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The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers | 
 enlarge | Author: Phil Rosenzweig
Publisher: Free Press
Category: Book
List Price: $25.00
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Avg. Customer Rating:  55 reviews
Sales Rank: 391988
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Media: Hardcover
Number Of Items: 1
Pages: 256
Shipping Weight (lbs): 0.7
Dimensions (in): 8.3 x 5.5 x 1.1
Dewey Decimal Number: 658
ASIN: B0018T0Y1C
Publication Date: February 6, 2007
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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: - 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.
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 Myth Buster September 27, 2008
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
 Too Smug for My Taste June 25, 2008
3 out of 6 found this review helpful
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.
Must read for any business manager or business analyst June 18, 2008
2 out of 3 found this review helpful
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.
Thought provoking. Full of wisdom. Valuable or not? Depends May 2, 2008
0 out of 1 found this review helpful
Unless you are willing to fight against the crowd, dont open this book, coz you will read something very different from what you had learnt or read in business schools or popular management literature that Nassim Nicholas Taleb, the author of "Black Swan" and the guru in probabilities management, praised it as one of the most important management books of all time. How dare I challenge one of the brightest living mind on this planet? In short, a must read.
p.s. Below please find some of my passages may help you grasp what the author tried to preach.
To be excellent, you have to be consistent. When you're consistent, you're vulnerable to attack. Yes, it's a paradox. Now deal with it. - Tom Peters pg 156
The answer to the question What really works? is simple: Nothing really works, at least not all the time. That's not the nature of the business world. pg 158
Nothing is provably certain. One corollary of this view is probabilistic decision making. It isnt just an intellectual construct for me, but a habit and discipline deeply rooted in my psyche. Robert E. Rubin pg 160
Success is relative, never absolute. Competitors imitate and advantages erode. Even good decisions sometimes turn out badly - which doesnt mean they were mistakes or blunders. The practices that work at one company wont have quite the same effect at another. pg 170
But when the die is cast, the best managers act as if chance is irrelevant - persistence and tenacity are everything. pg 174
How to separate the "nuggets" from the "nonsense" April 30, 2008
According to Phil Rosenzweig, "The central idea in this book is that our thinking about business is shaped by a number of delusions...the ones that distort our understanding of company performance, that make it difficult to know why one company succeeds and another fails. These errors of thinking pervade much that we read about business, whether in leading magazines or scholarly journals or management bestsellers. They cloud our ability to think clearly and critically about the nature of business." When our minds play tricks on is, the result is an illusion. "But if you think you can lace up a pair of Nikes, grab a basketball, and be like Mike [i.e. Michael Jordan], that's a delusion. You're kidding yourself." Rosenzweig identifies nine separate but somewhat related delusions, the first being the Halo Effect: "The tendency to look at a company's performance and make attributions about its culture, leadership, values, and more. In fact, many things we commonly claim drive company performance are simply attributions based on prior performance.
For example, he calls into question the validity research conducted for several of the most successful business books of recent years, notably In Search of Excellence co-authored by Tom Peters and Robert Waterman (1982) and Jim Collins' Good to Great (2001). "According to Peters and Waterman, America's best companies do not only a few of the eight exemplary practices, they do them all together. "In Search of Excellence was nothing less than an affirmation of basic principles of good management...How good was their research? Peters admitted in 2001 that the quantitative data analysis came after they had reached their findings...'I confess, we faked the data.'....Peters and Waterman went searching for excellence, but they found a handful of Halos."
"Collins claimed to explain why some companies made the leap [from good to great] while others didn't, but in fact he did nothing of the kind. Good to Great documented what was written and said about the companies that had made the leap versus those that had not - which is completely different." More specifically, Rosenzweig explains, "If you start by selecting companies based on outcome, and then gather data by conducting retrospective interviews and collecting articles from the business press, you're not likely to discover what led some companies to become Great. You'll mainly catch the glow from the Halo Effect."
Rosenzweig seems to have no quarrel whatsoever with any of the basic principles of good management that Peters and Waterman, Collins, and other prominent business book authors affirm. If I understand his ultimate objective (and I may not), it is to eliminate any delusions his reader may have about what leads to high performance in business. What then really works? "Nothing! At least not all the time." Rosenzweig concludes his book with observations that include these:
"Success rarely lasts as long as we like - for the most part, long-term success is a delusion based on selection after the fact."
"Company performance is relative, not absolute. A company can get better and fall further behind at the same time."
"Execution, too, is uncertain - what works in one company with one workforce may have different results elsewhere."
"Chance often plays a greater role than we think, or than successful managers usually think."
"The link between inputs and outcomes is tenuous. Bad outcomes don't always mean that managers made mistakes; and good outcomes don't always mean they acted brilliantly."
Rosenzweig's rigorous analysis of the nine delusions will help a reflective manager to challenge the assumptions and premises of conventional wisdom and thereby "separate the nuggets from the nonsense." That is precisely what Phil Rosenzweig did and then he wrote this book to share what he learned.
Those who share my high regard for this book are urged to check out Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting From Evidence-Based Management co-authored by Jeffrey Pfeffer and Robert Sutton as well as Pfeffer's more recently published What Were They Thinking?: Unconventional Wisdom About Management. Also Gary Hamel's The Future of Management with Bill Breen, Jim Champy's Outsmart!: How to Do What Your Competitors Can't, and Edward Lawler's Talent: Making People Your Competitive Advantage.
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