Decision-Making Best Practice 18 – Dealing with Assumptions

StrategyDriven Decision Making ArticleAll choices require the decision-maker to deal with a degree of uncertainty and ambiguity. Many times the information needed to make the highest quality decision simply does not exist, is unavailable to the decision-maker, or cannot be identified within the decision’s needed timeframe. Consequently, these information gaps are filled with assumptions – the best educated guesses of the decision-maker and his or her team – in order to allow the decision-making process to move forward. These assumptions necessarily contribute to the uncertainty surrounding the decision and therefore must be treated carefully.[wcm_restrict plans=”49356, 25542, 25653″]

Using assumptions in decision-making is not necessarily wrong or inappropriate. Some information is simply not attainable, does not add enough value to be worth its acquisition cost, or is simply unknown. Therefore, assumptions play an important role in decision-making. That said, there are several steps leaders should be taken when using assumptions in decision-making to help minimize the uncertainty risk created and/or eliminate that risk during the decision’s execution. These include:

  1. Document all assumptions, including the basis under which they are made
  2. Validate the basis of assumptions to the maximum extent possible using highly respected data sources and expert opinions
  3. Define underlying assumption basis using multiple data sources so to triangulate on the quantity to be used and its uncertainty range
  4. Establish a protocol for periodically checking the underlying assumption basis such that assumptions can be refined if contradictory or additional information is obtained
  5. For high value information, continue to pursue acquisition of the data and replace the assumption(s) once that data is acquired; refining the decision and execution strategy as required
  6. Establish a plus / minus range around assumed quantities and evaluate decision options based on how in range changes to assumptions impact each alternative
  7. Prepare decision contingencies based on possible changes to the assumptions in either the plus or minus direction. These should be triggered at predefined points based on the ongoing basis monitoring previously discussed
  8. Once the decision is made and executed, follow-up by evaluating and documenting the legitimacy of assumptions used such that they can be used again in future decisions including business case development

The central purpose of these actions is to first ensure the assumptions used are valid and remain valid so the decision itself and the actions taken result in the desired outcomes. Second, that when assumptions are later found to be inaccurate, prompt action is taken to adjust the course of action and ensure desired outcomes are attained. Third, that validated assumptions are carried forward to be used in future decisions such that the validation work is not wasted.[/wcm_restrict][wcm_nonmember plans=”49356, 25542, 25653″]

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