Table Of ContentFree Press
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Copyright © 2007 by Philip Rosenzweig
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FREE PRESS and colophon are trademarks of Simon & Schuster, Inc.
Library of Congress Cataloging-in-Publication Data
Rosenzweig, Philip M., 1955–
The halo effect…and the eight other business delusions
that deceive managers / Phil Rosenzweig.
p. cm.
Includes bibliographical references
1. Industrial management — Philosophy. 2. Business enterprises — Public
opinion.3. Fallacies (Logic) 4. Success in business. I. Title.
HD30.19.R67 2007
658 — dc22
2006049010
ISBN-13: 978-1-4165-3858-5
ISBN-10: 1-4165-3858-5
Lyrics to “How Little We Know,” words by Carolyn Leigh and music by
Philip Springer, courtesy of Alfred Publishing, Co., Inc.
Visit us on the World Wide Web:
http://www.SimonSays.com
To my parents,
Mark and Janine Rosenzweig
Contents
Preface
Chapter One: How Little We Know
Why do some companies prosper while others fail? Despite great amounts
of research, there’s much we don’t know. While some studies of company
performance meet the standard of science, many are better described as
pseudoscience — they follow the form of science but are better described as
stories.
Chapter Two: The Story of Cisco
Cisco Systems surged in the late 1990s with a brilliant strategy, a laserlike
focus on its customers, and a masterful skill for acquisitions. When the
bubble burst, Cisco was said to have bungled its strategy, neglected its
customers, and made reckless acquisitions. History was rewritten in light of
diminished performance.
Chapter Three: Up and Down with ABB
While times were good, ABB was a New Age wonder with a great
corporate culture, a futuristic organization, and a hero at the helm. When it
collapsed, ABB was remembered as having a complacent culture, a chaotic
organization, and an arrogant leader. ABB hadn’t changed much — the
difference was mainly in the eye of the beholder.
Chapter Four: Halos All Around Us
A central problem that clouds so much of our thinking about business is The
Halo Effect. Many things we commonly believe lead to company
performance — corporate culture, leadership, and more — are often simply
attributions based on company performance.
Chapter Five: Research to the Rescue?
Can academic research about company performance overcome the Halo
Effect? Only if it measures independent variables in a way that’s truly
independent of performance. Even then, many studies have other flaws,
including The Delusion of Correlation and Causality and The Delusion of
Single Explanations.
Chapter Six: Searching for Stars, Finding Halos
Examining two well-known bestsellers, In Search of Excellence and Built to
Last, we find strong evidence of the Halo Effect as well as other errors such
as The Delusion of Connecting the Winning Dots, The Delusion of Rigorous
Research, and The Delusion of Lasting Success.
Chapter Seven: Delusions Piled High and Deep
Subsequent studies, including Good to Great, tried to be even more
elaborate and ambitious but reveal still more mistakes in their thinking
about company performance, including The Delusion of Absolute
Performance, The Delusion of the Wrong End of the Stick, and The
Delusion of Organizational Physics.
Chapter Eight: Stories, Science, and the Schizophrenic Tour de Force
Many popular business books are deeply flawed as science, but are
appealing because they work well as stories. They inspire and comfort their
readers. Yet they also focus attention on the wrong priorities and sometimes
lead managers in dangerous directions.
Chapter Nine: The Mother of All Business Questions, Take Two
So what does lead to high performance? One approach looks at just two
elements: strategic choice and execution. Yet both are full of uncertainty,
which explains why company performance can never be guaranteed and
why efforts to isolate the secrets of success will always come up short.
Chapter Ten: Managing Without Coconut Headsets
How can managers press onward without delusions? Consider a few
managers who set aside wishful thinking and guide their companies with
wisdom and clarity, recognizing the uncertain nature of business
performance and working to improve their probability of success. In
closing, a few words for wise managers.
Appendix
Notes
Bibliography
Acknowledgments
About the Author
The Halo Effect and
Other Business Delusions
Delusion One: The Halo Effect
The tendency to look at a company’s overall 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.
Delusion Two: The Delusion of Correlation and Causality
Two things may be correlated, but we may not know which one causes
which. Does employee satisfaction lead to high performance? The evidence
suggests it’s mainly the other way around — company success has a
stronger impact on employee satisfaction.
Delusion Three: The Delusion of Single Explanations
Many studies show that a particular factor — strong company culture or
customer focus or great leadership — leads to improved performance. But
since many of these factors are highly correlated, the effect of each one is
usually less than suggested.
Delusion Four: The Delusion of Connecting the Winning Dots
If we pick a number of successful companies and search for what they have
in common, we’ll never isolate the reasons for their success, because we
have no way of comparing them with less successful companies.
Delusion Five: The Delusion of Rigorous Research
If the data aren’t of good quality, it doesn’t matter how much we have
gathered or how sophisticated our research methods appear to be.
