The Halo Effect (business book)
Encyclopedia
The Halo Effect is a 2007 book by business academic Phil Rosenzweig that criticizes pseudoscientific
tendencies in the explanation of business performance. As well as many business magazines and newspapers, it targets specific books (those that offer secrets of guaranteed business success) and academic research published by business schools. It outlines nine "delusions": mistakes of reasoning that undermine these recipes for business success. In light of these mistakes, Rosenzweig argues, much of business writing is what Richard Feynman
called "cargo cult science
", having the superficial trappings of science
but operating at the level of story-telling
. The book also considers some more scientific business research, whose conclusions are more rigorous but do not promise a simple recipe for success. The subtitle of the 2007 US edition is "and the eight other business delusions that deceive managers" while that of the 2008 UK edition is "How Managers Let Themselves Be Deceived".
The book was named "Business Book of the Year" 2007 at the Frankfurt Book Fair
. It has been described as part of a trend for books that encourage evidence-based practice in business research.
, before serving on the faculty at Harvard Business School
and later at the International Institute for Management Development
in Switzerland. His corporate career included seven years at Hewlett-Packard
.
, Good to Great
, What Really Works and Built to Last
. It finds similar faults with a swathe of business journalism
.
,
The Independent
, and the Financial Times
. Financial Times columnist Stefan Stern wrote that Rosenzweig "deserves acclaim for this brave, provocative piece of work" and included The Halo Effect in his top business books of the year. The Halo Effect topped a Forbes.com list of "Five Must-Read Books For The Chastened CEO In 2009," which described it as a "delightful critique, which systematically destroys the entire management jujitsu oeuvre". The Wall Street Journal recommended the book for its "trenchant view of business and business advice".
USA Today
s reviewer wrote, "That a management book can be at once scientific and a palatable read is a credit to Rosenzweig's writing style and clear thinking." A favorable review in The Guardian
called it a "feisty and entertaining new book". Columnist Simon Hoggart
also mentioned it as a "refreshing corrective" to human gullibility. A 2008 paper in the Journal of Corporate Accounting & Finance complains that the corporate world is infected with "best practicism"; the illusion that industry leadership can be made inevitable by following a simple formula. It cites The Halo Effect as an "outstanding" book. Newsweek
said the book "employs an empirical rigor often lacking in business journalism" but complains that Rosenzweig "has little to offer" to replace the books he critiques.
Pseudoscience
Pseudoscience is a claim, belief, or practice which is presented as scientific, but which does not adhere to a valid scientific method, lacks supporting evidence or plausibility, cannot be reliably tested, or otherwise lacks scientific status...
tendencies in the explanation of business performance. As well as many business magazines and newspapers, it targets specific books (those that offer secrets of guaranteed business success) and academic research published by business schools. It outlines nine "delusions": mistakes of reasoning that undermine these recipes for business success. In light of these mistakes, Rosenzweig argues, much of business writing is what Richard Feynman
Richard Feynman
Richard Phillips Feynman was an American physicist known for his work in the path integral formulation of quantum mechanics, the theory of quantum electrodynamics and the physics of the superfluidity of supercooled liquid helium, as well as in particle physics...
called "cargo cult science
Cargo cult science
Cargo cult science refers to practices that have the semblance of being scientific, but are missing "a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty". The term was first used by the physicist Richard Feynman during his commencement...
", having the superficial trappings of science
Science
Science is a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe...
but operating at the level of story-telling
Narrative
A narrative is a constructive format that describes a sequence of non-fictional or fictional events. The word derives from the Latin verb narrare, "to recount", and is related to the adjective gnarus, "knowing" or "skilled"...
. The book also considers some more scientific business research, whose conclusions are more rigorous but do not promise a simple recipe for success. The subtitle of the 2007 US edition is "and the eight other business delusions that deceive managers" while that of the 2008 UK edition is "How Managers Let Themselves Be Deceived".
The book was named "Business Book of the Year" 2007 at the Frankfurt Book Fair
Frankfurt Book Fair
The Frankfurt Book Fair is the world's largest trade fair for books, based on the number of publishing companies represented. As to the number of visitors, the Turin Book Fair attracts about as many visitors, viz. some 300,000....
. It has been described as part of a trend for books that encourage evidence-based practice in business research.
Background
The author told reporters the book had been written over the course of 25 years of experience in business consultancy and academia. Rosenzweig earned his PhD at the University of PennsylvaniaUniversity of Pennsylvania
The University of Pennsylvania is a private, Ivy League university located in Philadelphia, Pennsylvania, United States. Penn is the fourth-oldest institution of higher education in the United States,Penn is the fourth-oldest using the founding dates claimed by each institution...
, before serving on the faculty at Harvard Business School
Harvard Business School
Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...
and later at the International Institute for Management Development
International Institute for Management Development
IMD - International Institute for Management Development is a non profit business school located in Lausanne, Switzerland.- History & Mission :...
in Switzerland. His corporate career included seven years at Hewlett-Packard
Hewlett-Packard
Hewlett-Packard Company or HP is an American multinational information technology corporation headquartered in Palo Alto, California, USA that provides products, technologies, softwares, solutions and services to consumers, small- and medium-sized businesses and large enterprises, including...
.
Targets
The book is critical of a genre of business books including In Search of ExcellenceIn Search of Excellence
In Search of Excellence is an international bestselling book written by Tom Peters and Robert H. Waterman, Jr.. First published in 1982, it is one of the biggest selling and most widely read business books ever, selling 3 million copies in its first four years, and being the most widely held...
, Good to Great
Good to Great
Good to Great: Why Some Companies Make the Leap... and Others Don't is a 2001 management book by James C. Collins that aims to describe how companies transition from being average companies to great companies and how companies can fail to make the transition...
, What Really Works and Built to Last
Built to Last: Successful Habits of Visionary Companies
Built to Last: Successful Habits of Visionary Companies is a book written by Jim Collins and Jerry I. Porras on October 26, 1994. The book outlines the results of a six-year research project into what makes enduring great companies...
. It finds similar faults with a swathe of business journalism
Business journalism
Business journalism is the branch of journalism that tracks, records, analyzes and interprets the economic changes that take place in a society...
.
Nine delusions
- The Halo Effect of the book's title refers to the cognitive biasHalo effectThe halo effect is a cognitive bias whereby one trait influences another trait or traits of that person or object. This is very common among physically attractiveness...
in which the perception of one quality is contaminated by a more readily available quality (for example good-looking people being rated as more intelligent). In the context of business, observers think they are making judgements of a company's customer-focus, quality of leadership or other virtues, but their judgement is contaminated by indicators of company performance such as share priceShare priceA share price is the price of a single share of a number of saleable stocks of a company. Once the stock is purchased, the owner becomes a shareholder of the company that issued the share.-Behavior of share prices:...
or profitabilityProfit (accounting)In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
. Correlations of, for example, customer-focus with business success then become meaningless, because success was the basis for the measure of customer focus. - The Delusion of Correlation and Causality: mistakenly thinking that correlation is causation.
- The Delusion of Single Explanations: arguments that factor X improves performance by 40% and factor Y improves by another 40%, so both at once will result in an 80% improvement. The fallacy is that X and Y might be very strongly correlated. E.g. X might improve performance by causing Y.
- The Delusion of Connecting the Winning Dots: looking only at successful companies and finding their common features, without comparing them against unsuccessful companies.
- The Delusion of Rigorous Research: Some authors boast of the amount of data that they have collected, as though that in itself made the conclusions of the research valid.
- The Delusion of Lasting Success: the "secrets of success" books imply that lasting success is achievable, if only managers will follow their recommended approach. Rosenzweig argues that truly lasting success (outperforming the market for more than a generation) never happens in business.
- The Delusion of Absolute Performance: market performance is down to what competitors do as well as what the company itself does. A company can do everything right and yet still fall behind.
- The Delusion of the Wrong End of the Stick: getting cause the wrong way round. E.g. successful companies have a Corporate Social Responsibility policy. Should we infer that CSR contributes to success, or that profitable companies have money to spend on CSR?
- The Delusion of Organisational Physics: the idea that business performance is non-chaotically determined by discoverable factors, so that there are rules for success out there if only we can find them.
Reception
Favourable reviews of the book included ForbesForbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
,
The Independent
The Independent
The Independent is a British national morning newspaper published in London by Independent Print Limited, owned by Alexander Lebedev since 2010. It is nicknamed the Indy, while the Sunday edition, The Independent on Sunday, is the Sindy. Launched in 1986, it is one of the youngest UK national daily...
, and the Financial Times
Financial Times
The Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
. Financial Times columnist Stefan Stern wrote that Rosenzweig "deserves acclaim for this brave, provocative piece of work" and included The Halo Effect in his top business books of the year. The Halo Effect topped a Forbes.com list of "Five Must-Read Books For The Chastened CEO In 2009," which described it as a "delightful critique, which systematically destroys the entire management jujitsu oeuvre". The Wall Street Journal recommended the book for its "trenchant view of business and business advice".
USA Today
USA Today
USA Today is a national American daily newspaper published by the Gannett Company. It was founded by Al Neuharth. The newspaper vies with The Wall Street Journal for the position of having the widest circulation of any newspaper in the United States, something it previously held since 2003...
s reviewer wrote, "That a management book can be at once scientific and a palatable read is a credit to Rosenzweig's writing style and clear thinking." A favorable review in The Guardian
The Guardian
The Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
called it a "feisty and entertaining new book". Columnist Simon Hoggart
Simon Hoggart
Simon David Hoggart is an English journalist and broadcaster. He writes on politics for The Guardian, and on wine for The Spectator. Until 2006 he presented The News Quiz on Radio 4...
also mentioned it as a "refreshing corrective" to human gullibility. A 2008 paper in the Journal of Corporate Accounting & Finance complains that the corporate world is infected with "best practicism"; the illusion that industry leadership can be made inevitable by following a simple formula. It cites The Halo Effect as an "outstanding" book. Newsweek
Newsweek
Newsweek is an American weekly news magazine published in New York City. It is distributed throughout the United States and internationally. It is the second-largest news weekly magazine in the U.S., having trailed Time in circulation and advertising revenue for most of its existence...
said the book "employs an empirical rigor often lacking in business journalism" but complains that Rosenzweig "has little to offer" to replace the books he critiques.
Further reading
- Chernikoff, Helen (Jun 9, 2007) Management bibles are not gospel Reuters