Book Review: Hard Facts, Dangerous Half-Truths, and Total Nonsense

    By: PDMA Headquarters on Oct 02, 2013

    Book Review: Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management    

    By: Jeffrey Pfeffer and Robert I. SuttonBoston , Harvard Business School Press , 2006 . 276+x pages . 
    Review by: George Castellion

    Jeffrey Pfeffer and Robert Sutton, each with three decades of academic and consulting experience, conclude that when they want to learn a lot about a company quickly they ask the following question: “What happens when people fail?” They single out this as the best of their nine diagnostic questions for profiting from evidence-based management:

    There is no innovation without failure. Most organizational change efforts have a high failure rate—from mergers, to new product introductions, to technological change efforts. … The most succinct and useful advice we know about how to handle failure comes from medicine, where the motto is forgive and remember. Forgive so that people are willing to talk about and admit the errors that are inevitable in any human endeavor, and remember, so that the same mistakes don't occur repeatedly. … Forgiving but remembering failure promotes learning without creating a climate of fear. Remembering also helps because when the same people keep making the same mistakes again and again (and others don't), it is a sign that these people need more training or are better suited for a different job. (p. 233, italics in original)

    Battle-scarred new product practitioners, as well as inexperienced practitioners, will find other useful diagnostic questions and valuable new tools in this thought-provoking book. The authors bring insights from the emerging evidence-based management field in medicine and apply this wisdom to business. Their purpose is to show managers how to find and use better evidence in business. They also spell out why this approach produces profitable results.

    The book has three parts: “Setting the Stage,”“Dangerous Half-Truths about Managing People and Organizations,” and “From Evidence to Action.” The authors begin by cataloging the three most common poor decision practices. The first is casual (shallow) benchmarking. Benchmarkingusing other organizations' performance and experience to set standards for your organization—makes sense. The problem in the authors' view is that people practice benchmarking in a manner that is usually far too casual. Casual benchmarking seldom finds the underlying logic behind what works at top performers, why it works, and what will work at the benchmarker's organization. The second is doing what in the past (looked like it) worked. To avoid repeating the past, the authors suggest you ask some simple questions. Then, “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).

    The third flawed basis for decisions is following deeply held yet unexamined ideologies. This practice does the most damage of all three because it is the most difficult to change. The authors give a new-product example, belief in first-mover advantage—the first company to enter a market will have an edge over competitors. Evidence is unclear that such an advantage exists (Markides and Geroski, 2005). Nonetheless, this belief is widespread among people who write for and those who read the business press. The authors suggest, “To avoid succumbing to using belief or ideology over evidence, ask yourself: Is my preference for a particular management practice solely or mostly because it fits with my intuitions about people and organizations?” (p. 12).

    Chapter 2 gives six evidence-based guidelines for evaluating management ideas and knowledge. The first guideline is treat old ideas like old ideas. The authors cite an example that resonates with my Product Development and Management Association (PDMA) experience. This is the topic of incentive pay and organizational performance—where evidence-based studies repeatedly show that compensating people for individual performance creates more problems than it solves. I was director of the 1995 PDMA Frontier Dialogue on this topic. A speaker on the first day, Alfie Kohn, gave a provocative talk with plenty of evidence for his view that incentive plans cannot work (Kohn, 1993). Judging by the questions at the end of the talk, many attendees believed he was dead wrong. At the end of the second day, after dialogue and sharing of experience in small groups, the opponents of Kohn's view did 180-degree turns. After examining the evidence of their own and others' experiences, they shifted to his view. Nonetheless, my Google search in 2007 on incentive compensation new product yielded 543,000 results, with the top results touting enterprise incentive management software as a new idea to solve the individual performance problem in new product commercialization.

    The other five guidelines are as follows: (1) be suspicious of breakthrough ideas and studies; (2) celebrate and develop collective brilliance, not lone geniuses or gurus; (3) emphasize both virtues and drawbacks; (4) use success and failure stories to illustrate sound practices, not as a valid research method; and (5) take a neutral, dispassionate approach to ideologies and theories. Beyond these guidelines the authors recommend “striking a balance between arrogance (assuming you know more than you do) and insecurity (believing you know too little to act)” (p. 52).

    Part 2 contains six chapters. Each chapter title lists the half-truth examined in that chapter. Chapter 3 discusses “Is Work Fundamentally Different from The Rest of Life and Should It Be?” In their view the presumption that work is separate and uses different rules than the rest of life is widely taken for granted. However, it is a half-truth, and solid data and logic topple it. “Do the Best Organizations Have the Best People?” is the half-truth engaged in the next chapter. Their conclusions are that talent is not fixed—unless you believe it is—and great systems are often more important than great people. They explain this last conclusion with a contrast between successful and failed new product process improvement efforts in a manufacturing firm (Repenning and Sterman, 2002). Managers in the unsuccessful effort to speed product development blamed poor performance on individual skills and effort, not the system. Then the managers used a different approach for a successful effort to improve cycle time. Here managers surfaced and fought their tendency to blame and credit and instead worked on strengthening the system.

    “Do Financial Incentives Drive Company Performance?” is the question resolved in chapter 5. Their evidence appears under a subchapter heading, “Don't Try to Solve Every Problem with Financial Incentives.” They suggest that instead of using financial plans to sort people, consider trying to attract people for other reasons, such as believing in the company, liking its culture, and enjoying the work.

    “Strategy Is Destiny?” is the half-truth dealt with in then next chapter. I adapted a test suggested in the chapter and found that Google searches produced 46,200 entries for the term new product strategy and three entries for the term new product strategy implementation. Judging by the search engine's results, I found, as did Pfeffer and Sutton for their example, that figuring out what to do is more interesting to researchers than finding evidence on the capacity to do something.

    The next to last chapter in part 2 considers the pros and cons of change or die. Table 7-1 is a list of dangerous organizational changes (p. 161). Included in the look-before-you-leap changes are (1) launching a new product; (2) setting up new enterprise software; (3) quality improvement efforts; (4) business process reengineering; and (5) layoffs. It is followed by a chapter titled, “Are Great Leaders in Control of Their Companies?” The chapter explores two half-truths: (1) leaders are in control; and (2) they ought to be. When one of the authors published a review of research on leadership (Pfeffer, 1977) he found that leaders' actions rarely explain more than 10% of the differences in performance between the best and worst organizations. Here the authors assert that one of the most consistent findings in the literature on decision making and performance is that the best groups perform better than the best individuals. Groups take advantage of the collective wisdom and insight of many individuals, whereas individual judgments reflect the narrower insights and skills of one person. In the authors' view, leaders often have the most positive impact when they help build systems where the actions of a few powerful and magnificently skilled people matter least.

    Part 3, From Evidence to Action,” sums up the book's key points. In a subchapter headed “See Yourself and Your Organization as Outsiders Do” they repeat the old joke that when you hire a consultant, the consultant looks at your watch to tell you the time. They go on to say, “Unfortunately, human biases are so strong that companies may be wise to hire consultants for just that purpose” (p. 225).

    Merging the thinking of consultants and professors on dealing with decisions of unknown scope and using uncertain data is a task few bring about. I believe that Pfeffer and Sutton succeed, and this book can provide a firm foundation for decision-making in new products management. I subscribe to their rejection of the concept that only quantitative data are acceptable for evidence-based management. “Many quantitative studies are published on developing new products, but few compare to Tracy Kidder's Pulitzer Prize-winning Soul of a New Machine for capturing how engineers develop products and how managers can contribute to-or undermine-their success” (p. 40).

    Released: October 2, 2013, 1:16 pm
    Keywords: PDMA Blog

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