Transcript Organizational Alignment/Fit

HARD FACTS, DANGEROUS
HALF TRUTHS, AND TOTAL
NONSENSE:
PROFITING FROM EVIDENCE-BASED MANAGEMENT
Robert Sutton
Stanford University
I. Why We Need
Evidence Based-Management
• Three reasons that convinced us the
time was ripe
IMPETUS #1: REACTIONS TO THE
KNOWING-DOING GAP
PAY DISPERSION: A TROUBLING
“DOING-KNOWING” GAP
• “Rank and yank”
• A,B,C rankings
War for Talent “Differentiate and affirm”
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
IMPETUS #2: THE EVIDENCE-BASED
MEDICINE MOVEMENT
• Striving to “bring the best evidence to
the bedside” in ways that physicians
can actually use
Dr. Kevin Patterson
“People, doctors included, have a
tendency to see what they expect to
see. It’s the premise of every sleightof-hand game. If it makes sense that a
treatment will work…then a doctor
will, with alarming and disheartening
reliability, perceive that it does in fact
work.”
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

NCH Healthcare “It’s OK to ask”
campaign
IMPETUS #3: ORGANIZATIONS HAVE PROFOUND
EFFECTS ON PEOPLE AND SOCIETY
• Studies of mortality rates in hospitals

British study of 61 hospitals links use of
common HR practices – training and
performance evaluation systems – to lower
mortality rates.
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
II. WHAT IS EVIDENCE-BASED
MANAGEMENT?
• A way of thinking

Being committed to “fact-based” and “evidencebased” action
• The attitude of wisdom

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
CORPORATE MERGERS
• When a larger company buys a smaller
company with stock


About 70% fail to deliver the anticipated
economic value
Analysis of 93 studies covering over
200,000 mergers: Negative effects of
shareholders value evident less than one
month after announcement
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
HOW CISCO BEAT THE ODDS



Focus on acquiring smaller companies,
close by, and where there is cultural fit.
Devote enormous effort to merger
integration
Do constant post-mortems and constantly
update Cisco’s decision-making and
merger integration process
CENTERING THE SEARCH BOX ON
YAHOO’S HOME PAGE
IE Version
Netscape Version
DATA SHOWED THAT NETSCAPE USERS HAD HIGHER SEARCH USAGE DATA
III. MANAGEMENT IS A CRAFT,
NOT A SCIENCE
• You can only learn it by doing it
• Like medicine, using better evidence =
higher success rate
IV. Hazards of Business Advice
• There is too much
• Much of it is bad
• Much of it clashes
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”)
WARRING BOOK TITLES
In Search of Excellence
Charisma: Seven Keys to
Developing the
Magnetism that Leads
to Success
The Myth of Excellence
Leading Quietly: An
Unorthodox Guide to Doing
the Right Thing
Love is the Killer App
Business is Combat
The Peaceable Kingdom
Capitalizing on Conflict
Managing with Passion
Managing by Measuring
Out of the Box
Thinking Inside the Box
Built to Last: Successful
Habits
of Visionary Companies
Corporate Failure by Design:
Why Organizations are
Built
to Fail
Standards for Judging Business Advice
• Treat old ideas as if they are old ideas
• What are the incentives?
• Avoid the “best practices trap”
A. Treat old ideas as if they are old
ideas
• HBR’s “breakthrough ideas”

Don’t hire “jerks?”

Do practice evidence-based management?
James March on “breakthroughs”
“Most claims of
originality are testimony
to ignorance and most
claims of magic are
testimonial to hubris.”
B. What are the incentives?
• Large software implementations

Who gains and loses, regardless of the
financial outcome for your organization?
C. The trouble with “best
practices”
• What is good for them might be
bad for you
• It might help you, if implementing
it doesn’t kill your organization
first
• Great people and companies
succeed despite rather than
because of some practices
“Correlation is Not Causation”
Herb and Southwest

Should you start drinking a quart
of Wild Turkey each day?
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
Dangerous Half-Truth
Change is Difficult & Takes a Long
Time?
Change Can Be Hard to Accept
• It makes human-beings squirm

Breaking out of a mindless state isn’t easy
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
Change is Hard to Accept
• Shoot the messenger problem –
executives often don’t like to hear the
bad news:

The HP VP who gave Carly the bad news
about Compaq products – she blamed him.
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)
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.
The Dilemma of Change
• The only thing more risky than doing
change is not doing any at all!
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.
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
Big Four for Making Change Happen After A
Decision
• Dissatisfaction
• Direction
• Overconfidence – punctuated by selfdoubt and updating
• Embrace the mess
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
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.”
All Leaders Make Lots of Mistakes
THE DILEMMA: LEADERSHIP REQUIRES
MAINTAINING THE ILLUSION OF CONTROL
• If you don’t pretend to be in control, you will
never get or keep a leadership job.
• If you don’t pretend to be in control, you will
never achieve any actual influence over the
situation and make necessary changes
“I think it is very important for you to do two
things: act on your temporary conviction as if it
was a real conviction; and when you realize that
you are wrong, correct course very quickly ….
And try not to get too depressed in the part of
the journey, because there’s a professional
responsibility. If you are depressed, you can’t
motivate your staff to extraordinary measures.
So you have to keep your own spirits up even
though you well understand that you don’t know
what you’re doing.”
-
Andy Grove, Intel
How to fuel the illusion and reality of
control: Playing The Blame Game
Taking credit (and some blame) for
what happens—and always talking as
if the situation can be controlled
Research shows that leaders who
attribute setbacks to controllable but
internal factors preside over more
successful organizations
ACCEPTING RESPONSIBIITY THE RIGHT
WAY
Take at least partial responsibility for the
problems, particularly those that actually are
your fault (Loveman and a bad health
insurance decision)
Announce actions you are taking—and others
can take—to bolster performance
WARNING 1: BECOMING A LEADER
CAN MAKE YOU A JERK!
Putting people in power:
Makes them oblivious to reactions and
needs of people with less power
Makes them more focused on satisfying
their own needs and wants
THE COOKIE STUDY
• Three Berkeley students, five cookies
• Two students brainstorm and the third has the power
to evaluate their ideas
• Those with power tend to:

Take the fourth cookie

Eat with their mouths open

Leave more crumbs
WARNING 2: THE BEST LEADERSHIP
IS SOMETIMES LESS LEADERSHIP
The message from George Patton, John
Wayne, and MBA education…Leaders:
Monitor


Ask questions

Give lots of feedback
“When you plant a seed in the ground,
you don’t dig it up every week to see
how it is doing.”
- William Coyne, Former EVP, 3M
PARTING THOUGHT 1:
MASTER THE OBVIOUS AND MUNDANE
• Obvious: Nothing can have an effect unless
you actually do it
• Mundane: Conscientious people and
standing-up (and washing your hands!)
PARTING THOUGHT 2:
THE BEST SINGLE DIAGNOSTIC QUESTION
• What Happens When People Fail?


Forgive and remember
The importance of setbacks for innovation
and learning
Teach us more, learn more
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