THE COST OF ASSUMPTIONS IN BUSINESS

I always knew, Assumption is dangerous but I did not know it was costly and that the cost could be measured.

So, we start another ABP class this week and we are discussing a case. Well, not much of the case but rather, whether a manager who had a problem in production analyzed the case well.  Now, answers/suggestions started coming in and these suggestions coming in were eye opening to all of us because there were from different people so what one person did not pick from his/her review, another person would see. Now, in this case the manager had an issue of production defects and so asked the engineering department what the problem was and they assured him that the problem was not an engineering problem so the other possibility seen by the manager was employee sabotage which he then pursued as the problem that needed solution.

Now, many of us students reasoned that since there was no proper check or diagnosis run on all the machines and lines of production that the manager was too hasty to conclude internally that it was employee sabotage at play. We reasoned that the problem was most likely from the performance of the machine and hence saying the manager did not analyze the situation well. Our analysis seemed so reasonable and the argument that the production problem was caused by machine malfunction and so the managers analysis was not well reasoned. But then our facilitator called to our attention that whether it was caused by machine malfunction or employee sabotage are both assumptions and the only thing that is certain is the information given to us in the case description and so we should work strictly with the information so we can arrive at fact-based answers/solutions/recommendations.

I took a moment to recall our first case and how the was a criterion (a factor in a case/story that you can use to compare alternatives which are the different possible solutions/answers/decision) we disagreed on. Let me shortly describe the factor. A company wanted to set up a new plant either in the city or in a village which did not have enough professional and so we wanted to calculate the cost of training some new employees. Now in the case it was stated this kind of training would normally take six months but with a government acceleration program, it would take half as long and would cost about $5000 each trainee per month, but some colleagues calculated the training cost for a whole year ‘assuming it would take a whole year of training for the trainees to become professionals because it made sense to them logically. Now for 50 trainees it would cost $750,000 (50 trainees*5000 price per trainee *3months) to get trained but they calculated $3000,000 (50 trainees*5000 price per trainee *12months) having a whooping different of $2,250,000 and that was the cist of assumption in this case and as big as this was I could only imagine bigger cases of assumption and the false estimations that come with it.