Effective planning relies on considering various assumptions about the future. These assumptions, also known as planning premises, are identified through a process called environmental scanning.
There are three main ways to categorize planning premises or planning assumptions.
Environmental scanning – identifying premises or assumptions
While making a plan it’s important to consider some assumptions. And this is possible when an environmental scanning is done. Here are the 3 ways to classify these planning assumptions or premises.
A) Internal vs. External Premises or Assumptions:
- Internal Premises or Assumptions: These assumptions stem from within the organization and can be influenced by factors like:
- Sales forecasts
- Company policies and programs
- Investments in equipment and facilities
- Management and workforce skills
- Available resources (machinery, finances, methods)
- Employee and owner values and behaviors
- External Premises or Assumptions: These assumptions arise from outside the organization and can be grouped into three categories:
- Business Environment: Overall economic climate, industry trends
- Product Demand: Factors affecting customer interest in the company’s offerings
- Resource Availability: Factors influencing access to necessary resources (labor, materials)
- Examples of external factors include:
- General economic conditions
- Technological advancements
- Government regulations
- Population growth
- Political stability
- Social trends
- Demand for the industry’s products
B) Measurable vs. Unmeasurable Premises or Assumptions [Tangible vs. Intangible]:
- Tangible Assumptions: These assumptions can be readily measured with numbers. (quantitatively measured). Examples include:
- Projected population growth
- Industry product demand
- Investment in company resources
- Intangible Assumptions: These are qualitative and difficult to measure precisely. Examples include:
- Political stability
- Social, business, and economic environment
- Owner philosophies and behaviors
C) Controllable vs. Uncontrollable Assumptions:
- Controllable Assumptions: These assumptions can be managed by the organization. Examples include:
- Marketing strategies
- Employee training programs
- Resource allocation decisions
- Owner’s leadership approach
- Uncontrollable Assumptions: These are external factors beyond the organization’s direct control. Examples include:
- Labor strikes
- Natural disasters
- Changes in government regulations
- Economic downturns
Conclusions: Adapting to Change:
Due to uncontrollable factors, plans need periodic revision to reflect current situations. By acknowledging these uncertainties and assumptions, organizations can develop flexible plans that can adapt to changing circumstances.
By understanding these different types of planning assumptions, organizations can create more robust and adaptable plans that consider both internal and external factors, both measurable and qualitative elements, and both controllable and uncontrollable influences.
