Soapbox

April 17, 2013 2:46 pm

Don’t discount the role of research

Uncertainty in decision making is a simple fact of business life

Management scholars have heard these arguments before. . . Academic research on business is a self-aggrandising exercise by academics, for academics, that results in little practical or relevant insight for today’s managers. It is business decision making that counts – according to Larry Zicklin in a recent interview in the Financial Times – and business schools should focus on teaching decision making, or “good judgement” as Mr Zicklin puts it.

Academic research in business schools should be significantly limited to that which constitutes “good research” and research faculty should focus instead primarily on teaching.

Let’s leave aside the question of just what constitutes “good research” and how we determine whether research is good before we get the findings from that research. The biggest challenge with Mr Zicklin’s argument is a disconnect between what Mr Zicklin describes as good judgment and how we go about making good decisions. At issue here is the role of theory – a statement of the causal relationship between two or more variables. Whether we realise it or not, every decision that we make involving a prediction of some kind uses theory. What will happen if I eat a gallon of ice cream? What will happen if I touch a hot stove? Will customers purchase our new product? How will competitors react to our price increase? Answering these questions requires theory – a prediction of what will happen. Good theory should tell us the outcome with reasonable certainty. You will put on weight eating a gallon of ice cream and you will burn your hand on the hot stove. The purchase and pricing questions however are a bit harder.

As most executives will tell you, there are rarely any true right answers in business. Uncertainty in decision making is a simple fact of business life. That uncertainty means that we cannot predict with absolute precision the outcome of most business decisions. However, that uncertainty does not mean we are unable to help managers make better decisions. Indeed, business research has developed a great deal of insight on topics ranging from employee motivation, to dividend pricing, to managing innovation. This insight, when taught from the prospective of trying to guide decision making, is called theory, whether the word theory is used or not. Good theory – theory that makes reasonably reliable and valid predictions across time and contexts – comes from rigorous research that follows the scientific method.

Some of that research will lead to a dead-end. Some of it will be wrong. Some of it will yield only incremental knowledge. Some of it will yield ground-breaking new insight that shapes management practice for the coming decade. But we will not know the value of that research until we go through the research process. The underlying objective of academic research in business is to create new knowledge that helps managers make better decisions. That new knowledge forms the basis of the theoretical models so derided by Mr Zicklin. What Mr Zicklin does not seem to acknowledge however, is that without rigorously tested theory, “good judgment” is nothing more than conjecture.

As business school professors, we have done a negligible job promoting the importance of theory in business decision making. Some of it is attributable to the proliferation of management books that purport to offer causal recommendations but whose methodology is questionable at best. Some of it is attributable to the connotation of the word “theory” as being inimical to practice. Some of it has to do with the language researchers use in communicating our ideas – scholarly articles are not generally page turners. Much of it however has to do with the nature of the scientific process. Theory building takes time, sometimes decades, tends to advance in small increments and is cumulative, building incrementally from work that has come before. The time requirement and the inherent difficulties in the process of theory building is often at conflict with the speed of change in the business world. But just because we have not done a good job in communicating the importance of theory and just because developing good theory is hard work, does not mean we should stop creating theory.

As Mr Zicklin notes, there are exciting changes coming to business education. To some extent these changes have already shaken the foundation of business schools. That is a good thing – business education could use a little revolution. But to jettison the fundamental role of the creation of knowledge within the business school in the face of that change seems short-sighted. Of course, that is an open question. Perhaps research can shed some light on the answer?

The author is MBA ‘80 faculty fellow in entrepreneurship and assistant professor of entrepreneurship, Ivey Business School, Western University.

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