Evidence-based management

Life is a series of decisions. From day to day business operations to critical decision for the future directions of a firm, managers are always demanded to make many decisions. It becomes more and more important for managers to know how to make good decisions. Imagine if you were the CEO of Amazon, what should you do to deal with the challenges from competitors? That is why you need to use evidence-based management and get your own way of problem-solving, so this approach enables managers to make rational, fact-based decisions, elevating conversations from preference and opinions to logic and insights.

Evidence-based management is an emerging movement to use and analysed via multiple, high-quality experiments, and various other types of studies and has consistently yielded positive findings. This intervention generally uses well-established facts with a high probability of effectiveness and low potential for harm.

Unfortunately, the challenge in the current business world is that many managers are not solving problems based on relevant evidence of best practices. Without measurable data, the success of any initiatives is based on nothing more than intuition and assumption. Numerous decisions are still driven by dogma and belief. They are not using creativity to make hypotheses and using innovation to solve problems. They are too afraid to try new ways, worry about failure and no original judgement. In that way, the situation is not going to change, plus the problems are not going to solve.

Nowadays, we live in a VUCA (Volatility, Uncertainty, Complexity and Ambiguity) world with too much information. Managers and entrepreneurs should think in empiricism like Sherlock Holmes to make hypotheses, then test and proof if it is right. Treat your organization as an unfinished prototype and encourage trial and error experimentations by applying the scientific method. Evidence-based practice is the applied science that contains the cleverest ideas from the past 200 years.

The movement to pay attention to evidence-based practice began when medical researchers discovered a lot of suboptimal treatments were being given, even after there was data indicating they should not be given. For example. It took almost 40 years for medical doctors and nurses to start washing their hands before surgery. Meanwhile, recent research shows doctors wash their hands only about 1/3 of the amount they should and only about 15% of physicians decisions are evidence-based. Simply asking people to act in a certain way does not work either, but need to influence them using proven psychology theories in order to make an impact.

Another example is in professional baseball field which has many myths about who are the best players and how to build winning teams. The book, Moneyball by Michael Lewis, on the other hand, shows the evidence-based way for selecting players, while facing resistance to innovation in the sports industry. The general manager demonstrated the use of strategic thinking to win the game.

Similarly, the same behaviour holds true in the business world with lots of old myths dominated. Ideology is to blame for the persistence of the first-mover-advantage myth. However, empirical evidence shows that it is more important to get it right than get it first. Amazon is not the first online bookseller while Google is not the first search engine either. The first product does not necessary to be the best in order to launch but only needs to be good enough for the users.

Other myth includes what factors are the most important for firm success. In fact, 25% is innovation and a new venture, while 10% from a good leader and CEO. Based on the survey, it shows that 17% with no goal versus 75% has specific goals leads to good performance. Therefore it is a good practice to set goals in management. Organisations would perform better if leaders knew and applied the best evidence.

Furthermore, it is a common myth from a boss in the old days that criticism, complaining and condemnation could push the staffs harder and get a better result. On the contrary, performance drops from bad emotions. Criticism demotivates people which makes employee afraid to make a mistake. Intuitively, there is a correlation between smiling and sales. If you do not rely on the study, then you would probably make a campaign to ensure every employee smiles, but this could lead to counterproductive result since, during a good sales, the employee could be too busy to smile. Also, there is little evidence that equity incentives of any kind, including stock options, enhance organizational performance.

In conclusion, it is time for managers to change how they think and act by trust of science. Collect good data to avoid unexamined ideologies. It matters to your company, as the best practices add to the performance and trump the competition. Decision-makers could look to technology to improve the use of data and analytics, measuring outcomes could provide a clearer lens through which to evaluate practices currently in use. This evidence is an opportunity for empirical analysis of change and initiatives through fact and insight.