Would you sign-up for a medical procedure that had a 50% to
70% chance of making you sicker? Would you go ahead with it
anyway because you believe that you are smarter or better than the rest of
those losers who get the same operation? It sounds absurd, but that is what keeps happening in corporate America with merger decisions

The wisdom of some
management practices are difficult to assess with rigorous research because
existing studies report clashing results (the virtues of being a “first-mover’
is a good example). But the case against the typical merger is ironclad. A 2004
article in the Strategic Management
Journal by Professor David King and his colleagues did a “meta-analysis” of
93 studies covering over 200,000 mergers. This rigorous analysis of studies in peer-reviewed journals showed that,
on average, the negative effects of a merger on shareholder value became
evident less than a month after a merger was announced and persisted
thereafter.  The upshot is to be wary of
people – especially investment bankers – who push for mergers because, even if
you lose, they win so long as you close the deal. As economists put it, be wary
of salespeople with “perverse incentives” for you to buy their wares.

But an evidence-based approach also points to ways to beat
the odds. It turns out that when big firms buy little firms, the odds of
success are a lot higher. It turns out
that when companies pick “targets” where that fit well with their cultures, and
especially, devote intense and prolonged attention to integrating the
companies, that the odds of success go up. Jeff Pfeffer and I showed how Cisco uses these and other tricks in Hard
Facts to beat the odds. US News &
World Report writer Justin Ewers got interested in Cisco’s merger process
when he wrote a story on Hard Facts called Management Maxims in Need of a
Makeover. And he tells us that writing
that story got him interested in digging into Cisco’s merger process more
deeply to understand why they’ve made most of the 110 acquisitions they’ve done
since 1993 successful, and especially how they’ve held on to such a high
percentage of the people from these acquisitions. See Cisco’s Connections.   To me, the three most striking parts of
Ewer’s report are

1. Cisco focuses on acquiring small companies that fit well with their culture – which increases the odds of success (Their acquisition of Linksys seems to be an exception, and as a result, has been handled differently than other mergers, but most fit this pattern).
2. Cisco treats the acquisition decision as the beginning rather the end of a long and complex process. They have a 40 person team devoted to the integration process. For example, Ewer’s describes how, in a 1999 acquisition of Cerent: “On the morning that Cisco took over the company, employees arrived at work to discover they already had new titles, business cards, bosses, bonus plans, and health plans, plus access to Cisco’s computer system.” If you know about how most mergers go, this is shocking stuff!
3. Cisco sees mergers as, first, and foremost, the acquisition of people. So they focus on the developing a career path within Cisco for each person in each company they acquire.

In addition, one of the things that Jeff Pfeffer and I
discovered about Cisco is that, after every merger, they stop to examine went
well and what didn’t, and use that information to keep fine-tuning how they do
mergers.  In other words, they treat
their merger process as an unfinished prototype, and constantly try to update
it in response to new and better information – an attitude and approach that is
the hallmark of companies that practice evidence-based management.

The customer service fiasco at AOL has
received massive press attention, and the outcry is well-deserved. You can even see video of the abused
customer, Vincent Ferrari, on You Tube. AOL has
apologized and fired the abusive customer service representative, a guy named
John. Take a look at the story by Randall
Stros in today’s New York Times, it seems that poor John was fired for
doing his job, and in fact, AOL still refuses to apologize for making it so
difficult for customers to quit their service. Worse yet, John (a “retention specialist”) was apparently provided
financial incentives for persuading customers NOT to quit AOL. In other words, they fired him for doing what he was told to do. The root cause of John’s
awful actions is the incentive system, which is driven by AOL’s greed to put up
good numbers even if they frustrate customers and waste their time (Stros
estimates that the 3 million AOL customers who dropped their service in the
last year have wasted a total of over 250 years).  As my colleague Jeff Pfeffer and I show in Hard
Facts, the problem with financial incentives is that they often work too
well, causing people to focus on doing just the few things they get paid for,
even when it damages customers and the organization’s reputation. Ironically, there is evidence that having
smaller and more vague financial incentives can enhance organizational
performance because people focus on “the right thing to do” instead of “what
will put as much money in my pocket right now.”

I just read the pre-publication version of this book for the
second time, and just like the first time, my reaction was “This is one of the
most important business books ever written.” What
Sticks is written by a Chip Heath
and Dan Heath,
who are brothers, and will be published by Random House early next year. Chip is a professor at the Stanford Business
School, a social
psychologist by training, and a broad intellectual who is interested in
everything and really cares about using his work to make life better. He is also the most engaging speakers I’ve
seen, mesmerizing in a no-nonsense sort of way. IDEO’s Tom
Kelley is the only person I’ve seen in recent years who is similarly
engaging and inspiring. I don’t know
Chip’s  brother Dan, but Chip tells me he
is a sharp Harvard MBA and is now managing executive education programs at
Duke. Chip also gives Dan a lot of credit for the book’s engaging writing
style.

“What Sticks” is just as useful and just as evidence-based
as great books including Robert Cialdini’s Influence,
Malcolm Gladwell’s Tipping
Point, and Steve Levitt and Stephen Dubner’s Freakonomics. I love how the Heath brothers dissect false
stories and myths, (like “you only use 10% of your brain”) to show what kinds
ideas spread and persist, and what kinds don’t. The book focuses squarely on
using this research to help you design your own messages that will stick and
affect what people actually do.

One of my favorites is their analysis of the success of the
“Don’t Mess with Texas”
anti-littering campaign. The Heath brothers show us how, while warm and cuddly
appeals to stop litter had failed in Texas, this simple, unexpected, concrete,
credible, and emotional message – which had a toughness that appealed to
conservative rednecks, not just liberal tree-huggers – quickly became a
favorite bumper sticker, was known and could be recalled by 73% of Texans just
a few months after the campaign was launched, and roadside litter declined in
Texas declined nearly 30% within a year. The campaign was so effective that the
state abandoned other expensive anti-littering campaigns, and five years into
the “Don’t Mess With Texas” campaign, roadside litter had decreased 72%.

And it isn’t just that the Heath brothers tell such great
stories, they show how you – as a manager, a marketer, an organizational change
agent, or a politician – can craft new messages, and evaluate and alter your
current messages to have the greatest impact. What Sticks is an example of  evidence-based
management at its finest, as it draws on the best knowledge that behavioral
scientists have generated and then goes the difficult extra step of showing all
of us how to apply it.

This book deserves to be on
the best-seller list all next year and, as an added bonus, Chip Heath is my
candidate for the next Malcolm Gladwell. Of course, the future is impossible to
predict, but you really owe to yourself to buy the book and to hear Chip talk
about it.

As singer Jimmy Buffett once put it, “Some things in life
are a mystery to me, while other things are much too clear.” This is pretty much sums what I’ve learned
from studying organizations and trying to help managers apply the best
evidence. There are some things that are
really hard to solve, perhaps impossible. Take leadership. There is some good evidence out there about what
effective leaders do, but uncovering it is challenging. There is so much bad evidence and so much
ideology running through writings on effective leadership that virtually any
leadership style can be justified by some writings. When Jeff Pfeffer and I
were writing Hard Facts, he put “the leadership secrets of” in
Amazon. The first book to pop-up was
“The Leadership Secrets of Attila the Hun.” The second was “The Leadership Secrets of Santa Claus.” I just did it again, and found that Santa was
replaced by “The Leadership Secrets of Colin Powell.” If you can see a pattern there, let me know.

 At the same time, I’ve become convinced that managers and
their people would make a lot more progress if, rather than trying to just
solve complex riddles like “what is a great leader,” if, instead, they focused
more energy on things that, in fact, are both known to be true and that aren’t
that hard to implement. To quote Jeff
Pfeffer, my co-author and dear friend, one big “secret” of the best managers is
that they are “masters of the obvious.”

Consider my favorite example in Hard Facts: stand-up versus sit down meetings. A study at the
University of Missouri compared groups where people
stood-up during short (10- to 20-minute) meetings to groups where members sat.
Groups where members stood-up took about 34 percent less time to make the
assigned decision, without loss of quality. Do
the math: How many people work in your organization? How many 10- to 20 minute meetings do you
have a year? Sure, there are times when people need to sit down during
meetings, like when emotionally hot issues are discussed. But there are plenty
of times when standing is fine. Let’s consider a company that is getting a lot
of heat these days for keeping too much money from consumers, energy giant
Chevron-Texaco, which has over 50,000 employees. If each employee replaced one
20-minute sit-down meeting per year with a stand-up meeting, this study that
each meeting would be about 7 minutes shorter and be just as effective. That
would save about 6,000 hours per in employee time. The upshot is that you might
pull the chairs out of some of your conference rooms and put in some stand-up
desks instead. It might save a lot of time and money.

Or take medicine. Cancer and heart disease are tough to
cure, and billions of dollars are devoted to them – as it should be. But some
problems can be tackled with a little soap, water, and elbow grease. Almost
100,000 Americans die from infections that they catch from health care
providers and in health care settings. One of the most effective ways to cut
this number is to simply getting doctors to wash their hands after they touch
each patient; yet recent research suggests that less than 50% of doctors wash
their hands as often as they should. Some forget. Some are rushed. And some
doctors don’t believe the evidence. One
hospital that I know of in Florida fights this problem by displaying signs and
giving out buttons to patients that say “It’s OK to ask,” which means that it
is OK to ask if your doctor to wash his or her hands. The CEO of this hospital
told me that the doctors hate these buttons, as they don’t like being told what
to do. But he also reported that they seem to be more conscientious about
washing their hands!

Sure, it is worthwhile trying to solve hard problems like
what effective leaders do or how to manage creative work. But it bewilders me
why so many managers and organizations chase vague shadows, while electing to
ignore so many small, simple, and obvious things that can have such a big
impact.