Evidence-Based Management
I recently read the article Evidence-Based Management (HBR Jan 06) which outlines an emerging movement which applies the scientific approach long used in medicine to the practice of management.
A number of factors inhibit managers’ ability to make good decisions including:
- specialty bias (e.g. marketers tend to recommend marketing as a solution)
- hype (e.g. managers taken by the latest pop management theory)
- dogma (e.g. managers who know that people really only click on items “above the fold”)
- casual benchmarking (e.g. Shuttle by United’s attempt to copy Southwest)
Evidence-based management aims to avoid these pitfalls by:
- Investing in Analytics – In order to make sound decisions you must have the sound underlying evidence upon which to do so. This often means a large investment in metrics and analytics.
- Asking Questions – Recognize gaps in logic and misuse of inference. Often the positive effect touted is unrelated to the claimed cause. Demand that proposals be backed by sound data.
- Performing A/B Testing – Rather than make an uneducated decision, create a test for your hypothesis. eBay and other internet companies have been doing this for years and it is amazing all that you can learn from it.
- Showing Humility – By admitting what you don’t know you’ve taken the first step toward learning something. Celebrate mistakes and a means to learning about your business.
Having worked at companies that employ this management theory I think we must pay close attention to each decision made. A poor decision can be made under the guise of what looks like evidence-based management but is in fact not (see pitfalls above).
Want to know more?
- Pfeffer & Sutton (Stanford) site: http://www.evidence-basedmanagement.com/
- Article: Evidence-Based Management (HBR Jan 06 by Pfeffer & Sutton)
- Wikipedia on Evidence-Based Management