicted. For example, sales volume of the enterprise can be partly controlled by the management. There are certain other factors which affect the sales volume of the enterprise but are quite uncontrollable.
Forecasting gives the manager an idea of knowledge of their variations.