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Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management Hardcover – March 1, 2006
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The writers of this book suggest that like any ideas Management theories should be tested to see if they actually work. They are of the view that some ideas work, some don't and some are counter productive. To illustrate the notion of testing they first discuss a Casino in Nevada. The running and management of casinos has had what could be called basic unchallenged assumptions. They are:
* High rollers should be encouraged by the provision of free rooms alcohol and the like
* Large ostentatious buildings are important in attracting customers
* Advertising is effective
The writers talk about a Casino manager who rather than become a captive of the notion of accepted wisdom tried different things and then measured the financial gain. The managers name was Gary Loveman. What he found out was that the group who targeted the greatest revenue were retired people who would play machines for longer periods of time as a form of entertainment. The source of these customers were the local area. Direct mail was the best means of encouraging these people and as they lived in the area they were not interested in free rooms. What they responded to was the gift of $60 worth of playing chips. Other groups such as families with children were much less profitable as they had much less of their income to gamble and were poor targets for advertising.
On the cost side Loveman found that if money was spent on staff selection and training and some realistic notion of what the job was like was communicated to staff retention rates increased 50%.
Having outlined the idea of a methodology of approach the book looks at some of the conventional management approaches. One of the accepted truisms of modern management is incentive style pay systems. Do they in fact work? The answer is sometimes they work, sometimes they don't and other times they can be disastrous.
The best example of a successful incentive scheme is assembly production. The authors speak of a plant in which windscreens are installed in cars. In this case an incentive scheme achieved big productivity gains. The worst example is that of the New Orleans police. New Orleans had a big increase in crime and incentives were designed to reward police for reduction in crime figures. What happened was that instead of a decrease in crime the police simply faked the figures reporting offences as less serious matters. This initially led some of them to get reward payments but led to a clean out of the New Orleans police with large numbers of senior management being sacked. Clearly there are some differences which are important in working out when incentive schemes will work. With a production line it is easy to see if someone is cheating. One can look at the production for both quantity and quality. With a civilian authority dealing with a police department the flow and knowledge and the ability to understand what is going on is more limited.
It is clear however that incentive systems can send out rather bad signals and often can be counterproductive. Thus one of the goals of most organisations it to have their employees to work as a team. Another goal is to have the employees think that they are valued. Both of these goals are ones that run contrary to a system which may encourage competition and feelings of being seen as inferior to other employees. The point that the book makes is simply that such systems cannot be seen as by default good and their effects in a given system must be measured to see how they perform.
Another good example is the discussion of strategic plans. One of the writers attended a function run by a large law firm. The law firm had a secret strategic plan. The writer said the he was certain that he could guess the secret plan. He suggested that it was:
* Growing high margin areas
* Getting out of low margin areas
* Easing out historically low profit partners
* Bring in more profitable partners
* Move from a location based to practice based structure
The thing is that a large number of consultancy firms make a living out of working with law firms and offering such advice. The reality is that the advice is simply a set of truisms and that the key is not having those ideas but being able to move toward the goal. They key in any organisation is not the plan but the execution. As a result strategic plans have been going out of fashion and are seen as mainly effective at providing revenue streams for consulting firms.
The book suggests that there are no simple answers to any question and the best management tool is for managers to be open minded and to know their limitations and when they do not know the answers.
For those that have seen through or tired of the endless stream of fad management processes, this book lifts the lid on most "popular" management systems and details the failings of good companies and bad alike. With this more balanced approach and the emphasis on empirical data analysis in order to make business decisions this book is a fantastic foundation resource for executives at all levels.
My favorite extract is " Firstly, the willingness to put aside belief and conventional wisdom-the dangerous half-truths that many embrace-and instead head and act on the facts; second, and unrelenting commitment to gather the facts and information necessary to make more informed and intelligent decisions, and to keep pace with new evidence and use the new facts to update practices."
Intuitively, many (including myself ) have been opposed to the blind advice of leaders but lacked the evidence to challenge such assumptions. This resources provides a practical and systematic approach to significantly improve and enhance any business and decision process.
I thoroughly recommend this book to all business leaders and owners if you truly want to succeed.
The book consists of three parts. The first part, setting the stage, is an introduction to the concept of evidence based management and how to practice it. It takes a couple of myths or half-truths and examines them and shows how they are not based on evidence.
The second part are examples of half-truths in organizations. I found this chapter most fun. It looks at a six assumptions common in modern management and examines the evidence that support these practices. The first half-truth is that work ought to be different than the rest of the life. The half-truth that people ought to act differently since "now they are at work". The second half-truth relates to hiring the best people. Is it true that all companies need to do is hire the best. This chapter examines the relationship between systems and people and skill. The third chapter relates to motivation and incentives. Do they drive your company? Are they important? Or, are they perhaps harmful? The fourth chapter looks at the focus modern management puts on strategy and questions whether this is worth the amount of effort. Is having the right strategy really the most important thing for an organization? Next a chapter called "Change or die" which looks at organizational change in general and asks whether organizations really have to adapt or else they will not survive? It discusses the risk of organizational change and gives advise, evidence-based advice, on how to be more successful in change. The last half-truth is about leadership. Are leaders in control?
The last part is the typical ending part of a book, how to change? It summarizes evidence-based management in ten principles. Adopting evidence-based management will mean to adopt these principles.
"Hard facts" is well written. It's fun to read and it is a serious attempt to tackle some myths in current management practices. An excellent book and highly recommended for anyone who is interested in management based on facts.