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The Halo Effect: ... and the Eight Other…

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

by Phil Rosenzweig

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  ronchan | Nov 14, 2016 |
The illogical and unreflective nature of most business writing surprises most interested outsiders, that is, writing by theorists or academics intended to be consumed by practitioners. We think, "A vein of non-ridiculous reflections on business must be extant!" This book is not from that, but is useful in that it attacks the useless works that fill business shelves.

If I may summarize:
- independent variables in business studies must be measurable independently (i.e., culture or vision is completely dependent on an organization's current success and are not useful in explaining its features).
- garbage data in, garbage analysis out.
- success rapidly fades, always faster than we hope.
- performance is relative: one must improve faster than competitors.
- Pr(long shot | success) >> Pr(success | long shot), that is, many successes were the result of long shots, but most long shots do not end in success.
- business physics is an oxymoron, as much as business magic.

Rosenzweig's observations in light of the above are:
- strategy and execution always have risk (I cannot determine if he explicitly asserts the unknowability of such risk).
- what works with one workforce may work differently in another. Causes and effects are difficult to disentangle.
- the effects of chance dominate.
- a bad outcome doesn't imply a mistake, and a good outcome doesn't imply foresight. Nassim Taleb calls this the chasm between abilities and payoff.
- once the die is cast, ignore chance: pretend that passion, vigor, and faith dominate.

My complaint is that the above are completely qualitative. This makes the book long and the examples only somewhat convincing. The core content, outlined above, is obviously "correct." No doubt we will see many more books like this soon, as authors jump to weigh in on this trend in business thought. Raynor's "The Strategy Paradox" seems to be another example.

The search for reenactments and non-academic analyses of business decisions, the business world's equivalent of military histories, continues. ( )
  aldebrn | Jul 11, 2010 |
I just finished reading Phil Rosenzweig's book "The Halo Effect...and the Eight Other Business Delusions That Deceive Managers". This book takes aim at the general run of business books and, in particular, their tendency to dress up vivid stories as scientific study. Phil does not seem to have anything against stories per se, nor does he disagree with some of the advice given in the books. What he takes issue with is the focus on a single, definitive "scientific" set of recommendations when there is no real scientific rigor behind them.

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. ( )
  jamet123 | Jul 10, 2009 |
This is a rare business and management book. But a warning is in order. It is not intended for those seeking the “secret to success” or the formula to “dominate the market.”

Phil Rosenzweig, a professor at IMD in Lausanne, Switzerland and strategy consultant, argues that much of business thinking is dominated by nine delusions:

1. The Halo Effect – many performance drivers are simply attributions based on prior performance.
2. The Delusion of Correlation and Causality – Two things may be correlated but we may not know which is the base cause.
3. The Delusion of Single Explanations – Many explanations are highly correlated; the effect of each one is usually less than suggested.
4. The Delusion of Connecting the Winning Dots – It is difficult to isolate the reasons for success. There is no way of comparing them with less successful companies.
5. The Delusion of Rigorous Research – If the data are not good, it does not matter how sophisticated the research methods appear to be.
6. The Delusion of Lasting Success – Almost all high-performing companies regress over time.
7. The Delusion of Absolute Performance – Company performance is relative, not absolute.
8. The Delusion of the Wrong End of the Stick – Highly-focused companies are often successful; yet highly-focused companies are not all successful.
9. The Delusion of Organizational Physics – Despite our quest for certainty and order, company performance does not obey the laws of nature and science.

In his final two chapters, Rosenzweig suggests ways for managers to replace delusions with a more discerning way to understand company performance.

This book carries no promises of success. Rosenzweig guarantees no successful results. He believes, and I agree, that a clear-eyed, critical and thoughtful approach to management is better than the causal tripe that dominates today’s business bookshelves.

Penned by the Pointed Pundit
February 20, 2007
9:05:47 AM ( )
  PointedPundit | Mar 23, 2008 |
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Amazon.com Product Description (ISBN 0743291255, Hardcover)

Why do some companies prosper while others fail? Despite great amounts of research, many of the studies that claim to pin down the secret of success are based in pseudoscience. The Halo Effect is the outcome of that pseudoscience, a myth that Philip Rosenzweig masterfully debunks in THE HALO EFFECT. The Halo Effect describes the tendency of experts to point to the high financial performance of a successful company and then spread its golden glow to all of the company's attributes - clear strategy, strong values, and brilliant leadership. But in fact, as Rosenzweig clearly illustrates, the experts are not just wrong, but deluded. In this irreverent and witty book, the author shows readers how to truly understand business performance. Readers will learn about the Delusion of Single Explanations, the Delusion of Absolute Performance, the Delusion of the Wrong End of the Stick, and other fantasies lovingly held by managers that ultimately destroy business success. Rosenzweig also suggests a more accurate way to think about leading a company, a robust and clearheaded approach that can save any business from ultimate failure.

(retrieved from Amazon Thu, 12 Mar 2015 18:23:28 -0400)

(see all 2 descriptions)

"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."--BOOK JACKET.… (more)

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