evidence based management

These two “Best Practice” Case Studies are good examples of “Evidence-Based Management”, as opposed to intuition-based management. Harrah’s was a company that seemed to be focused on the right things and some of the lessons that can be gleaned from these case studies are in the paragraphs that follow.

Gary Loveman was a Harvard professor who was hired as a consultant by Harrah’s, then hired full-time as COO and later as CEO. He said that he saw it as a good hands-on and real world experience to complement his teaching and academic experience. He brought an academic background, which was rare in the casino industry (most had worked their way up through the casino industry), and created some cultural shifts at Harrah’s that met with some resistance. In line with his academic background, he insisted on pilot programs and control groups for new marketing programs. Also, there were many personnel changes and terminations due to a new system of meritocratic management: horsepower and performance now trumped experience, which was reverse of the historical condition at Harrah’s.

Noteworthy was that Loveman maintained a guard against an over-inflated ego, which is easy to come by when everything in a company seems to revolve around the CEO and the perks are immeasurable. He said “I try to remind myself that this is not about me. It’s not about any great affection anyone has for me. It’s the position. I don’t really deserve this. I just happen to have it right now.” This is an invaluable, and all too rare, attitude among CEO’s as well as other high-powered leaders.

Some lessons:

  • Be careful to know what you know and also know what you don’t know and set about getting to know it. An argument for evidence-based management.
  • Especially with modern computers, a big (and specific) database about customers is good. Specific information allows a better understanding of customers and an ability to customize customer service.
  • Let the data lead; don’t force it to fit preconceived paradigms and existing programs.
  • Keep an eye on the long-term. Focus on a customer’s worth over time.
  • Use customer segmentation. Not all clients are the same or create the same value for the business.
  • Testing and pilot programs of new marketing ideas is very important.
  • Focus employees on their job of satisfying customers and contributing to the top line.
  • Really drill into your data and use the information to exceed the expectations of your regular customers.

From an article in the Harvard Business Review, January 2006 by Jeffrey Pfeffer and Robert I. Sutton.

In our information-intensive world there is undoubtedly a heck of a lot of information out there. However, many businesses (even including medical professionals, as discussed in the article) don’t use it to make decisions. It is difficult to change course, and an established direction of momentum, on any big ship and doing what everyone else does, what one has always done, or what one thought was true is still much more prevalent than peering into the face of actual evidence and using it to make informed decisions.

As an example, the article says that research shows that only 15% of physicians’ decisions are evidence based. Instead their decisions are mainly based on: obsolete knowledge gained in school, long-standing but never proven traditions, patterns gleaned from experience, the methods they believe in and are most skilled in applying, and information from hordes of vendors with products and services to sell.

This same example may be extrapolated to managers of organizations; they exhibit many of the same behaviors. In fact, business managers are often in a worse off position, with regard to evidence-based decisions, than doctors are. Business managers are usually less scientifically based and trained in the first place and there are a lot more variations in businesses than there are in the human body, thus making general rules and prescriptions less useful; i.e. there is a lot more customization required for business “fixes”. When managers act on better logic and evidence their companies enjoy a competitive advantage.

Evidence-based management, although difficult to implement, is a worthwhile cause and a noble effort is not the only tool that a business should use. Evidence-based management should be implemented and should augment, not displace, the artistic functioning, and good old people to people storytelling and relating that many companies are already good at. It is not an either/or proposition but another tool to be added to the toolbox. As Einstein once wrote, “Not everything that can be counted counts, and not everything that counts can be counted.”

A salient quote from the article: “Evidence-based management is conducted best not by know-it-alls but by managers who profoundly appreciate how much they do not know.”