Hard Facts, Dangerous Half-Truths, & Total Nonsense

Key Concepts

Poor decision practices

Casual Benchmarking

“In these and scores of other examples, a pair of fundamental problems render casual benchmarking ineffective. The first is that people copy the most visible, obvious, and frequently least important practices. Southwest’s success is based on its culture and management philosophy, the priority it places on its employees (Southwest did not lay off one person following the September 11 meltdown in the aviation industry), not on how it dresses its gate agents and flight attendants, which planes it flies, or how it schedules them. Similarly, the secret to Toyota’s success is not a set of techniques but its philosophy—the mind-set of total quality management 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.’” (p. 7)

Doing What (Seems to Have) Worked in the Past

“Why do you think the past practice you intend to use again has been effective? If you cannot unpack the logic of why things have worked, it is unlikely you will be able to determine whether or not they will work this time.” (p. 9)

Following Deeply Held Yet Unexamined Ideologies

“The third flawed and widespread basis for decisions often does the most damage because it is the most difficult to change. It happens when people are overly influenced by deeply held ideologies or beliefs—causing their organization to adopt some management practice not because it is based on sound logic or hard facts but because managers “believe” it works, or it matches their (sometimes flawed) assumptions about what propels people and organizations to be successful.” (p. 10)

What Is 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. Evidence-based management is based on the belief that facing the hard facts about what works and what doesn’t, understanding the dangerous half-truths that constitute so much conventional wisdom about management, and rejecting the total nonsense that too often passes for sound advice will help organizations perform better.” (p. 13)

“Even when companies have little or no data, however, there are things executives can do to rely more on evidence and logic and less on guesswork, fear, belief, or hope. For starters, qualitative data, especially field trips to test existing assumptions, can be powerful tools for gathering useful evidence quickly.” (p. 21)

“Even before gathering any data, however, you can assess ideas that you are using or thinking about using: unpack the assumptions that underlie the proposed policy, practice, or intervention, and confront those assumptions with your collective wisdom and experience to see if they seem sensible. If they are, proceed; if they are not, don’t bother.” (p. 21)

Some Guidelines for Evaluating Management Ideas and Knowledge

1. Treat Old Ideas As If They Are Old Ideas

2. Be Suspicious of “Breakthrough” Ideas and Studies

3. Celebrate and Develop Collective Brilliance, Not Lone Geniuses or Gurus

4. Emphasize Virtues and Drawbacks

5. Use Success (and Failure) Stories to Illustrate Sound Practices, Not as a Valid Research Method

6. Take a Neutral, Dispassionate Approach to Ideologies and Theories

“Is Work Fundamentally Different from the Rest of Life and Should It Be?”

“The presumption that work is and should be separate from the rest of life, with different standards for motivating and judging human action, runs through many of the other half-truths we unpack in this book.” (p. 58)

“Actions that are praised and rewarded at work are often forbidden, or at least discouraged, in other parts of life. Interpersonal competition is expected, accepted, praised, and routinely encouraged at work. By contrast, sibling rivalry is seen as a problem, not a virtue that brings out the best in people.” (p. 64)

“In a competitive world in which success is difficult enough to achieve, it seems counterproductive to have people expend energy trying to be different than they really are just for the sake of appearances inside organizations.” (p. 78)

“Do the Best Organizations Have the Best People?”

“First, even the best predictors don’t do a very good job of selecting the best people. Take IQ. Intelligence is the most powerful predictor of job performance across studies, but IQ still seldom correlates more than 0.4 with performance. Since the amount of variation explained by a predictor is the correlation squared, intelligence accounts for no more than 16 percent of the variation in performance, leaving some 84 percent unexplained. Other alleged predictors have even lower correlations. This doesn’t mean that companies should spurn valid indicators of ability when selecting people. But it does mean we all ought to be more circumspect about our ability to discern talent.” (p. 91)

“Second, performance naturally varies over time. Even the best athletes, the best musicians, and yes, the best professors, have off days.” (p. 91)

“These uncertainties and human frailties mean that for most jobs in most organizations, assessing talent and ability is fraught with error and bias.” (p. 92)

“These studies all suggest that the “talent mind-set” is dangerous because it treats talent as something fixed. This mind-set causes people to believe that it just isn’t worth trying hard because they—or the people they lead—are naturally smart or not, and there is little if anything anyone can do about it. Yet raw cognitive ability—at least performance on tests that measure it—isn’t nearly as difficult to enhance as many people think. When people believe they can get smarter, they do. But—and this is very important—when people believe that cognitive ability is difficult or impossible to change, they don’t get smarter.” (p. 95)

Great Systems Are Often More Important Than Great People

“Given all the evidence on the importance of systems, something that W. Edwards Deming and the quality movement emphasized for years, why do so many companies still place so much emphasis on getting and keeping great people and so little on building and sustaining great systems? A big part of the answer is that Western countries, like the United States, glorify rugged individualism so much that we make a cognitive error. We forget that history, organizational goals, rewards, and structure are potent causes of what people and organizations do. We give too much credit to individual heroes when organizations do things right and place too much blame on individual scapegoats when things go wrong. This perceptual blindness pervades the talent mind-set, and you see it in story after story in the business press, in corporate histories, and in advice given by gurus and management consultants.” (p. 99)

“Do Financial Incentives Drive Company Performance?”

“Second, financial incentives can provide people with information about what the organization values and what its priorities are, an informational effect.” (p. 112)

“Research on customer service shows that sending clear signals can have powerful effects. One analysis of airline on-time performance reported that whether or not airline executives seemed to care about flying on time was among the most critical differentiating factors in whether airlines actually flew on time.” (p. 113)

“Financial incentives are best applied when there are simple, clear, agreed-upon measures that make cheating almost impossible, or perhaps, when the powers that be care only about optimizing performance on those measures, regardless of what it takes for people to hit the numbers.” (p. 121)

“People derive satisfaction from their social relationships in the workplace. Differential rewards people drive people apart, sorting them into categories as “winners,” “nothing special,” and “losers.” The result is jealousy and resentment, which damages social ties and diminishes trust and sociability in the workplace.” (p. 127)

“Strategy Is Destiny?”

“The justification for the prestige, high prices, and attention lavished on strategy seems straightforward: doing the right thing, even if it isn’t done perfectly, is more important than doing the wrong thing exceptionally well. This means that it is paramount for companies and organizations of all types to understand what they should be doing to achieve success—to devise a strategy that helps them survive in an increasingly competitive world.” (p. 136)

“But like many of the half-truths we consider in this book, a fixation on strategy can obscure as much as it illuminates. The corporate obsession with strategy can cause leaders to overlook other, even more crucial and more sustainable avenues for success. Even corporate successes attributed to great strategy often turn out, on closer examination, not to stem from strategy at all, and the empirical evidence shows a surprisingly weak link between the activity of strategic planning and company performance. There are also many ways of figuring out the right thing to do, and emphasizing strategy is only one method and possibly not the best.” (p. 136)

“As this leader suggested, what actually provides competitive success and what is difficult to copy is not so much knowing what to do—deciding on the right strategy—but instead having the ability to do it.” (p. 145)

“Focus is great. But it can create blinders. In a world of uncertainty and change, and in an organizational world in which everyone, including senior management, is inevitably fallible, too much focus and too little peripheral vision leaves organizations susceptible to being replaced in the marketplace by new entrants or more nimble competitors. Take a look at Winning Through Innovation by Michael Tushman and Charles O’Reilly, which lists industry after industry—everything from watches, to cement, to tires, to airlines—where strong incumbents were displaced by newcomers and upstarts. The rise and fall of leading companies is a well-known story. But the role of too much strategic focus in this inability to maintain competitive advantage is a part of the tale that is all too infrequently told.” (p. 149)

Keep It Simple

“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 the 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 aren’t likely to get anywhere if you don’t know where you are going.” (p. 153)

Learn As You Go

“The lack of emphasis on strategy formulation has persisted at Southwest over the years. As former CEO Herb Kelleher puts it, ‘We don’t do strategic planning. It’s a waste of time. You can spend three months coming up with something, and then you have to get buy-in from the other leadership. By the time you sell it to the board, things could have changed. Then you need to un-sell it to everyone before you can react. We don’t do navel gazing. You miss opportunities while you’re off thinking.’” (p. 155)

Balance Attention to Strategy with Attention to the Details of Implementation

“Change or Die?”

“As we saw in the case of incentives, sometimes less is more. Senior leaders who push for fewer changes and push for them harder are more likely to have success than leaders who introduce so many changes that people become confused about which matter most and least to the company and how to spread their time and money among the initiatives.” (p. 173)

“Change happens when: 

1. “People are dissatisfied with the status quo 

2. “The direction they need to go is clear (at least much of the time) and they stay focused on that direction 

3. “There is confidence conveyed to others—more accurately overconfidence —that it will succeed (so long as it is punctuated by reflective self-doubt and updating as new information rolls in)

4. “They accept that change is a messy process marked by episodes of confusion and anxiety that people must endure” (pp. 177-8)

“Are Great Leaders in Control of Their Companies?”

“What the evidence indicates is that leaders can and do make an important difference in organizational and group performance, although the effects are not as large as usually assumed nor as important as many other factors. It seems clear that leaders have some chance of making things better, but they can also make things much worse by taking actions that increase employee turnover and diminish employee motivation, as well as encourage lying and stealing, and causing numerous other organizational problems. This all suggests that avoiding bad leaders may be a crucial goal, perhaps more important than getting great leaders.” (p. 194)

“The image of the leader as an architect comes through in a number of popular management books in which the job of creating a culture and set of practices in which people can be successful, innovative, and productive is described. 60 The fact that Toyota can succeed over decades, even as the value of the Japanese yen fluctuates, there are changes in preferences for cars of different sizes, and technology and competitive conditions change, and that the company shows no leadership effect—or changes from succession—speaks to building a robust set of interrelated management practices and philosophies that provide advantage above and beyond the ideas or inspiration of single individuals.” (p. 210)

“A second, related myth about leadership is that a skilled leader can manage well in any company or industry. This belief has led to an excessive reliance on outside succession and the problems that sometimes ensue when people come in without sufficient grounding in the institutional specifics of the company they are running. Becoming an effective manager requires deep knowledge of your industry, organization, people, and the work they do.” (p. 212)

Implementation Principles

1. Treat Your Organization as an Unfinished Prototype

2. No Brag, Just Facts

3. Master the Obvious and Mundane

4. See Yourself and Your Organization 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

“The best organizations are places where everyone has permission, or better yet, the responsibility to gather and act on quantitative and qualitative data, and to help everyone else learn what they know.” (p. 227)

“The theme that cuts across all of these settings is that when managers treat employees as if a big part of their job is to invent, find, test, and implement the best ideas, then managers make fewer mistakes, organizations learn more, and more innovation happens. This conclusion isn’t backed just by selective case studies. Much research shows that when companies use more of each employee’s intelligence and talents, they make more money.” (p. 228)

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?

Quotables

“The most interesting thing about these monthly reports [at DaVita] is what isn’t yet included. Joe Mello explains that if the company decides that a particular measure is important, but is not yet able to collect it, it is included on the report anyway with the notation “not available.” Mello notes that the persistent appearance of an important measure that is missing motivates his people to figure out ways and systems for gathering it.” (p. 19)

“A former student who worked at Netscape reported that James Barksdale, a former CEO of that company, once remarked at a meeting at the company something to the effect of: ‘If the decision is going to be made by the facts, [then] anyone’s facts, as long as they are relevant, are equal. If the decision is going to be made on the basis of people’s opinions, then mine [he was the CEO at the time] counts for a lot more.’” (p. 31)

“Those of us who hawk business knowledge need to come clean. We need to deny that we have magic answers. We need to confess that we are just suggesting ideas that might make managers’ hard jobs a bit easier.” (p. 46)

“Organizations actually change all the time. When leaders talk about resistance to change, what they usually mean is that subordinates (or perhaps board members, stockholders, or the media) aren’t doing what leaders want them to do.” (p. 184)