The Halo Effect and the Eight Other Business Delusions That Deceive Managers
by Phil Rosenzweig
Many business books and articles have been written about what Phil Rosenzweig calls “the mother of all business questions… What leads to high performance?” This book explains why much of this analysis is “riddled with errors.”
Using the examples of Cisco, ABB, and others, the author demonstrates the phenomenon. When times were good—strong revenue growth and a soaring stock price—these companies were praised for their exemplary strategy, culture, and CEO. When financial performance fell, the same strategy, culture, and CEO were ripped apart as severely flawed.
Why does this happen? Because we love stories. “As long as Cisco was growing and profitable and setting records for its share price, managers and journalists and professors inferred that it had a wonderful ability to listen to its customers, a cohesive culture, and a brilliant strategy. And when the bubble burst, observers were quick to make the opposite attribution. It all made sense. It told a coherent story.”
“Yet there’s a bit more to it. Our desire to tell stories, to provide a coherent direction to events, may also cause us to see trends that do not exist or infer causes incorrectly. We may ignore facts because they don’t fit into our story.”
How does this happen? Introducing the Halo Effect. Continue reading