How managers can harness the power of evidence to make quality decisions

Management is one of mankind’s oldest practices in organised societies, and there is profuse evidence that archaeologists and historians have unearthed over the past decades that will attest to this.

In 1790BC, Babylonians wrote and observed the famous code of Hammurabi, which enshrined laws and regulations related to the transfer of goods and the conduct of trade. The Ancient Egyptians were masters of bureaucracy, adopting and maintaining very strict and tight control over the general management of people, workers and slaves. In India, classical Indian texts written around second to third century BC described how to manage society and its members. In China, Confucius believed in a regulated economy and argued in favour of a balance between supply and demand to ensure the cutting down on waste. In Ancient Greece, influential philosophers like Plato inspired millions to follow through his important work on administration entitled The Republic. And, deeply influenced by the Greeks, Romans too had their own thinkers like Virgil. Early Islam also took note of the traits of the virtuous leader, the importance of the profit motive and the need for free markets as captured in the works of Ibn Khaldun.

Management thought has remained in development throughout the later periods of world civilisation – from the medieval period to the Renaissance, with recognisable advancement in the Industrial Revolution marked by approaches such as Scientific Management and the Human Relations Movement. Modern history of management is shaped and coloured by the growth of various management disciplines like marketing, leadership, theories about people at work, strategy, international business and the growth of business education.

With time, management evolved to become both an art and a science. However, management evolution often meant that the artistic portion manifested itself as managers’ opting for choices as they feel best – or an attitude at the expense of management’s reliance on more sound evidence. Peter Drucker – an influential and revered management thinker – proposed that “‘management’ meant the substitution of thought for brawn and muscle, and of knowledge for superstition.”

Pfeffer and Sutton, two scholars from Stanford, comment on the lack of evidence-based decision making among managers, and comment that “managers are actually more ignorant than doctors about which prescriptions are reliable – and they’re less eager to find out.” This need to re-orient the art of management and give it a more scientific flavour has been felt in a number of prestigious business schools and management thinkers, culminating in the advent of Evidence-Based Management (EBM).

What is Evidence-Based Management (EBM)?

In an era where data-transformed-into-information has become so critical to decision making, EBM could not be timelier. Indeed, in management education, the ‘revolution’ of how and why managers adopt specific practices as opposed to others (e.g. evidence-based medicine or evidence-based policy) remains mostly an art in the rawest form and subject to misconceptions, cognitive biases and personal preferences for methods that seem to work only in the eyes of the beholder.

The question here is why should we emphasise ‘evidence’ to feed management practices?

William Edwards Deming is credited a dictum: ‘Without data you’re just another person with an opinion’.  Evidence is information; Information generates knowledge; and knowledge is power. Ensuring that information is reliable and valid is the challenge of every manager who acknowledges that there is little use for unreliable and/or invalid information to support decision-making.  EBM provides the tools to critically assess, evaluate and extract the best quality of information from different sources that managers access, to reduce the uncertainties around any decision that matters. Relying on old or time-tested formulae is not necessarily the ‘best’ and neither is there any guarantee for managers that depending on old formulae offers reliable results. 

Decisions lie at the core of EBM as much as making decisions lies at the heart of management practice. Decisions bear monetary, time and resources implications and are an important foundation for managers’ learning. We live in a business environment where the market topography is complex, filled with challenges, uncertainties and therefore risks. Never more has this become a reality in the current pandemic era, and this topography is increasingly in need of undoing failed business models and developing new organisational capacities to forecast and manage risk in the process of adaptation.

We have learnt so much about how managers think in making decisions, largely thanks to the pioneering works of social-cognitive psychologists and Nobel prize winners in Economics, Herbert Simon (1978) and Daniel Kahneman (2002) and others like Amos Tversky. These thinkers and scientists have shown how organisations and markets have become more complex, with an increasing factor of uncertainty revealing that in such instances, managers are more likely to resort to simplistic assumptions rather than consider the variables in the broader picture. The inception of EBM (co-founded by one of Simon’s own mentees) is intended to provide guidelines on how to regulate our methods of gathering and assessing management and business knowledge to produce better standards, results and courses of action.

Can we really portray the manager as a scientist?

I ask then: Given our understanding of the emerging complexity in organizational life, can we really portray the manager as a scientist? How do the principles underlying EBM help to accomplish this? The evidence relying manager is a critical thinker who can see the big picture composed of multitude of facts. The picture is a jigsaw puzzle of 1001 pieces, covering an entire hall. It can only be seen in its entirety if one steps back to get all pieces in plain sight. EBM is, after all, a way of thinking, rendering the manager ‘the thinker in the practitioner’. 

Evidence relying managers adopt many techniques to evaluate information prior to making a decision, without resorting to imitation and relying on copycat practices from other companies. This notion is consistent with the USA’s first Secretary of Commerce William C. Redfield’s maxim, who noted that “efficiency means keen self-criticism”.  Indeed, managers need to move out of the office to the shop-floor and challenge all that is sacred or fixed and should justify the questioning of the status quo in everything they see. Indeed, any development programme related to managers should combine four fundamental activities that are relevant to managers’ everyday judgement and decision-making. First is the use of the best scientific findings; the second relates to managers gathering and attending to organisational facts and metrics in a systematic fashion to increase information reliability and usefulness; the third is the on-going use of critical, reflective judgement and decision aids in order to reduce bias and improve decision quality; and finally, a consideration of ethical issues including the short- and long-term impact of decisions on stakeholders.

In doing so, managers would be harnessing the power of the evidence in providing more quality decisions that can mitigate against the increasing complexities and uncertainties of the new organisational shape. In doing so, managers will too become critical-thinking practitioners; indeed, managers-as-scientists!

Interested in learning more about Evidence-Based Management? Look no further.