Evidence-based Management in Business

Abstract

Evidence-based management in business is a practice of decision making used by managers that research, study, analyze, and apply scientifically designed studies of company practices. This is a different method of decision making than historic practices based on institutional tradition, a manager's opinions, or guesswork. The movement toward evidence-based management in business has fueled new research studies and funding to produce evidence on which managers can make decisions.

Overview

Evidence-based management emerged as a result of similar decision-making trends in medicine, economics, and socio-scientific fields. The demand that managers use evidence-based decision making in their managerial practices has been supported by the vast body of literature about business management in different fields, industries, and countries. Additionally, it has fueled the development of new studies and experiments, and encouraged managers to write about their own experiments and successes in management. This body of literature offers specific information as well as generalizable take home messages. As such, it has become important for managers to be able to make decisions for larger groups of people while ensuring that they have accounted for small nuances in each office and setting.

To meet the need for evidence-based management, researchers have developed and expanded their focus on a diversity of business topics, including mergers, employee psychology, office politics, work/life balance, performance reviews, and organizational structure. This growth in the body of business-based literature has required that managers spend more time reviewing industry literature, and that they have the educational achievements to understand and process the information they are reading.

Teaching these skills early allows future managers to succeed in their jobs. Many undergraduate and graduate business programs require that their students develop strong research and analytical skills. The most successful programs may go a step further, teaching their students to produce their own case studies, utilizing local evidence that has been collected at their own companies and addressing specific problems (Dietz et al., 2014). Local evidence is helpful for managers because they are sure that the solutions proposed will work in their specific field and offices.

Additionally, managers have an easier time explaining their decisions when they are based on research that has been conducted by known associates. However, it is not always possible to rely on local evidence, and even when it is, managers may wish to make comparisons with how decisions have been made in other companies. This means that all managers need to be able to collect and assess evidence.

Applications

Evidence Gathering and Analysis. Managers are frequently trained to use six steps in the application of evidence-based management. Each of these steps needs to be done in sequence. However, a manager might stop at any part of the sequence because they have determined that the process is taking too long, that the problem which prompted the study has resolved itself, or that there is not enough evidence on a specific topic to inform their decision.

First, managers determine a specific research question to guide their study. This question might address a specific problem which a company is currently facing, such as "How can management use incentives to encourage team performance improvements?" Or managers may be looking toward the future and thinking about topics which have not yet affected their departments but may soon need attention. For example, managers might ask, "How can training and educational opportunities improve employee retention?" or "how can we foster integration of social media in the workplace?"

Second, managers will determine the best sources for finding answers to these questions. When finding research materials, managers should be mindful of how old their materials can be—it may be inadvisable to use studies which are ten years old, or a study published within the last year may introduce distortions in the data due to some one-time event. Older studies may be acceptable for questions such as not to increase morale or relationships among employees. However, for questions that address social media, computer usage, or other quickly changing tools, managers may wish to use only the most recent studies.

After setting a date range, managers may use online databases, search engines, and consult with librarians to collect studies and examples to be used in their analysis. Many managers will rely exclusively on peer-reviewed academic publications and high quality trade journals, both of which guarantee that thee published studies have been reviewed by subject matter experts, are of high quality, an have been conducted ethically. Managers who frequently make decisions based on an evidence-based management approach will develop a habit of reading each new issue of these publications. This habit both saves time when conducting research and helps managers to expect forthcoming topics and research questions.

Third, managers will read the collected publications. As they read, they must be sure that each study has been conducted in a setting similar to their own, and that results are presented with sound scientific reasoning that the manager can understand. This determination requires that managers are well trained in critical thinking, as well as statistical reasoning. It also requires that managers are honest with themselves regarding their reading comprehension and understanding of the studies. They must be sure that they fully understand why a specific intervention or change in management strategy worked and the limitations of that change. Otherwise, the manager risks taking the wrong message away from a study, and when implementing a new program, they risk either making no change or making a bad situation worse.

Fourth, after studies have been collected and read individually, managers need to combine the information that they have collected and begin to devise a new solution for their own offices and employees. This combining of multiple studies and results is very important as it ensures that the manager has examined a problem from multiple angles. Doing so allows the manager a greater chance of success as it makes it easier to present the new management strategy to colleagues and employees. Managers should not base a new decision or policy on a single study. If a manager can find only one study on their topic, they need to broaden their research question and then return to the prior step and search for more information.

Fifth, after a new policy is crafted, the manager applies that policy by explaining the change to colleagues and employees. This presentation might be made with a simple directive. For larger changes, many managers like to use a success-story. In this narrative process, the manager explains how the new change worked for one company, how research has been done to ensure that it will work in their own offices, and the rationale used to apply the solution in their own office or company. The success story works to explain the change, but it also motivates employees who oftentimes are eager to work in an improved workspace, but maybe skeptical of managers who make too many changes or make changes that do not immediately make sense to employees.

Sixth, once the new policy has been implemented, the manager must be sure to track the new policy's success. This tracking can be done through a speedy evaluation or through a systematic evaluation, which produces evidence that can be used in future decision-making situations. If the second option is chosen, then the manager has begun producing local knowledge that can inform other managers faced with similar questions and issues.

Benchmarks. Following these steps allows managers to explain the process they are using to gather and assess evidence. Additionally, they may make managers feel more comfortable with the decisions they are making for their companies. Managers who are using this process are also now equipped to make comparisons between their own industry and others through a process of benchmarking. Through the research process, managers should have determined which indicators of success are most effective, and how the best companies in their industry live up to or meet those benchmarks. with this knowledge, managers will be able to assess how well their own offices or companies are doing in comparison to others in the industry.

For example, a manager concerned with the use of social media may have collected studies that reviewed the basic themes and trends in workplace integration of social media (El Ouirdi, El Ouirdi, Segers & Hendeickx, 2015). The manager might also have looked at the effect of social media use in tourist industries (Dijkmans, Kerkof & Beukeboom, 2015) and the ways that employees view and respond to changing social media policies (Drouin, O'Connor & Schmidt, 2015). These combined studies could be used, alongside others, to form a comprehensive new policy and predict how employees would respond to that new policy. Based on this research, the manager can expect to have a successful new policy that has relied on evidence-based management.

However, even when this process is used, some managers do not trust the evidence (Kepes, Bennett & McCaniel, 2014). This distrust could be because academics and managers work in very different situations and frequently do not have the same skills or experiences on which to base their studies. Further, academics generally do not write in a way that is approachable to managers. Yet, despite these challenges, researchers have continued to produce new studies of management practices and make recommendations for managers who want to use evidence-based management.

Issues

Studies that are used in evidence-based management have been conducted in a variety of settings on many topics. One of the most famous studies addresses the question of using bonuses to improve teacher satisfaction. This program used a strategy known as merit pay, which guarantees a bonus to teachers whose students improve on national or state exams. Although the study was conducted among teachers, managers in many different fields are interested in these studies because they speak to the effect of merit or performance pay on motivating employees to do better in their work. For example, food industry managers can learn from the study of educators because these studies gauge natural human reactions to motivational sequences. These managers cannot base their decisions only on publications discussing education. However, they can include the education examples in their body of collected literature, for example, including studies which have compared merit pay in relation to employee retention (Woodhams, Lupton, Perkins & Cowling, 2015). The manager can then use these collected studies in her analysis, which is used to determine which policy should be adapted.

Reliance on evidence-based management allows managers to use "success stories" when presenting a new strategy to employees. By explaining the new policy or actions in terms of what worked well in another company, managers can build trust among employees. These success stories are most effective when they are firmly grounded in evidence. Scholars have studied the ways that managers have responded to stories of success that are not backed by evidence but nevertheless create cycles of new stories and experiments—such anecdotal evidence can result in free-rein experimentation without positive results. Additional problems occur when a manager hears a success story from one company, but takes away the wrong information or wrong message. To be successful, managers must know how to study a success story and how to produce a model from that story that contains the useful information and criteria for replicating success in their own company (Christensen, Bartman & van Bever, 2016).

Not all managers are interested in evidence-based management. This may be because they mistrust the ways that studies are produced. Or, their disinterest may be based in the threat which they feel that evidence-based management makes to their own experiences and opinions. Some managers may wonder why their tried and true methods are now in question.

Managers may also be simply overwhelmed. It can take hours each week to review the newest literature, and that time may seem wasted if the literature does not immediately reveal solutions to the manager's pressing problems or merely reiterates information the manager already has.

Additionally managers may be taking a risk when adapting the solutions outlined by new data and studies. While the study may suggest that a new method works, it is the manager, not the study which will be held accountable if the new method does not work. Because of this personal risk, companies that want to instill a practice of evidence-based management need to ensure that their managers feel safe and secure in their employment. This includes the ability to take risks, be rewarded when those risks pay off, and be confident that they will not lose their jobs if a new project or proposal fails.

Terms & Concepts

Benchmarking: The evaluation of success based on an industry standard or industry leader. Managers may determine that the best company in the industry should be their benchmark and then design policies to attempt to match the best company's success. Or, managers may decide that they will aim for the middle of the industry so that they can determine how well they are doing in comparison with average industry success.

Best Practices: Company procedures and protocols that have been determined to produce the most desirable outcomes. Best practices may be based on evidence or tradition within a company. One of the roles of evidence-based management is to ensure that best practices are backed by study and analysis, not just a gut feeling among managers.

Casual Benchmarking: This widely discouraged practice looks only at the end results of a particular management practice, not the how and why that practice is successful. New management decisions based on casual benchmarking are often unsuccessful because they are based on insufficient information and cannot adapt to a specific business environment.

Confidence-based Models: Examples and protocols for management that have been tested in many settings. Confidence-based models are preferred by managers because they have strong backing and have been proven to work in many different settings. This is different from experimentation, which might be based on evidence but does not have the backing of in-person trials in other departments or companies.

Continuous Learning: The use of evidence-based management requires that managers continually update their education. This can be through independent readings or refresher classes that provide information about the newest research and trends in management.

Success Stories: A short narration of a study or evidence that the manager uses to persuade employees and/or upper level management that a proposed policy change will be successful.

Bibliography

Christensen, C. M., Bartman, T., & Van Bever, D. (2016). The hard truth about business model innovation. MIT Sloan Management Review, 58(1), 31. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=118652576&site=ehost-live

Dietz, J., Antonakis, J., Hoffrage, U., Krings, F., Marewski, J. N., & Zehnder, C. (2014). Teaching evidence-based management with a focus on producing local evidence. Academy of Management Learning & Education, 13(3), 397–414. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=98592785&site=ehost-live

Dijkmans, C., Kerkhof, P., & Beukeboom, C. J. (2015). A stage to engage: Social media use and corporate reputation. Tourism Management, 47, 58–67.

Drouin, M., O'Connor, K. W., Schmidt, G. B., & Miller, D. A. (2015). Facebook fired: Legal perspectives and young adults' opinions on the use of social media in hiring and firing decisions. Computers in Human Behavior, 46, 123–128.

El Ouirdi, A., El Ouirdi, M., Segers, J., & Henderickx, E. (2015). Employees' use of social media technologies: A methodological and thematic review. Behavior & Information Technology, 34(5), 454–464. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=101515408&site=ehost-live

Kepes, S., Bennett, A. A., & McDaniel, M. A. (2014). Evidence-based management and the trustworthiness of our cumulative scientific knowledge: Implications for teaching, research, and practice. Academy of Management Learning & Education, 13(3), 446–466. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=98592788&site=ehost-live

Recker, J. (2015). Evidence-based business process management: Using digital opportunities to drive organizational innovation. In BPM-Driving Innovation in a Digital World (pp. 129–143). Cham: Springer.

Woodhams, C., Lupton, B., Perkins, G., & Cowling, M. (2015). Multiple disadvantage and wage growth: The effect of merit pay on pay gaps. Human Resource Management, 54(2), 283–301. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=101643306&site=ehost-live

Suggested Reading

Chotipanich, S., & Issarasak, S. (2017). A study of facility management operation strategy in shopping malls: Insights from 4 top-class shopping malls in Bangkok. Property Management, 35(3), 236–253. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=123799016&site=ehost-live

Creelman, D. (2018). Watch out for the "HR snake oil salesmen": How evidence-based management will change consulting. HR Future, 12–13. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=127423420&site=ehost-live

Daspit, J. J., Chrisman, J. J., Sharma, P., Pearson, A. W., & Long, R. G. (2017). A strategic management perspective of the family firm: Past trends, new insights, and future directions. Journal of Managerial Issues, 29(1), 6. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=121094681&site=ehost-live

Morrell, K., & Learmonth, M. (2015). Against evidence-based management, for management learning. Academy of Management Learning & Education, 14(4), 520-533. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=111805003&site=ehost-live

Palma, J. F., & Pavez, H. R. (2017). Management, innovation and business results under the Resources and Capabilities Theory. RAN, 1(3), 35–50.