The Halo Effect Book Review
The Halo Effect: And Eight Other Business Delusions That Deceive Managers, a business management book by Phil Rosenzweig, unmasks and explores many of the errors of logic and flawed judgments commonly found in the corporate world. The Halo Effect provides serious and striking arguments to help sharpen understandings of what drives businesses to succeed or fail, all the while doing it in a witty and sometimes humorous manner free of suffocating business jargon. With that, I must give The Halo Effect my highest recommendation.
At its core, The Halo Effect is still a book about business and management. It covers success and failure, and science and storytelling. However, instead of promising to reveal the secrets of success or the formula to dominate the market, Rosezweig takes a revolutionary approach. He does not tell us “how” we should conduct business or the “what”, but asks the “why” questions so many are either afraid to ask or unable to answer. Why is it so hard to determine the factors that lead to success? Why is it that even intellectual researchers that sincerely want to uncover the secrets of success cannot find answers, even with enormous amounts of references and data gathered over many years at their disposal? Why is it so hard to understand high performance? Additionally, he focuses on the central idea that our thinking about business is shaped by a number of delusions.
His goal is to help managers think for themselves, rather than follow the never-ending parade of business and management experts, consultants, and celebrity CEO’s all claiming to have the new formula for success.
Rosenzweig specifically identifies nine specific business delusions:
The Halo Effect
- The tendency to make attributions about a company’s culture, leadership, values, and more based simply on that company’s overall performance
The Delusion of Correlation and Causality
- Two things may be correlated, but we may not know which one causes which
The Delusion of Single Explanations
- Many studies show that a particular factor leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested
The Delusion of Connecting the Winning Dots
- By only searching for what successful companies have in common, the reasons for success will never be isolated because there is no way of comparing them with less successful companies
The Delusion of Rigorous Research
- No matter how much data is gathered or how sophisticated research methods are, if the data are not of good quality then so are the results
The Delusion of Lasting Success
- Almost all high-performing companies regress over time.
The Delusion of Absolute Performance
- Company performance is relative, not absolute. A company can improve and fall further behind its rivals at the same time
The Delusion of the Wrong End of the Stick
- It may be true that successful companies often pursued a highly focused strategy, but that does not mean highly focused strategies often lead to success
The Delusion of Organizational Physics
- Company performance does not obey immutable laws of nature and cannot be predicted with the accuracy of science – despite our desire for certainty and order
He presents many real-world examples from leading companies such as Lego, Cisco Systems, Nokia, IBM, and ABB, and calls into question the validity of previous business bestsellers such as In Search of Excellence, Build to Last, and Good to Great.