The Halo Effect (business book)
|Publisher||The Free Press|
|February 6, 2007|
|LC Class||HD30.19 .R67 2007|
The Halo Effect is a book by business academic Phil Rosenzweig that criticizes pseudoscientific tendencies in the explanation of business performance. The book was published by Free Press on February 6, 2007. As well as many business magazines and newspapers, the text targets specific books (those that offer secrets of guaranteed business success) and academic research published by business schools. It outlines nine "delusions": mistakes of reasoning that undermine these recipes for business success. In light of these mistakes, Rosenzweig argues, much of business writing is what Richard Feynman called "cargo cult science", having the superficial trappings of science but operating at the level of story-telling. The book also considers some more scientific business research, whose conclusions are more rigorous but do not promise a simple recipe for success. The subtitle of the 2007 US edition is "and the Eight Other Business Delusions that Deceive Managers" while that of the 2008 UK edition is "How Managers Let Themselves Be Deceived".
The author told reporters the book had been written over the course of 25 years of experience in business consultancy and academia. Rosenzweig earned his PhD at the University of Pennsylvania, before serving on the faculty at Harvard Business School and later at the International Institute for Management Development in Switzerland. His corporate career included seven years at Hewlett-Packard.
The book is critical of a genre of business books including In Search of Excellence, Good to Great, What Really Works and Built to Last. It finds similar faults with a swathe of business journalism.
- The Halo Effect of the book's title refers to the cognitive bias in which the perception of one quality is contaminated by a more readily available quality (for example good-looking people being rated as more intelligent). In the context of business, observers think they are making judgements of a company's customer-focus, quality of leadership or other virtues, but their judgement is contaminated by indicators of company performance such as share price or profitability. Correlations of, for example, customer-focus with business success then become meaningless, because success was the basis for the measure of customer focus.
- The Delusion of Correlation and Causality: mistakenly thinking that correlation is causation.
- The Delusion of Single Explanations: arguments that factor X improves performance by 40% and factor Y improves by another 40%, so both at once will result in an 80% improvement. The fallacy is that X and Y might be very strongly correlated. E.g. X might improve performance by causing Y.
- The Delusion of Connecting the Winning Dots: looking only at successful companies and finding their common features, without comparing them against unsuccessful companies.
- The Delusion of Rigorous Research: Some authors boast of the amount of data that they have collected, as though that in itself made the conclusions of the research valid.
- The Delusion of Lasting Success: the "secrets of success" books imply that lasting success is achievable, if only managers will follow their recommended approach. Rosenzweig argues that truly lasting success (outperforming the market for more than a generation) never happens in business.
- The Delusion of Absolute Performance: market performance is down to what competitors do as well as what the company itself does. A company can do everything right and yet still fall behind.
- The Delusion of the Wrong End of the Stick: getting cause the wrong way round. E.g. successful companies have a Corporate Social Responsibility policy. Should we infer that CSR contributes to success, or that profitable companies have money to spend on CSR?
- The Delusion of Organisational Physics: the idea that business performance is non-chaotically determined by discoverable factors, so that there are rules for success out there if only we can find them.
Favourable reviews of the book included Forbes, The Independent, and the Financial Times. Financial Times columnist Stefan Stern wrote that Rosenzweig "deserves acclaim for this brave, provocative piece of work" and included The Halo Effect in his top business books of the year. The Halo Effect topped a Forbes.com list of "Five Must-Read Books For The Chastened CEO In 2009," which described it as a "delightful critique, which systematically destroys the entire management jujitsu oeuvre". The Wall Street Journal recommended the book for its "trenchant view of business and business advice".
USA Today's reviewer wrote, "That a management book can be at once scientific and a palatable read is a credit to Rosenzweig's writing style and clear thinking." A favorable review in The Guardian called it a "feisty and entertaining new book". Columnist Simon Hoggart also mentioned it as a "refreshing corrective" to human gullibility. A 2008 paper in the Journal of Corporate Accounting & Finance complains that the corporate world is infected with "best practicism"; the illusion that industry leadership can be made inevitable by following a simple formula. It cites The Halo Effect as an "outstanding" book. Newsweek said the book "employs an empirical rigor often lacking in business journalism" but complains that Rosenzweig "has little to offer" to replace the books he critiques.
- Blindspots analysis
- Fooled by Randomness by Nicolas Nassim Taleb
- Good to Great
- In Search of Excellence
- Rosenzweig, Phil (February 2007). "The halo effect, and other managerial delusions". McKinsey Quarterly. McKinsey & Company. Retrieved 2009-07-03.
- Mitchell, Alan (March 8, 2007). "Business success stories are masterpieces of fiction.". Marketing Week. Centaur Publishing.
- Miller, Steve (July 31, 2007). "Interview with Phil Rosenzweig, Author of The Halo Effect". Business Intelligence Network Newsletter. Powell Media. Retrieved 2009-07-02.
- Rosenzweig, Phil (2007). "Misunderstanding the nature of company performance: the halo effect and other business delusions". California Management Review. Emerald Group Publishing. 49 (4): 6–20. doi:10.2307/41166403. ISSN 0008-1256.
- Jack, Vuyo (October 7, 2007). "Discovering the delusions of the business world". Business Report. South Africa. Retrieved 2009-07-02.[dead link]
- Rosenzweig, Phil (December 2, 2008). "Viewpoint: Britain's Most Admired?". BBC News. Retrieved 2009-07-02.
- Chernikoff, Helen (Jun 9, 2007) Management bibles are not gospel Reuters
- Teach, Edward (January 2007). "Blinded by the light: How the "halo effect" distorts our view of company performance". CFO Magazine. Retrieved 10 January 2011.
- Caulkin, Simon (March 18, 2007). "The snares and delusions of pseudoscience". The Guardian. Guardian News & Media. Retrieved 2009-07-02.
- Lisa Von Ahn (December 6, 2007). "Business Books: Titles that got attention in 2007". Reuters. Thomas Reuters. Retrieved 2009-07-02.
- Bennett, Drake (April 12, 2009). "Luck, Inc.: The 7 secrets of really, really lucky companies". The Boston Globe. Retrieved 2009-07-02.
- Archer, Michelle (February 19, 2007). "Level-headed book exposes some wrong business thinking". USA Today. Retrieved 2009-06-02.
- Stern, Stefan (January 3, 2007). "Superstar yarns that dazzle and delude". The Financial Times. Retrieved 2009-07-02.
- Nisbett, Richard E.; Timothy D. Wilson (1977). "The halo effect: Evidence for unconscious alteration of judgments". Journal of Personality and Social Psychology. American Psychological Association. 35 (4): 250–256. doi:10.1037/0022-35126.96.36.199. ISSN 1939-1315.
- "Debunking Some Hot Business Books". Forbes.com. June 3, 2007. Retrieved 2009-07-02.
- Foster, Mike (March 9, 2008). "City Eye: From heroes to zeros – the cult of personality will punish chief executives". The Independent. Independent News and Media. Retrieved 2009-07-02.
- Kay, John (May 8, 2007). "Leaders should say goodbye to their haloes". Financial Times. Retrieved 2009-07-02.
- Gurria-Quintana, Angel (December 7, 2007). "The best books of 2007". Financial Times. Retrieved 2009-07-02.
- Shaywitz, David A. (June 1, 2009). "Five Must-Read Books For The Chastened CEO In 2009". Forbes.com. Retrieved 2009-07-02.
- Hymowitz, Carol (December 24, 2007). "Some Holiday Books About Inspiration And Delusion at Work". Wall Street Journal. Dow Jones & Company. Retrieved 2009-07-02.
- Hoggart, Simon (March 17, 2007). "English joy and French sang-froid". The Guardian. Guardian News & Media. Retrieved 2009-07-02.
- Sanwal, Anand (2008). "The Myth of best practices". Journal of Corporate Accounting & Finance. Wiley Periodicals. 19 (5): 51–60. doi:10.1002/jcaf.20417.
- Sparks, John (March 19, 2007). "Quick Read". Newsweek. Retrieved 10 January 2011.