Pfeffer and Sutton point out that executives often make decisions based on gut feel, what’s worked in the past, recommendations from others, and conventional wisdom. In fact, conventional wisdom is so powerful that executives have difficulty seeing the evidence to the contrary and continue to make decisions that do not enhance the performance of the company. This echoes the insight of Edwards W. Deming who noted that most management knowledge is based on superstition, not fact. As an antidote, the authors recommend evidence-based management.
“Why do executives do things without real knowledge or evidence that what they are doing is valid?”
In today’s ultra-fast, ultra-competitive, and ultra-confusing world, executives are constantly seeking anything that will provide a performance or competitive edge. And there are gurus, writers, consultants, and former executives who all have a plan or formula or template for that edge. The need and these so-called solutions come together in a seductive and sometimes lethal package called “best practices.”
But:
- Who says these are the best practices?
- What is the evidence that these are valid beyond their immediate context?
- What is the real cost and strategic impact of adopting the best practice?
Pfeffer and Sutton point out that executives often make decisions based on gut feel, what’s worked in the past, recommendations from others, and conventional wisdom. In fact, conventional wisdom is so powerful that executives have difficulty seeing the evidence to the contrary and continue to make decisions that do not enhance the performance of the company. This echoes the insight of Edwards W. Deming who noted that most management knowledge is based on superstition, not fact. As an antidote, the authors recommend evidence-based management.
In Part One: Setting the Stage, the book discusses why companies need evidence based management and how to practice it. These two chapters are the foundation of the book. The power of conventional wisdom to direct decision-making even after substantial evidence demonstrates the error is illustrated. For example, we see in the news merger after merger being touted as critical winning strategies for companies. However, the evidence shows that over 70% of mergers “fail to deliver their intended results and destroy economic value in the process.” There are very specific reasons why mergers succeed, but few take the time to figure out what those factors are and use them to guide their actions.
Poor decision practices are at the heart of why companies harm themselves. Three of the most common decision practices are:
- Casual Benchmarking that leads to mindless imitation
- Doing what seems to have worked in the past
- Following deeply held yet unexamined ideologies.
This section is a challenge to leaders trying to operate their businesses from a Biblical worldview. Often I have observed very casual imitation behind the very thin rationale that people in the business world really know what they are doing. This behavior is fueled by an unexamined worldview that is more secular than it is Biblical. And it leads to mindless imitation of practices that may not align with a Biblical worldview.
The authors also provide suggestions on improving decision-making in situations where there may be no sound data available.
In Part Two: Dangerous Half-Truths About Managing People and Organizations, attention is turned to half-truths that are a powerful part of the conventional wisdom in business today. There are wrong and destructive ideas circulating, but the half-truths can be as dangerous. The authors challenge six of the most influential half-truths in the market today by posing each as a question and then looking at the real evidence behind the practices.
- Is Work Fundamentally Different from the Rest of Life and Should It Be?
The Biblical worldview says that people are an integrated whole. They do not live bifurcated lives divided between the work and their private lives, or between their work lives and their “spiritual” lives. The evidence demonstrates, in spite of many management practices, that people who are treated as whole people are more motivated and perform better. - Do the Best Organizations Have the Best People?
Squarely in the cross hairs of this section is the so-called War for Talent. The methodology and the results of the original study are clearly debunked. Also in the cross hairs are the aggressive forced ranking systems of personnel. Again, the evidence shows everyone has talent that can be developed and that “crappy systems” account for more of the problem than “crappy people”. Moreover, the crucial talent to develop is wisdom! - Do Financial Incentives Drive Company Performance?
What is it that incentives really do? Why is money used so much as an incentive? Money certainly motivates, but does it motivate the right behaviors? Money attracts talent, but does it attract the right kind?
- Strategy is Destiny?
Is strategy the source of success? If I’m in a declining industry is that my destiny, too. Why are some of the best companies in unattractive industries? Focus is great, but what are the dangers of being too focused? Does strategy matter? How do we balance the need for strategy and the need for effective execution?
- Change or Die?
The authors state, “Change and innovation are nasty double-edged swords.” What are the risks of pursuing change, when we know that most new changes may fail? And what are the risks of not changing? What are the questions we need to ask before we launch organizational change? Does change have to be difficult and take a long time?
- Are Great Leaders in Control of Their Companies?
The last decade has seen a staggering increase of interest on the subject of leadership. But do leaders really have the influence over their organizations that we think? What should leaders really do, recognizing that they do not have the control or influence that they might think they do?
In Part Three: From Evidence to Action, the authors outline nine steps for the implementation of evidence-based management. For example, “If all else fails, slow the spread of bad practices.” And “The best diagnostic question: What happens when people fail?”
The book also includes extensive supporting notes pointing the reader to the evidence behind their conclusions.
The goal of this book is not to make the job of the executive or manager more difficult, but to improve thinking and decision-making so that you understand what and why you are doing what you are doing. And in doing so, you reduce cost and risk while increasing the chances of improving competitive performance. At the least you’ll be a more careful consumer of business advice.
