Intuition In Management Is Unavoidable; Intuition Backed By Evidence Is Much Better

Sometimes, management seems to focus on only that which can be measured – regardless of whether what is measured is a worthy focus – at the expense of softer issues, such as relationships, judgment, wisdom, emotions, etc.  Yet, just as often, perhaps almost always, they forego all evidence in favor of that “gut feeling.”  Much as I think “intuition” is a bit too fuzzy and too much of a catch-all, its existence, usage and applications cannot be neglected.  When intuition is the gestalt for accumulated experience and knowledge, that’s fine, but if it’s based on wishful thinking, ideology, fear, or some guru’s sound bites, then, it can hurt, both the organizational performance and the people doing the work.

looks warm…not

Of course, it is understandable that managers often cannot afford to wait, in terms of time and money, for all the data before having to make decisions.  It is yet another fine line for managers to walk.  But on balance, managers should seek and utilize evidence as much as possible to weigh in making decisions.  During the month of April, my topics, Work-Life, System, and Organizational Strategy, had been largely based on chapters of Hard Facts, Dangerous Half-Truths & Total Nonsense:  Profiting from evidence-based management, by Jeffrey Pfeffer & Robert Sutton.  There remain a few chapters for which I will provide some summary and discussion in the next two entries.  In this entry, I will lay out the why and the how of evidence-based management.  In the next entry, I will put the spotlight on specific issues:  Financial incentives; When to change and when not to; and Management control.

Who’d dispute that you should follow the evidence?  It’s intuitively (yes, pun intended) common-sense, isn’t?  Yet, we see again and again in Pfeffer & Sutton that often, not only does management fail or even refuse to follow the trail of evidence, they sometimes choose to do the opposite.  For instance, “mergers often come to a bad end” (approximately 70% failure rate) especially when the firms to be merged are of vastly different sizes, of different industries that bear little resemblance to each other, or of similar sizes but of very different cultures.  Yet, senior management keeps heading that direction.  Remember Daimler-Chrysler? AOL-Time Warner? HP-Compaq?  The evidence strongly suggests that merging is an excellent means of spending lots of money to accomplish nothing, yet managers continue to pursue mergers.  That said, there are examples of successful mergers, which achieved success because the initiating firm has done careful studies prior to the proposal, and once the merger took place, the merging firms were (and still are) careful to work out the differences in their operations, cultures, and management philosophies.  In other words, they pay more attention to the “doing” to create effective integration than the “planning and negotiations.”

looks cool…not

There are certain common decision-making practices that seem reasonable, but are deeply flawed upon examination.  Pfeffer & Sutton list three:  Casual benchmarking; Doing what works best in the past; Using untested ideologies(or using them regardless of evidence).  On the surface, it seems reasonable to do benchmarking, embrace successes from the past, and holding onto principles/ideolgies.  Certainly, there is nothing wrong to benchmark against the best practices of other organizations.  However, just copying the outcomes without understanding the philosophies, process and procedures of bringing successful outcomes, the thinking and attitude of the workforce of the successful firms… is like copying wealthy people’s spending habits in order to become wealthy.  To be truly useful, benchmarking requires careful study of the indices or dimensions for comparison.  How do we choose these “important” criteria?  Again, based on what do we deem certain aspects to be more important than others?  Quite often, management uses benchmarking as excuse to hide from their own organization’s reality, and at the same time, reject the voices of truth from other employees.  (I use “other employees” because managers are employees too.)  As the authors point out, if Southwest Airlines – the current darling model – has a CEO who favors a certain brand of whisky, should that be an index?!  How many airlines have tried to copy Southwest Airlines?  And how are they doing?  Similarly, the U.S. auto industry has been trying, for years, to copy what Toyota does, with little successful results.  What most successful organizations do lies in their fundamental philosophy of treating employees as the most sacred asset and listening to their customers; it’s all about relationships, not snazzy uniforms, parading “employee of the month,” or painting your airplanes with interesting motifs.

definitely windy

The same logic applies to continuing the successful past practices within the organization.  Environment changes; workforces evolve; technologies can metamorphosise so that the current conditions are drastically different from the past.  Not only it is important to recognize that what worked in time A may not work for Time C, but more importantly, do most organizations have a good grasp on why and how certain practices brought about success, say, for time A?  The answer to this question is all about establishing causality, a notoriously moving target in the social sciences.  Certainly we should learn from the past, but we shouldn’t be locked in the past.

As for unexamined ideologies, they are numerous, and the bulk of Pfeffer & Sutton’s book deals with some of the most common ones which I related earlier and of which I will provide more in subsequent entries.  For now, let’s use the favorite “stock option” as an example of defying evidence for the sake of ideology, to the detriment of real organizational performance.   Even Moody’s, the bond rating agency, states that “[incentive pay package] can create an environment that ultimately leads to fraud.”  Because stock options are essentially about expectations, not performance, they are subject to hyperbole and manipulation.  This is not to say that stock options would never work , but it depends on many factors and circumstances; generally they are best used for organizations that are small startups.

So, why do managers keep using “half-truths” or “nonsense?”  The authors give at least three reasons: 1. “using data changes power dynamics;” 2. “people often don’t want to hear the truth;” 3. “the marketplace for business ideas is messy and inefficient.”  Facts and evidence are equalizers; anyone can gather them and present them to back up their assertions.  If we allow anyone to apply facts, we can easily imagine the erosion of management power, and newly-legitimized criticism of the often ridiculously high pay associated with senior management levels.  Issues of ego, hero stature, and power probably will all be re-written.  Have you tried to change the power dynamics at work lately?  And, have you tried to tell whole truths, especially unpleasant ones?

a short lived beauty

Concerning the business literature, the marketplace for business advice and ideas is huge, and quite often fraught with contradictions.  How do you separate good and sound ideas from others that look similar but are without merit?  When truths are not pleasant, it is all the more enticing to just grab whatever seems attractive and sounds appealing; for example, who wouldn’t want to “search for excellence?”

How, then, does one go about gathering and assessing evidence?  The answer sounds an anticlimactic truth:  “Use Sound Logic and Analysis.”  Readers, take note:  There just aren’t any simple 12-step programs to guide managers.  Managers need to invest time and effort to get acquainted with as many logical and analytical issues as possible, so that when encountering yet another book or essay, managers will be in better position to judge the validity of claims.  Related, managers should have some ideas of how social research is conducted, i.e. what the main questions in the study are, how the data are collected, where the samples come from, the approach of analysis, etc.  For instance, are the data all about successful firms?  Any failed ones for comparisons?  Are they all based on respondents’ memory?  Any “objective” data to back up assertions?  This doesn’t imply that another workshop on statistics or research method is needed.  However, setting this foundation will go a long way toward developing more rigorous criteria for choosing publications, and assessing ones’ own organizations, knowing what to ask and when to ask.

So here are the guidelines authors offer:

  1. Treat old ideas like old ideas.”
  2. “Be suspicious of breakthrough ideas and studies – they almost never happen.”
  3. “Celebrate communities of smart people and collective brilliance, not lone geniuses or gurus.”
  4. “Emphasize the virtues and drawbacks (and uncertainties) of your research and proposed practices.”
  5. “Use success and failure stories to illustrate practices supported by other evidence, not necessarily as valid evidence.”
  6. “Take a neutral approach to ideologies and theories.  Base management practices on the best evidence, not what is in vogue.” 

a sweet pair

Most of these points are fairly self-explanatory.  Yet, they do require some thought and reflection before they can be internalized.  Remember what I mentioned in the last entry on emotional intelligence?  It will take at least one year before changes in emotional state may be long lasting.  Evidence-based management may sound dry, and the consequences do evoke emotions.  So, best to start with just one principle and familiarize with it and practice again and again.  After all, doing supersedes planning and learning.  Till you internalize one principle,

Staying Sane and Charging Ahead.

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