Postgraduate Course

Evidence-based management:

Why do we need it?

Postgraduate Course

Reason 1: Mounting criticism

”Staff in the private and public sectors are addressed on a daily basis in a language which does not express their own specific reality but the make-believe world of managers. This make-believe world is dominated by objectives couched and repeated in a theatrical rhetoric: top quality, excellence and continuous innovation”

Managers have to endure a great deal of criticism from various directions. Misuse of the position of power to one's own benefit, failure and mismanagement are the charges most commonly heard.

Postgraduate Course

Trust me, I’m a manager.

Postgraduate Course

Reason 2: Accountability

As a result of this increasing social

pressure there is an external drive for

transparency which fosters an upheaval

for ‘objective opinion’ and even ‘objective

evidence’.

Postgraduate Course

Half of what you learn will be shown to be either dead

wrong or out-of-date within 7 years of your graduation;

the trouble is that nobody can tell you which half

Reason 3: false information

Postgraduate Course

1. Incompetent people benefit more from feedback than

highly competent people.

2. Task conflict improves work group performance while

relational conflict harms it.

3. Encouraging employees to participate in decision

making is more effective for improving organizational

performance than setting performance goals.

True or false?

Postgraduate Course

How evidence-based are managers?

959 (US) + 626 (Dutch) HR professionals

35 statements, based on an extensive body of

evidence

true / false / uncertain

On average: 35% - 57% correct

HR Professionals' beliefs about effective human resource practices: correspondence between research and practice, (Rynes et al, 2002, Sanders et al 2008)

Postgraduate Course

5 years? 7 years? 10 years?

Reason 4: half time value of knowledge

Postgraduate Course

Evidence-based practice movements abound in

medicine, education, and public policy

Management research from psychology, engineering,

operations research yields 1000s of studies annually

Internet (scholar.google.com) gives ready access

Innovative companies now hiring “chief evidence

officers”

Public demands accountability (quality decisions that are

defensible)

Reason 5: The Zeitgeist

Postgraduate Course

But the MAIN reason is .....

Postgraduate Course

Bounded rationality

Postgraduate Course

Bounded rationality

System 1

Fast Intuitive, associative heuristics & biases

System 2

Slow (lazy) Deliberate, ‘reasoning’ Rational

Postgraduate Course

Bounded rationality

limbic system and brainstem(system 1)

neo cortex(system 2)

Postgraduate Course

Systeem 1: necessary to survive

Postgraduate Course

Seeing order in randomness Mental corner cutting Misinterpretation of incomplete data Halo effect False consensus effect Group think Self serving bias Sunk cost fallacy Cognitive dissonance reduction

System 1: very prone to biases

Confirmation bias Authority bias Small numbers fallacy In-group bias Recall bias Anchoring bias Inaccurate covariation detection Distortions due to plausibility

Postgraduate Course

Errors and Biases of Human Judgment

Managers and consultants hold many erroneous

beliefs, not because they are ignorant or stupid, but

because they seem to be the most sensible conclusion

consistent with their own professional experience!

(system 1 will always engage!)

Postgraduate Course

“The first principle is that you must not fool yourself - and you are the easiest person to fool”.

Richard Feynman

Postgraduate Course

I’ve been studying intuition for 45 years, and I’m no better than when I started. I make extreme predictions. I’m over-confident. I fall for every one of the biases.”

Bounded rationality

Postgraduate Course

Developing expert skill and intuition

1. A sufficiently regular, predictable environment

2. Opportunities to learn regularities through prolonged practice

and feedback

The management domain is not highly favorable to expert skill and intuition!

Postgraduate Course

“It’s hard to tell the signal from the noise. The

story the data tell us is often the one we’d like to

hear, and we usually make sure it has a happy

ending.

It is when we deny our role

in the process that the odds

of failure rise.”

Nate Silver

EBP is about the signal and the noise

Postgraduate Course

EBMgt Overcomes Limits of Unaided Decisions

Bounded Rationality

The Small Numbers Problem of Individual Experience

Prone to See Patterns Even in Random Data

Critical Thinking

Decision Supports

Research

• Large Ns > individual experience

• Controls reduce bias

The “Human” ProblemEvidence-Based Practice