1. Evidence-Based Management

15% of doctors’ decisions are based on evidence, the other 85% on obsolete knowledge. Seasoned practitioners sometimes neglect to seek out new evidence because they trust

their own clinical experience more than they trust research. Managers get companies into trouble by using performance management and measurement practices from their own experience.

Companies differ in size, product, distribution, and target markets, so the same policy cannot and should not be applied across different companies.

Another example is making decisions that capitalize on the practitioner’s own skills. o Specialists default to the treatments with which they have the most experience and skill.

The old saying “To a hammer, everything looks like a nail” often explains what gets done. Hype and marketing also play a role in what information reaches the busy practitioner.

o For years, general physicians have referred patients with plantar warts on their feet to specialists for expensive and painful surgical procedures. Only recently has word got out that duct tape does the trick just as well.

Numerous other decisions are driven by dogma and belief. When people are overly influenced by ideology, they often fail to question whether a practice will work. o In business, the use and defense of stock options as a compensation strategy seems to be

just such a case of cherished belief trumping evidence, to the detriment of organizations. There is, in fact, little evidence that equity incentives of any kind, including stock options, enhance organizational performance. A recent review of more than 220 studies compiled by Indiana University’s Dan R. Dalton and colleagues concluded that equity ownership had no consistent effects on financial performance.

Ideology is also to blame for the persistence of the first-mover-advantage myth.o Research by Wharton’s Lisa Bolton demonstrates that most people—whether

experienced in business or naive about it—believe that the first company to enter an industry or market will have a big advantage over competitors. Yet empirical evidence is actually quite mixed as to whether such an advantage exists, and many “success stories” purported to support the first-mover advantage turn out to be false.

o Beliefs rooted in ideology or in cultural values are quite “sticky,” resist disconfirmation, and persist in affecting judgments and choice, regardless of whether they are true.

There is the problem of uncritical emulation and its business equivalent: casual benchmarking.o It is important to remember that if you only copy what other people or companies do,

the best you can be is a perfect imitation.o Benchmarking is most hazardous to organizational health, however, when used in its

“casual” form, in which the logic behind what works for top performers, why it works, and what will work elsewhere is barely unraveled.

Can Benchmarking Produce Evidence?o Do sound logic and evidence indicate that the benchmarking target’s success is

attributable to the practice we seek to emulate?o Are the conditions at our company—strategy, business model, workforce—similar

enough to those at the benchmarked company to make the learning useful?

o Why does a given practice enhance performance? And what is the logic that links it to bottom-line results?

o What are the downsides of implementing the practice even if it is a good idea overall? The decision-making process used at Oxford’s Centre for Evidence-Based Medicine starts

with a crucial first step—the situation must be framed as an answerable question. Evidence-based management could have prevented the debacle that was Enron who

mimicked GE’s ranking system. o First, managers would have immediately questioned whether their company was similar

enough to GE in various respects that a practice cribbed from it could be expected to play out in the same way.

o Then, they would have been compelled to take a harder look at the data presumably supporting forced ranking.

o Next, management would have assembled more evidence and weighed the negative against the positive. In doing so, it would have found plenty of evidence that performance improves with team continuity and time in position—two reasons to avoid the churn of what’s been called the “rank and yank” approach.

o In a Haas School of Business study of 102 business units, Douglas Cowherd and David Levine found that the greater the gap between top management’s pay and that of other employees, the lower the product quality.

o Wharton’s John Paul MacDuffie has combined quantitative studies of every automobile plant in the world with in-depth case studies to understand why some plants are more effective than others. MacDuffie has found that lean or flexible production systems—with their emphasis on teams, training, and job rotation, and their de-emphasis on status differences among employees—build higher-quality cars at a lower cost.

If you ask for evidence of efficacy every time a change is proposed, people will sit up and take notice. If you take the time to parse the logic behind that evidence, people will become more disciplined in their own thinking.

If you take the time to parse the logic behind that evidence, people will become more disciplined in their own thinking.

If you treat the organization like an unfinished prototype and encourage trial programs, pilot studies, and experimentation—and reward learning from these activities, even when something new fails—your organization will begin to develop its own evidence base.

DaVita CEO that the persistent mention of important measures that are missing helps motivate the company to figure out ways of gathering that information.

As managers or consultants make their case, pay close attention to gaps in exposition, logic, and inference. This is particularly important because, in management research, studies that use surveys or data from company records to correlate practices with various performance outcomes are far more common than experiments.

Are You Part of the Problem?o Stop treating old ideas as if they were brand-new.o Be suspicious of “breakthrough” ideas and studies.o Celebrate and develop collective brilliance.o Emphasize drawbacks as well as virtues.

o Use success (and failure) stories to illustrate sound practices, but not in place of a valid research method.

o Adopt a neutral stance toward ideologies and theories. Evidence-based management is conducted best not by know-it-alls but by managers who

profoundly appreciate how much they do not know. These managers aren’t frozen into inaction by ignorance; rather, they act on the best of their knowledge while questioning what they know.

Another tactic is to encourage inquiry and observation even when rigorous evidence is lacking and you feel compelled to act quickly.

Practicing evidence-based management often entails being a master of the mundane. Leaders who are committed to practicing evidence-based management also need to brace

themselves for a nasty side effect: When done right, it will undermine their power and prestige.

Evidence-based practice changes power dynamics, replacing formal authority, reputation, and intuition with data. This means that senior leaders—often venerated for their wisdom and decisiveness—may lose some stature as their intuitions are replaced, at least at times, by judgments based on data available to virtually any educated person.

2. The Age of Hyper Specialization

Boeing’s initiative to build the 787 Dreamliner, for example, was hailed as the epitome of subcontracting—and then proved to have gone a bridge too far when the parts failed to come together as seamlessly as envisioned, and delays ensued.

TopCoder chops its clients’ IT projects into bite-size chunks and offers them up to its worldwide community of freelance developers as competitive challenges.o In the great tradition of the division of labor, this hyperspecialization pays off.

TopCoder can often provide its clients with development work that is comparable in quality to what they would get by more traditional means but at as little as 25% of the cost.

Quality improves when more of the work that goes into a final product is done by people who are good at it. The improvement is even greater when, as with TopCoder projects, people who are good at work compete with one another to get it.

The Roche and CastingWords examples show that hyperspecialization also speeds up the innovation process.

Because hyperspecialization entails off-loading the pieces of knowledge workers’ jobs that can be done more efficiently by remote specialists, those knowledge workers immediately have time freed up to spend on the higher-value tasks that only they can do.

Regardless of task level, capitalizing on hyperspecialization will call for new managerial skills:o First, managers will need to learn how best to divide knowledge work into discrete,

assignable tasks. o Second, workers will have to be recruited and the terms of their contribution settled. o Third, the quality of the work must be ensured. o And finally, the pieces have to be integrated.

In a flow dependency, tasks occur in a sequence, with later tasks reliant on the output of earlier ones. Software tools can often manage this by tracking task status and automatically passing work from one stage to the next.

In a sharing dependency, more than one worker uses the same resource (e.g. library of software). A common way to manage this dependency is with various forms of markets and bidding.

A fit dependency occurs when separate outputs must be integrated into a whole. Modular architecture and standards can be effective in managing fit. A good example of this is Crowdforge which told a set of workers to write an outline, another set to collect facts for the sections, and another set to write the paragraphs. The system concatenated the paragraphs according to the original outlines.

The Promise of Hyperspecializationo Workers can choose their hours and tasks.o Companies can rapidly ramp capacity up and down.o Jobs can be refined to off-load lower-skilled tasks.o Traditional job-market barriers can be jumped.o Workers in developing countries get virtual mobility.

The Perils of Hyperspecializationo “Digital sweatshops” may spring up.o Tasks may be used for creating spam or astroturfing.o Work can become dull and meaningless.o More work may be done with no guarantee of payment.o Workers may be subjected to more electronic surveillance.

Establishing global rules and practices to govern hyperspecialization would be a big challenge. On one hand, the very concept of hyperspecialization cuts against the grain of many countries’ labor regulations, especially in the European Union. On the other hand, some developing economies may well resist any rules or standards, fearing they would curb growth. It might be possible to reframe knowledge work undertaken on the web as a form of international trade. Thus global rules for the exchange of knowledge work might create win-win outcomes—much as the loosening of trade restrictions, first under GATT and then under the WTO, has enabled a massive expansion of trade in goods since World War II.

3. The New Science of Building Great Teams

The key to high performance lay not in the content of a team’s discussions but in the manner in which it was communicating.

In fact, we’ve found patterns of communication to be the most important predictor of a team’s success. Not only that, but they are as significant as all the other factors—individual intelligence, personality, skill, and the substance of discussions—combined.

We found that the best predictors of productivity were a team’s energy and engagement outside formal meetings.

Average Handling Time (AHT) fell by more than 20% among lower-performing teams and decreased by 8% overall because team members were allowed a common break time.

The badges produce “sociometrics,” or measures of how people interact—such as what tone of voice they use; whether they face one another; how much they gesture; how much they talk, listen, and interrupt; and even their levels of extroversion and empathy.

o Productive teams have certain data signatures, and they’re so consistent that we can predict a team’s success simply by looking at the data—without ever meeting its members.

Successful teams share several defining characteristics:o Everyone on the team talks and listens in roughly equal measure, keeping

contributions short and sweet.o Members face one another, and their conversations and gestures are energetic.o Members connect directly with one another—not just with the team leader.o Members carry on back-channel or side conversations within the team.o Members break, go exploring outside the team, and bring information back.

Individual reasoning and talent contribute far less to team success than one might expect. The best way to build a great team is not to select individuals for their smarts or accomplishments but to learn how they communicate and to shape and guide the team so that it follows successful communication patterns.

We identified three aspects of communication that affect team performance:o The first is energy, which we measure by the number and the nature of exchanges

among team members.o The second important dimension of communication is engagement, which reflects

the distribution of energy among team members. If all members of a team have relatively equal and reasonably high energy with all other members, engagement is extremely strong.

o The third critical dimension, exploration, involves communication that members engage in outside their team.

o Our data also show that exploration and engagement, while both good, don’t easily coexist, because they require that the energy of team members be put to two different uses. Energy is a finite resource.

We know as well that the “right” number of exchanges in a team is as many as dozens per working hour, but that going beyond that ideal number decreases performance. We can also state with certainty that in a typical high-performance team, members are listening or speaking to the whole group only about half the time, and when addressing the whole group, each team member speaks for only his or her fair share of time, using brief, to-the-point statements. The other half of the time members are engaging in one-on-one conversations, which are usually quite short.

Social time turns out to be deeply critical to team performance, often accounting for more than 50% of positive changes in communication patterns.

The best-performing and most creative teams in our study, however, sought fresh perspectives constantly, from all other groups in (and some outside) the organization.

Data can now provide a foundation on which to build better individual and team performance. This happens in three steps:

o Visualization.

o Training.

Day 1 Day 7o Fine-tuning performance.

Most people, given feedback, can learn to interrupt less, say, or to face other people, or to listen more actively. Leaders should use the data to force change within their teams.

We have discovered the data signature of what we consider the best type of team member. Some might call these individuals “natural leaders.” We call them “charismatic connectors.” Badge data show that these people circulate actively, engaging people in short, high-energy conversations. They are democratic with their time—communicating with everyone equally and making sure all team members get a chance to contribute. They’re not necessarily extroverts, although they feel comfortable approaching other people. They listen as much as or more than they talk and are usually very engaged with whomever they’re listening to. We call it “energized but focused listening.”

The best team players also connect their teammates with one another and spread ideas around. And they are appropriately exploratory, seeking ideas from outside the group but not at the expense of group engagement.

4. Teamwork On the Fly

Teaming is teamwork on the fly: a pickup basketball game rather than plays run by a team that has trained as a unit for years. It’s a way to gather experts in temporary groups to solve problems they’re encountering for the first and perhaps only time.

Teaming involves both technical and interpersonal challenges. It therefore falls to leaders to draw on best practices of project management (to plan and execute in a complex and changing environment) and team leadership (to foster collaboration in shifting groups that will be inherently prone to conflict). These are called hardware and software respectively.

Hardwareo Scoping. The first step in any teaming scenario is to draw a line in the (shifting) sand

by scoping out the challenge, determining what expertise is needed, tapping collaborators, and outlining roles and responsibilities.

o Structuring. For improvisational, interdependent work carried out by a shifting mix of participants, some structuring can help the group by establishing boundaries, roles, and targets. The objective of structuring is to make it easier for teaming partners to coordinate and communicate—face-to-face or virtually. Temporary colocation is a common type of scaffold for high-priority, short-term projects in corporate settings.

o Sorting. The third step is the conscious prioritizing of tasks according to the degree of interdependence among individuals. Combining, or interdependence, can take three forms: pooled, sequential, or reciprocal.

Pooled interdependence was the very essence of the industrial era—breaking work down into small tasks that could be done and monitored individually, without input from others.

Sequential interdependence characterizes tasks that need input (information, material, or both) from someone else. Effective teaming streamlines handoffs between sequential tasks to avoid wasted time.

The management of tasks involving reciprocal interdependence—work that calls for back-and-forth communication and mutual adjustment—is most

critical to successful teaming. It’s crucial that leaders specify points when individuals or subgroups must gather—literally or virtually—to coordinate upcoming decisions and resources or to analyze and solve problems.

o One factor that distinguished the design and construction of the Water Cube from most large-scale building projects—in which different tasks are performed sequentially by different disciplines—was that all the experts came together at the beginning to brainstorm and consider the implications of various design ideas. The result was greater complexity and more need for coordination but also better design, less waste, quicker completion, and lower cost.

The Behaviors of Successful Teamingo Speaking up. Communicating honestly and directly with others by asking questions,

acknowledging errors, raising issues, and explaining ideas.o Experimenting. Taking an iterative approach to action that recognizes the novelty

and uncertainty inherent in interactions between individuals and in the possibilities and plans they develop.

o Reflecting. Observing, questioning, and discussing processes and outcomes on a consistent basis—daily, weekly, monthly—that reflects the rhythm of the work.

o Listening intently. Working hard to understand the knowledge, expertise, ideas, and opinions of others

o Integrating. Synthesizing different facts and points of view to create new possibilities.

Softwareo One challenge of any kind of teamwork is that people working together are more

vulnerable to the effects of others’ decisions and actions than people working independently. Leaders have at their disposal four software tools to combat this:

Emphasizing purpose. Purpose is fundamentally about shared values; it answers the question why we (this company, this project) exist, which can galvanize even the most diverse, amorphous team.

Building psychological safety. Because these vital interpersonal exchanges don’t always happen spontaneously, leaders must facilitate them by creating a climate of psychological safety in which it’s expected that people will speak up and disagree. A basic way to create such a climate is to model the behaviors on which teaming depends: asking thoughtful questions, acknowledging ignorance about a topic or area of expertise, and conveying awareness of one’s own fallibility.

Embracing failure. In teaming situations, leaders must ensure that all participants get over their natural desire to avoid the embarrassment and loss of confidence associated with making mistakes.

Putting conflict to work. To move forward, all parties must be pushed to consider the degree to which their positions reflect not just facts but also personal values and biases, to explain how they have arrived at their views, and to express interest in one another’s analytic journeys. In this way, people can put conflict to good use.

Learning from conflict requires us to balance our natural tendency toward advocacy (explaining, communicating, teaching) with a less spontaneous behavior: inquiry (expressions of curiosity followed by genuine listening).

A useful discipline for leaders is to force moments of reflection, asking themselves and then others, “Is this the only way to see the situation? What might I be missing?” Such exploration—even in the face of deadlines—is critical to successful teaming.

The [Risks and] Rewards of Teamingo Multiple functions must work together

Innovation from combining skills and perspective Ability to solve cross-disciplinary problems Boundary-spanning skills Understanding of other disciplines Broader perspective on the business

o People are geographically dispersed Greater alignment across divisions Better diffusion of the company’s culture Familiarity with people in different locations Deep understanding of different cultures and the organization’s operations

o Relationships are temporary More shared experience among colleagues Greater camaraderie across the company Interpersonal skills Extensive network of collaborators

o No two projects are alike Ability to meet changing customer needs Flexibility and agility Ability to import ideas from one context to another

o The work can be uncertain and chaotic Ability to manage unexpected events Project management skills Experimentation skills

5. Not So Fast

An industrial engineer from Philadelphia named Frederick Winslow Taylor invented “Scientific Management” and thus management consulting.

Matthew Stewart argues that this was all a gimmick. Management consulting isn’t a science, Stewart says; it’s a party trick.

Louis Brandeis was not convinced. Brandeis gathered Taylor’s disciples—Taylor, busy man, sent his regrets—at that 1910 meeting because he was in the process of arguing that railroad companies shouldn’t be allowed to raise their freight rates.

o Brandeis managed to get from Charles Daly, a railroad VP, that pricing was arbitrary.

o Brandeis next set about demonstrating that freight rates could be determined, scientifically, by introducing, as evidence, Taylor’s work at the Bethlehem Steel.

o Brandeis’s star witness turned out to be Frank Gilbreth, who, with his wife, specialized in motion study. Where Taylor dissected a job into timed tasks, the Gilbreths divided human action into seventeen motions, which they called “therbligs”—it’s an eponymous anagram—in order to determine the one best way to do a piece of work.

o Brandeis won the case, and Taylor became a household name. In 1911, Taylor explained his methods—Schmidt and the pig iron, Gilbreth and the bricks—in “The Principles of Scientific Management,” whose argument the business über-guru Peter Drucker once called “the most powerful as well as the most lasting contribution America has made to Western thought since the Federalist Papers.”

o Taylor is the mortar, and the Gilbreths the bricks, of every American business school. But it was Brandeis who brought Taylor national and international acclaim.

The methods used in calculating the figures were rigged.o A out half of “The Management Myth” is an exposé of management consulting (the

emperor has no clothes); the rest is Stewart’s exploration of his erstwhile profession’s checkered past (the emperor never did), although the kind of business book people have been buying for, oh, the past half century is instruction (you, too, can be an emperor!).

o Business schools have been indicted before. Earning an M.B.A. has been found to have little correlation with later business success. Business isn’t a science, critics say; it’s a set of skills, best learned on the job. Some business schools, accused of teaching nothing so much as greed, now offer ethics courses. Stewart argues that this whole conversation, about people, production, wealth, and virtue, is a conversation about ethics, and is better had within a liberal-arts curriculum.

o Scientific management didn’t just change businesses and business schools. Speeding up production meant that workers came home knackered. Some Bethlehem ironworkers were so wrecked after a Taylor-size day’s work that they couldn’t get out of bed the next morning.

o Taylor taught efficiency; Brandeis championed it; Gilbreth lived it. The Gilbreths agreed to have twelve children, six boys and six girls, and to raise them by the most scientific methods. The wonderful zaniness of the Gilbreths’ family life was recorded by two of their children in “Cheaper by the Dozen,” published in 1948.

o Lillian had an argument to make, which she put forward in “The Psychology of Management,” published in 1914: “The emphasis in successful management lies on the man, not on the work.”

o Taylor thought that men were mules. Brandeis advocated industrial democracy: workers must have a voice in how a business is run. The Gilbreths favored putting a suggestion box in the workplace.

o Brandeis insisted that, if workers were to enjoy sufficient leisure to participate in a democratic society, productivity had to be increased, but he also worried that, without unions, workers would be pushed past the limits of human endurance. That’s why unions, he believed, ought to consent to efficiency.

o She also shared Brandeis’s view that profit wasn’t everything. The whole point of efficiency, she said, was to maximize “happiness minutes.” Happiness minutes? For Lillian Gilbreth, scientific management wasn’t just a business practice; it was a habit of mind and a way of life.

o In the nineteen-twenties, she engineered model kitchens—one was called the Kitchen Efficient—and purported to eliminate, for instance, five out of every six steps in the making of coffee cake.

o If you have an island in your kitchen, or a rolling cart, or if you think about a work triangle, you’ve got Lillian Gilbreth to thank.

o Efficiency was meant to lead to a shorter workday, but, in the final two decades of the twentieth century, the average American added a hundred and sixty-four hours of work in the course of a year; that’s a whole extra month’s time, but not, typically, a month’s worth of either happiness minutes or civic participation.

o