HARD FACTS, DANGEROUS HALF TRUTHS, AND TOTAL NONSENSE: PROFITING FROM EVIDENCE-BASED MANAGEMENT Robert Sutton Stanford University

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  • HARD FACTS, DANGEROUS HALF TRUTHS, AND TOTAL NONSENSE: PROFITING FROM EVIDENCE-BASED MANAGEMENT Robert Sutton Stanford University
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  • I.Why We Need Evidence Based-Management Three reasons that convinced us the time was ripe
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  • IMPETUS #1: REACTIONS TO THE KNOWING-DOING GAP
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  • PAY DISPERSION: A TROUBLING DOING-KNOWING GAP Rank and yank A,B,C rankings War for Talent Differentiate and affirm
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  • CONTRADICTED BY EVERY PEER-REVIEWED STUDY Spread between CEO pay and next three executives Baseball teams: Smaller differences between top 50% and bottom 50% linked to better attendance, media income, and win-loss records
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  • IMPETUS #2: THE EVIDENCE-BASED MEDICINE MOVEMENT Striving to bring the best evidence to the bedside in ways that physicians can actually use
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  • Dr. Kevin Patterson People, doctors included, have a tendency to see what they expect to see. Its the premise of every sleight- of-hand game. If it makes sense that a treatment will workthen a doctor will, with alarming and disheartening reliability, perceive that it does in fact work.
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  • DR. DAVID SACKETT AND OTHERS IN THE EBM MOVEMENT Weave conversations using evidence into clinical training Summarize evidence in forms that physicians can quickly use and grasp, in journals like Evidence-Based Medicine Often simple things: Hand washing s NCH Healthcare Its OK to ask campaign
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  • IMPETUS #3: ORGANIZATIONS HAVE PROFOUND EFFECTS ON PEOPLE AND SOCIETY Studies of mortality rates in hospitals n British study of 61 hospitals links use of common HR practices training and performance evaluation systems to lower mortality rates.
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  • IMPETUS #3: ORGANIZATIONS HAVE PROFOUND EFFECTS ON PEOPLE AND SOCIETY 2007 study of 532 American found that 44% had at least one abusive boss. 1997 study of 130 U.S. nurses in the Journal of Professional Nursing found 90% were victims of verbal abuse by physicians (6 to 12 incidents in past year). 2006 longitudinal study of 3000 medical students from 16 U.S. medical schools in the BMJ: 42 percent of seniors were harassed; 84 percent belittled
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  • II. WHAT IS EVIDENCE-BASED MANAGEMENT? A way of thinking n Being committed to fact-based and evidence- based action The attitude of wisdom n The courage to act on what you know and the humility to update when better evidence comes along Treating your organization as an unfinished prototype
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  • CORPORATE MERGERS When a larger company buys a smaller company with stock n About 70% fail to deliver the anticipated economic value n Analysis of 93 studies covering over 200,000 mergers: Negative effects of shareholders value evident less than one month after announcement
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  • MERGERS ARE ESPECIALLY RISKY WHEN.... When CEOs suffer from hubris bigger acquisition premiums When the two companies are closer to the same size (e.g., Daimler-Chrysler) Insufficient attention is devoted to integration
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  • HOW CISCO BEAT THE ODDS n Focus on acquiring smaller companies, close by, and where there is cultural fit. n Devote enormous effort to merger integration n Do constant post-mortems and constantly update Ciscos decision-making and merger integration process
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  • IE Version Netscape Version DATA SHOWED THAT NETSCAPE USERS HAD HIGHER SEARCH USAGE DATA CENTERING THE SEARCH BOX ON YAHOOS HOME PAGE
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  • III. MANAGEMENT IS A CRAFT, NOT A SCIENCE You can only learn it by doing it Like medicine, using better evidence = higher success rate
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  • IV. Hazards of Business Advice There is too much Much of it is bad Much of it clashes
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  • The market for business knowledge 2000+ business books published per year (35,000 in print, conferences, dozens of business publications films and Web events, experts, consultants, and consulting firms, lots of research)
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  • WARRING BOOK TITLES In Search of Excellence Charisma: Seven Keys to Developing the Magnetism that Leads to Success Love is the Killer App The Peaceable Kingdom Managing with Passion Out of the Box Built to Last: Successful Habits of Visionary Companies The Myth of Excellence Leading Quietly: An Unorthodox Guide to Doing the Right Thing Business is Combat Capitalizing on Conflict Managing by Measuring Thinking Inside the Box Corporate Failure by Design: Why Organizations are Built to Fail
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  • Standards for Judging Business Advice Treat old ideas as if they are old ideas What are the incentives? Avoid the best practices trap
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  • A. Treat old ideas as if they are old ideas HBRs breakthrough ideas n Dont hire jerks? n Do practice evidence-based management?
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  • James March on breakthroughs Most claims of originality are testimony to ignorance and most claims of magic are testimonial to hubris.
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  • B. What are the incentives? Large software implementations n Who gains and loses, regardless of the financial outcome for your organization?
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  • C. The trouble with best practices What is good for them might be bad for you It might help you, if implementing it doesnt kill your organization first Great people and companies succeed despite rather than because of some practices
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  • Correlation is Not Causation Herb and Southwest n Should you start drinking a quart of Wild Turkey each day?
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  • V. THE BEST EVIDENCE REVEALS MANY DANGEROUS HALF-TRUTHS Work is Fundamentally Different From the Rest of Life, and Should Be? The Best Organizations Have the Best People? Financial Incentives Drive Company Performance? Strategy is Destiny? Change is Difficult & Takes a Long Time? Great Leaders are in Control of their Companies, and Ought to Be
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  • Dangerous Half-Truth Change is Difficult & Takes a Long Time?
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  • Change Can Be Hard to Accept It makes human-beings squirm n Breaking out of a mindless state isnt easy
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  • Change Can Be Hard to Accept The confirmation bias problem we love our beliefs and dismiss ideas that clash with them. Kodak and digital photography
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  • Change is Hard to Accept Shoot the messenger problem executives often dont like to hear the bad news: n The HP VP who gave Carly the bad news about Compaq products she blamed him.
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  • Most Changes Fail Mergers Enterprise Software Implementations take longer than expected and fail at substantial rate (Hershey missed Halloween) Quality Improvement. Often window dressing and linked to more incremental innovation (Kodak)
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  • Most Changes Fail Layoffs Bain study shows that layoffs associated with modest drops on stock price and may take 18 months to get savings and firms often need the people again by then. New product introductions. Less than 1% of compounds developed by pharma firms ever sold. 30% to 60% of new product introductions fail.
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  • The Dilemma of Change The only thing more risky than doing change is not doing any at all!
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  • Some Decision Criteria Is there a good reason to believe that the new practice is actually better? Is the change really worth the disruption? Is it best to only make symbolic changes? Are people already suffering from the flavor of the month problem Will you be able to pull the plug at least cheaply.
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  • Watch the Self-Fulfilling Prophecy Does change really need to be difficult and take a long time? Urgency, deadlines, and belief it can happen can help a lot: Continental Airlines: From worst to first in on time performance in a year DaVita: Went from near bankruptcy and suspect treatment outcomes, to, less than 2 years later, stock price up from 2 to $40 and among the best treatment outcomes in the businesses
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  • Big Four for Making Change Happen After A Decision Dissatisfaction Direction Overconfidence punctuated by self- doubt and updating Embrace the mess
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  • DANGEROUS HALF-TRUTH: GREAT LEADERS ARE IN CONTROL OF THEIR COMPANIES, AND OUGHT TO BE? Leaders matter far less than most people think their control is partly a cognitive illusion
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  • Former GE executive Spencer Clark Jack did a good job, but everyone seems to forget that the company had been around for over a hundred years before he ever took the job and he had 70,000 other people to help him.
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  • All Leaders Make Lots of Mistakes
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  • THE DILEMMA: LEADERSHIP REQUIRES MAINTAINING THE ILLUSION OF CONTROL If you dont pretend to be in control, you will never get or keep a leadership job. If you dont pretend to be in control, you will never achieve any actual influence over the situation and make necessary changes
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  • I think it is very important for you to do two things