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Business

If Managers Were Scientists: 8 Things I Learned in 20 Minutes with Don Peppers

Don Peppers is:

  • a “Top 50 Business Brains” by The Times of London

  • “Top 100 Business Intellectuals” by Accenture

  • 50 “most influential thinkers in marketing and business today”; UK’s Chartered Institute for Marketing

  • Hall of Fame, Direct Marketing Association (US; 2013)

Here’s 8 things I learned in 20 minutes when interviewing him for the business podcast of the American Chamber of Commerce:

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1) Bad management decisions are rampant; many are obviously wrong in retrospect.

 

  • Over a 30-year period 90% of rail projects were built on overly optimistic passenger forecasts.

  • Billions of dollars have been spent on reducing US school sizes based on faulty statistical reasoning.

  • The leading cause of death in the US is medical mistakes, most of which could easily be avoided.

  • A majority of economists didn’t think a recession likely even after the 3 most recent had already begun.

Ohio State University management professor, Paul C. Nutt, says only about 50% of our decisions in the workplace are right.

 

So why do business managers make so many dopey decisions?

 

Because you can lead a man to data but you can’t make him think.

 

2) We have biases that afflict our decision-making.

biases

To make better decisions we need to recognize our biases.

People are inherently superstitious (ie, acting on beliefs that are not based on ration or knowledge).  As G.K. Chesteron said, “When people stop believing in God, they don’t believe in nothing, they believe in anything.”

 

Even atheists are superstitious.  In one UK survey:  30% of respondents don’t believe in God, but more than half believe “psychics have real powers”.

 

Here’s an example:

spain's christmas lottery

 

 

Traditionally, 7 x 7 = 49, not 48.  Even in Spain.

 

3)  Our natural biases dominate the way we are influenced.

We’re human, and humans always seek reciprocity, consistency, safety in numbers, and will defer to perceived authority.  That’s just how we’ve evolved.  (Robert Cialdini’s 6  Principles of Influence)

It is human nature to make judgments, then search for supporting evidence. It’s called ‘confirmation bias’ and it’s our natural tendency to place more credence in whatever facts or numbers confirm our existing beliefs.  But the economic consequences of such a flawed decision-making process are costly.

 

4)  Meta-knowledge matters more and more. 

Meta-knowledge, ie, knowledge about pre-selected knowledge, is how you know the range and limitations of your own knowledge.   It’s the difference between being competent or clueless.

 

In our Google Age, it’s less important to know facts about geography, history, or math.

 

But you still need to know that you don’t know those facts.

 

Unfortunately, research shows that less competent people are less likely to know it. In other words, they think they’re competent when in fact, they’re clueless.

 

This produces one huge managerial problem:  over-confidence.  Over-confidence is based on feeling rather than fact.  But confidence unsupported by evidence leads management into making egregiously bad decisions.

 

Mark Twain said it best:

what you know

5) Forget the fads, examine the evidence.

We can’t shed our instincts and biases but we can avoid being imprisoned by them.

Evidence-Based Management is based on structured logical thinking, facts, and rigorous analysis instead of fads and quick-fix, pseudo-solutions.  It’s the gathering of facts and evidence in order to scientifically evaluate a situation.  Only then do you take the most important step:  examine the evidence before making any judgment or decision. (Source: Robert I. Sutton).

 

Evidence-based management recruits hard facts and dismisses pre-conceived notions of how the world is or should work.  You test your assumptions instead of embracing conventional wisdom.  In evidence-based management there is no immutable truth; all preconceptions are challenged.

 

6) Failure to consider disconfirming data is the biggest flaw in management today.

When making acquisitions, Warren Buffett often employs two bankers on the same deal.

 

One banker gets a bonus if the deal goes through.

rich 1

The other gets a bonus if it doesn’t!

rich 2

Too many business leaders cling to miracle cures and fail to do the homework necessary to become evidence based managers.

 

Sure, most managers act on the best available evidence but that’s not good enough.  You need actively seek out disconfirming data, ie, data that disproves your pre-conceptions.

That takes rigor.  But managers who actually stop and think about what they are doing are usually successful.

m. twain

 

7)  Five processes for making scientific management decisions:

 

  • Ensure that your data is trustworthy.

trustable data

The old Roman adage applies:  cui bono?

Who benefits?

Apply scepticism and critical thinking to data to ensure it’s reliability.

 

  •  Search hard for disconfirming data.

 

disconfirming data

 

 

 

 

 

 

 

 

 

 

 

  • Experiment using tests and controls.

hard wired confirming data

 

 

 

 

 

 

 

 

 

 

  • Apply statistical reasoning to statistical data

  • Plan for unpredictability.

chekclist more checklists

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8. What Edwards Deming Really Said:

what Deming really said

slides COPYRIGHT © 2014. ALL RIGHTS PROTECTED AND RESERVED; Peppers &Rogers Group

 

 

 

 

 

 

 

 

 

 

 

 Your comments?

 

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About Dr. Duff Watkins [www.execsearch.com.au]

international executive search consultant / author-- dispensing career advice about how the job market really works

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