(Editor's note: This is the second of a two-part series on evidence-based management (EBM) by guest columnist Steve Miller of Open BI. Part 1 discussed evidence-based medicine and the evidence hierarchy as foundations for EBM. This article examines the roles of management, BI, and psychology in EBM.)

Management

Jeffrey Pfeffer and Robert Sutton, professors at Stanford University, have applied to business the pillars of evidence-based medicine outlined in Part I to promote evidence-based management. In their somewhat meandering but nevertheless insightful book, "Hard Facts Dangerous Half-Truths & Total Nonsense - Profiting from Evidence-Based Management," Pfeffer and Sutton provide ample wisdom to help businesses gain from an evidenced-based approach. For them EBM is a philosophy of thinking scientifically and systematically to solve problems. Whether it's a good physician or a good manager, evidence-based translates to "an attitude of wisdom" that has two major tenets: The use of the best-available research or intelligence for decision-making; and an obsession with evaluating the results of decisions to determine what works and what doesn't - and cataloging unintended side effects for future use. This perspective could just as easily be called "the method of doubt" that acts with the knowledge at hand while constantly challenging, testing and confirming the effectiveness of decisions.

Business Intelligence

An organizational commitment to evidence-based management is just as fundamentally a commitment to business intelligence and performance management. Data, experiments, and analytics are the grist of a successful EBM approach, providing the means to manage in a fact-driven environment by rigorously measuring and evaluating performance - and providing the bases for adjustments. Though companies that embrace EBM plan strategically, they are not slaves to a top-down strategic planning process. They iterate through "learn-as-you-go" sequences of planning and testing. In fact, a central EBM implementation principle for Pfeffer and Sutton is to treat the enterprise as an unfinished prototype - to strive for a balance between knowing and doubting. With such a prototype focus, disparate companies such as Cisco, Harrah's, Enterprise Rent-A-Car, Amazon, QVC and Yahoo! have experimented and analyzed their ways to fluid success, mindful that it often better to act on a little information now than a large amount later.

Psychology

At the same time, EBM is as much about psychology as it is about medicine, management, measurement and business intelligence. Evidence-based management culture values organizational wisdom as much as organizational IQ. Whereas IQ reflects an ability to solve problems and get correct answers quickly, wisdom denotes an understanding of the process by which correct decisions are made - with both acknowledging limits and making appropriate adjustments. In short, wisdom mandates the humility to commit to continuous learning. As Pfeffer and Sutton note: "Wise people realize that all knowledge is flawed, that the only way to keep getting better at anything is to act on what you know now and to keep updating."

Indeed, the authority to act on systematic knowledge and the doubt to constantly evaluate and learn could just as easily be called business wisdom as EBM. Business wisdom stands in stark contrast to business ideology that, unfortunately, appears to pervade today's business world. If business wisdom thrives on established intelligence and doubt, business ideology revolves on presumption and certainty. If business wisdom connotes humility and curiosity, business ideology is arrogance and apathy. If business wisdom acknowledges limits, business ideology limits acknowledgements.

It's What You Learn after You Know It All That Counts

Venerable former UCLA basketball coach John Wooden offers testimony to the wisdom of evidence-based management. The astonishing success of coach Wooden and the UCLA basketball team in winning 10 NCAA championships from 1964 to 1975 is part of college basketball lore, as is the prowess of marquee players like Gail Goodrich, Lew Alcindor and Bill Walton. Much less is known about the struggles of many of Coach Wooden's first 15 seasons at UCLA. Ironically, he probably wouldn't have gotten the opportunity to win a championship in 1963-1964 with today's win-now-or-else mentality. A fascinating March 19, 2007, Sports Illustrated article entitled "Birth of a Dynasty" chronicles Coach Wooden's "education."

UCLA enjoyed winning records in each of Coach Wooden's first 14 seasons after his hiring in 1948, qualifying for the NCAA tournament three times, but for various reasons couldn't get over the hump and make a serious run for the championship. Constantly analyzing, evaluating and modifying UCLA's approach, Coach Wooden solicited input from empowered assistant coaches, outsiders and even players, generally unafraid to make changes to improve. It was in a controversial last-minute loss to eventual champion Cincinnati in the 1962 national semi-finals where Coach Wooden learned he could play with the best and compete for a national championship.

UCLA had the makings of a title contender for the 1963-64 season with standouts Gail Goodrich, Walt Hazzard, Keith Erickson and Jack Hirsch and a diverse group of capable role players. But it was probably Coach Wooden's adherence to his documented principals in the elevation of an assistant coach - "Whatever you do in life surround yourself with smart people who'll argue with you" - that tipped the scales for UCLA. The Bruins at times had used a man-to-man press, challenging opponents off the dribble, but with modest success only. Jerry Norman lobbied for the adoption of a full-court, 2-2-1 zone press to pick up the tempo of play, making opponents advance the ball by passing, where UCLA's quickness, range and athleticism could force turnovers leading to fast-break points. Though skeptical, Coach Wooden ultimately acceded to the logic, and the 2-2-1 played perfectly into talents of the small, quick, athletic UCLA team in a plodding, big man's, Pac 10 league. UCLA ascended to No. 1 in the polls in January, concluding an undefeated season by defeating mighty Duke in the final, where the zone press fueled a decisive run of 16 unanswered points. The zone press, of course, became a staple of UCLA's incredible title run. True to his self-evaluative psychology, Coach Wooden concluded he had erred in not adopting the press earlier.

"People say he didn't have the horses before us," said Hirsch. "No - he didn't win because he wasn't a great coach. He was a good coach who filled in all the blanks." Coach Wooden agreed with the assessment. "We'd have had a little better chance in earlier years if I'd have known a little more." What I thought at first was a back-handed compliment, I later realized was highest praise from an ex-player: Coach Wooden ascended to the top of his craft not by having the very highest coaching IQ, but by exercising the best coaching wisdom. The coach's struggles, learning, and growth are comforting to a public that has come to see him as a descendent from Mt. Olympus. He subscribed fully to the mantra on his office wall that he preached constantly to his players: "When you're through learning, you're through." Coach Wooden was indeed an evidenced-based manager.

Conclusion

In the end, the most important factor underpinning a successful culture of EBM may well be a psychological obsession to evaluate, learn, adapt and grow. In her outstanding book on politically self-destructive behavior entitled "The March of Folly," Barbara Tuchman talks of "wooden-headedness," a malady of government that "consists in assessing a situation in terms of preconceived fixed notions while ignoring or rejecting contrary signs. It is acting according to wish while not allowing oneself to be deflected by the facts." Mindful of this, perhaps the lessons of evolving to the wisdom of an evidence-based management approach can best be summarized by the simple aphorism: "From wooden-headedness to john wooden-headedness."

References:

1. Jeffrey Pfeffer and Robert I. Sutton. Hard Facts Dangerous Half-Truths & Total Nonsense. Harvard Business School Press. 2006.
2. Alexander Wolff. "Birth of a Dynasty." Sports Illustrated. March 19, 2007.
3. Barbara W. Tuchman. The March of Folly - From Troy to Vietnam. Ballantine Books. 1984.
4. http://www.stanfordalumni.org/news/magazine/2006/mayjun/dept/management.html
http://www.cebm.net/ebm_is_isnt.asp

Steve Miller is co-founder of Chicago-based business intelligence services firm OpenBI, LLC. He can be reached at steve.miller@openbi.com.

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