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Assumptions are double-edged swords.  To live productive lives and to be organizationally efficient, we are compelled to make dozens of assumptions every day.  We simply don't have time to stop and verify everything.  Take just one example - checking the air pressure in the tires of our car.  Would we verify the pressure in each of the four tires every day? If we did, and verified everything else in our lives, little or nothing would get done!  Our society would be considerably less advanced than it is today and the general standard of living would be much lower.  So, in a practical sense, we have little choice but to make assumptions, and many of them.  So, assumptions are very useful, but only to the extent that they are VALID. 

However, when we make assumptions that are INVALID, especially those concerning safety or well-being, the result can be catastrophic.  On a less catastrophic level, but on a much more frequent basis, hidden assumptions are often the root cause of many lengthy, costly and protracted disputes and disagreements.

Let's look at how assumptions create risks and how we can best manage them.

1.0  Definition

1.1  General

Assumptions are a form of decision-making or judgment that we make, sometimes formally, but more often informally or even subconsciously. We form assumptions either on the basis of our estimates of probabilities or on the basis of trust.  Assumptions are the unquestioned beliefs behind our decisions and actions.  These beliefs may turn out to be false under closer examination.  Typically, we assume that something will or will not happen, based strictly on our past familiarity with the event (e.g. "the car will start when I turn the key")   It has been said that looking to the past to project the future is rather like driving down the road by looking in the rear view mirror.  Indeed, 18th century Swiss mathematician, Jacob Bernoulli argued that "under similar conditions, the occurrence (or non-occurrence) of an event in the future will follow the same pattern as was observed in the past."  But as 20th century financial advisor Peter Bernstein (1996) points out, not without some irony, "that is a giant assumption."   Unless all the salient factors that were present in the past are present in the future, the past can be no guarantee of the future.  It is often at best an approximation. So it is with assumptions.

Assumptions are then what we postulate or take for granted, without demanding proof.  We assume things will or will not happen, that people will or will not do things at a certain time, in a certain order or in a certain way.  For example, we assume that oncoming drivers will stay on their side of the road and not cross into ours.  We assume that the lights in the room will come on when we flick the switch.  We assume we can safely drink the water that we assume will gush out of the faucet when we turn on the tap.  Some assumptions are inconsequential - an error that might be temporarily embarrassing or merely inconvenient.  But more ominously, others, even those considered to be the most routine and banal, can be ruinous, catastrophic or fatal.

Other words that have similar meanings to synonyms for assumptions include models, standards, plans, beliefs, faith, supposition, theory, presumption, proposition, hypothesis, approximation, extrapolation, conjecture, premises and values.  Verbs that signify assumptions include guess, speculate, estimate and suggest.

When a solution to a given problem appears to be successful over time, it soon becomes an assumption. These 'solutions' need not be proven by scientific analysis but only deemed to be effective. Popular theories on criminology and foreign policy often fall into this trap.  Because the link between cause and effect may not have been established in these cases, 'certainty' and 'truth' may not be synonymous .

Assumptions may also have undisclosed moral underpinnings, which may run the spectrum from what some observers may deem moral, to amoral to immoral.  Of course, these descriptors are highly subjective, making assumptions open to wide interpretation.  Assumptions are a deeply value-laden area that may invoke rational (i.e. selfish), utilitarian, egalitarian, altruistic or other such ethical systems.

Assumptions can be used deal with complexities, such as those in technological endeavours, economic theory and foreign affairs.  These complexities might otherwise be cause for confusion, discussion, anxiety and even dissent, inhibiting unrestricted action by some parties.  Thus, assumptions can be applied to calm public anxieties, to stimulate either support for or opposition against any number of causes, be they animal rights, environmental, military intervention, the sale of tobacco or the expansion of gambling.  These assumptions can easily favour the interests of a particular stakeholder or interest group as opposed to those of the community at large. 

1.2  Sources

Among contemporary researchers, some of the most cogent insights on assumptions come from Douglas McGregor (1960), Ralph Kilman (1989), Granger Morgan and Max Henrion (1990), Peter Senge (1990),  Edgar Schein (1992), Ian Mitroff  & Harold Linstone (1993) and Joel Barker (1993).  

McGregor introduced us to Theory X and Theory Y which have a tendency to become self-fulfilling prophecies concerning the work ethic of employees.  Kilman, a former associate of Mitroff, speaks to surfacing and analyzing assumptions.  Morgan and Hendrion press the case that all significant assumptions should be identified.  Senge, borrowing from Quantum Theorist David Bohm, argues that assumptions should be 'suspended' i.e. held up for examination.  Schein's interest in assumptions focuses on interpreting corporate culture and he argues that without understanding the underlying assumptions, one cannot decipher the more visible artifacts and behaviours of a group. Projecting one's own assumptions on the actions of others is often misleading and misdirective and altogether too easy, believes Schein.  He further differentiates assumptions, which are so taken for granted that there is no questioning them, from what he calls "dominant theory," which at least acknowledges the existence of other competing theories.  Mitroff and Linstone call for the vigorous identification and challenge of assumptions as part of a larger coherent inquiry system. It should also be noted that the combination of several assumptions can lead to a paradigm, a useful but nevertheless ultimately limiting concept that has been well-developed by Barker.  

1.3  Importance

Decisions and judgments are supposed to reduce risk, by selecting the best course of action, by rejecting the inferior choice(s), and by eliminating any ambiguity or delay.  However, assumptions, even more than decisions, can be loaded with risk, because the risk is often taken unwittingly - with no precautions taken, should the assumption turn out to be invalid.  That is because, by definition, we don't check our assumptions - and when the assumption is not an accurate reflection of reality, and it is important, that assumption can prove fatal to people and organizations alike.  Pilots assume they know both their altitude and the terrain beneath them.  When they are wrong, and the Theory of the Situation is not the same as or very close to the Reality of the Situation, people get killed.  We have to manage our assumptions carefully.

In yet another paradox of assumptions - those in which we place the most confidence are often those on which we are most dependent - witness electricity, drinking water, the speedometer in our car.  We don't question them until after disaster strikes.  This is not wise! 

Management may be lulled into a state of complacency by the relative infrequency of major losses, especially by those caused by an immediate failure, such as human error.  The notion that the loss would not have occurred had the person done their job correctly is, or course, yet another assumption, and one which may be the tip of an iceberg of latent hazards.  These compounding assumptions can easily provoke an organizational loss.

With respect to validity, there can be three outcomes:

1. Our assumption can be VALID by reflecting or at least being a reasonable facsimile of reality;

2. Our assumption can MIMIC (or imitate) reality - being apparently correct, but in fact being dissimilar, the difference being masked by many possible factors, including permutations and combinations of other assumptions -  which may not be present in a later set of circumstances, which will then mislead us into making an invalid assumption in the future; or

3. Our assumption can immediately be proven INVALID, hopefully with nothing serious lost, such that we can correct our faulty assumption. 

The riskiest assumptions are of the second kind, because they offer a false - or at least unchallenged - assurance  that only reinforces the error until a later date, when it could result in serious loss ("nothing bad ever happened before, so I thought it must be OK").  This is the basis of the 'latent hazard' identified and well-covered by Jens Rasmussen and O.M. Pedersen (1984) and James Reason (1990 & 1997). 

1.4  Types of Assumptions 

1.4.1  Implicit and Explicit Assumptions

Assumptions can be either explicit (stated openly and thus subject to examination and challenge by others) or implicit (not openly stated, often made semi- or subconsciously, which are unlikely to be examined or challenged by others).  

Implicit assumptions, like latent hazards, are usually very subtle.  Many such assumptions originate deeply in an organization's or society's culture, like corporate philosophy, policies, procedures and practices that have long been in use.  These may have been set in place by authorities who are unfamiliar with current or local reality or who are far removed from the scene, making it difficult to spot merely by doing a visual inspection of the site.  Outsiders are often better able to identify such assumptions.  That is why diversity, properly managed, can be an aid to managing assumptions.

1.4.2  Assumptions Based on Necessary Conditions, Upstream Events and Dependencies

Another assumptions is not considering necessary conditions - the upstream events on which we depend for our normal personal or business lives, such as a source of income, good health, a place to live, and possibly transportation.  Let us start with an example, perhaps absurd, only to make the point: "The sun will rise in the east in the morning." This assumption, almost never identified because it is so taken for granted, is based on four necessary conditions: first, the sun continues to exist at its present mass; second, that it continues to produce heat and light in a consistent manner as it has in the past; third, that the earth remains in a similar orbit around the sun; and, fourth, the earth continues to rotate around its polar axis as it has in the past.  Remove any one, two or three or all four of these necessary conditions and the assumption becomes invalid.  

Let's consider another example.  You are dependent on electricity to read this message. Where is that electricity coming from? If we trace it upstream, it flows into your monitor/CPU or laptop either from batteries or from the electric service in your home or your business. (You might also have your laptop plugged into a car, train, aircraft, boat or ship). There may be issues in your building or vehicle that might interrupt that power.  Your house of office could have a fire, a flood or something might cut the power line to your location, be it construction, a vehicular accident or the weather. 

Let's move one step further upstream. If we are on the ground grid, then it likely comes from a local utility.  What are the problems that might interrupt your power from this source? Weather, accident, overload, incompetence, insolvency come to mind. If we are utterly dependant on a reliable supply of power, then are we monitoring evens at the local electricity provider?

Let's take it upstream one more step. The local electricity provider purchase the electricity from a larger utility.  That larger utility might get its power to generate electricity from oil, coal, hydro (water/gravity), wind or a nuclear reactor.  There may be a host of issues there that might interrupt the supply of power.

Most businesses who are dependant on commodities, be it fuel or raw material, have managed their supply risks with alternative sources, hedged prices, etc. but you must confirm your supply assumptions and if you need to manage your risks, you need to take this analysis upstream several steps; if critical, all the way to the source.

1.4.3  Assumptions based on Trust

Sometimes we assume things that have been told to us by people we trust - or indications we get from things that we trust - the temperature indicated by a thermometer, the speed of our car, based on a speedometer, etc.  This trust has been formed on the basis of past experience where the accuracy of the information was never put in question.  People may change under stress and measuring equipment may require periodic testing and recalibration.  Trust those who are trustworthy but do not ignore the need, on occasion to verify.  This is the principle behind all government safety inspections and audits.

1.4.4  Assumptions based on Language and Words (Semantics)

Many assumptions are caused by the use of words and differences between their implied and understood meanings.  Words are imbued with values that may not be shared by the person speaking or writing, and the other person listening or reading.  Examples include 'liberal' and 'conservative' in the US; 'constitutional' or 'national unity' in Canada; or 'hot' and 'cool' between teenagers and their parents.  In business language, even the difference between 'a' and 'the' can be significant, the former being open and indefinite and the latter being more restrictive and exclusive.  These subtleties are rarely noticed, especially in the lead-up to or in the midst of a crisis, when they are particularly critical. 

Not only can there be broad differences in meaning, but some words can open and liberate thought and understanding, while other words and phrases can regulate, confine, control and limit them. 

1.4.5  Assumptions created by Worldviews/Personal Philosophy

Depending on how, when and where a person was brought up, educated and their life experiences, each may hold sharply different assumptions about the world in general and specific issues in particular.  Assumptions can be buried in ideology, theology, philosophy, although the purpose of the latter (and of the sciences), is to discern truth in conformity with reality; including to articulate and challenge assumptions. Some theology, in its purest form, also attempts to do this. ("Come now, let us reason together," says the Lord - Isaiah 1:18) In some cases, however, variant streams have done just the opposite. 

1.4.6 Assumptions made about Byproducts, Waste and Housekeeping issues

Often overlooked assumptions are the byproducts and waste output of a process.  These too need review, especially in light of the global push towards green policies and sustainability.  Finally, in a world which has witnessed unprecedented organizational cutbacks, old standards of housekeeping and hygiene are assumed.  We ought not to forget that "dust bunnies" can down a Jumbo Jet, a layer of oil can torch a factory and  unpainted, rusting surfaces can send an ocean-going ship to the bottom.

1.4.7  Assumptions due to Temporal Logic

When we review, post facto, a situation, there is a tendency to assume that the parties in question, and at the time of the event in question, knew much, if not most, and possibly even more of what you now know, well after the fact.  However, the players did not have the luxury of hindsight and may well have been dealing with an extremely restricted picture compared to the picture that you have, with its temporal and fuller situational context. (Ladkin, 1996; Johnson and Telford; Lamport, 1994)

1.4.8  Assumptions about the Market

During the 1960s and 1970's Detroit automakers made numerous assumptions about their industry:

Most of these assumptions ultimately proved to be invalid were some of the reasons why the US went from producing 75% of the world's automobiles in 1960 to just 20% in 1992. 

2.0 Identifying Assumptions

Assumptions that are critical to our goals must be identified and evaluated.  This can prove remarkably difficult, since what one assumes is given so little thought , it is hard to think of them at all!  They are so deeply embedded in our lives and in our culture they are virtually invisible. When surfaced, they may seem trivial to the point of being banal. 

Other ways of identifying assumptions are to encourage people to ask questions and to make one's assumptions explicit.  Dialogue and examination can then validate the assumptions stated.  Some assumptions are physically present but, like electricity and drinkable water, seem so obvious, they are taken for granted.   Larger, more complex and more closely coupled organizations and processes, involve many assumptions out of necessity and the consequences of those assumptions are likely greater than with other organizations.  

Too frequently, assumptions pose fraudulently as facts. This point was covered, with mordant wit, by Harold S. Geneen (1984), former President, CEO and Chairman of ITT.

"Time after time in those early ITT management meetings, I would question a man about his facts, Where did he get them? (Usually from some other man.) How did he know they were correct? Were they facts? So I wrote a memo about "unshakeable facts."

Yesterday, we put in a long hard-driving meeting mostly seeking the facts on which easy management decisions could be then made. I think the most important conclusion to be drawn is simple. There is no word in the English language that more strongly conveys the intent of incontrovertibility, i.e. "final and reliable reality" than the word 'fact."

However, no word is more honored by its breach in actual usage. For example, there are and we saw yesterday:

"Apparent facts"
"Assumed facts"
"Reported Facts"
"Hoped-for facts"
"Facts" so labeled and accepted as facts - i.e. "accepted facts" - and many others of similar derivation.

In most cases these were not facts at all

In many cases of daily life this point may not be too important, but in the area of management momentum and decision, is all-important. Whole trains of events and decision of an entire management can be put in motion in the wrong direction - with inevitable loss of money, time and morale - by one "unfactual fact" accepted by or submitted by YOU - however unintentional. 

The highest art of professional management requires the literal ability to "smell" a "real fact" from all others - and moreover to have the temerity, intellectual curiosity, guts and/or plain impoliteness, if necessary to be sure that what you do have is indeed what we will call an "unshakeable fact."  

So . . . start now IS IT A FACT? but more important, IS IT AN UNSHAKEABLE FACT?

No matter what you think, try "shaking it" to be sure.

Send this message down the line."

No manager can afford to ignore Geneen's advice.


3.0  Analyzing Assumptions

The best tools for managing the risks arising from assumptions include:

4.0  Making Assumptions Explicit

Granger Morgan and Max Henrion (1990) implore us to identify all significant assumptions, including those contained in:

Areas where assumptions must be examined:

  1. Organizational objectives

  2. Major policy concerns, initiatives or decisions

  3. Evaluation criteria

  4. value judgments and trade-offs

  5. Scope and boundaries of analysis

  6. Upstream events which affect the person or organization

  7. Dependencies in terms of material, environmental/political conditions, legislation and economics 

  8. Direction and preferences of the Market

  9. Motives of allies and adversaries