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Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-based Management Hardcover – 1 Mar 2006
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The best organizations have the best talent...Financial incentives drive company performance...Firms must change or die. Popular axioms like these drive business decisions every day. Yet too much common management 'wisdom' isn't wise at all - but, instead, flawed knowledge based on 'best practices' that are actually poor, incomplete, or outright obsolete. Worse, legions of managers use this dubious knowledge to make decisions that are hazardous to organizational health. This practical and candid book challenges leaders to commit to evidence-based management as a way of organizational life - and shows how to finally turn this common sense into common practice.See all Product description
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We have all heard the phrases, "war for talent", "keep work separate from life", "getting financial incentives right", "strategy is destiny", and "we need more leadership". We often latch on to these snippets of conventional wisdom, translating them into organisational policy, yet seldom stop to question the assumptions behind conventional wisdom.
In this brilliant book, authors, Jeffrey Pfeffer and Robert Sutton, remind us to practice evidence-based management. They show how surprisingly many management decisions are driven by the ideology and charisma of managers, and not necessarily by the evidence. They tackle some `conventional wisdoms' of the management literature. I'll rehash some of the more important of these `wisdoms' here:
1. GREAT LEADERS ARE IN CONTROL OF THEIR COMPANIES
The business press and our contemporary culture are obsessed with leadership; therefore, we lionise corporate leaders like Jack Welch and Lee Iacocca. Pfeffer and Sutton emphasise that leaders do make a difference. Indeed, some of the defining social changes of the last century may not have occurred without the leadership of people like Gandhi, Martin Luther-King and Mother Theresa.
While leadership matters (as a Nigerian, I have seen my fair share of questionable political leaders), Pfeffer and Sutton suggest that the myth of leadership is a half-truth, especially in large organisations. Citing research on human psychology, they (Pfeffer and Sutton) put it down to human nature: "when we look at organisations, we see people who are in charge; we don't see the constraints that affect their behaviour and company performance". We tend to attribute to much blame for mistake--and credit for success--to leader. One GE executive interviewed in the book joked, "Jack [Welch] did a good job, but everyone seems to forget that the company has been around for over 100 years...and he had 70,000 other people to help him".
2. FINANCIAL INCENTIVES DRIVE COMPANY PERFORMANCE
Citing recent research, the authors show that financial incentives are used to drive performance because individuals believe that other are motivated by money, even as they (the individuals) know that they are much less so. Often, financial incentives are overused and tend to attract the wrong kind of talent: people only interested in making a buck. Pfeffer and Sutton show that there are cases in which financial incentives work well: where work is mostly done by single individuals, who do not work in interdependent settings. Once people work in large interdependent settings, then financial incentives alone are not the key drivers of company performance (see for example, Amazon, SouthWest Airlines and CostCo).
3. STRATEGY IS DESTINY
Business schools, governments, the military and corporations are fixated on strategy (defined as what the organisation does based on its competences and where it can add value). The authors question the logic and evidence for why conventional wisdom states that strategy is destiny.
Using examples of successful companies like Dell, Intel and Amazon, the authors show that these companies did not succeed by having proprietary (secret) strategies; if anything, their strategies were public knowledge. Dell's strategy, for example, was to bypass the wholesalers and sell directly to the consumer using just-in-time inventories. Even though Dell's competitors knew this strategy, they could not replicate Dell's success. What made the difference then? The authors stress that implementation of Dell's strategy was the key to delivering the goods. No, strategy is not destiny. While a company will benefit from good strategic planning (what business to be in and how to compete with other firms), it will almost certainly benefit from the less glamorous details of implementation (keeping it simple, learning as you do etc).
In the words of John Maxwell, conventional wisdom is borne of "lazy thinking". Pfeffer and Sutton's Hard Facts is a reminder to challenge this lazy thinking and to practice evidence-based management, a commitment to using the facts--and only the facts--to inform the management of organisations. This means that management should be based on the best available evidence of what works in a given organisational setting. Pfeffer and Sutton make their case with clarity, wit, healthy skepticism and conviction. It is a message that every senior executive should hear. Pfeffer and Sutton's Hard Facts deserve five glittering stars.
The book resembles tape-recordings of spoken lectures. Superficial cases and knowing in hindsight might impress naive students but to more senior people - eg. managers or consultants searching for evidence about management - it is of no use.
One small disappointment I had with this book was that several of the case studies were frankly tearing down ideas that almost no one believes any longer anyway. For example, is strategy destiny? The whole strategic planning movement was discredited long ago. Nevertheless, the news that strategy is not destiny does not need to be news to you for this to be of value. It's worth rehearsing the reasons why it has been discredited, and it is yet another example of why the evidence-based approach is important for success.
Some of the material is more cutting edge - for example the last case study, on whether leaders are in control, touches very slightly on some of the more recent thinking on leadership by people like Goleman (though they don't quote him - but the territory they cover is similar).
To my mind, though, the case studies are simply demonstrations. The importance of Sutton and Pfeffers' work is the theory, which can then be applied in any arena. This is not a workbook - as others have commented, there is no detail about precisely how one goes about producing evidence-based thinking. Instead, they offer general guidance about things that must somehow be done - for example being curious, keeping yourself open to new ideas and challenges to existing thinking. They also point to symptoms that can tell you whether an organisation works in this way, such as what happens when people fail. The reader is, by and large, left to then figure out the pragmatic steps for their situation.
I would definitely recommend this book to any manager or leader - indeed to anyone who has the power to make decisions. In some ways this is a "basics" book - but given how prevalent non evidence-based decision-making is these days, it's a very useful reminder that however attractive management fads and "trust your gut" advice may be, the hard work of thinking well is what pays off in the longer term.