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Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management

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This is an outstanding book written by two business and engineering Stanford professors. Analyzing modern management practices using surveys and studies, they debunk many of modern management practices. According to their studies, pay-for-performance does not work. Companies that had the widest range of pay scale between top and bottom performers also suffered the poorest financial results. So, pay-for-performance does not translate into superior stock performance. Similarly, forced ranking where employees performances are clustered in three different buckets (top 20%, middle 70%, and bottom 10%) where the weakest bucket is expectedly weeded out does not work either. Companies using this system have been plagued with an employee force with low morale, high turnover, and low productivity.

The authors debunk tens of other well established managerial practices. These practices are often so well established that no one seemed to question them until these two academic types came along. By doing so, they have done a great service to the business community by opening our eyes using the scientific method.

So, why have such practices that seemed to be part of corporate capitalism not work so well? According to the authors' analysis it is because they all foster a winner take all mentality. They reinforce an individual star system. That works well in individual sports like alpine skiing where it is one individual against the clock. The corporate business world is more like a team sport. Soccer comes to mind. One star within an otherwise demoralized team does not stand a chance against a motivated high performance team. In the corporate world it gets even more complicated than that because the team concept extends way beyond the walls of the corporation. Effective teamwork entails including suppliers and customers in product design and management decision. In such an environment, pushing internally a star system that is demoralizing to the 99% who come in distant seconds does not foster optimal team performance either internally or externally.

This book has a wealth of information relevant to any corporate employee. The authors do an excellent job at analyzing existing managerial practices. Besides suggesting a stronger focus on teams, they don't offer any easy solutions. That's refreshing. You know these guys are not trying to market themselves as the new managerial gurus. This gives them much credibility in criticizing the existing ones.

Pfeffer and Sutton's book Hard Facts takes 276 pages (including index) to make one simple point - business leaders cling to miracle cures and don't do the work or homework necessary to become evidence based managers. This is a good insight, but hardly new (try Richard Pascale's Managing on the Edge, 1990, or any Dilbert cartoon). It also treads a similar path to Sydney Finkelstein's earlier book "Why Smart Executives Fail" (2003) and both have similar tables of contents, observations and conclusions. Personally I'd recommend Finkelstein, especially for Chaper 10.

The cover asks "Are you making the right decisions" and leaves the reader to wonder if they are. The first 214 pages illustrate through anecdotal evidence, and some limited analysis, that:
- organizations would perform better if leaders applied evidence better
- implementing evidence based management is difficult
- integrating work and rest of life is good (is this really central to the book?)
- wise people are better than intelligent ones and they must be nurtured
- strategy is something senior people aspire to, without fully appreciating how difficult it is to formulate or implement it
- there are advantages to getting change done quickly
- leadership is difficult and bad leadership is dangerous

At times it's difficult to see the coherence of these diverse ideas, maybe they are nothing more than a list of ideas. I agree with most of the ideas, but they're not new nor original. The test of an idea is in the action, so my expectation was that this book would deliver in Part 3 "From Evidence to Action".

Part 3 is a big disappointment. It's brief, and says:
- treat your organization as an unfinished prototype
- no brag, just facts
- master the obvious and mundane
- see yourself and organization...etc
By the time I got to page 225 I'm pretty frustrated. I plough on the last page, and feel disappointed. I've just spent a lot of time reading stuff I already know, and the practical advice is a mirage.

Evidence based leadership is difficult for key reasons that these authors overlook. Leaders are seldom in a position to control their organizations because they do not have the evidence in their hands to decide, direct, or even influence on the basis of anything other than luck and guesswork. How to get leaders into a position to lead? Well that's a practical question that this book didn't answer, but I sure wish it had

Suggested reading:
- Managing with Power (ISBN: 0875844405 )
- Marketing and the Bottom Line (ISBN: 0273661949)
- Marketing Payback (ISBN: 0273688847)

Ever since I read his book "Competitive Advantage through People" I have bought every book Jeffrey Pfeffer has (co-)written. And I have never been disappointed. All his books both are consistent with and build on his previous work and add new and interesting angles. When this new book by Jeffrey Pfeffer and Robert Sutton was advertized I had a slight worry about its title. It sounds so decisive and self-assured .... I worried whether it wouldn't be too pretentious. Management surely is not only a matter of applying knowledge! It is also dealing with uncertainty, improvisation, choices etc....

But after reading the book, I can (again) say that it is fantastic. It fully acknowledges 'the other half of management' (the parts where you can not yet rely on proven knowledge).

The authors pose some brilliant questions like: is work fundamentally different from the rest of life and should it be? Do the best organizations have the best people? Do financial incentives drive company performance? Is strategy destiny? Is the reality of organizations nowadays "change or die"? Are great leaders in control of their companies?

Do you think you know the answers to these questions? And if you do, do you know what these answers imply for you actions as a manager? I bet you will learn a lot by reading what Jeffrey Pfeffer and Robert Sutton have to say about these things (like I did).

This book is jammed with intruiging thoughts, packed with practical wisdom and a true inspirational read!

Coert Visser, http://www.m-cc.nl/solutionfocusedchange.htm

The marketplace for business advice is crowded with conflicting advice, many of which are retreads of older versions claiming to offer breakthrough results. The "really bad news" is that breakthroughs rarely happen - the wise manager will not simply jump for what is in vogue.

Corporate leaders who want to practice evidence-based management might begin by recognizing that the odds are against them in undertaking a merger and therefore, resist the urge to merge. More thoughtful leaders might do what Cisco Systems did - determine the factors associated with successful and unsuccessful mergers and then use those insights. Cisco concluded that mergers between similar-sized companies rarely work, due to frequent power struggles. They also found that mergers work best when companies are geographically proximate, with organizational cultural compatibility. Finally, Cisco also works to ensure that people within the acquired company stay.

"Hard Facts" then takes a swipe against benchmarking, stating that the wrong item may be copied (eg. Southwest Airlines' fast turnaround, instead of how it treats employees).

As for stock options, a study that looked at companies restating their financials found that the higher the proportion of pay in stock options, the more likely it would restate. Stock-based compensation is an incentive to increase expectations, not performance, and the easiest way to do that is to hype the stock. Similarly, the authors claim that there is little evidence that equity of any kind enhances organizational performance. Many believe in a first-mover advantage; empirical evidence is mixed and unclear.

Experiments (eg. marketing promotions, web-page design) offer a way to generate facts for management; another is to visit customers - especially when less data is available.

An important barrier to fact-based management is that is changes the organization's power structure. Another is that management lore is filled with "half-truths" that work sometimes, but not others. Examples include "the best organizations have the best people (yet IQ - the best predictor of performance - only explains 16% of performance; systems are a bigger issue (bad at NASA; excellent at Toyota, evidenced by its reopening G.M.'s troublesome Fremont plant and then attaining outstanding results with essentially the same former G.M. staff). Another example is "financial rewards driver performance" - yet, Emery Freight succeeded in immediate and substantial improvement using praise, while financial rewards often bring cheating and/or adverse side effects (eg. reduced safety). (The authors also point out that most performance drivers are outside the CEO's control; to be fair, one also needs to recognize that one of G.E.'s strengths under Jack Welch was his insistence on rapid response to environmental changes.) A third is "strategy is king" - here the authors conclude that most research in the area has not been well done, and that which has produced mixed results. Sometimes it is just "luck" - eg. Southwest came to emphasize fast turnarounds during its beginnings because extensive legal wrangling had reduced its fleet to three planes, which it then tried to cover a schedule designed for four; IBM's outsourcing CPU manufacture led Intel into chips, not Intel's planning.

Most change efforts (new products, process re-engineering, major software implementation) fail. But then, those who don't change face even higher odds of failure.

Finally, "Hard Facts" ends with a less than convincing set of guidelines for helping leaders sort through the conflicting evidence brought by management consultants, etc. Regardless, their excellence in pointing out all evidence against and contradictions between various proponents is invaluable. The book is also a call for reorganizing how business courses and materials are presented, so that more useful evidence (eg. the Cisco approach to mergers) is utilized.

I agree with the basic opening principle of this book, that management based on structured logical thinking, facts, and rigorous analysis is far superior to management based on fads and quick fix solutions.

Unfortunately, instead of building on this idea, most of the book argues from anecdote and uses weak logic or misdirection in a series of chapters aimed at dismissing so-called conventional business wisdom. Much of the time, the evidence provided to support their case is no better than the evidence they dismiss for supporting the opposite case. For instance, in debunking the idea that "strategy is destiny" they quote the Innovator's Dilemma (and the rigorous research behind it) for support of the idea that strategy is very difficult and even good strategies that have been successful in the past will often fail if circumstances change. Then they recommend in the same chapter that "listening to your customers" is the best strategy -- pretty much the opposite of the conclusion in the Innovator's Dilemma.

Almost every chapter has similar logical failures and most present one-sided arguments that gloss over mountains and years of academic research. Strangely, almost none of the book discusses how to actually build a structured, fact-based approach to management and business problem-solving.

In fact, the book seems to be a personal vendetta against MBAs, consultants, Harvard Business School, and specific business authors they don't like. There are some good points to be made on these topics, but the authors use such broad brush strokes as to way overstep the evidence they put forth.

I was very disappointed in this book.

When it comes to popularized management wisdom, there are a lot of balloons of ignorance out there, many of them reinforced by self interest and self confidence. Fortunately these two Stanford professors are also out there, popping those balloons with wisdom, style and wit. You can learn a great deal, about management and otherwise, by reading these delightful essays.

p.s. Below please find some of my favorite passages for your reference.

The secret to Toyota's success is not a set of techniques but is philosophy - the mindset of TQM and continuous improvement it has embraced - and the company's relationship with workers that has enabled it to tap their deep knowledge. As a wise executive in one of our classes said about imitating others, "We have been benchmarking the wrong things. Instead of copying what others do, we ought to copy how they think." pg 7

Instead of being interested in what is new, we ought to be interested in what is true. - Pfefffer's Law pg 29

Not everything that can be counted counts, and not eveything that counts can be counted. - Einstein pg 40

Wisdom means "knowing what you know and knowing what you dont know," especially striking a balance between arrogance (assuming you know more than you do) and insecurity (believing you know too little to act). This attitude enables people to act on their present knowledge while doubting what they know. It means they can do things now, as well as keep learning along the way. pg 52

Can you and your colleagues describe your company's strategy in a sentence or two? Do you and your colleagues even agree on what the strategy is? There is one powerful lesson from teh strategy literature and that is the importance of having people understand what they are supposed to be doing and develop some consensus about where, in their view, business success comes from. In simple terms, you arent likely to get anywhere if you dont know where you are going. pg 153

CEO Meg Whitman attributes much of eBay's success to the fact that the company spends less time on strategic analysis and more time trying and tweaking things that seem like they might work, and learning along the way...Andy Grove, former CEO of Intel, said, "None of us has a real understanding of where we are heading. I dont. I have sense about it...but decisions dont wait. pg 155

The nine implementation principles to help people and companies that are committed to doing what it takes to profit from evidence based management. Chapter 9
1. Treat your organisation as un unfinished prototype
2. No brags. Just facts
3. Master the obvious and mundane
4. See yourself and your organisation as outsiders do
5. Power, prestige and performance make you stubborn, stupid and resistant to valid evidence
6. Evidence based management is not just for senior executives
7. Like everything else, you still need to sell it
8. If all else fails, slow the spread of bad practices
9. The best diagnostic question: What happens when people fail?

In my opinion, the most valuable business books are those which pose and then respond to an especially important question. For example, before Pfeffer and Sutton wrote their previously published book, The Knowing Doing-Gap, they asked: Why is it that managers who know so much about organizational performance, say so many smart things about how to achieve performance, and work so hard are nonetheless trapped in firms that do so many things they know will undermine performance? Their research indicated that a substantial majority of the executives they studied demonstrated a significant gap: They knew what to do and how to do it but seldom took effective action based on that knowledge.

In this book, Pfeffer and Sutton examine what they call "the doing-knowing gap": doing without knowing, or at least without knowing enough. "People kept telling us about the wonderful things they were doing to implement knowledge - but those things clashed with, and at times were the opposite of, what we knew about organizations and people. Upon probing, we soon discovered that many managers had been prompted by a seminar, book, or consultants to do things that were at odds with the best evidence about what works." Pfeffer and Sutton identify some of the barriers to what they call "evidence-based management" and recommend specific steps that leaders can take to overcome those barriers. Of special interest to me is what they have to say about "half-truths that bedevil organizations."

These are among the specific questions to which Pfeffer and Sutton respond and they do so brilliantly:

1. What exactly is "evidence-based management"?
2. Evidence of what? And how to verify it?
3. Why do all organizations need evidence-based management?
4. What are the most damaging half-truths about managing people and organizations?
5. When attempting to implement evidence-based management, what are the most formidable barriers to overcome?
6. How best to overcome each?
7. Which incentives are most important to individual performance?
8. To organizational performance?
9. What are the most valuable potential benefits of evidence-based management?
10. Which specific principles can guide and inform the collaborative efforts of those who are committed to doing whatever it takes to achieve such benefits?

As I read this book, I thought about what Pfeffer and Sutton had said about "the knowing-doing gap" in their previous book bearing that title. Whereas that gap indicated that people could possess sufficient skills and knowledge but are unable to take effective action, "the doing-knowing gap" suggests problems of a quite different nature. Perhaps Pfeffer and Sutton share my own concern that many of those who read their book will then exclaim "Aha! That's it! Now I understand!" In fact, some of them will "get it" but most won't...at least not immediately. I agree with Pfeffer and Sutton's suggestion that each organization be viewed as an "unfinished prototype." Readers would be well-advised to consider Pfeffer and Sutton's ideas with the same perspective.

In my opinion, hard facts are not enough. They must also be the right facts and there must be enough of them. Although I fully appreciate the importance of faith, trust, hope, empathy, and decency, the fact remains that what cannot be verified cannot be managed.

What about half-truths? I suggest that they be treated like cockroaches: Turn on bright lights and refuse to let them hide or escape. One of my favorite techniques, "fishboning," involves saying "Why?" to each response until neither you nor anyone else can bear to continue. When subjected to such rigorous scrutiny, half-truths don't have a chance. Fishboning worked well for Socrates and it will also work well for us.

With regard to "total nonsense," it is amazing how durable it can be. The fact remains that some people are convinced that wet highways cause rain...and that's that. For whatever reasons, it is very important to them to cling to such beliefs despite all evidence to the contrary. It seems a fool's errand to waste time and energy trying to convince them of the merits of evidence-based management...or of anything else.

One final point: What Pfeffer and Sutton recommend can - and should - be implemented at all levels throughout any organization, regardless of size or nature. The leadership which evidence-based management requires has nothing to do with title or tenure but everything to do with being resourceful, empirical, and pragmatic, skeptical and suspicious but not cynical or manipulative. And the initiatives to achieve and then sustain effective evidence-based management must be collaborative and continuous .

Those who share my high regard for this book are urged to check out Pfeffer and Sutton's earlier book, The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action as well as Robert Mittelstaedt's Will Your Next Mistake Be Fatal: Avoiding the Chain of Mistakes Which Can Destroy Your Company, Michael Levine's Broken Windows, Broken Business: How the Smallest Remedies Reap the Biggest Rewards, George S. Day and Paul J.H. Schoemaker's Periferal Vision: Detecting the Weak Signals That Will Make or Break Your Company, and Sydney Finkelstein's Why Smart Executives Fail and What You Can Learn from Their Mistakes.

This was one of the best business books to pass my desk in a long time. Then, I'm biased. Doing research bores me, but _applying_ research is my great love. It's a love unrequited after decades in the business world. Not for lack of trying; more for lack of good research. Most business books, buzzwords, and brilliance are pretty much bull-pucky. Not "Hard Facts." Pfeffer and Sutton have a simple premise: Companies run better by using business principles based or high-quality research, instead of by jumping on the pithily-promoted trend-of-the-day. They support their premis with *gasp* facts and research. The book follows its own advice. It is heavily footnoted with sources and studies, enough to make the most obsessive librarian happy for months.

Other reviews have mentioned the Big Half-Truths the authors explore: should we leave our lives at the door when we go to work? do the best organizations have the best people? does pay drive performance? is strategy destiny? They explore all these questions and often conclude the conventional wisdom is wrong. But their evidence isn't a cute little mouse looking for his cheese; it's decades of research, data, and examples. Their swiss cheese has far fewer holes in the logic.

The Big Half-Truths weren't the big takeaways for me. The offhand examples are what changed my world:
Oh, by the way, holding back students who fail causes them to do worse than letting them advance anyway.
Oh, by the way, do you like to ask winners why they succeeded? Research shows self-reports of losers who _think_ they're winners are the same as self-reports of winners. Hmm...
Oh, by the way, talent isn't innate. Believing you can (or can't) develop talent becomes a self-fulling prophecy.
Oh, by the way, even a super-competent CEO will get better results by yielding control.
Oh, by the way, merit-based pay for teachers doesn't produce better learning in schools.

All were, of course, properly footnoted. Without actually converting to Librarianism, I'll likely spend the next few months happily chasing down the supporting research to find out what else I think I know that just isn't so.

The Big Half-Truths were the main point of each chapter, of course, with the Little Half Truths as the supporting evidence. The authors don't just debunk; they go one step further and tell you what to do differently, if you've bought in to the Halfs.

Along the way, Sutton and Pfeffer also utter a word rarely heard in business: Wisdom. They believe Wisdom is more important than knowledge or IQ. They define it precisely, and the definition will surprise you. You may or may not agree with it, but if you don't meet the definition yourself, you'll likely dismiss it as absurdity. And of such self-fulfilling prophecy will your fate be wrought.

Sadly, the consulting market thrives on new fads, delivered in pithy books, easily extensible(*) to keep the consultant in Beamers for years. So we aren't likely to see any sudden groundswell desire for competent advice that isn't attached to new-and-different-sounding buzzwords. But here's my advice:

Are you a manager? Buy this book and follow its advice. You'll fail, of course. The book itself explains that your dysfunctional corporate culture will easily swat down your wave-making desire for fact-based management. So then you can hire a consultant to help.

Are you a consultant? Buy this book and read it. Then get that manager's phone number and sell him/her your latest buzzword, but actually *deliver* evidence-based management.

"Hard Facts" and evidence-based management isn't new; it's the premise behind business school, for goodness' sake. But this book will give you a lot of fact-based insight you're unlikely to get any other way.

(*) The "Cheese" brand alone lends itself to a decade of sequels. Organizational change: Who Moved my Cheese? Mergers and acquisition: Who Bought my Cheese? Competitive strategy: Who Grilled my Cheese? Layoffs and divestitures: Who Cut my Cheese?

Jeffrey Pfeffer is Professor of Organizational Behavior and Robert I. Sutton is Professor of Management Science and Engineering at Stanford's Graduate School of Business. They are the author of business bestseller `The Knowing-Doing Gap' (2000). This book was published in 2006 and consists of 9 chapters.

In the preface the authors explain the result of their exercise: "[This book] is a call for evidence-based management, a case for its potential impact, and a guide on how to use it." They also immediately warn readers: "There are no simple, easy answers, but there are answers." Part I - Setting the Stage - consists of two chapters, whereby the first chapter serves as an introduction into evidence-based management. "Evidence-based management proceeds from the premise that using better, deeper logic and employing facts to the extent possible permits leaders to do their jobs better." And although most managers try to act on the best evidence there is little rigorous use or serious appreciation of evidence-based management. In the second chapter the authors consider key impediments to implementing evidence-based management and how to overcome them. They also offer guidelines and ways of thinking to help organizations turn these ideas into action.

The main body of the book is contained within Part II - Dangerous Half-Truths About Managing People and Organizations - and consists of six chapters. Chapter 2 shows simple but powerful standards for judging which advice and practices advocated in the vast marketplace for business ideas are sound, which are suspect, and which are total nonsense. This is followed by an examination of perhaps the most basic half-truth - "work is fundamentally different from the rest of life and should be." This half-truth is fundamental because so much else follows from it. The organizational practices are quite different than we observe - or at least aspire to - in our personal life. Chapter 4 discusses the half-truth that "the best organizations have the best people", which was embraced during the dot-com boom and still lives on in the "war for talent" imagery. The next chapter examines one of the most deeply held half-truths in the business world, that "financial incentives drive company performance." However the authors' best evidence shows that using them to solve many problems leads organizations to stray from their goals and undermines performance.

The remaining three half-truths move up to the organizational level of analysis, focusing on the challenges of managing the enterprise. For instance, chapter 6 questions whether and when "strategy is destiny". Peffer and Sutton make an evidence-based case that excessive faith in strategic decision making is hazardous to an organization's health. This is followed by an examination of the faulty evidence and logic behind the mantra "change or die". The final chapter of this part considers what leaders are expected to do versus what they actually can and should do. The authors focus on these half-truths because they believe that "leaders who understand why each belief is flawed, and who think hard about the evidence for and against each, can develop more effective and sophisticated approaches to running their organizations."

In the final chapter the authors explain that managers can find and use evidence so their companies can avoid such dreadful journeys. They identify and discuss 9 implementation principles to help people and organizations to commit themselves to profit from evidence-based management. None of these principles will surprise anyone and most are in fact predictable. However, most of us do not always stick to them for a variety of reasons. "The question remains: Who will have the courage and wisdom to do it?"

Yes, I do like this book. Although it does not fundamentally bring any new principles to table, it will help most of us re-focus onto the extremely important task of managing based on evidence, data and facts. Pfeffer and Sutton effectively break down dangerous half-truths and make a compelling case for finding and using evidence to succeed not just in management/business but also in the rest of life. Just one criticism, there could be some more details on methods for gathering data and translating this into evidence.

So how much of that business "conventional wisdom" is really true (or even wise)? Jeffrey Pfeffer and Robert I. Sutton make a great case for evidence-based management in the book Hard Facts, Dangerous Half-Truths, And Total Nonsense: Profiting From Evidence-Based Management.

Contents:
Part One - Setting the Stage: Why Every Company Needs Evidence-Based Management; How to Practice Evidence-Based Management
Part Two - Dangerous Half-Truths About Managing People and Organizations: Is Work Fundamentally Different from the Rest of Life and Should It Be?; Do the Best Organizations Have the Best People?; Do Financial Incentives Drive Company Performance?; Strategy Is Destiny?; Change or Die?; Are Great Leaders in Control of Their Companies?
Part Three - From Evidence to Action: Profiting from Evidence-Based Management
Notes; Acknowledgments; Index; About the Authors

The main gist of Hard Fact is that the common and conventional wisdom so often parroted in business today isn't really based on hard evidence to back it up. Some platitudes have been repeated and taught so often that it's just accepted as true, even in the face of evidence to the contrary. Pfeffer and Sutton take a look at how these half-truths are acted upon, why they can be persuasive (and wrong), and how the evidence points to a very different conclusion, if only people would step back and question the assumptions. For instance, my favorite chapter was the one on leaders being in control of their companies. You can find thousands of books on leadership, all showing how leader X was decisive, wise, executed flawlessly, and otherwise walked on water. This general view of "great leaders" has lead to the ever-elusive search for the savior CEO, exorbitant compensation packages, and general neglect of the business in favor of personalities. The hard evidence shows that often the success of a company is more based on other factors, such as the market, people, systems in place, or just plain "being in the right place at the right time". True, solid management is a factor, but not as much as common wisdom would dictate. This chapter, as well as the others, will make you sit back and question your assumptions. Which, you really should be doing anyway...

You may not agree with all their conclusions, but the underlying premise is dead on. Just because everyone assumes it to be true, doesn't make it so. This should be required reading for senior management in all organizations...