Evidence-Based Decision Making

A rapidly spreading movement in the medical profession is evidence-based decision making. The business community has also begun to take notice. Pfeffer and Sutton’s recent “Harvard Business Review” article argues for evidence-based decision making in business management.

Physicians using evidence-based decision making are committed to identifying, disseminating, and applying the latest research that is soundly conducted and clinically relevant. While this makes common sense, it is not common practice.

Thousands of studies of medical practice are conducted each year. You may find the research findings disturbing. Only 15% of medical decisions are evidence based!

What do physicians rely on the other 85% of the time? It appears to be a combination of the following:

• generally accepted, but never proven, tradition
• methods in which they are most skilled
• information from vendors of products and services
• obsolete knowledge acquired in medical school

Pfeffer and Sutton believe, “managers are actually much more ignorant than doctors about which prescriptions are reliable—and less eager to find out.” A harsh accusation, but one containing a serious reason for concern.

I should point out that Pfeffer and Sutton’s research focuses on “how companies ought to be managed” (their own words). Their prescriptive, rather than descriptive, conclusions often clash with the reality of real-world business decision making. Nevertheless, their work reveals opportunities for improving our decision making effectiveness.

As I stated in my book, “Strategic Organizational Learning,” competence in any profession (medicine, management, or consulting) depends largely on the tacit knowledge gained from experience. While I am an advocate for seeking real-world professional experience, our experience will always be limited.

Pfeffer and Sutton, correctly state, “Seasoned practitioners sometimes neglect to seek out new evidence because they trust their own clinical experience more than they trust research.” They go on to say, “information acquired firsthand often feels richer and closer to real knowledge than do words and data in a journal article.”

So, what am I suggesting? Should you discount the hard-earned tacit knowledge you have acquired over many years of professional work? Of course not. But, I do recommend that you become any active member of a community of practice, read the journals in your field, and always question what you “know.”

To read more about this topic, I recommend Pfeffer and Sutton’s new book, “Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management” (Harvard Business School Press).

For more discussion on organizational effectiveness topics, check out my website www.mikebeitler.com.

Transformational Outsourcing

During the past few years, we have heard a lot of whining in the media about outsourcing and offshoring. Let’s look for the opportunities in these irreversible trends (and ignore the whiners!).

By fully leveraging offshore talent (a strategic view of global sourcing) we can improve productivity, increase quality, and create American jobs. Yes, I said “create America jobs.”

An aggressive outsourcer in Pasadena, California named IndyMac Bankcorp has risen from the twenty-second largest U.S. mortgage issuer to the number-nine position in only three years. According to IndyMac’s CEO, they are more productive, more cost efficient, more flexible, and provide better customer service than the competition because of IndyMac’s outsourcing and offshoring partners. India’s Exlservice Holdings (with a staff of 5,000) handles over 30 of IndyMac’s back-office processes, including bill collection and the “welcome calls” that assist American customers. IndyMac is also using New York-based Cognizant Technology Solutions Corporation to develop next-generation software, which will increase productivity by as much as 20% by 2008. All of this outsourcing and offshoring has led to explosive growth. IndyMac has doubled its American workforce, in just four years, to almost 6,000 jobs.

Charlotte-based Wachovia Corporation has a $1.1 billion deal with India’s Genpact to handle finance and accounting jobs, and a separate deal with Illinois-based Hewitt Associates to handle administrative and HR programs. But, it is not just about cost savings, it’s about growth! Wachovia plans to invest up to 40% of the $600 million to $1 billion in savings in core business growth. Wachovia’s Director of Corporate Development believes this is what is necessary to become a “great customer-relationship company.”

Eli Lilly and other “big pharma” companies are facing unsustainable costs to develop new drugs. Lilly now does 20% of its chemistry work in China for one-quarter of the U.S. cost. Lilly plans to expand these efforts into Russia, China, India, and Brazil.

Many new companies are using outsourcing and offshoring from the start. California-based Crimson Consulting Group (with only 14 full-time employees) is able to compete with the world’s largest consulting firms (including McKensey and Bain) by offshoring research. Crimson uses India-based Evalueserve, as well as independent experts from around the world.

Wise leaders (and consultants) are now asking for articulate outsourcing/offshoring strategies. Are you familiar with the wide array of business services, software development, and call center resources that are currently available?

For more discussion on this and related topics, please see my book entitled “Strategic Organizational Learning.” And, for free articles and other resources visit my website www.mikebeitler.com.