Feature of the Week

April 7, 2013 11:46 pm

Short-term decisions can have unexpected consequences

Freek Vermeulen, Associate Professor of Strategy and Entrepeneurship at London Business School and Mihaela Stan, Assistant Professor in Strategy at University College London, photographed at the London Business School©Charlie Bibby

Actions and consequences: Freek Vermeulen and Mihaela Stan

Every so often a story emerges from the world of business where the good guy wins and the bad guy loses. Admittedly this sort of occurrence is rare, but if the findings of recently published research by Freek Vermeulen of London Business School and Mihaela Stan of University College London are taken on board they could become just a little more common.

Prof Vermeulen and his co-author decided to investigate the success rates of in vitro fertilisation (IVF) clinics and compare them to how they went about selecting their patients. The fertility clinics, many of which are located in London’s Harley Street area, adjacent to London Business School, are required to publish their success rates. As most of the clinics are privately run, their fortunes depend on what percentage of their patients have live births. It is no surprise, therefore, that many of the clinics refuse to take on what they fear might be difficult cases that might not have a positive result.

“One of the competitive elements is success rate, inevitably, and you’ve got to do all that you possibly can to maximise your outcome and one of those, of course, is to select your patient,” says one senior doctor, interviewed by the professors in the course of their research.

The professors established their criteria for difficult cases which they defined as women who had failed to conceive under previous IVF treatment, women who produced relatively few eggs and women who were aged 35 or more (35 being the industry’s standard cutoff rate). They then gathered their data, entered the findings into their computer and ran their program.

The results were counter-intuitive, although of no surprise to Prof Vermeulen. The clinics who selected easier cases enjoyed an early advantage in terms of success rates, but those who were non-selective – for example the National Health Service clinics, which provide a service funded by the UK government – soon caught up and then overtook them.

“What surprises me is that it surprises people in the industry – that people are not aware at all of these long term consequences,” says Prof Vermeulen.

The problem, says Prof Vermeulen, is that people do not see the long term consequences of a decision simply because they are long term. They can only see the short term consequences.

Focusing on the easy things that seemingly make you the most money can have adverse consequences in the long run

To check their findings, the professors also investigated whether clinics with more difficult cases also brought in more specialists to deal with them or made use of superior technology. They discovered the clinics with the more difficult cases actually had no more resources than their more choosy peers. Prof Vermeulen says he therefore believes the enhanced learning and skills that clinics had to develop in order to handle more difficult cases led to the improved success rates over time.

“It’s basically a feel-good story,” he says, in which ”villain” clinics who are focused more on their bottom line eventually lose out to the heroes who are more focused on the patient.

The implications of the research are much broader, Prof Vermeulen says. Organisations should not necessarily embrace difficulties, although that could be beneficial. Rather, they should look very hard at decisions which will deliver short term gains.

“Focusing on the easy things that seemingly make you the most money can have adverse consequences in the long run,” he says.

. . .

He and Prof Stan refer to other academic studies that have shown how the adoption of a process management system such as ISO9000 can lead to a decline in innovation. Similarly, downsizing programmes to cut costs and boost profits have been shown to have adverse consequences. Outsourcing of certain activities has also been shown to have unanticipated negative effects.

“I think my main task here is simply to raise awareness that sometimes long term consequences are very different to short term consequences.”

For women hoping to use the professors’ work to inform their choice of IVF clinic there is no easy solution. Without access to the huge amount of data gathered for the research it would be hard to know what stage the clinic was at in its learning process. If, however, a clinic has turned you away, that might be no bad thing.

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