Weighing the Evidence

Weighing the Evidence

If doctors practised medicine the way many companies practise management, there would be far more sick and dead patients, and many more doctors would be in jail

Evidence-based management is about making decisions based on facts rather than conventional wisdom, history, ideology or assumptions

Oh, what a tangled web we weave when first we practise to believe. - Laurence J Peter

There is an old saying that goes: "It's not the things you don't know that get you into trouble. It's the things you do know that just ain't so."

Try these pearls of wisdom on for size:

Financial incentives drive company performance.

Work is fundamentally different from the rest of life, and should be.

Layoffs are a good way to cut costs.

First-movers have the advantage.

Mergers are a winning strategy.

Or these two, dear to the heart of many an IT manager:

The best organizations have the best talent.

Casual benchmarking of what your competitors do can be a useful way to figure out the secrets of their success.

While many executives act as if all these were well-tested and utterly rational maxims prescribing a sure-fire guide to sound business strategy, Stanford University professors Jeffrey Pfeffer and Robert Sutton warn "it ain't necessarily so". Far too many organizations continue to bet the farm - and lose - on these and others of what they characterize as either dangerous half-truths or total nonsense, when a careful look at the facts belies such beliefs.

  • Dispassionately examine the evidence, for example, and you will find incentives can inspire bad behaviour as well as good and hurt performance as much as they help. In fact, the only connection between high executive pay and company performance supported by the evidence shows the wider the pay differentials, the lower the commitment of the less well paid.

  • The evidence shows that despite the huge numbers of executives that keep ploughing ahead with them, up to 70 percent of mergers fail to deliver their intended benefits.

  • First movers often do not have the advantage - indeed the success stories that support first-mover advantage are frequently false, and the evidence certainly mixed, despite the fact that many executives hold the notion as an article of faith.

  • Further, while some research shows that layoffs have no effect on long-term financial performance, and other data show they have a negative effect, few studies, if any, demonstrate that layoffs have a positive effect on company performance.

  • Also, heroic leaders are never an answer. The major outcome of the typical consultancy assignment is another consultancy assignment. And if you want to survive and thrive, you should put a stake in the heart of "silver bullet" solutions or "big ideas".

All facts, backed up by hard evidence. Yet every day, in organizations around the world, executives ignore the facts and bullishly forge ahead with corporate buy-outs and change initiatives dreamed up by executives inspired by other executives living on dreams. They pay their CEOs enough to keep a third world country afloat and imagine pay for performance incentives for other executives will boost productivity. And they push one big idea after another, with sadly predictable results.

So in their recent book, Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting From Evidence-Based Management (Harvard Business School Press), Pfeffer and Sutton demolish conventional wisdom on a host of management truisms. In doing so, they capably demonstrate just how much current management orthodoxy is based on flawed understanding of so-called "best practices": that is, built on a shaky foundation of beliefs that are untrue, incomplete or just plain barmy - and hence extremely dangerous to an organization's health.

The book urges companies to boost their performance by adopting evidence-based management (EBM), an application of knowledge management principles that pre-dates the current crop of knowledge management literature by more than two decades. From its roots in the medical field, EBM aimed to bring research and practice closer together to reduce the time lag between the development of clinically proven treatments and their use in everyday medical practice. These days, educators, criminologists and others in the policy sciences have also become converts to EBM.

"If doctors practised medicine the way many companies practise management, there would be far more sick and dead patients, and many more doctors would be in jail," the book states.

Taking medicine as an example, Pfeffer and Sutton point out that when former Intel chairman and CEO Andy Grove got prostate cancer, he assiduously tracked down all the data he could comparing treatment options and their risks and benefits, so he could have the best available evidence in front of him when making medical decisions. That is not the way he does business. "That's what we would expect from a well-trained engineer and scientist," the authors write. "Grove, however, like many of his Silicon Valley friends, continues to insist on the benefits of options and doesn't cite evidence for his views, even though with other business decisions, Grove sticks closely to the facts."

Take note of this contradictory behaviour, the authors warn, or remain among those who will not subject their business practices and decisions to the same degree of scientific rigour they would adopt unquestionably for technical or medical issues.

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