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

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

3.92 of 5 stars 3.92 · rating details · 565 ratings · 53 reviews

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...more 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.(less)

Hardcover, 256 pages

Published February 6th 2007 by Free Press (first published January 1st 208)

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Feb 17, 2013 Austen rated it 4 of 5 stars

If you've ever had to suffer through business management books by Jim Collins, Tom Peters, et al., this is a welcomed counterpoint. Rosenzweig spares you from having to make all the usual arguments debunking the junk science behind the outrageous claims in many of those business management books. He does acknowledge that the cheerleading component of the management gurus can have a place. But most importantly he actually engages in some of the serious academic research out there on business mana...more

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Feb 06, 2011 Michael Greenwell rated it 3 of 5 stars

I read The Halo Effect because I was unsettled by, among other business books, Jim Collins' Good to Great and Built to Last, and I was interested in reading a critique to see if the criticism matched my own misgivings. Phil Rosenzweig's book provided more than I bargained for by both tearing down Built to Last and Good to Great, and then acknowledging that they are still intriguing and potentially valuable works despite their flaws.

Specifically, Rosenzweig criticizes the kind of research practis...more

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Apr 13, 2010 Paul marked it as to-read

From HBR:
If a company is making a lot of money and you ask its employees to rate its performance on other dimensions – talent management, customer orientation, innovation, and so forth – they will give it high marks across the board. If a company is struggling financially, the ratings will be low across the board. This is due to the “halo effect,” a term coined decades ago by psychologist Edward Thorndike to describe people’s tendency, having already formed a conclusion about something’s merit,...more From HBR:
If a company is making a lot of money and you ask its employees to rate its performance on other dimensions – talent management, customer orientation, innovation, and so forth – they will give it high marks across the board. If a company is struggling financially, the ratings will be low across the board. This is due to the “halo effect,” a term coined decades ago by psychologist Edward Thorndike to describe people’s tendency, having already formed a conclusion about something’s merit, to attribute other qualities to it that are in line with that assessment.
With regard to organizational performance, it isn’t just the workforce that falls into this trap. The halo effect also distorts the judgments of analysts and journalists – and, in turn, the findings of management
researchers.
Phil Rosenzweig, a professor of strategy and international management at IMD in Switzerland, explains this problem and others in The Halo Effect…and the Eight Other Business Delusions That Deceive Managers and shows how these biases have undermined efforts to answer the “mother of all business questions”: What leads to high performance? That’s what Jim Collins famously examines in Good to Great and William Joyce and coauthors ponder in What Really Works. Rosenzweig shows, for instance, why we can’t trust John Kotter and James Heskett on the matter of
how culture drives performance. They surveyed employees and found that successful companies have strong cultures. That, says Rosenzweig, is a classic halo finding, as well as a probable muddling of cause and effect. Since people love being on winning teams, it may be that it’s the great financial results that are creating positive vibes in hallways, rather than the reverse.
The Halo Effect is immensely readable and will find an audience among management practitioners – no small feat for a text on research method. Rosenzweig crafts his narrative well, getting readers on board with his argument before putting their most beloved gurus in his crosshairs. By the end of the book, he’s getting away with borderline snarky comments he couldn’t have made in chapter one. He’s become a friend who rants but is right.
To say that this is a book for managers, though, is stretching it. The author says his goal is “to help managers become…less vulnerable to simplistic formulas and quick-fix remedies.” That’s noble, but managers are plenty skeptical about such claims. Indeed, when Rosenzweig decries the harm done by delusional research, he doesn’t put much heart into it. “Pursuing a dream of enduring greatness may divert attention from the pressing need to win immediate battles,” he notes. And “believing that performance is absolute can cause us to take our eye off rivals.” It’s all theoretically true – but just as clearly not happening.
The people who are really being saved here are management scholars. For
the ones who want to do rigorous research but don’t know how, this is as
concise and memorable a text as they’ll get. For those who’d like to get away with less, it’s fair warning. Enough of us will have read Rosenzweig to call them on it.(less)

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Jun 20, 2009 Nicholas rated it 4 of 5 stars

Shelves: business, psychology, management

This review has been hidden because it contains spoilers. To view it, click here. The basic premise was that it is very difficult to evaluate why companies are successful. The data is usually biased and easy to misinterpret or overvalue. It's also really hard to isolate particular things that help companies. Most of the pop psych books on what to do to be successful are bogus.

Paid due attention to storytelling.

Quotes tell it.

Quotes:

"Delusions
1. The Halo Effect: the tendency to look at a company's overall performance and make attributions about its culture, leadership, values,...more

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Mar 06, 2009 Jamie rated it 4 of 5 stars

No, this isn't about the video game. The full title on this one is The Halo Effect ...and the Eight Other Business Delusions that Deceive Managers. In it, author Phil Rosenzweig sets out to take the business press and best sellers to task for a list of flaws in their thinking and chest thumping. Basically, it's a list of fallacies that you could compile from the chapter titles in most books on psychology, decision-making, and behavioral economics:

1. The Halo Effect (inferring other traits on th...more No, this isn't about the video game. The full title on this one is The Halo Effect ...and the Eight Other Business Delusions that Deceive Managers. In it, author Phil Rosenzweig sets out to take the business press and best sellers to task for a list of flaws in their thinking and chest thumping. Basically, it's a list of fallacies that you could compile from the chapter titles in most books on psychology, decision-making, and behavioral economics:

1. The Halo Effect (inferring other traits on the basis of one trait, like performance)
2. The Delusion of Correlation and Causality (assuming correlation means causation)
3. The Delusion of Single Explanations (not realizing that it's all a rich tapestry; every outcome has multiple causes)
4. The Delusion of Connecting the Winning Dots (a.k.a., selection bias; the habit of studying only successes)
5. The Delusion of Rigorous Research (substituting research quantity for quality)
6. The Delusion of Lasting Success (forgetting that the nature of business means very few successes are permanant or even long-lasting)
7. The Delusion of Absolute Performance (not realizing that company performance is relative to your competition, not absolute)
8. The Delusion fo the Wrong End of the Stick (attributing success for a trait that both successful and unsuccessful companies share)
9. The Delusion of Organizational Physics (Failing to realize that human systems like the marketplace are too complex to predict perfectly)

I liked this book quite a bit, in part because I just like exploring these little kinks in human nature, but also because Rosenzweig fully committed himself to a no bullshit, no pulled punches critique of the silliness you see in the business press and best-selling books like Built to Last or Good to Great (which I thought was transparently terrible, too). His diatribes are replete with real-world examples, quotes, and data compilations, but also always cogent and centered around one of the delusions above (though sometimes they bleed together, as you might expect). He spends a fair amount of time splendidly savaging people like Jim Collins (of Good to Great fame and fortune), calling him on the carpet for making sure that facts, science, and sound methodology don't get in the way of telling an uplifting story. It's great to see someone with both the moxie to say stuff like this and the scientific training to substantiate his critiques. If the Journal of Applied Psychology were more like this, I'd read it cover to cover every issue.

My only substantial complaint about the book is that it's almost all criticism and has very little in the way of solutions beyond "don't fall into this faulty mode of thinking." The subtext of the book is that business performance is gosh-darn hard to measure and even harder to predict or influence. So what do you do? How DO you identify the qualities that make businesses better? Clearly, some are better than others. What are the methodologies by which we can evaluate things in the absence of truely scientific experiments? The Halo Effect isn't much help there. But at least the author criticizes the ways NOT to do it in an entertaining and enlightening way.(less)

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Dec 24, 2012 Shannon rated it 3 of 5 stars

Shelves: business-books

Rosenzweig is surly and a little angry or at least exhausted with the business of business book publishing and the blind, eager consumption of this rubbish by managers and executives looking for the "keys to success".

I spent the first 80 pages trying to read through the noise of the author's frustration. But I do believe there is valuable content here.

If nothing else, I am irrationally optimistic and business books provide fun nuggets that feed that addiction. While he needed a better editor to...more

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Jan 22, 2013 Drew rated it 3 of 5 stars

Shelves: business

It isn't long as is, but it really has the content of a Kindle Single. That content seems legit, with all of the "delusions" he cites having some example from popular business literature. They get a little banal after the first one though; if you've ever read an Internet comment thread you're probably familiar with delusion number two - correlation is not causation. The author also has an irritating habit of explaining the conclusions of faulty research, but not of the (few) examples of valid re...more

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Aug 02, 2012 Rick rated it 3 of 5 stars

I've always loathed business books and management books because they all usually set out with the goal of providing you with some magic formula that will make your management style or business transformational! Data tells us so! The thing is, just like any magical investing formula, if it actually worked EVERYONE would be using it and it wouldn't be some secret that has been a mystery up until the publication of said book and after publication everyone would be using it. There is no magic bullet...more

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Jun 28, 2010 Ryan rated it 4 of 5 stars

Antidote to Good to Great, In Search of Excellence, shows how writers make narrative of business qualities based on financial results (CISCO, ABB). Pretty good stuff. Some chapters are fluff, and his advice about what really works is pretty lightweight stuff. But I got some good takeaways: the normal cycle of businesses is up and down, not continuous growth. Plus the studies that show what really works have found at best about a 10% impact of management. Has a lot of delusions that are perpetuat...more

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Feb 02, 2013 Omar Halabieh rated it 5 of 5 stars

As best summarized by the author: "The central idea in this book is that our thinking about business is shaped by a number of delusions...More recently, cognitive psychologists have identified biases that affect the way individuals make decisions under uncertainty. this book is about a different set 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...more

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Jan 28, 2012 Doug Garnett rated it 5 of 5 stars

Shelves: marketing

For anyone in business, this is an outstanding book that offers up the real truths about business - that a set of 7 habits doesn't guarantee success. Instead, success is the result of simpler and higher risk reality - reality where chance plays a major role.

About time someone took apart the supposedly researched work of charlatans like Tom Peters and Jim Collins. He respects their sentiments, but shows how their "research" is self-predictive and it would require some really exceptional circumsta...more

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Jul 25, 2008 Robert rated it 5 of 5 stars

The Halo Effect:….and the Eight Other Business Delusions That Deceive Managers
Phil Rosenzweig
Free Press

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 ma...more The Halo Effect:….and the Eight Other Business Delusions That Deceive Managers
Phil Rosenzweig
Free Press

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.

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.

(less)

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Aug 24, 2011 Phil Simon rated it 5 of 5 stars

Shelves: business

Rosenzweig points out the myths with many business texts. They confuses correlation and causation, overemphasize absolute performance (at the expense of its relative counterpart), and rely far too much on hindsight. The author's justifiably suspect of business books that promise to transform your business with five simple steps--and he should be.

One of the best business books I've read in years.

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Jul 31, 2010 John rated it 5 of 5 stars

Shelves: i-own

As I've been reading up on quite a bit of business stuff lately I couldn't figure out why I really disliked a bunch of them. Turns it it's cos they're fairytales full of bad data. This book points out all the shoddy "science" in a lot of popular business literature (esp. the "X rules of Y for Z" style ones) and then offers some boring modest business advice (which is probably more helpful)

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Jul 30, 2011 Pradipta Saha added it

If Phil Rosenzweig were a CEO, I'd love to work for him. As an author, he makes perfect sense but rather belabours the point.After the first two chapters, it is all preaching to the converted, until the last two chapters (which he probably should have spent more pages on). A nice effort overall though - I normally avoid "business" books altogether, but found myself drawn into this one.

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Jan 25, 2011 Katya Kean rated it 3 of 5 stars

This book is cumbersome to read, after two weeks I'm only half way through. But as dry and soulless as it is, it has a few good albeit cynical points about the rise and fall of businesses. A good reminder not to get too swept up in simple prescriptions for success and explanations of failure. A decent exercise in critical thinking, but I don't know anyone who really needs to read it unless you are really into investing or own a large business. Or write news articles about that sort of thing.
Ok,...more

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Jul 25, 2011 Niels added it

Superb. ALl the management jibba jabba read over the last many years have just been torn to pieces. Basically takes business down to 2 variables only. Strategy and execution. Loved the exit quote.... In order to successful you need to be consisten. When you are consistent you expose yourself to vulnerability and attack - now deal with it! Great read that brings you down to earth and forces you to think about what you read in other management books... not just suck it in and believe it..

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Dec 30, 2009 Nefficus rated it 5 of 5 stars

Shelves: psychology

One of the best and most insightful books I have ever read about human behavior. This book discusses how we tend to ascribe all sorts of unjustified, unrelated positive attributes to those who possess one outstanding attribute. Thoroughly debunks the failed analyses of popular researchers like Jim Collins.

Well written and spot on...

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Aug 06, 2012 Craig a.k.a Meatstack rated it 4 of 5 stars

Shelves: 2012, audiobook, business

I have to admit, I have a bit of a soft spot for business books. I've read through all the greats. However this book has opened made me reconsider them from a whole new light.

The basic premise, the "Halo", is that when a company does well, it's reflected in the soft aspects of the company. When it does poorly the opposite is true.

So, Intel dumping it's memory chip line to focus on processors was a bold stroke and demonstrated visionary leadership because it worked. Had it not worked, business bo...more

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Jul 29, 2011 Stephen Redwood rated it 4 of 5 stars

After reading this, if you are a consultant, it will raise the bar on the level of evidence you bring to clients. If you are a client or consultant you'll be hard pressed to believe in any of the business books professing to have the answer. Excellent destruction job on the misplaced confidence of most management books.

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Apr 10, 2013 Anton rated it 5 of 5 stars

Отличная книга. Позволяет по другому взглянуть на труды вроде "несколько шагов к успеху". В книге приведен анализ таких исследований как "In Search of Exellence" и др., раскрыты ошибки. В последней главе приводятся примеры/советы по принятию решений, не поддаваясь влиянию "эффекта ореола" и других заблуждений.

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Jun 12, 2007 Kristina rated it 2 of 5 stars Recommends it for: no one

It tried so hard to separate itself from other business books, but I found it to be redundant and recalcitrant about the poor research in "Good to Great" . (Personally, didn't really care for that book either.)

Message gleaned from the book: There are so many business books out there that try to correlate specific practices with success and this book emphasizes that it is practically impossible to prove a causal relationship for a simple prescription to multi-billion dollar status. If you are doi...more

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Jan 20, 2010 Mark rated it 5 of 5 stars

My favorite business book ever. Phil effectively shows why many of the business books out there are fundamentally flawed and may lead to dangerous management practices. He gives great suggestions for avoiding those errors in thinking and evaluating performance.

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May 20, 2008 Mark rated it 5 of 5 stars

Yes, yes, yes, yes. Finally a good business book. This book basically attacks all other business books on the grounds of statistics. It seems that popular business authors either failed or didn't take Intro to Statistics. The author points this out. His main point is to be skeptical of what you read. He does make some suggestions as to "strategy." But, that may be more to please the publisher. It received a negative review from Publisher's Weekly because it didn't offer much, if any, advice. Exa...more

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Jul 27, 2008 Jonas Sørensen rated it 5 of 5 stars

Phil Rosenzweig identifies nine business delusions often encountered in academia, business and too much management literature. The most central problem that clouds thinking of business students, managers and management authors are the halo effect.

The halo effect is when you in retrospective attribute causality between success and whatever you think caused the success. The knowledge of the success is controversial for identifying plausible explanations, because it resembles the methodological mi...more

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Sep 18, 2007 Tyson Strauser rated it 3 of 5 stars

Shelves: process, finance

Dr. Rosenzweig's book provides a new lens through which he evaluates the prevailing literature concerning what turns good companies into great organizations. He argues effectively that most of the popular literature confuses attributes that were followed by an outcome as causative, rather than correlated, data points. To explain the concept, here are a few notes from the book:

Defining Halo Effect p. 50 "There are a few kinds of Halo Effect. One refers to...a tendency to make inferences about sp...more

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Mar 12, 2010 Stephen Hampshire rated it 5 of 5 stars

I don't normally put books I'm reading for work on here, but this one is absolutely brilliant.

Merged review:

I don't normally put books I'm reading for work on here, but this one is absolutely brilliant.

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Jul 28, 2009 Dimitri rated it 5 of 5 stars

Shelves: psycology, business

One of the best business book I have ever read. It explained a lot of things that were and are happening around me and in the corporate world in general.

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Jan 01, 2013 Adrienne rated it 5 of 5 stars

Why didn't I learn about The Halo Effect until the end of my MBA? This book will help you apply critical thinking to the masses of business books out there. Quite simply, there are no easy steps and no guarantees. Take the good ideas from the business literature, STUDY YOUR COMPETITION, and respond to their moves appropriately. Then cross your fingers.

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Nov 21, 2012 Tal rated it 2 of 5 stars

Important concept, one trick writing and one basic idea. I suppose if you are going to read one business book, though, this one should be it.

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