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 / Spring 2006 / Issue 42(originally published by Booz & Company)


Why Managing by Facts Works

Here are two basic guidelines for a successful evidence-based management program:

First, act on the facts. Many managers don’t want to hear bad news, admit that they don’t know something, or learn from others. But with these shortcomings they’re doomed to operate without critical information. An excellent example of a company that sees the value in evidence-based management is DaVita, the kidney dialysis company whose mantra is “no brag, just facts.” Data is so important at DaVita that the company always reports quantitative information on patient outcomes, good or bad, even though it is not required to. And when an important measure, such as the number of patients who don’t show up for treatment, is not routinely collected, it is nonetheless included in company reports with the notation “not available” to encourage employees to figure out how to get the information.

Second, treat the organization as an unfinished prototype. Executives who use evidence-based management best encourage their employees to learn even as they act on what they already know. They regard their companies as a work in progress — one that constantly needs to be tested, probed, and experimented with, to be certain that it is evolving in the right direction. They never view their companies as “not broke, so why fix it?” They are confident enough to act on what is already known (even when knowledge is vague and incomplete), and humble enough to change course, if need be, when new information comes along. As former Intel CEO Andy Grove put it, “None of us has a real understanding of where we are heading. But decisions don’t wait for the picture to be clarified. So you take your shots and clean up the bad ones later.”

The most striking thing about evidence-based management is that it forces executives to be curious, not passive, and to be receptive, not closed, to new information. The difference between an executive who embraces evidence-based management and one who can’t see the value in it is invoked in the joke about the two economists walking down the street who spot a $20 bill on the sidewalk. The first says, “Look, a $20 bill. Let’s pick it up.” The second replies, “It can’t possibly be a $20 bill. If a $20 bill were lying on the sidewalk, someone would have picked it up by now.”

Author Profiles:

Jeffrey Pfeffer ([email protected]) is professor of organizational behavior at Stanford University Graduate School of Business. He is the coauthor, with Robert Sutton, of Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management (Harvard Business School Press, 2006).

Robert I. Sutton ([email protected]) is professor of management science and engineering at Stanford University. He specializes in organizational creativity and innovation, and the role of wisdom in organizational life and performance.
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