...Evidence-Based Decisions

When was the last time you examined a business decision? What was the basis for you to make your determination? Did you make it based on what you have usually done? Did you check any recent research developments? Maybe the decision was so routine that you did not feel that you had to check the basis for your resolution?

Make sure you have taken into account the best-available evidence!

Certainly, you might have made your decision based on the very best available evidence. I hope you did! But if some of my colleagues are right, an excessive amount of business decisions are being made for the wrong reasons. If you can find yourself making business decisions based on any of the illustrations from Table 1, please! Keep reading!! …and consider attending the workshops that will be offered during the 2008 Annual Conference and Career Expo, to be held in Atlanta in October!

Evidence-Based Management (EBMgmt) is the integration of (a) best-available scientific evidence, (b) manager’s judgment, and (c) stakeholder values in business decision making. Its roots are in Medicine, Education, and the Behavioral Sciences, where Evidence-Based movements have taken these disciplines by storm. In each of these fields, there are hundreds of professionals contributing to and profiting from the latest developments in the improvement of their areas by focusing on these three aspects. Sure enough, there are critics that find fault in what has been described as a movement that favors a particular type of scientific philosophy (for further detail, see the articles or books in the box titled “To Learn More…”). Still, if we are to judge by the success that Evidence-Based Medicine, Evidence-Based Education, and similar fields have had, chances are that we ought to examine carefully the way that we are making our decisions.

A Smoking Gun…

To illustrate, Sara Rynes and her colleagues have identified seven human resource practices for which a sample of 959 HR professionals had beliefs that actually contradict research findings (Rynes et al, 2007). More specifically, these professionals either disagreed with or showed lack of knowledge of the following findings: (a) that intelligence is a better predictor of employee performance than conscientiousness, (b) that personality (including integrity tests) is related to job performance, and (c) that goal setting is a highly effective motivational tool. The implication is that managers that are basing their hiring decisions on factors like conscientiousness –or any others than intelligence—are running the risk of sub-optimizing their organizations. A similar case can be made about personality being a strong predictor of job performance and about goal setting as a way to motivate employees!

But the problem is not exclusive to HR. In a recent best-selling book, Stanford Professors Jeff Pfeffer and Bob Sutton (Hard Facts… 2006) describe in detail how managers in various fields –Strategy, Leadership, Mergers and Acquisitions, Change Management, etc.—neglect available scientific evidence at their own peril. Of course, the business disciplines are not like the physical sciences, where principles and rules are unbreakable –there is no way around the laws of gravity or thermodynamics, but occasionally, hiring a new employee based on their previous business connections is the best way to increase the bottomline, even if there was a less-experienced genius as a candidate. There are many circumstances that might intervene in making a particular decision more fitting to a set of circumstances.

…and there’s the Beauty of EBMgmt!

Indeed, the fact that EBMgmt is the integration of managerial judgment, best-available scientific evidence and (not ‘or’) stakeholder values, makes it possible to make those exceptions that differentiate excellent from average managers. But you cannot integrate these three components if you don’t know what the best available evidence is, can you?

What do you think? Have you witnessed business decisions that are clearly neglecting what you learned in grad school while you studied your MBA? What are the best sources of scientific evidence in business that you have found so you can use EBMgmt? Please post your thoughts and comments on this blog or send them via email (drolivaslujan_at_gmail.com)! I look forward to seeing you in Atlanta!

Table 1. Business Decision Models NOT Based in Best Available Scientific Evidence
Problematic model and illustrations:

(1) Individual preferences such as gut feelings, obsolete knowledge, personal experience, and specialized skills
• “I feel that we should…”
• “What I learned in school (30 years ago) is that…”
• “This has always worked in the organizations I have been: …”
• “I can help with the following tools in which I specialize: …”
• “To a hammer, everything looks like a nail”

(2) Tradition
• “This is the way things are done around here.”
• “If it ain’t broke, don’t fix it!”

(3) Bandwagon, dogma, ideology
• “The industry leader started this project several months ago!”
• “All of our competitors are starting this too!”
• “Our company’s first and foremost obligation is toward…”

(4) Superficial “best practice,” mimicry of top performers, hype
• “If this practice worked for HP [or Citi, or any other highly respected firm, regardless of industry], why wouldn’t it work here?”
• “I just found a report/attended a conference/read a book that convinced me that we should…”
• “Dr. So-and-so from Most Prestigious University (or Consulting Firm) just wrote this in her latest book…”

(5) Political pressures
• “Well, you will be on your own if you don’t consent to this initiative…”
• “The boss is really sold out on this; you better choose other battles…”

Source: Olivas-Luján, M.R. (forthcoming).

To Learn More…
  • Olivas-Luján, M.R. (forthcoming). Evidence-Based Management: A Business Necessity for Hispanics. The Business Journal of Hispanic Research.
  • Pfeffer, J., & Sutton, R.I. (2006b). Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting from Evidence-Based Management. Boston, MA: Harvard Business School Press.
  • Rousseau, D.M. (2006a). Is there such a thing as ‘evidence-based management’? Academy of Management Review, 31(2), 256-269.
  • Rynes, S.L., Giluk, T.L., & Brown, K.G. (2007). The very separate worlds of academic and practitioner periodicals in human resource management: Implications for Evidence-Based Management. Academy of Management Journal, 50(5), 987–1008.