What are underlying assumptions? Why do they matter? How do they affect your balance sheet and your income statements as a business owner?
This blog post aims to answer all these questions and more.
Questioning Assumptions: Why It's Often A Good Idea
Examining your basic underlying assumptions is always useful because it forces you to examine the context you’re (subconsciously) imposing on the situation. It is a forcing mechanism to look at situations in the correct way.
Approaching your circumstances with the awareness of your underlying assumptions can dramatically improve your experience of life as a human being and as a business owner.
When I refer to underlying assumptions I'm not referring to those usually made during the preparation of financial statements within a accounting periods.
I'm referring to basic assumptions we make as business owners around how the world works and the way things are.
Edgar Schein's contribution to business and leadership
I'm probably dating myself here, but I remember reading about Schein's work when I did my MBA.
Edgar Schein — professor emeritus at the MIT Sloan School of Management — has been a major influence in management thinking around leadership and organisational culture.
In his book titled "Organizational Culture and Leadership" he says an organisation's culture has three levels:
- Artifacts (visible organizational structures and processes)
- Espoused values (strategic goals and ideals), and
- Underlying assumptions (unconscious, taken-for-granted beliefs, thoughts, and feelings)
In this blog post, I want to dive deeper into this last aspect.
Organisational Culture
We all have taken-for-granted beliefs about human nature, the nature of work, how our business relates to its environment etc etc.
These assumptions are critical to how a business operates but are rarely discussed openly. I think of this as an organisation's culture.
Here's how Schein defined culture:
A pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration
In simple terms, this means the shared beliefs, values, attitudes, and behaviours in a company.
You can think o fit like the personality of the organisation.
To understand (and change) organisational culture, we need to first examine these shared beliefs, values and attitudes, and discuss them as a team.
The cohesive and harmonious functioning of individuals in a group (based on these shared assumptions) is what Schein called internal integration.
You can read a scholarly article on Schien's views on organisational culture here.
An example of when poor culture can impact a specific business unit
Imagine a business that has different teams responsible for sales and marketing.
Each team can develop their own underlying assumptions and this can breed toxicity.
For example, the sales team makes assumptions that the marketing team isn't giving them good enough leads and that's the reason they can't close their sales.
The marketing team on the other hand assumes they're doing a great jobs and sales isn't good at closing the leads.
The answer is almost always somewhere in the middle but what's required here is for both teams to get together and talk to each other if they want to resolve such arguments.
This almost always leads to value conflicts between interested parties.
Underlying assumptions in business
Making the wrong assumptions in business is probably one of the biggest causes of business failure.
It's important to question your assumptions even before you start your business and then regularly examine them as part of your business planning activities.
Here's an example:
Let's say you operate under the (common) assumption that all sales people are sleazy and unethical. How is this going to impact your approach to selling?
I've personally struggled with this assumption for years and it's held me back from offering my services to companies and individuals that would actually benefit from my services.
Unless I examine my assumption around sales, it's unlikely I'm going to be very successful in approaching prospects who would genuinely benefit from my services (and that of my team).
Given that sales is one of the most important roles in any business, it would be a good decision to examine my beliefs around sales and look for strong evidence to challenge it.
Limiting assumptions around sales can have a dramatic impact on your income statements and your balance sheet.
Assumptions people make about the economy has an effect on consumer spending and on economic activity.
The act of examining your underlying assumptions is a very valuable activity, provided you do it consistently over extended time periods.
Most of us make hundreds of assumptions every day. And in some cases this can be very damaging.
The incorrect assumption about Large Language Models (LLMs) in 2024
Take ChatGPT as a content creation tool for example.
In 2024, a lot of people assume ChatGPT based content is mediocre and so it shouldn't be used at all for content creation. Based on this assumption, a lot of people completely avoid Large Language Models (LLMs) like ChatGPT or Claude 3.
But the truth is, these LLMs can be extremely useful brainstorming tools. Not to use them at all in the content creation process is a huge mistake.
Sure, you don't want to use the content directly from ChatGPT or Claude 3. But you do want to use it as a brainstorming tool and add your own experiences and examples to fortify the content and personalise it.
Examples of underlying assumptions in our personal lives
Assumptions from past experiences are stored in our brains and help fortify the status quo. We need those to function effectively each day.
But what about those assumptions we make about situations or people that aren't warranted?
Here are some examples of our internal dialogue that stems from assumptions that might be worth questioning:
- "She walked out during my speech because she was bored"
- "If I call these prospects they'll feel like I'm harassing them"
- "He checked his phone during our conversation which means he wasn't listening at all"
I'm not suggesting that the underlying assumptions behind those statements are incorrect or unfounded. But I am suggesting that they're worth examining.
Maybe she walked out during my speech because there was a family emergency. Maybe the prospects I've been hesitant to call would be happy to hear from me because I have a solution they're interested in. Maybe he checked his phone while we were speaking because his son is sick at school and he's expecting a call from the teacher to tell him to come and pick up his son.
Again, it's critical that we understand and examine these beliefs if we want to change our lives or effect social change.
Mindfulness as a way of examining and questioning your underlying assumptions
Mindfulness practice is a great way to incorporate this into your life. Practicing mindfulness as a discipline is valuable on so many levels.
Mindfulness is the process of approaching each moment with an attitude of self-awareness using your breath as an anchor.
You can do most things mindfully.
You can eat mindfully, walk mindfully, speak mindfully, and yes even think mindfully.
The more conscious and deliberate you are as you go about your daily activities, the more likely you'll be to catch yourself making assumptions that sabotage you.
Conclusion
In conclusion, the journey of questioning and examining our underlying assumptions is not just an exercise in intellectual curiosity. It's a critical to unlocking potential in our personal and business lives.
By adopting Edgar Schein's wisdom and integrating practices such as mindfulness, we can challenge the status quo, and be more innovative in our approach.
Remember, the assumptions we hold unconsciously shape our reality and influence our success. It's time to bring these assumptions into the light, scrutinize them, and, where necessary, recalibrate our beliefs to better serve our goals. The first step is acknowledging that what we assume to know might not be the whole picture. From there, the possibilities for growth and improvement are limitless. So, let's start today, question freely, and pave the way for transformation. Ciao for now, soon to be PROFIT millionaire, and embark on this journey of introspection and enlightenment.
