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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 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.


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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 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.

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

  1. 5 out of 5

    Herve

    When I read that Nassim Nicholas Taleb said this is “one of the most important management books of all time”, I was intrigued. Usually I do not like general business books. But here, not only is it a great book, but fun to read! What is the halo effect? A tendency to make inferences about specific traits on the basis of a general impression [Page 50]. The author has a major question: Is management a science? Pages 12-17 cover that sensitive topic: “In other fields, from medicine to chemistry to ae When I read that Nassim Nicholas Taleb said this is “one of the most important management books of all time”, I was intrigued. Usually I do not like general business books. But here, not only is it a great book, but fun to read! What is the halo effect? A tendency to make inferences about specific traits on the basis of a general impression [Page 50]. The author has a major question: Is management a science? Pages 12-17 cover that sensitive topic: “In other fields, from medicine to chemistry to aeronautical engineering, knowledge seems to march ahead relentlessly. What do these fields have in common? In a word, these fields move forward thanks to a form of inquiry we call science. Richard Feynman once defined science as “a method for trying to answer questions which can be put into the form: If I do this, what will happen?” Science isn’t about beauty or truth or justice or wisdom or ethics. It’s eminently practical. It asks, If I do something over here, what will happen over there? If I apply this much force, or that much heat, or if I mix these chemicals, what will happen? By this definition, What leads to sustained profitable growth? is a scientific question. It asks, If a company does this or that, what will happen to its revenues or profits or share price?” [Page 12] “Our inability to capture the full complexity of the business world through scientific experiments has provided fodder for some critics of business schools. Management gurus Warren Bennis and James O’Toole, in 2005 Harvard Business Review article, criticized business schools for their reliance on the scientific method. They wrote: “This scientific model is predicated on the faulty assumption that business is an academic discipline like chemistry or geology when, in fact, business is a profession and business schools are professional schools – or should be”. The notion seems to be that since business will never be understood with the precision of the natural sciences, it’s best understood as a sort of humanity, a realm where the logic of scientific inquiry doesn’t apply. Well, yes and no.” [Page 14] Rozenzweig concludes this 1st chapter with a beautiful story (page 16), again from Richard Feynman: In the South Seas, there is a cult of people. During the war they saw airplanes land with lots of materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas – he’s the controller. And they wait for the airplanes to land. They’re doing everything right. The form is perfect. But it doesn’t work. No airplanes land. So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land. He called that last section Science, Pseudoscience and Coconut Headsets. Storytelling and science His criticism in chapter 6 of famous bestsellers In Search of Excellence by Peters and Waterman [page 83] and then of Built to Last by Collins and Porras [page 94] are particularly striking. Stories and science are different and the author explains many delusions created by approximate science: #1: The Hallo Effect #2: The delusion of Correlation and Causality #3: The Delusion of Single Explanations #4: The Delusion of Connecting the Winning Dots #5: The Delusion of Rigorous Research #6: The Delusion of Lasting Success #7: The Delusion of Absolute Performance #8: The Delusion of the Wrong End of the Stick #9: The Delusion of Organizational Physics. (if you are too lazy to read this great book, have at least a look at https://en.wikipedia.org/wiki/The_Hal...) Rosenzweig tries to explain the complexity of measuring company performance. What are the key elements that managers should take into account for excellence? And Rosenzweig shows that storytelling has been as important as research in that quest. He further claims that authors of bestsellers such as In Search of Excellence, Built to Last or From Good to Great who claim their results were based on research, indeed were more excellent story tellers than rigorous researchers. “It’s not that the important elements are not right. In Search of Excellence gives eight best practice: a bias for action; staying close to the customer; autonomy and entrepreneurship; productivity through people; hands-on, value-driven; stick to the knitting; simple form, lean staff; and simultaneous loose-tight properties.” [Page 85] “Whereas in Built to Last, Collins and Porras give their 5 timeless principles: having a strong core ideology; building a strong corporate culture; setting audacious goals; developing and promoting people; creating a spirit of experimentation and risk-taking; driving for excellence”. [Page 96] “Several researchers have studied the rate at which company performance changes over time. Pankaj Ghemawat at Harvard Business School examined the return on investments (ROI) of a sample of 692 American companies over a ten-year period from 1971 to 1980. He put together one group of top performers, with an average ROI of 39 percent, and one group of low performers, with an average ROI of just 3 percent. Then he tracked the two groups over time. What would happen to their ROIS? Would the gap persist, would it grow, or would it diminish? After nine years, both groups converged together toward the middle, the top performers falling from 39 percent to 21 percent and the low performers rising from 3 percent to 18 percent.” [Page 104] “These studies, and others like them, all point to the basic nature of competition in a market economy. Competitive advantage is hard to sustain. Sure, if you want to, you can look back over seventy years of business history and pick out a handful of companies that have endured, but that’s selection based on outcomes.” [Page 105] “Interviews with managers, asking them to look back over the ten-year period and recount their experiences (…) these sort of retrospective interviews are likely to be full of halos, as people take cues from performance and make attributions accordingly.” [Page 108] Again Rosenzwieg has nothing against interviews, he just warns the reader that they have to be meticulously prepared to avoid any bias and answers based on outcomes. “Another famous study, the Evergreen project, identified eight practices: strategy; execution; culture; structure; talent; leadership; innovation; and mergers and partnerships (Page 110). Yet once we see that performance is relative, it becomes obvious that companies can never achieve success simply by following a given set of steps, no matter how well intended; their success will always be affected by what rivals do” [Page 116]. “Perhaps the most interesting factor in Big Winners and Big Losers is mentioned as a brief aside but not examined closely: Marcus points out that large companies show up more frequently among the Big Losers, while almost all the Big Winners are small or midsize companies. This observation ought to spark one’s curiosity, because large companies got that way in the first place by doing things well – they didn’t grow by being Losers – yet something seemed to prevent them from maintaining that high performance. Extremer performance, for better and for worse, is more common among small companies”. [Page 132] But a 10 percent difference in performance doesn’t say anything about what will happen at my company – the impact could be more or less or nothing at all. There’s no guarantee, no promise that inspires me to take action. Books, which provide simple and definitive advice and studies of organizational performance, stand in two very different worlds. The first world speaks to practicing managers and rewards speculations about how to improve performance. The second world demands and rewards adherence to rigorous standards of scholarship. Here science is paramount, storytelling less so. The result is a schizophrenic tour de force in which the demands of the roles of the consultant and teacher are disassociated form the demands of the researcher”. [Page 135] “According to the Economist, Tom Peters can charge corporate clients up to $85,000 for a single appearance, and Jim Collins commands a fee of $150,000. There’s a lucrative market for spinning stories of corporate success. Will anyone hire (a researcher) at $85,000 or $150,000 a pop to talk about a statistically significant 4 percent difference in performance? Somehow it seems doubtful [page 136]. The test of a good story is not whether it is entirely, fully, scientifically accurate – by definition it won’t be. Rather, the test of a good story is whether it leads us toward valuable insights, if it is inspires towards helpful action, at least most of the time. [Page 137] Strategy and execution “Here’s how I like to think about company performance. According to Michael Porter of Harvard Business School, company performance is driven by two things: Strategy and execution.” [Page 144] But both are full of uncertainties: “Strategy always involves risk because we don’t know for sure how our choices will turn out. […] A first reason has to do with customers. […] Sam Philips, the legendary Sun records producer, once cautioned, “Anytime we think you know what the public’s going to want that’s when you know you’re looking at a damn fool when you’re looking in the mirror”. Market reaction is always uncertain, and smart strategists know it. [Page 146] “A second source of risk has to do with competitors. […] An entire branch of economics, game theory, has grown up around a simple form of competitive intelligence. […] A third source of risk comes from technological change. […] In his groundbreaking research Clayton Christensens at Harvard Business School showed that in a wide range of industries, from earth-moving equipment to disk drives to steel, successful companies were repeatedly dislodged by new technologies. [Page 147] Jim Collins expressed surprised that [his] eleven Great companies came from ordinary, unspectacular industries. […] I suspect a different interpretation. These industries can be described as dowdy, but a better word might be stable. They were less subject to radical changes in technology, were less susceptible to shifts in customer demand, and may have had less intense competition. [Page 147] As James March of Stanford and Zur Shapira of New York University explained, “Posthoc reconstruction permits history to be told in such a way that “chance”, either in the sense of genuinely probabilistic phenomena or in the senses of unexplained variation, is minimized as an explanation.” But chance does play a role, and the difference between a brilliant visionary and a foolish gambler is usually inferred after the fact, an attribution based on outcomes. [Page 150] There are fewer unknowns […], yet execution still involves a number of uncertainties. [Page 151] And that brings us to the best answer I can provide to the question, What leads to high performance? If we set the usual suspects of leadership and culture and focus and so on – which are perhaps causes of performance – we’re left with two broad categories: strategic choice and execution. The former is inherently risky since it’s based on our best guesses about customers, about competitors, and technology, as well as about our internal capabilities. The latter is uncertain because best practices that work well on one company may not have the same effect in another. […] Wise managers know that business is about finding ways to improve the odds of success – but never imagine that success is certain. If a company makes strategic choices which are shrewd, works hard to operate effectively, and is favored by Lady Luck, it may put some distance between itself and its rivals, at least for a time. But even those profits will tend to erode over time. [Page 156] The answer to the question what really works? is simple: Nothing really works. At least not all the time. […] So what can be done? A first step is to set aside the delusions that color so much of our thinking about business performance. To accept that few companies achieve lasting success. To admit that the margin between success and failure is often very narrow, and never quite as distinct or as enduring as it appears at a distance. And finally, to acknowledge that luck often plays a role in company success. [Page 158] Rosenzweig finishes his book with examples of bold decisions from leaders at Goldman Sachs, Intel, BP, Logitech. Entrepreneurship inherently involves risks, but not doing anything would be much riskier.

  2. 5 out of 5

    Michael Greenwell

    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 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 practised in business novels, and notes that this lack of rigour can only be addressed by changing the kind of information being collected, rather than the volume, as is common practice among popular business books. His criticism identifies a number of logical fallacies, and then he proceeds to link those fallacies directly to both anecdotal cases and popular business books. However, the thing I loved most about this book was not the criticism I came looking for, but rather the acknowledgement of the remaining value in the leading business books that were criticized. This acknowledgement, coupled with a intriguing conclusion regarding strategy, made this book a delightful and illuminating experience.

  3. 5 out of 5

    Paul

    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, 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.

  4. 4 out of 5

    Craig a.k.a Meatstack

    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 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 books would have said that Intel strayed from it's core, or lost focus. Thinking about all those books I've read, I have to agree on this. This book is a great reality check to cut some of the sweet from the genre. If you've read "Good to Great" "Built to Last" etc, then you ought to check this one out too.

  5. 5 out of 5

    Zohreh Avatefi hafez

    Beyond that i read too much about this book title but it have too much good points of view (especially in management) and i like it.

  6. 4 out of 5

    Preston Kutney

    Foundational for anyone who reads business books. The "Halo Effect" in social psychology is the tendency for competence or success in one area to spill into evaluations of other areas that are not necessarily related. In management research this manifests itself as the tendency to positively evaluate characteristics of companies that are successful, and negatively evaluate characteristics of companies that are unsuccessful, even if those characteristics in isolation are identical. As an example Foundational for anyone who reads business books. The "Halo Effect" in social psychology is the tendency for competence or success in one area to spill into evaluations of other areas that are not necessarily related. In management research this manifests itself as the tendency to positively evaluate characteristics of companies that are successful, and negatively evaluate characteristics of companies that are unsuccessful, even if those characteristics in isolation are identical. As an example of how this works, take the statement: "Winners are confident, losers are arrogant". The exact same manager could be evaluated completely differently depending on the outcome. And the problem with most management research is that it is conducted retrospectively - we know whether the company succeeded or failed, meaning that our evaluation of the characteristics, behaviors, components of the company that led to that outcome are colored by our knowledge of the outcome. This becomes a chicken-and-egg problem where the process of success cannot be untangled from the success, because our evaluation of the process is affected by the outcome. "Do these practices lead to high performance? Or do high-performing companies tend to be described in these terms? The latter explanation is at least as likely as the former. " Lessons: Culture or leadership factors probably lead to business success, but it is hard to separate them from the outcome - you get positive attribution from positive outcomes and vice versa. So then...what's left? Rosenzweig gives his conclusion: "We're left with two broad categories: strategic choice and execution. The former is inherently risky since it's based on our best guesses about customers, about competitors, and technology, as well as about our internal capabilities. The latter is uncertain because practices that work well in one company may not have the same effect in another. In spite of our desire for simple steps, the reality of management is much more uncertain than we would often like to admit -- and much more so than our comforting stories would have us believe. Wise managers know that business is about finding ways to improve the odds of success -- but never imagine that success is certain....If a company makes strategic choices that are shrewd, works hard to operate effectively, and is favored by Lady Luck, it may put some distance between itself and its rivals, at least for a time." Not a reassuring takeaway for someone about to study management, but a sober look at a subject whose claims often reach delusion.

  7. 5 out of 5

    Milan

    I wanted to learn about biases but Halo Effect by Phil Rosenzweig did not deliver on that count and turned out to be a business book. A few points from the book: • The Halo Effect - If you think well of a particular business, you will attach positive attributes to anything connected to it, even without any logic. • Connecting the Winning Dots - Most of the time researchers look for similar traits among prosperous companies. • Lasting Success - Don’t be sure that once you get lucky, it will last f I wanted to learn about biases but Halo Effect by Phil Rosenzweig did not deliver on that count and turned out to be a business book. A few points from the book: • The Halo Effect - If you think well of a particular business, you will attach positive attributes to anything connected to it, even without any logic. • Connecting the Winning Dots - Most of the time researchers look for similar traits among prosperous companies. • Lasting Success - Don’t be sure that once you get lucky, it will last forever. Rosenzweig list five things that 'enlightened' managers should be aware of: 1. Good strategies involve risk and no strategy can be foolproof. 2. What works well for one company may not be effective for another company. 3. Chance plays a greater role in success than managers may want to admit or even realize. 4. Bad outcomes don’t always mean that managers have made mistakes. Likewise, favourable outcomes don’t necessarily mean that managers have made great decisions. 5. “When the die is cast, the best managers act as if chance is irrelevant. Persistence and tenacity are everything.”

  8. 5 out of 5

    Jurgen Appelo

    Every management consultant, speaker and writer should read this.

  9. 5 out of 5

    Eugene

    The true "success formula" often is not what we want to think and to hear!

  10. 5 out of 5

    Adrienne

    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. **** Update: I’m employee #1 in a startup now, which motivates me to revisit some B school faves. I’m not only looking for refreshers on strategy, 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. **** Update: I’m employee #1 in a startup now, which motivates me to revisit some B school faves. I’m not only looking for refreshers on strategy, but also for help in framing the product. Here are some of my notes from this second read: * A scientific question: “What leads to sustained profitable growth?” * What is a halo? Attributions based on performance. A halo doesn’t contribute to performance, but rather is based on it. * Our desire to tell stories, to provide coherent direction to events, may also cause us to see trends that do not exist or infer causes incorrectly. * According to Michael Porter (HBS), company performance is driven by STRATEGY and EXECUTION. Strategy is about performing different activities from those of rival companies, or performing similar activities in different ways. Execution is all about carrying out those choices: - Building high quality products - Providing customer service - Managing working capital - Developing and deploying talent * Strategic choice is hugely consequential for a company’s performance, yet also inherently risky. The key is to ask: “For OUR company, at THIS time, competing against OUR rivals, which of the many dimensions of execution are MOST important? * Tom Peters observed, “To be excellent, you have to be consistent. When you’re consistent, you’re vulnerable to attack. Yes, it’s a paradox. Now deal with it.” * A decision process should include information gathering, assumptions, calculations (if applicable), and possible outcomes with impacts estimated. (Then you can compare with actual results.) * Continuously scan the environment to learn of changes in technology and competitors and customers, gathering info the whole time. * Improve your chances of success by looking clearly and carefully at the odds, at your own capabilities, at the motives and abilities of your rivals, and make the best judgment you can. - THEN follow disciplined execution. - MEASURE performance every step of the way. - ADAPT to new information.

  11. 5 out of 5

    Geoff Noble

    I will the first to admit I read a lot of business "how to" books, stories about bubbles and crashes etc. This book made me rethink everything I have read in the past and made me realise how I am as guilty as anyone for letting the Halo effect cloud my decision making. The Halo Effect is essentially about our very human desire to find meaning in everything by ascribing causes to certain outcomes. In other words, we tend to judge our decisions by the outcomes they produce. Unfortunately (or some w I will the first to admit I read a lot of business "how to" books, stories about bubbles and crashes etc. This book made me rethink everything I have read in the past and made me realise how I am as guilty as anyone for letting the Halo effect cloud my decision making. The Halo Effect is essentially about our very human desire to find meaning in everything by ascribing causes to certain outcomes. In other words, we tend to judge our decisions by the outcomes they produce. Unfortunately (or some would counter fortunately), we live in an uncertain complex world where the outcome of most decisions cannot not be predicted. This resonates with me due to the fact I work as a fund manager. We are judged by the performance of the funds we manage (and more often than not over the short term). Sometimes you follow a sound process and end up with a poor investment result and on other occasions your process is flawed and you end up with a good result (if we honest we should call the outcome luck!). The point is investment professionals should be judged by how they came about a decision rather than merely the outcome. This of course is unrealistic as it completely against the outcomes obsessed nature of humans. This book is also about thinking in probabilistic terms. We should make decisions based on probabilities. This acknowledges that we will not always get the outcome desired but if we consistently follow probabilities then we should more often than not end up with a satisfactory result. A great book that I will read over and over again.

  12. 4 out of 5

    Chris Rock

    I didn't think I'd ever give 5 stars to a business book, but this is no ordinary business book. This book points out the logical errors that are made by most other business books--mainly, that when you examine success (or failure) in a business, their practices are influenced by your initial impression of the company. A successful company that tries something new is "innovate", "creative", "risk-taking". A company that tried something new and failed is "overextended", "unfocused", and "risky". Ad I didn't think I'd ever give 5 stars to a business book, but this is no ordinary business book. This book points out the logical errors that are made by most other business books--mainly, that when you examine success (or failure) in a business, their practices are influenced by your initial impression of the company. A successful company that tries something new is "innovate", "creative", "risk-taking". A company that tried something new and failed is "overextended", "unfocused", and "risky". Add in difference between correlation and causation, the cumulative effect of positive traits, and the human bias for storytelling and explanation and you've got all the reasons I've disliked almost every other business book I've read (especially "research"-based ones). The book lays out why it's difficult to find "silver bullet solutions" to business practices and just from that it's a refreshing change from almost every other business book out there.

  13. 5 out of 5

    Fraser Kinnear

    I liked this in that it's a business book that tells you not to trust business books. This book discusses the halo effect as it applies to businesses and business leaders. The book points out how difficult it is to identify what factors cause a business or business leader to be successful. Like any business book, I think I would have preferred to get this as a short article - not really worth reading in its entirety.

  14. 4 out of 5

    Danial Kalbasi

    This shouldn't be a book with 200 pages, it should be just an article. Maybe a long one. Full of repetitive sections which totally ruin the reading experience. Not the book has nothing good, but it has a little. The most part of the chapters spends to criticize the other writers and their books. This is fine at some point, but only if it comes with lots of other suggestions.

  15. 5 out of 5

    Prakriti

    Perhaps the best management book of all time. It is not inspiring (which is why the four stars) because it is critical. Needs to be read by anyone who is exposed to management writing of any kind, and that includes journalism's coverage of business. Very highly recommended.

  16. 4 out of 5

    Leonardo

    It's a good book in general and draws our attention to the biases of many of the books I had read in the past - such as "Good to great". However it is repetitive and I feel the ideas could have been conveyed in half the amount of pages.

  17. 4 out of 5

    Alexey Vyskubov

    Water, water, and more water. The short summary of the book: blah, blah, blah, one trivial idea, blah, blah, blah, wow! popular "business" books are not science! blah, blah, blah.

  18. 4 out of 5

    Mads Gorm Larsen

    Finally a book that takes on all the hot air and bullshit in mangement litterature. I do hope that Rosenzweig will one day run over Simon Sinek.

  19. 4 out of 5

    Arno Mosikyan

    EXCERPTS: 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 t EXCERPTS: 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. Delusion Six: The Delusion of Lasting Success Almost all high-performing companies regress over time. The promise of a blueprint for lasting success is attractive but not realistic. Delusion Seven: The Delusion of Absolute Performance Company performance is relative, not absolute. A company can improve and fall further behind its rivals at the same time. Delusion Eight: The Delusion of the Wrong End of the Stick It may be true that successful companies often pursued a highly focused strategy, but that doesn’t mean highly focused strategies often lead to success. Delusion Nine: The Delusion of Organizational Physics Company performance doesn’t obey immutable laws of nature and can’t be predicted with the accuracy of science—despite our desire for certainty and order. “We don’t mind if others put a halo on us, but we never want to be fooled by our success. We need to understand what drives our success, and strive to do better.” ICICI’s leaders wanted to focus on the real drivers of performance for a financial institution and not merely infer that they were doing well at execution or customer service just because the overall results were strong. They didn’t want to be taken in by the Halo of their own success. Is delusion too strong a word? I don’t think so. A longtime friend of mine, Dick Stull, explains the difference between illusion and delusion this way. When Michael Jordan appears to hang motionless in midair for a split second while on his way to a slam-dunk, that’s an illusion. Your eyes are playing tricks on you. But if you think you can lace up a pair of Nikes, grab a basketball, and be like Mike, well, that’s a delusion. The delusions I describe in this book are a bit like that—they’re promises that you can achieve great success if you just do one thing or another, but they’re fundamentally flawed. In fact, some of the biggest business blockbusters of recent years contain not one or two, but several delusions. For all their claims of scientific rigor, for all their lengthy descriptions of apparently solid and careful research, they operate mainly at the level of storytelling. They offer tales of inspiration that we find comforting and satisfying, but they’re based on shaky thinking. They’re deluded. The business world is full of people who are plenty smart—clever, quick of mind, and conversant in current management concepts. In short supply are managers who are wise—by which I mean discerning, reflective, and able to judge what’s correct and what’s wrong. One of my role models here is the late Herbert Simon, father of artificial intelligence, Nobel Prize winner in economics for his work on decision making, and professor at Carnegie Mellon University from the late 1940s until his death in 2001. In his memoirs, Models of My Life, Simon described how his service on several foreign fact-finding missions in the 1960s, often time-consuming and very costly, led him to formulate his Travel Theorem, which goes like this: Anything that can be learned by a normal American adult on a trip to a foreign country (of less than one year’s duration) can be learned more quickly, cheaply, and easily by visiting the San Diego Public Library. Another of the wise men whose voice appears in these pages, the physicist Richard Feynman, once remarked that many fields have a tendency for pomposity, to make things seem deep and profound. It’s as if the less we know, the more we try to dress things up with complicated-sounding terms. We do this in countless fields, from sociology to philosophy to history to economics—and it’s definitely the case in business. Chris Zook at Bain & Company argued in his 2001 book, Profit from the Core, that companies often do best when they focus on relatively few products for a clear segment of customers. When companies get into very different products or go after very different sets of customers, the results often aren’t pretty. But here’s the catch: Exactly how do we define a company’s core? The social psychologist Eliot Aronson observed that people are not rational beings so much as rationalizing beings. Richard Feynman once defined science as “a method for trying to answer questions which can be put into the form: If I do this, what will happen?” Science isn’t about beauty or truth or justice or wisdom or ethics. They’re better described as pseudoscience. Richard Feynman had an even more memorable phrase: Cargo Cult Science. Here’s the way Feynman described it: In the South Seas there is a cult of people. During the war they saw airplanes land with lots of materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. But it doesn’t work. No airplanes land. So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land. That’s not to say that Cargo Cult Science doesn’t have some benefits. Show me a company that has fallen on hard times, and I can always find some reason to explain why the leader failed. All of which brings to mind a 1964 Supreme Court case about free speech and pornography, in which Justice Potter Stewart memorably wrote that while he could not provide a good definition of hard-core pornography, “I know it when I see it.” Since good leadership is usually difficult to identify in the absence of data about performance, it seems that leadership is even more difficult to recognize than is hard-core pornography—which at least Justice Stewart knew when he saw it. But when some researchers took a closer look, they found that Fortune’s Most Admired ratings were heavily influenced by a Halo Effect. Foster and Kaplan conclude: “McKinsey’s long-term studies of corporate birth, survival, and death in America clearly show that the corporate equivalent of El Dorado, the golden company that continually performs better than the markets, has never existed. It is a myth. Managing for survival, even among the best and most revered corporations, does not guarantee strong long-term performance for shareholders. In fact, just the opposite is true. In the long run, the markets always win” (Italics in the original). The Delusion of Absolute Performance is hugely important because it suggests that companies can achieve high performance by following a simple formula, regardless of the actions of competitors. Add together these three factors—uncertain customer demand, unpredictable competitors, and changing technology—and it becomes clear why strategic choice is inherently risky. Anyone who claims to have found laws of business physics either understands little about business, or little about physics, or both. Any good strategy involves risk. If you think your strategy is foolproof, the fool may well be you. Chance often plays a greater role than we think, or than successful managers usually like to admit.

  20. 5 out of 5

    Aanu

    Interesting insights regarding the way the analysis of firms is done. The reasoning of delusions and explanations of why the author calls them as delusions are vividly written. Necessary read for anyone interested in management and business world.

  21. 4 out of 5

    Robert

    This book makes you look at very popular management books from a different vantage point. Not so much that they are wrong, but in the sense that there is not just a simple fix that will make your company run better. Instead there are always different variables for each and every situation and you need to look at the surrounding data for that specific circumstance to make the best decisions. The book also makes you remember that simple truth that history is written by the winners and that sometim This book makes you look at very popular management books from a different vantage point. Not so much that they are wrong, but in the sense that there is not just a simple fix that will make your company run better. Instead there are always different variables for each and every situation and you need to look at the surrounding data for that specific circumstance to make the best decisions. The book also makes you remember that simple truth that history is written by the winners and that sometimes not everything written in a retrospective light is better or worse in a comparison. I found it insightful even though several of the books and ideas are things I fundamentally believe in, which is great as it gave me new ways to evaluate those ideas.

  22. 5 out of 5

    Stephen

    This book takes a serious look at a lot of the so-called research around the success of companies. I enjoyed the way it showed various general flaws in typical management books by examining very specific cases. I would recommend this book to people who read a lot of books around the "secrets of management". To people with a scientific background or who have given some thought to scepticism or biases, this book may just appear to be stating just the obvious. A lot of the fallacies explained in th This book takes a serious look at a lot of the so-called research around the success of companies. I enjoyed the way it showed various general flaws in typical management books by examining very specific cases. I would recommend this book to people who read a lot of books around the "secrets of management". To people with a scientific background or who have given some thought to scepticism or biases, this book may just appear to be stating just the obvious. A lot of the fallacies explained in this book are just an application of all the usual fallacies to a business setting.

  23. 4 out of 5

    Abhishek

    This review has been hidden because it contains spoilers. To view it, click here. A wise book that rightly cautions against attributing performance to its reflection. Objectivity of measure is important. Subjective Q&A are fraught with the “halo effect” - we think a person or organization is doing well because of how they are doing it. We are not attentive enough to ask and investigate if they might be succeeding in spite of these attributes and may just as likely recede into failure in spite of them. The author described following great delusions when trying to ascribe an org A wise book that rightly cautions against attributing performance to its reflection. Objectivity of measure is important. Subjective Q&A are fraught with the “halo effect” - we think a person or organization is doing well because of how they are doing it. We are not attentive enough to ask and investigate if they might be succeeding in spite of these attributes and may just as likely recede into failure in spite of them. The author described following great delusions when trying to ascribe an organizations performance: 1. The Halo Effect: so many of the things that we commonly think contribute to company performance are often attributions based on performance - management, culture, customer orientation, etc. 2. Delusion of correlation and causation: because things are correlated doesn’t mean there’s a causation relationship. 3. Delusion of single explanations: most studies look at single explanations such as HR, customer service, CSR etc as causes of performance for an organization, without considering additive effects of various areas. This leads to simplistic and incomplete explanations. In reality there is no single explanation for performance. 4. The delusion of connecting the winning dots: when our sample consists of only winners, we have a sample selection that is based on outcomes (dependent variables) - a classic error. To learn what leads to high blood pressure we need to compare them to a population that doesn’t have high blood pressure. 5. The delusion of rigorous research: a huge volume of research data means nothing if it’s tainted by halo effect (or other problems). It’s not just the quality but quality (objectivity and applicability) of data that counts. 6. Delusion of lasting success: success is not random but it is fleeting. Focusing on parameters of performance, attributed from companies performing well at the time, may cause one to believe that following certain rules would guarantee success. It does not. In fact ability to stay ahead of the curve is markedly dictated by a company’s ability to innovate at higher than market rate. 7. The delusion of absolute performance: a company’s performance matters relative to its competition. Running fast alone won’t make you a winner, you have to run faster than others in the race. 8. Delusion of the wrong end of the stick: it’s not quite the case that companies perform better when they are more focused (hedgehog principle), flexibility triumphs on average. Being a hedgehog can have a huge payoff, however, for most companies it fails big as well. 9. The delusion of organizational physics: the desire to believe there are timeless universal answers that could be applied to any organization to achieve performance, when nothing could be farther from the truth. Author then offers two critical attributes to success: 1. Strategy: strategy is about being different from rivals in some important way (performing different activities or similar activities in different ways). It is not a goal, or objective, or target, or vision, or mission, or statement of purpose. 2. Execution: it’s about carrying out the the strategic choices, about breaking down strategy into specific actions. Execution is complex, unpredictable and risky because it’s a combination of people, processes and technology/hardware. For instance, processes, software, inventory management etc can be replicated but when we examine how these technical systems interact with social systems - people, values, expectations, attitudes - results are harder to predict. Instead of trying to be flawless everywhere, managers would be better off to identify those few elements of execution that are most important to deliver on the chosen strategy. The key is to ask: for our company, at this time, competing against our rivals, which of the many dimensions of competition are most important? Which ones are the most vital for us at this time? Strategy however does not guarantee success. In fact, strategy is always fraught with risk because we don’t know for sure how our choices will turn out. There are many areas that could upend the strategy cart: 1. Uncertain Customer demand: they may or may not embrace the new product or service. 2. Unpredictable Competition: it could always beat us to the finish line. 3. Technological change: too much of it in your given industry can easily make or break the business, depending on which side you are on. 4. Uncertainty of internal capabilities: Managers can’t be sure how their company - with its particular people, skills and experience - will respond to a new course of action. 5. The bigger world: the author doesn’t mention this, but an increasingly important source of strategic risk is changes at macroscopic levels. These include political and economic risks as well as things such as global warming and such. There then is no guarantee to success. However, there are principles that can improve likelihood - strategic choices and their effective implementation. A wise manager knows: 1. Any good strategy involves risk. 2. Execution too is uncertain - what works in one company with one workforce may have different results elsewhere. 3. Chance often plays a greater role than successful managers usually like to admit. 4. Link between inputs and outcomes is tenuous - good results don’t always mean good decisions by managers and corollary. 5. But when the die is cast, the best managers act as if chance is irrelevant - persistence and tenacity are everything.

  24. 5 out of 5

    Jonas Heide

    You can search all you want for recipes for success in business. But analysts and journalists are incapable of keeping the variables separate and even the most celebrated descriptions of the road to excellence fall short when they meet, oh you know, reality. Do read Rosenzweig's scathing criticism. It is slightly repetitive, not carefully edited, but it is in fact profound and says many important things that apply beyond the world of business.

  25. 4 out of 5

    Cola Hash

    Reads like pop fiction, written at the 8th grade level. Like the author, I am generally disappointed in the lack of rigor in business books. I am always disappointed that they seem to be written at an 8th grade level, this one included. The author’s writing style makes his critiques of other research sound like a high-school gossip session with all the requisite faulty logic and marketing gimmicks. I am uncertain if this book is a self-effacing satire.

  26. 4 out of 5

    Riccardo Bua

    How someone should look at scientific approach to case studies and scenarios.... and every day life events

  27. 4 out of 5

    InvestingByTheBooks.com

    The Halo Effect is something as paradoxical as a business book about how bad business books are. The main objection is that while most management books describe their formulas for success as the result of scientific study they are in fact often just pseudoscience combined with good storytelling. The author, Philip Rosenzweig, has written several books on business performance and behavioural finance. After earning a PhD at Wharton he spent six years at Harvard Business School. He is now a profess The Halo Effect is something as paradoxical as a business book about how bad business books are. The main objection is that while most management books describe their formulas for success as the result of scientific study they are in fact often just pseudoscience combined with good storytelling. The author, Philip Rosenzweig, has written several books on business performance and behavioural finance. After earning a PhD at Wharton he spent six years at Harvard Business School. He is now a professor of strategy and international business at IMD in Switzerland. The key premise is that it is hard to know why one company is a success and another is a failure. It is therefore difficult to distil a simple formula for success, as so many management books try to do. An important business delusion that Rosenzweig discusses is the halo effect. It means that a company’s performance creates a halo that affects how the company is perceived. The story of Percy Barnevik and ABB is given as an example. When profits tripled between the years 1988-1996 Barnevik was described by the business press as brilliant, hardworking and humble. A part of the success was also attributed to ABB’s unique organizational structure that made the company action orientated and nimble. But when ABB’s fortunes turned in the early 2000s and profits declined the story changed significantly. Suddenly Barnevik was arrogant, imperial, and resistant to criticism. The organizational structure which was previously a key success factor was now labeled as chaotic and a reason for the company’s problems. Hence, Rosenzweig argues that there are no simple answers to the question: What leads to high performance? According to him company performance is the result of strategic choices and execution. But there is no simple generic formula that works for all companies and situations. The book starts with describing the challenges of studying company performance objectively. After some real-world examples, the author describes 9 different delusions when it comes to understanding business performance, focusing on the halo effect. Rosenzweig ends the book with some proposed solutions to the described challenges. The book is a quick, easy and enjoyable read. The ideas covered in the book are important and I agree with Rosenzweig in his critique against most management books and how business performance is analyzed. Companies that have had recent financial success are often assigned positive and maybe even unique attributes. In a way the book deals with physics envy. Business and management are not exact sciences like physics and should not be treated as such. There are no exact formulas that will tell you how to achieve success. As a manager and investor, you need to be able to handle uncertainty and change. This book is a great reminder of that. That said, I think the book is a bit unbalanced in terms of how it is structured. Rosenzweig spends the majority of the book discussing the halo effect and criticizing two management gurus and their books. Although those gurus are famous, the majority of authors, journalists and analysts are subject to similar cognitive biases. I would have liked the book to be broader in terms of discussing different pitfalls in analyzing business performance instead of just focusing on the halo effect and the three mentioned books. Although the book is mainly written for managers, the described delusions are important to keep in mind for investors as well. For example, it is sometimes tempting to assign a competitive advantage, a superior culture or excellent management to a company that happens to be on a good performance streak. The lessons from this book might prevent that mistake. So, if you enjoy reading management books or analyzing businesses, the sooner you read The Halo Effect, the better.

  28. 4 out of 5

    Mike

    I have found myself picking up a lot of short, but thought provoking books of late. _The Halo Effect_ is one I had on my shelf, but never read until now. This is a book that will challenge your sense of what is objective reporting, at least in the business world. Within these pages the author talks about Cisco during the years I was there. He also skewers two business secret books that I found enlightening, but now see as flawed and hollow in their premises. The central theme of the book is the I have found myself picking up a lot of short, but thought provoking books of late. _The Halo Effect_ is one I had on my shelf, but never read until now. This is a book that will challenge your sense of what is objective reporting, at least in the business world. Within these pages the author talks about Cisco during the years I was there. He also skewers two business secret books that I found enlightening, but now see as flawed and hollow in their premises. The central theme of the book is the Halo Effect. Essentially it is seeing a company through distorted lenses, depending on its current performance. If the company is doing well, then their leadership is tops and execution is spot on. When a company isn't doing well, that same leadership is clueless and execution wasn't meeting goals. The kicker is that this high and low can happen within a couple years, when the leadership is the same and the execution hasn't changed in focus. Any research that relies on the messy views of people and not impartial data is to be suspect. I can attest to the fact that during the high flying days at Cisco, we were on top of the world. After the bust of the dot-com era, we still retained the same leaders and still had the same focus. Our frugality never wavered. I even know the leadership knew before most other companies that bad times were coming. The business press likes a big headline, so Cisco stumbling was good for them. As part of the examples of where the market turns on a high performing companies, no one stays on top forever. Market forces ensure that any "secrets" can not be divined. I thought that the book, _Built To Last_ was a wonderful illustration of companies that are solid performers. But the whole premise was flawed. After the study, many fell behind their peers. Correlation is not causation, a term I have used many a time in meetings. Here, all kinds of ideas could be in play, but none of them could be the real reason for business success. Or all of them together. Which is what the author is really getting at. Any book that says it knows how to make your company tops if you follow its simple formula should be immediately suspect. The real worry is that business managers attempt to deploy some of the ideas in the hope that something will rub off. It usually won't. Read this book to get a better sense of how popular business books sell their stories and hide the fact that their research is flawed. It will help sharpen your critical thinking skills.

  29. 5 out of 5

    Guanghua Mao

    The nine delusions are not only suitable for any businessman but also for any social science researchers. 1. 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).[6] In the context of business, observers think they are making judgments of a company's customer-focus, quality of leadership, or other virtues, but their judgment is co The nine delusions are not only suitable for any businessman but also for any social science researchers. 1. 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).[6] In the context of business, observers think they are making judgments of a company's customer-focus, quality of leadership, or other virtues, but their judgment 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. 2. The Delusion of Correlation and Causality: mistakenly thinking that correlation is causation. 3. 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. 4. The Delusion of Connecting the Winning Dots: looking only at successful companies and finding their common features, without comparing them against unsuccessful companies. 5. 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. 6. 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. 7. 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. 8. 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? 9. 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.

  30. 5 out of 5

    Karina Murpani

    The Halo effect as per definition means that when one trait of a person or thing is used to make an overall judgement of that person or thing. As there is 'Business' word in the title, this book explains the Halo Effect which is related to company's performance and how managers are deceived by this so-called 'Delusion' and other delusions which are well explained by numerous examples of various firms and managerial tactics. This book is a must read for the ones who are on the managerial post or o The Halo effect as per definition means that when one trait of a person or thing is used to make an overall judgement of that person or thing. As there is 'Business' word in the title, this book explains the Halo Effect which is related to company's performance and how managers are deceived by this so-called 'Delusion' and other delusions which are well explained by numerous examples of various firms and managerial tactics. This book is a must read for the ones who are on the managerial post or on the way to become one. The author has done a wonderful job of incorporating Science, Research and actual real-time applications of practises and techniques which lead to the rise or downfall of a company excluding all the business jargon. Since one cannot perform experiments on a few set of companies based on their attributes and parameters, we cannot obtain the desired or correct results which can ensure the answer to the Mother of all business questions: What leads to high performance? The book starts with a detailed illustration of companies Cisco and ABB in which the first delusion is explained that how people conclude when the company's performance are rising high and when the same company's performance is not up to the mark and their fall down. The Halo effect is that how the judgement of people are clouded based on the factors of profit and sales. Studying the market trends, undermining the business books like 'In Search of Excellence', 'What really works', 'Good to Great' with valid and logical checkpoints, taking in account the mammoth companies like 'Microsoft', 'Intel' and CEO managers like 'Robert Rubin', 'Andy Groove'. he says that there is no formula that guarantees the success of any business in a long run, meanwhile making the reader understand other delusions.

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