HARD FACTS, DANGEROUS HALF TRUTHS, AND TOTAL NONSENSE:

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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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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
• 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
• 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
• Being committed to fact-based and
  evidence-based 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

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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

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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

• 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
  Ciscos decision-making and merger integration
  process

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CENTERING THE SEARCH BOX ON YAHOOS HOME PAGE

• IE Version
  Netscape Version

DATA SHOWED THAT NETSCAPE USERS HAD HIGHER SEARCH
USAGE DATA
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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 Habitsof 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 Builtto 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
• Dont hire jerks?
• 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
• 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
• 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
• 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
• 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 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 theres a professional
  responsibility. If you are depressed, you cant
  motivate your staff to extraordinary measures. So
  you have to keep your own spirits up even though
  you well understand that you dont know what
  youre doing.
• - Andy Grove, Intel

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How to fuel the illusion and reality of control
Playing The Blame Game

• Taking credit (and some blame) for what
  happensand 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

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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 takingand others can
  taketo bolster performance

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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

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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

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WARNING 2 THE BEST LEADERSHIP IS SOMETIMES LESS
LEADERSHIP

• The message from George Patton, John Wayne,
  and MBA educationLeaders
• Monitor
• Ask questions
• Give lots of feedback

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• When you plant a seed in the ground, you
  dont dig it up every week to see how it is
  doing.
• - William Coyne, Former EVP, 3M

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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!)

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PARTING THOUGHT 2 THE BEST SINGLE DIAGNOSTIC
QUESTION

• What Happens When People Fail?
• Forgive and remember
• The importance of setbacks for innovation and
  learning

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Teach us more, learn more

• Email
• robert.sutton_at_stanford.edu
• Blogs
• www.bobsutton.net
• http//discussionleader.hbsp.com/sutton/