Books : The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers

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by: Phil Rosenzweig

: The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers

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Binding: Hardcover
Dewey Decimal Number: 658
EAN: 9780743291255
ISBN: 0743291255
Label: Free Press
Manufacturer: Free Press
Number Of Items: 1
Number Of Pages: 256
Publication Date: February 06, 2007
Publisher: Free Press
Sales Rank: 26604
Studio: Free Press



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Product 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:



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.



Customer Reviews
Average Rating: out of 5 stars

Rating: 5 out of 5 stars - Polemical; Sound
This is an excellent book and expose on the issues with many business books and case studies in general. The general premise around a Halo is that we use seemingly objective and empirical data (e.g., financial performance) to ascribe attributes around things that are ambiguous or difficult to measure (e.g., culture, leadership, values, etc.). In the case of a company, high performers are often described in effusive terms by the press and its managers (while they are successful), while if the same team has lower performance six months later then the same ambiguous attributes are often described as wrong, culpable, and misguided.

The author also points out some key issues with teasing out cause-and-effect. The emblematic example is the myth that employee satisfaction predicts high performance, whereas the opposite has been shown to be true (via a methodologically sound longitudinal study) - the latter better predicts the former - employees get their bonuses, raises, promotions, etc.

I've read all of the one, two and three star reviews. It seems that the biggest issue people have with this book is that it's somewhat dour, it could be shorter, and the author is somewhat smug in "knocking" down some other business authors and books. I would agree that you could probably understand the Halo concept and some examples via an article, but you would miss out on the richness of some of the examples and exposition. For those who believe in a 5-step recipe for business success, I could see how the book could help to "burst a bubble" in terms of a simple success formula. In terms of providing recommendations, I think the author is pretty clear on valuing the following:

X scenario planning,
X sensitivity analysis,
X longitudinal studies,
X independence between predictor and outcome variables,
X relative vs. absolute performance
X and good critical thinking skills.

If you're looking for a traditional business book around the n-things to success, this is not the book. If you want to be a better critical thinker around business research and decision making, you can't go wrong with reading this book.



Rating: 4 out of 5 stars - Felt like a really important class taught by a really dry professor
This is a short book; it only seemed long. Useful, thought-provoking, and (in spite of the dry writing) very persuasive. Started and finished strong. The middle chapters droned on and on without really saying anything. Read chapters 1, 9 & 10. Skim chapters 2-8. You won't miss anything but filler added to keep book from being a really good paper.


Rating: 5 out of 5 stars - Myth Buster
Ever read one of those business books that touts the greatness of certain companies only to find that the same great companies are in the toilet a couple of years after the published date? The Built to Last companies were seemingly not built to last after all, and the companies that went from Good to Great have slid to mediocrity. Phil Rosenzweig explains that the research commonly done in these widely lauded books is invalid. It is based on people's opinions (i.e. business writers, company managers, etc.). These opinions are all clouded by the Halo Effect, and the fact that there are truckloads of information collected does not change that fact. Wikipedia defines the halo effect as a cognitive bias whereby the perception of a particular trait is influenced by the perception of the former traits in a sequence of interpretations. So, when a company is doing well, people will tend to believe that it has great leadership, there is a focused strategy, there is wonderful teamwork, etc. In other words, all aspects of the company are blanketed in the glow of the success trait. Once the company performance turns for the worse, the opposite is true.

We are great at explaining causality after the fact, and no matter how things turn out, we can provide reasons in the sound bites that people crave. If a company is doing well, it's because their diversification strategy is brilliant. If it's not, the same strategy that was praised for its brilliance is vilified for straying from the core business. The leader that was praised for vision is then chastised for addiction to foolish acquisitions.

Why is it that we continue to get this wrong? One of the main reasons is it's difficult to do controlled scientific studies on businesses. There are so many variables that can impact the direction of a business and it's very difficult to isolate any particular one. It's much easier to rely on the stories and interpretations of others.

Rosenzweig does mention certain legitimate studies, but they don't reveal the clear cut, silver bullet explanations that we desire. He also offers up his explanation for what does indeed lead to higher performance - Strategy and Execution. "If a company makes strategic choices that are shrewd, works hard to operate effectively, and is favored by Lady Luck, it may put some distance between itself and rivals, at least for a time. Success at one moment doesn't ensure success in the next because success invites new challenges, some willing to take greater risks than incumbents... There is simply no formula that can generate success."

Although the Halo Effect is the concentration of the book, as the title mentions, Rosenzweig does tend to eight other delusions as well. It's important for managers to be aware of each in order to get to the truth.

Nick McCormick - Author, Lead Well and Prosper: 15 Successful Strategies for Becoming a Good Manager


Rating: 2 out of 5 stars - Too Smug for My Taste
Rosenzweig's information is interesting in a 'myth busting' sort of way, but for my taste I didn't care for the book. Let me share with you why.

The author spendsover 150 pages chopping down the premises that Tom Peters, Jim Collins and others have shared in their best sellers. All the while, he doesn't really point out what he'd do 'differently' or 'better' or 'instead'...he just sort of scoffs at what he finds to be innacurate assessments.

(Which is debateable - the information was valid at the time, just the companies profiled often faltered in the long run.)

Finally, after much scoffing and myth-busting, he gives props to 3 CEOs/companies that meet his idea of what is 'great'.
(I say great because his earlier-mentioned targets are Jim Collins' "Good to Great" and Tom Peters' "In Search of Excellence".)

Unfortunately, The Halo Effect is written with a certain smugness that may appeal to people who are looking for people at fauly, but likely won't appeal to managers and students looking for information they can learn from and be inspired by. I bought this book with hopes that I can see what was previously done wrong and how it can be done better or differently. I was not inspired. Maybe it's just me, but my future reading will entail work by authors who can be as optimistic and inspiring as they can be honest and direct.



Rating: 5 out of 5 stars - Must read for any business manager or business analyst
If you are looking for the "Get Rich Quick" scheme or "Key to Business Success", this book is NOT for you as the author offered none of this. What he offered is far more useful and practical than any business books you would read or may have read. Rosensweig helped us to see falsehood and delusions common in our daily business "analytic", from investment reports to the thousands of business books (e.g. In Search of Excellence) which supposedly offers you the "key to success" or "factors to create greatness". From Wall Street Journal stories on "best run companies" to PBS series showcasing the "best management practice". Rosensweig showed us that the factors that create "enduring success" are just fables not supportable by facts measured by net income, operating income or investor returns. The stories of how the best managed companies as reported by popular media were just stories of halo effect which makes interesting read but offer no true causation analytics. The Reed Business Review laments that Rosenzweig failed to offer "solution". Rosenzweig clearly stated that we may not know the true reason why some business was successful while others failed. There is no one sure win strategy or business algorithm. We have a lot we don't know. He even suggested that there may be a "luck" factor involved and that the "luck" is an element reflecting the complex dynamic we operate in. Based on the operating statistics of Fortune 500, Rosenzweig seems to get it more right than Tom Peters or Jim Collins.

Maybe the true key to success is the knowledge of our own ignorance and limitations. The ability to know that we do not know instead of thinking that we know while all along, we don't even know what we don't know. Great Book and Great Help for business analysis. MUST read for any professionals in the analytic or strategic management field.

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