Forecasting and Premising

For purposes of formulating plans, managers have to convert the appraisals, estimates and projections about the future events into certain meaningful assumptions, which are known as planning Premises. This conversion process is called Premising, which is an essential follow-up action after forecasting. Planning premises form the foundation of organisational plans. They are in the nature of informed guesses of managers with respect to specific future trends. A few examples of planning premises are given below :

a)     The enterprise will maintain its competitive strength over the next four years.

b)     There will be revolutionary developments in TV technology during the next five years.

c)     There will be future liberalisation in the economic and industrial policies of government with respect to big business enterprises.

Planning premises are categorised in various ways. External Premises relate to general economic and business conditions, social, political, technological and other trends. Internal Premises are confined to the activities of the enterprise; for example, cash flow, cost of products and services, profitability and so on. Tangible Premises are quantitative in nature, as sales volume of Rs. 50 crores. Intangible Premises are qualitative, as for instance the competence and character of managerial personnel in the organisation. Controllable Premises are those which are manageable by the enterprises (example: advertising expenditure). Uncontrollable Premises relate to acts of god or man about which little can be done by the industrial enterprise (example: A big fire in the plant, government policies etc.)

Forecasts and planning premises are different from plans. The former outline what the future is likely to be. The latter underline what the enterprise should do in future. Further forecasts and planning premises do not reduce the complexity and uncertainty of the future. They only aid managers in understanding the state of complexity and uncertainty of the behaviour of future events and in going ahead with confidence to cope with them.

It is true that forecasting is most unlikely to be perfect and that it is in fact a hazardous exercise especially in a situation of rapidly changing external conditions. Forecasts are only approximations and estimates. Future events may not behave exactly according to forecasts and premises made by managers. But still forecasting before formulating plans is an inescapable exercise. Without intelligent and systematic forecasting, organisational plans would be mere expectations and pious wishes.

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