Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-based Management Hardcover – Mar 1 2006
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About the Author
Jeffrey Pfeffer is Professor of Organizational Behavior at Stanford's Graduate School of Business. Robert I. Sutton is Professor of Management Science and Engineering at Stanford. They coauthored The Knowing-Doing Gap (HBS Press, 2000).
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The authors debunk tens of other well established managerial practices. These practices are often so well established that no one seemed to question them until these two academic types came along. By doing so, they have done a great service to the business community by opening our eyes using the scientific method.
So, why have such practices that seemed to be part of corporate capitalism not work so well? According to the authors' analysis it is because they all foster a winner take all mentality. They reinforce an individual star system. That works well in individual sports like alpine skiing where it is one individual against the clock. The corporate business world is more like a team sport. Soccer comes to mind. One star within an otherwise demoralized team does not stand a chance against a motivated high performance team. In the corporate world it gets even more complicated than that because the team concept extends way beyond the walls of the corporation. Effective teamwork entails including suppliers and customers in product design and management decision. In such an environment, pushing internally a star system that is demoralizing to the 99% who come in distant seconds does not foster optimal team performance either internally or externally.
This book has a wealth of information relevant to any corporate employee. The authors do an excellent job at analyzing existing managerial practices. Besides suggesting a stronger focus on teams, they don't offer any easy solutions. That's refreshing. You know these guys are not trying to market themselves as the new managerial gurus. This gives them much credibility in criticizing the existing ones.
The cover asks "Are you making the right decisions" and leaves the reader to wonder if they are. The first 214 pages illustrate through anecdotal evidence, and some limited analysis, that:
- organizations would perform better if leaders applied evidence better
- implementing evidence based management is difficult
- integrating work and rest of life is good (is this really central to the book?)
- wise people are better than intelligent ones and they must be nurtured
- strategy is something senior people aspire to, without fully appreciating how difficult it is to formulate or implement it
- there are advantages to getting change done quickly
- leadership is difficult and bad leadership is dangerous
At times it's difficult to see the coherence of these diverse ideas, maybe they are nothing more than a list of ideas. I agree with most of the ideas, but they're not new nor original. The test of an idea is in the action, so my expectation was that this book would deliver in Part 3 "From Evidence to Action".
Part 3 is a big disappointment. It's brief, and says:
- treat your organization as an unfinished prototype
- no brag, just facts
- master the obvious and mundane
- see yourself and organization...etc
By the time I got to page 225 I'm pretty frustrated. I plough on the last page, and feel disappointed. I've just spent a lot of time reading stuff I already know, and the practical advice is a mirage.
Evidence based leadership is difficult for key reasons that these authors overlook. Leaders are seldom in a position to control their organizations because they do not have the evidence in their hands to decide, direct, or even influence on the basis of anything other than luck and guesswork. How to get leaders into a position to lead? Well that's a practical question that this book didn't answer, but I sure wish it had
- Managing with Power (ISBN: 0875844405 )
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But after reading the book, I can (again) say that it is fantastic. It fully acknowledges 'the other half of management' (the parts where you can not yet rely on proven knowledge).
The authors pose some brilliant questions like: is work fundamentally different from the rest of life and should it be? Do the best organizations have the best people? Do financial incentives drive company performance? Is strategy destiny? Is the reality of organizations nowadays "change or die"? Are great leaders in control of their companies?
Do you think you know the answers to these questions? And if you do, do you know what these answers imply for you actions as a manager? I bet you will learn a lot by reading what Jeffrey Pfeffer and Robert Sutton have to say about these things (like I did).
This book is jammed with intruiging thoughts, packed with practical wisdom and a true inspirational read!
Coert Visser, http://www.m-cc.nl/solutionfocusedchange.htm
p.s. Below please find some of my favorite passages for your reference.
The secret to Toyota's success is not a set of techniques but is philosophy - the mindset of TQM and continuous improvement it has embraced - and the company's relationship with workers that has enabled it to tap their deep knowledge. As a wise executive in one of our classes said about imitating others, "We have been benchmarking the wrong things. Instead of copying what others do, we ought to copy how they think." pg 7
Instead of being interested in what is new, we ought to be interested in what is true. - Pfefffer's Law pg 29
Not everything that can be counted counts, and not eveything that counts can be counted. - Einstein pg 40
Wisdom means "knowing what you know and knowing what you dont know," especially striking a balance between arrogance (assuming you know more than you do) and insecurity (believing you know too little to act). This attitude enables people to act on their present knowledge while doubting what they know. It means they can do things now, as well as keep learning along the way. pg 52
Can you and your colleagues describe your company's strategy in a sentence or two? Do you and your colleagues even agree on what the strategy is? There is one powerful lesson from teh strategy literature and that is the importance of having people understand what they are supposed to be doing and develop some consensus about where, in their view, business success comes from. In simple terms, you arent likely to get anywhere if you dont know where you are going. pg 153
CEO Meg Whitman attributes much of eBay's success to the fact that the company spends less time on strategic analysis and more time trying and tweaking things that seem like they might work, and learning along the way...Andy Grove, former CEO of Intel, said, "None of us has a real understanding of where we are heading. I dont. I have sense about it...but decisions dont wait. pg 155
The nine implementation principles to help people and companies that are committed to doing what it takes to profit from evidence based management. Chapter 9
1. Treat your organisation as un unfinished prototype
2. No brags. Just facts
3. Master the obvious and mundane
4. See yourself and your organisation as outsiders do
5. Power, prestige and performance make you stubborn, stupid and resistant to valid evidence
6. Evidence based management is not just for senior executives
7. Like everything else, you still need to sell it
8. If all else fails, slow the spread of bad practices
9. The best diagnostic question: What happens when people fail?
Corporate leaders who want to practice evidence-based management might begin by recognizing that the odds are against them in undertaking a merger and therefore, resist the urge to merge. More thoughtful leaders might do what Cisco Systems did - determine the factors associated with successful and unsuccessful mergers and then use those insights. Cisco concluded that mergers between similar-sized companies rarely work, due to frequent power struggles. They also found that mergers work best when companies are geographically proximate, with organizational cultural compatibility. Finally, Cisco also works to ensure that people within the acquired company stay.
"Hard Facts" then takes a swipe against benchmarking, stating that the wrong item may be copied (eg. Southwest Airlines' fast turnaround, instead of how it treats employees).
As for stock options, a study that looked at companies restating their financials found that the higher the proportion of pay in stock options, the more likely it would restate. Stock-based compensation is an incentive to increase expectations, not performance, and the easiest way to do that is to hype the stock. Similarly, the authors claim that there is little evidence that equity of any kind enhances organizational performance. Many believe in a first-mover advantage; empirical evidence is mixed and unclear.
Experiments (eg. marketing promotions, web-page design) offer a way to generate facts for management; another is to visit customers - especially when less data is available.
An important barrier to fact-based management is that is changes the organization's power structure. Another is that management lore is filled with "half-truths" that work sometimes, but not others. Examples include "the best organizations have the best people (yet IQ - the best predictor of performance - only explains 16% of performance; systems are a bigger issue (bad at NASA; excellent at Toyota, evidenced by its reopening G.M.'s troublesome Fremont plant and then attaining outstanding results with essentially the same former G.M. staff). Another example is "financial rewards driver performance" - yet, Emery Freight succeeded in immediate and substantial improvement using praise, while financial rewards often bring cheating and/or adverse side effects (eg. reduced safety). (The authors also point out that most performance drivers are outside the CEO's control; to be fair, one also needs to recognize that one of G.E.'s strengths under Jack Welch was his insistence on rapid response to environmental changes.) A third is "strategy is king" - here the authors conclude that most research in the area has not been well done, and that which has produced mixed results. Sometimes it is just "luck" - eg. Southwest came to emphasize fast turnarounds during its beginnings because extensive legal wrangling had reduced its fleet to three planes, which it then tried to cover a schedule designed for four; IBM's outsourcing CPU manufacture led Intel into chips, not Intel's planning.
Most change efforts (new products, process re-engineering, major software implementation) fail. But then, those who don't change face even higher odds of failure.
Finally, "Hard Facts" ends with a less than convincing set of guidelines for helping leaders sort through the conflicting evidence brought by management consultants, etc. Regardless, their excellence in pointing out all evidence against and contradictions between various proponents is invaluable. The book is also a call for reorganizing how business courses and materials are presented, so that more useful evidence (eg. the Cisco approach to mergers) is utilized.
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