ASSUMPTIONS IN PLANNING

Strategy often has to be decided on the basis of assumptions about the future. Here we will discuss the importance of clarifying assumptions and making them explicit. It also demonstrates the need for decisions in different parts of the organisation to have a common base of assumptions, and shows their importance in considering risk. Strategic planning is about coping with change and uncertainty. As Scott states:
Planning is a process of groping forward. The future is enveloped in fog which grows denser the further we try to peer.

Prediction of future events and circumstances means grappling with the uncertainties looming in this fog, and trying to make incomplete and indirect information as intelligible as possible. Strategic management’s problem is not only demonstrating to managers that they must accept the challenge of the future but also finding a way of dealing with those half-perceived and moving shadows in the fog. The purpose of this chapter is to try to provide a framework to help thec ompany move from a perception of its future environment to a method whereby this perception can become the basis of all long-range plans. The premiss from which to start is that the future is always uncertain, and that the most talented of planners or managers will never be in a position to foretell all that will affect the company. Planning is not an exercise in clairvoyance, and planners do not have secret arts or psychic knowledge: nor does their portfolio of management techniques include those of the mystic.

Rational plans can only be made from a firm base. If a company’s future success depends on the continuance of exports to a certain country, a plan can only be made if the company reaches some sort of conclusion about whether or not that country will continue to allow imports. A marketing manager who sits back and says ‘I don’t know so I won’t say anything’ and then still expects manufacturing to meet all requirements in any eventuality is not planning, but trying to opt out.

Refusal to face up to a problem is hardly likely to persuade that problem to go away, and no rational plans can be completed in these circumstances. Although no manager can predict a future event with guaranteed accuracy, any manager can determine a logical outcome of events if the prediction is correct. It becomes possible to make a sound plan based on assumptions about the future which will be valid for as long as the assumptions are valid. If these prove to be wrong, it may be necessary to modify the plans or sometimes to completely restructure them.

An assumption may be defined as a statement of opinion about the occurrence of an event which is outside the control of the planner. This statement is treated as fact during the preparation of plans, although the company must never delude itself into believing that the assumption is an expression of a certainty. Assumptions themselves do not remove any uncertainty although they should be used in subsequent analysis and actions to reduce risk: their task is to enable objective thought to take place about the nature, shape, and size of those shadows in the fog, so actions can take place which have a rational basis.