The Halo Effect

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

Phil Rosenzweig isn’t terribly impressed with the average business book. The bigger the best seller, the more likely Rosenzweig is to be concerned. This isn’t simply sour grapes on the part of another business school professor wishing he could command the speaking fees of a Tom Peters or James Collins.

Rosenzweig’s fundamental concern is with the disconnect between what constitutes solid and defensible research and compelling, but ultimately misleading, storytelling masquerading as research. The bulk of Rosenzweig’s efforts focus on dismantling the arguments claiming to explain the successes (and failures) of high profile organizations. He makes important points about just how hard it is to make connections between actions and outcomes in competitive organizations. The “halo effect” is the problem of starting with a collection of winners and trying to ascertain what factors explain victory after the fact. While you can always construct coherent stories looking backwards, you can’t distinguish between good stories and true stories. Even if you could, it isn’t clear what action advice you can actually extract.

Somewhere about three chapters into this effort. Rosenzweig has killed the horse. Rather than turning to the question of what to do about the problem, he opts to mutilate the carcass for several more chapters. If you stick through to the end, his advice is reasonable but comes off as too little, too late. The stories he would have us attend to are of managers like Robert Rubin and Andy Grove who appreciate the inherent contingency of most business decisions. These are managers who think in terms of risks and probabilities, who attempt to shift the odds in their favor when they can, but understand that they are always compelled to act on incomplete information.

If you are interested in how organizations perform and in how their managers learn to make more effective decisions, this is certainly a book you should read. There is a website for the book and Rosenzweig also has a blog there, although it doesn’t appear to be updated frequently.