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1.3.3 Considering the Planning Premises

Another logical step in planning is to establish, obtain agreement to utilize and disseminate critical planning premises. These are forecast data of a factual nature, applicable basic policies, and existing company plans. Premises, then, are planning assumptions – in other words, the expected environment of plans in operation. This step leads to one of the major principles of planning.

The more individuals charged with planning understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be.

Forecasting is important in premising; for example,

· What kind of markets will there be?

· What quantity of sales?

· What are the products and its prices?

· What are the technical developments required?

· What are the costs?

· What are the required policies?

· How will expansion be financed?

· What is the expected nature of political and social environment?

Planning premises include far more than the usual basic forecasts of population, prices, costs, production, markets, and similar matters.

· A difficulty of establishing complete premises and keeping them up-to-date is that every major plan, and many minor ones, becomes a premise for the future.

· As one moves down the organization hierarchy, the composition of planning premises changes somehow.

Because the future environment of plans is so complex, it would not be profitable or realistic to make assumptions about every detail of the future environment of a plan.

Since agreement to utilize a given set of premises is important to coordinate planning, it becomes a major responsibility of managers, starting with those at the top, to make sure that subordinate managers understand the premises upon which they are expected to plan. It is not unusual for chief executives in well- managed companies to force top managers with differing views, through group deliberation, to arrive at a set of major premises that all can accept.