Stanford University professors Jeffrey Pfeffer and Bob Sutton, authors of Hard F

Question

Stanford University professors Jeffrey Pfeffer and Bob Sutton, authors of Hard Facts, Dangerous Half-Truths, and Total Nonsense, have put out a call for a renewed reliance on rationality in managerial decision making—an approach that they call evidence-based management (EBM). “Management decisions,” they argue, “[should] be based on the best evidence, managers [should] systematically learn from experience, and organizational practices [should] reflect sound principles of thought and analysis.” They define evidence-based management as “a commitment to finding and using the best theory and data available at the time to make decisions,” but their “Five Principles of Evidence-Based Management” make it clear that EBM means more than just sifting through data and crunching numbers. Here’s what they recommend: Face the hard facts and build a culture in which people are encouraged to tell the truth, even if it’s unpleasant. Be committed to “fact-based” decision making—which means being committed to using the best evidence to guide actions. Treat your organization as an unfinished prototype—encourage experimentation and learning by doing. Look for the risks and drawbacks in what people recommend (even the best medicine has side effects). Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical “benchmarking” of winners. Pfeffer and Sutton are particularly persuasive when they use EBM to question the outcomes of decisions based on “untested but strongly held beliefs” or on “uncritical ‘benchmarking’.” Take, for instance, the popular policy of paying high performers significantly more than low performers. Pfeffer and Sutton’s research shows that pay-for-performance policies get good results when employees work solo or independently. But it’s another matter altogether when it comes to the kind of collaborative teams that make so many organizational decisions today. Under these circumstances, the greater the gap between highest- and lowest-paid executives, the weaker the firm’s financial performance. Why? According to Pfeffer and Sutton, wide disparities in pay often weaken both trust among team members and the social connectivity that contributes to strong, team-based decision making. “Management decisions [should] be based on the best evidence, managers [should] systematically learn from experience, and organizational practices [should] reflect sound principles of thought and analysis.” Or consider another increasingly prevalent policy for evaluating and rewarding talent. Pioneered at General Electric by the legendary Jack Welch, the practice of “forced ranking” divides employees into three groups based on performance—the top 20 percent, middle 70 percent, and bottom 10 percent—and terminates those at the bottom. Pfeffer and Sutton found that, according to many HR managers, forced ranking impaired morale and collaboration and ultimately reduced productivity. They also concluded that automatically firing the bottom 10 percent resulted too often in the unnecessary disruption of otherwise effective teamwork. That’s how they found out that 73 percent of the errors committed by commercial airline pilots occur on the first day that reconfigured crews work together.

Case Questions

1. Do you think evidence-based management seems like common sense? If so, why wasn’t it advocated earlier?

2. Are there circumstances in which evidence-based management might not be the best approach?

3. Could automated evidence-based management ever replace human decision makers? Why or why not?

Explanation / Answer

1.Yes, I believe evidence based management seems like common sense. Management decisions are based on the best evidence and managers learn from experience and organizational practices should reflect sound principles of thought and analysis as per evidence based management. The best theory and data is used to make decisions in evidence based management. This approach makes the management decisions more effective and acceptable among the employees as the reason behind the decision making is best supported by the data. The decision making process becomes more transparent and employees try to do their best to make the decisions favorable to them.

It was not advocated earlier because in earlier times the management decisions were based on untested but strongly held beliefs or uncritical bench marking of winners. Managers were not ready to assess their decisions and always considered their decisions as superior. Hence evidence based management was not advocated earlier due the above attitude of management.

2. There are circumstances where evidence based management may not be the best approach, mainly in the case of payment policies where high performers are paid significantly more than low performers. Pay for performance policies give good result only when the employees work independently and in the case of team performance the difference in pay make the financial performance of the firm week. It affects the trust among the team members and social connectivity which helps in strong team based decision making. Hence when the payment is determined based on evidence based management, the huge difference between the payment given to higher performer and lower performer of the team affects the team collaboration and performance.

3. The automated evidence based management cannot replace the human decision makers because the process of decision making should consider many factors that affect the team performance and collaboration other than data for effective decision making. The reason behind the failure of job execution can be due to some other factors and not because of individual performance issues. This kind of analysis cannot be done by the automated systems which lead to wrong decision making.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.