The Halo Effect: How Managers Let Themselves Be Deceived Paperback – 6 Oct 2008
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"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
From the Inside Flap
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.
Top customer reviews
He lays out 9 specific delusions and shows how they distort the advice in management books:
- The Halo Effect - tending of analysis of a company to reflect only the overall results
- The Delusion of Correlation and Causality - the lack of proof of causality in many situations
- The Delusion of Single Explanations - one factor is unlikely to be the reason for success or failure
- The Delusion of Connecting the Winning Dots - problems with only considering "winners"
- The Delusion of Rigorous Research - mistaking large volumes of data for good data
- The Delusion of Lasting Success - most companies trend to the mean eventually
- The Delusion of Absolute Performance - companies can do well and still fail if a competitor does better
- The Delusion of the Wrong End of the Stick - successful companies may do various things but that does not mean that doing those things will make you successful
- The Delusion of Organizational Physics - business organizations are just not that predictable
Phil uses various stories to show how the perception of companies and leaders changes when the company's performance does. He also shows how the vivid but unscientific stories that arise from this are then used as evidence by later studies. He repeatedly makes the point that the business world is not a laboratory but a messy and complex world and that this limits our ability to do analysis. He shows that rather than a specific behavior leading to strong company performance, the behavior is at least as likely to be caused by strong company performance. He likens this to Cargo Cults who hope to get planes full of goods to return by recreating the look of a jungle airstrip, mistaking cause and effect.
The overall effect is to make you take most management books with a large pinch of salt - not ignoring them, but recognizing that they are just stories, not science.
This would not be too bad, except that many academics rely heavily on the business press as the raw data for their research. After all, it is very difficult, if not impossible, to run true scientific experiments in real life business settings. So academics rely on the business press and their own investigations (much of which are also subject to the Halo Effect) and the situation becomes self perpetuating and the Halo Effect becomes even greater.
The main tenet of this book is to investigate the rationale that underlie many of our most well known business textbooks (e.g. In search of excellence, Built to last, Good to great) and points out the flaws in the logic that underpin many of these books.
Personally, when any business text claims to have the "checklist to success", I always take it with a pinch of salt. The science might be somewhat lacking, however, they do tell a great story (well, the better ones do!). So my faith in business books may not have been that seriously undermined, however, I did find this book a thoroughly interesting read.
Interesting reflexion about how "fashions" can distort our views on companies' performance.
Not only useful for managers but also for investors.
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