Evidence-Based Management

It is a scientific fact that decision-making requires reasoning using research, facts and details, combined with emotion or gut feel. For example, Antonio and Hanna Damasio’s work demonstrated that when a person only has the capability of reasoning, it diminishes his/her aptitude for planning and deciding on actions.¹ In translation, emotion integrated with reason is an essential building block to decision-making – removing emotion reduces the capacity to evaluate effects, which renders decision-making inert.

There are two perspectives about decision-making that are important from a leadership perspective. First, only rational reasoning is necessary for decisions, a fact rebuffed by the research described above. This bias may be been exacerbated by the logically thinking Spock character in Star Trek. Alternatively is the belief that emotions are dominant in decision-making and that, as long as a decision has intuitive appeal, confirming evidence is not required.

In this publication, the focus will be on the latter problem. When gut feel becomes sole support for a decision, it usually happens at the higher ranks of the organization. Unfortunately, unchecked power can lead to flawed decisions with disastrous consequences. For example, Ron Johnson’s decision, as CEO of JC Penney, to discontinue promotional sales and discount coupons turned out to be very costly. His decision relied on a strategy from his former employer, Apple (“If it worked at Apple, it will work at JCP.”). The strength of his conviction led him to implement without a market test. Sales plummeted from $17 billion when he arrived in late 2011 to under $12 billion when he left in 2013. JCP has been teetering on the brink of bankruptcy ever since.

There is research supporting the importance of experience and intuition, but few recommend it as a stand-alone decision mechanism. Evidence-based decisions are essential in business today, and confirmation of a decision’s veracity should be discovered in advance to support what one emotionally or intuitively believes might be a good decision. Leaders can energize this issue in organizations by making sure decision-making bodies always appoint someone to play devil’s advocate or by asking someone to deliberately present opposing views using evidence.⁵ Without a process like this, humans tend to filter information that is contrary to ingrained beliefs. The Groupthink literature (see Irving Janus, 1971)⁶ provides helpful suggestions to prevent bias from entering the decision-making process.

What is evidence-based management? “Evidence-based management  (EBMgt) involves thoughtfully and explicitly gathering, evaluating, and integrating the best available scholarly research evidence, local evidence (i.e., facts of the situation, organizational characteristics), viewpoints of affected parties, ethical considerations, and the practitioner’s knowledge and judgment in the process of managerial decision-making.”^{2 (p. 322)}

One question that often arises is how much evidence is necessary? I recently worked on a consulting project where the charge was to develop an initial cost benefit analysis for a series of strategic projects. Calibrating the right amount of effort to get a preliminary look is not always easy. Thus, an initial effort to find evidence may only lead to a 40% confidence level that the project is viable. Once the initial round of evidence is gathered, and the metrics look good, the project can accelerate toward a 70% level. Why not 100%? It is too expensive to attempt to locate perfect information – instead, all decision-making is under a condition of ambiguity.

Generally, the objective for evidence-based management is to reduce the variation between what business leaders think they know versus what is supported in the research.³ The first steps of acquiring evidence is to do a search using a search engine.³ This is how the 40% confidence level is attained. In parallel, one can conduct the same research on an academic database; many college libraries are open to the public, and some larger public libraries also may provide access. I have also found Google Scholar ^TM helpful.  The benefit of using scholarly searches is that many of the journal articles are peer-reviewed; this means scholars in the field have previewed and accepted the research as valid and consistent with current knowledge. 

Beyond just finding the evidence, a manager must also assess its credibility. One way to do this is to find more than one piece of research to support a research conclusion.³

Even with the soundness supporting evidence-based management, leaders remain hesitant for a number of reasons. Here are a few outlined on Slideshare:⁴

• It takes longer to make a decision; managers want things to move fast – do it now rather than wait.

•  A leader may have found recent information that suggests an easy solution to a problem – why wait if it is simple?

• Organizational rewards may be aligned with quick action rather than tied to outcomes.

In addition, hesitancy may exist for other reasons:

• The sense that the leader looks impotent if he or she does not have the answers.

• A misunderstanding about leadership – leadership is co-sponsored by followers and leaders.

• Loss of control. If the leader needs evidence for decisions, what’s to stop all significant decisions from using evidence and diminishing the leader’s value to the company? Finally, what if workers start to challenge the leader based on evidence?

 I can see all the points made, but frankly, too many decisions bypass the appropriateness of finding evidence, and I propose it has pushed organizations toward mediocrity or failure.

Evidence is important for all significant decisions in organizations. Leaders must redefine their role as facilitators of decision-making rather than the decision-makers.

Please feel free to leave comments.

References

¹ Damasio, A.R. (1994). Descartes' Error: Emotion, Reason, and the Human Brain. New York, NY: Avon Books, Inc.

² Goodman, J.S., Gary, M.S., & Wood, R.E. (2014). “Bibliographic Search Training for Evidence-Based Education: A Review of Relevant Literatures.” Academy of Management Learning & Education, 13(3), pp. 322 - 353.

³ Kepes, S., Bennett, A.A., & McDaniel, M.A. (2014). “Evidence-Based Management and the Trustworthiness of Our Cumulative Scientific Knowledge: Implications for Teaching, Research and Practice.” Academy of Management Learning & Education, 13(3), pp. 446-466.

⁴ CEBMa Center for Evidence-Based Management, Slideshare, EBGMgt Course Module 4.  “Evidence-based Management: What is Stopping Us?” Retrieved 2-24-15 from: http://www.slideshare.net/barene/4-eb-mgtwhatisstoppingus/1

⁵ Janis, I. (1995). Groupthink. In J.T. Wren (Ed.), “The Leader's Companion” (pp. 360-373). New York: Free Press.

⁶ Janis, I.L. (1971). Groupthink. Psychology Today, pp. 43–46 and 74-75.