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25 August 2016

Social determinants of health, nonfinancial performance metrics, and satisficers.

Dear reader: Insights Weekly is starting a new chapter. Our spotlight topics are now accompanied by a 'newsletter' version of a PepperSlice, the capsule form of evidence-based analysis we've created at PepperSlice.com. Let me know what you think, and thanks for your continued readership. - Tracy Altman, Ugly Research

1. Is social services spending associated with better health outcomes? Yes.
Socialhealth-pepperslice-thumbnail Evidence has revealed a significant association between healthcare outcomes and the ratio of social service to healthcare spending in various OECD countries. Now a new study, published in Health Affairs, finds this same pattern within the US. The health differences were substantial. For instance, a 20% change in the median social-to-health spending ratio was associated with 85,000 fewer adults with obesity and more than 950,000 adults with mental illness. Elizabeth Bradley and Lauren Taylor explain on the RWJF Culture of Health blog.

This is great, but we wonder: Where/what is the cause-effect relationship?

The Evidence. Peer-reviewed: Variation In Health Outcomes: The Role Of Spending On Social Services, Public Health, And Health Care, 2000-09.

Data: Collected using longitudinal state-level spending data and analyzed with repeated measures multivariable modeling, retrospective.

Relationship: Social : medical spending → associated → better health outcomes

From the authors: "Reorienting attention and resources from the health care sector to upstream social factors is critical, but it’s also an uphill battle. More research is needed to characterize how the health effects of social determinants like education and poverty act over longer time horizons. Stakeholders need to use information about data on health—not just health care—to make resource allocation decisions."

#: statistical_modeling social_determinants population_health social_services health_policy

2. Are nonfinancial metrics good leading indicators of financial performance? Maybe.
Nonfinancial-metrics During the '90s and early 00's we heard a lot about Kaplan and Norton's Balanced Scorecard. A key concept was the use of nonfinancial management metrics such as customer satisfaction, employee engagement, and openness to innovation. This was thought to encourage actions that increased a company’s long-term value, rather than maximizing short-term financials.

The idea has taken hold, and nonfinancial metrics are often used in designing performance management systems and executive compensation plans. But not everyone is a fan: Some argue this can actually be harmful; for instance, execs might prioritize customer sat over other performance areas. Recent findings in the MIT Sloan Management Review look at whether these metrics truly are leading indicators of financial performance.

The Evidence. Business journal: Are Nonfinancial Metrics Good Leading Indicators of Future Financial Performance?

Data: Collected from American Customer Satisfaction Index, ExecuComp, and Compustat and analyzed with econometrics: panel data analysis.

Relationship: Nonfinancial metrics → predict → Financial performance

From the authors: "We found that there were notable variations in the lead indicator strength of customer satisfaction in a sample of companies drawn from different industries. For instance, for a chemical company in our sample, customer satisfaction’s lead indicator strength was negative; this finding is consistent with prior research suggesting that in many industries, the expense required to increase customer satisfaction can’t be justified. By contrast, for a telecommunications company we studied, customer satisfaction was a strong leading indicator; this finding is consistent with evidence showing that in many service industries, customer satisfaction reduces customer churn and price sensitivity. For a professional service firm in our sample, the lead indicator strength of customer satisfaction was weak; this is consistent with evidence showing that for such services, measures such as trust provide a clearer indication of the economic benefits than customer satisfaction.... Knowledge of whether a nonfinancial metric such as customer satisfaction is a strongly positive, weakly positive, or negative lead indicator of future financial performance can help companies avoid the pitfalls of using a nonfinancial metric to incentivize the wrong behavior."

#: customer_satisfaction nonfinancial balanced_scorecard CEO_compensation performance_management

3. Reliable evidence about p values.
Daniël Lakens (@lakens) puts it very well, saying "One of the most robust findings in psychology replicates again: Psychologists misinterpret p-values." This from Frontiers in Psychology.

4. Satisficers are happier.
Fast Company's article sounds at first just like clickbait, but they have a point. You can change how you see things, and reset your expectations. The Surprising Scientific Link Between Happiness And Decision Making.

Evidence & Insights Calendar:

September 19-21; Boston. FierceBiotech Drug Development Forum. Evaluate challenges, trends, and innovation in drug discovery and R&D. Covering the entire drug development process, from basic research through clinical trials.

September 13-14; Palo Alto, California. Nonprofit Management Institute: The Power of Network Leadership to Drive Social Change, hosted by Stanford Social Innovation Review.

September 20-22; Newark, New Jersey. Advanced Pharma Analytics. How to harness real-world evidence to optimize decision-making and improve patient-centric strategies.


Photo credit: Fat cat by brokinhrt2 on Flickr.

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