Assumptions Are a Necessary Part of the Planning Process

Assumptions are temporary estimates about some probable future event or development over which you have no particular control. When you make an investment in a stock you assume it is going to give you a positive return. Maybe you based that assumption on the historical track record of that stock. Maybe you based that assumption on a reliable tipster. Either way you are making an assumption about the future.

Some assumptions are as easy as assuming the sun will rise in the morning and others are as complex as predicting the economic outlook for the next ten years. If it is so difficult to make accurate assumptions, why even bother? Because assumptions are necessary for a good plan, and better assumptions make a better plan.

In credit unions you have to make assumptions of future trends in order to prepare for those trends now. Because the credit union industry is changing so rapidly some credit unions are choosing not to make any assumptions and maintain the status quo, each year refreshing the same game plan over and over without making any significant changes. This doesn’t solve their problems and leaves them exposed for a number of negative possibilities.

Assumptions built on experience, awareness and research are the guide for actions and strategic initiatives. For example, if the mortgage lending environment is becoming quite restrictive, how will that impact your loan growth and delinquency rates over the next 18 months? How should you shift your actions today to prepare for those assumptions becoming a reality?

Wishful thinking is different from assumptions. A CEO can be so excited about the new branch he is building that he is convinced everyone in the area will leave their current bank to come to his beautiful new branch. When confronted with the response by the competition who are vigorously working harder to retain their customers, only then does he realize he was thinking more along the lines of wishful thinking that a proper assumption of the situation.

Drill down into the details when making assumptions. Proper assumptions are based on solid facts. The deeper you get into the details your instinct and historical information will form a clearer assumption of future activities.

-- Russell