The Halo Effect: Avoid These 9 Delusions to Think Better About BusinessHFA Staff
Here is an excerpt from 250words.com on avoiding nine delusions to think better about business and then a book review on The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers by Phil Rosenzweig
Why do some companies prosper while others fail?
“Suppose we want to find out what leads to high blood pressure,” Phil Rosenzweig writes in The Halo Effect. “We’ll never find out if we only examine patients who suffer from high blood pressure; we’ll only know if we compare them to a sample of people who don’t have high blood pressure.
The same logic applies to business and performance. Books like In Search of Excellence and Good to Great dissect eminent companies to identify traits associated with success. But if we only look at “companies that perform well, we can never hope to show what makes them different from companies that perform less well.” What looks like genuine insight might simply be a trait associated with success, but that is not responsible for success.
Avoid These 9 Delusions to Think Better About Business
This delusion—”the delusion of connecting the winning dots,” as Rosenzweig terms it—is one of nine delusions in The Halo Effect. Free Press just released the second edition of The Halo Effect. It includes a new preface and two new chapters—“Greed and the Great Recession” and “Back to the Present.” I’ve listed the original nine delusions below.
Delusion One: The Halo Effect
Delusion Two: The Delusion of Correlation and Causality
Delusion Three: The Delusion of Single Explanations
Delusion Four: The Delusion of Connecting the Winning Dots
Delusion Five: The Delusion of Rigorous Research
Delusion Six: The Delusion of Lasting Success
Delusion Seven: The Delusion of Absolute Performance
Delusion Eight: The Delusion of the Wrong End of the Stick
Delusion Nine: The Delusion of Organizational Physics.
The Halo Effect – Description
Much of our business thinking is shaped by delusions — errors of logic and flawed judgments that distort our understanding of the real reasons for a company’s performance. In a brilliant and unconventional book, Phil Rosenzweig unmasks the delusions that are commonly found in the corporate world. These delusions affect the business press and academic research, as well as many bestselling books that promise to reveal the secrets of success or the path to greatness. Such books claim to be based on rigorous thinking, but operate mainly at the level of storytelling. They provide comfort and inspiration, but deceive managers about the true nature of business success.
The most pervasive delusion is The Halo Effect. When a company’s sales and profits are up, people often conclude that it has a brilliant strategy, a visionary leader, capable employees, and a superb corporate culture. When performance falters, they conclude that the strategy was wrong, the leader became arrogant, the people were complacent, and the culture was stagnant. In fact, little may have changed — company performance creates a Halo that shapes the way we perceive strategy, leadership, people, culture, and more.
Drawing on examples from leading companies including Cisco Systems, IBM, Nokia, and ABB, Rosenzweig shows how the Halo Effect is widespread, undermining the usefulness of business bestsellers from In Search of Excellence to Built to Last and Good to Great.
Rosenzweig identifies nine popular business delusions. Among them:
- The Delusion of Absolute Performance: Company performance is relative to competition, not absolute, which is why following a formula can never guarantee results. Success comes from doing things better than rivals, which means that managers have to take risks.
- The Delusion of Rigorous Research: Many bestselling authors praise themselves for the vast amount of data they have gathered, but forget that if the data aren’t valid, it doesn’t matter how much was gathered or how sophisticated the research methods appear to be. They trick the reader by substituting sizzle for substance.
- The Delusion of Single Explanations: Many studies show that a particular factor, such as corporate culture or social responsibility or customer focus, leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested.
In what promises to be a landmark book, The Halo Effect replaces mistaken thinking with a sharper understanding of what drives business success and failure. The Halo Effect is a guide for the thinking manager, a way to detect errors in business research and to reach a clearer understanding of what drives business success and failure.
Skeptical, brilliant, iconoclastic, and mercifully free of business jargon, Rosenzweig’s book is nevertheless dead serious, making his arguments about important issues in an unsparing and direct way that will appeal to a broad business audience. For managers who want to separate fact from fiction in the world of business, The Halo Effect is essential reading — witty, often funny, and sharply argued, it’s an antidote to so much of the conventional thinking that clutters business bookshelves.
The Halo Effect – Reviews
From Publishers Weekly
This tart takedown of fashionable management theories is a refreshing antidote to the glut of simplistic books about achieving high performance. Rosenzweig, a veteran business manager turned professor, argues that most popular business ideas are no more than soothing platitudes that promise easy success to harried managers. Consultants, journalists and other pundits tap scientifically suspect methods to produce what he calls “business delusions”: deeply flawed and widely held assumptions tainted by the “halo effect,” or the need to attribute sweeping positive qualities to any company that has achieved success. Following these delusions might provide managers with a comforting story that helps them frame their actions, but it also leads them to gross simplification and to ignore the constant demands of changing technologies, markets, customers and situations. Mega-selling books like Good to Great, Rosenzweig argues, are nothing more than comforting, highbrow business fables. Unfortunately, Rosenzweig hedges his own principles for success so much that managers will find little practical use for them. His argument about the complexity of sustained achievement, and his observation that success comes down to “shrewd strategy, superb execution and good luck,” may end up limiting the market for this smart and spicy critique. (Feb. 6)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. –This text refers to an out of print or unavailable edition of this title.
“I was taken by this book. It destroys myths concerning the attribution of success in the management literature using potent empirical arguments. It should stand as one of the most important management books of all time, and an antidote to those bestselling books by gurus presenting false patter and naive arguments.” — Nassim Nicholas Taleb, author of Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“In The Halo Effect, Phil Rosenzweig has done us all a great service by speaking the unspeakable. His iconoclastic analysis is a very welcome antidote to the kind of superficial, formulaic, and dumbed-down matter that seems to be the current stock in trade of many popular business books. It’s the right book at the right time.” — John R. Kimberly, Henry Bower Professor of Entrepreneurial Studies, The Wharton School, University of Pennsylvania
“Business books all too rarely combine real-world savvy with scientific rigor. Rosenzweig’s book is an outstanding exception — it’s a superb work and long overdue.” — Philip E. Tetlock, Lorraine Tyson Mitchell II Chair in Leadership and Communication, Haas School of Business, University of California, Berkeley
“Rosenzweig doesn’t only poke fun at the mass of bad writing and bad science in the management world. He explains why it is so bad — and how you can learn from it, despite the efforts of the authors.” — John Kay, Financial Times columnist and author of Everlasting Light Bulbs: How Economics Illuminates the World