Halo
Effect
By Phil
Rosenzweig
The book
talks about how different management gurus point to high financial performance
of a successful company and then EXTRAPOLATE it to believe high on other counts
– strategy, values, people and leadership. The author points out that our study
of the successful companies is deluded based on HALO EFFECT. The author pokes
fun at bad science of the management world and believes there is no publicly
available secret to a successful company. In the preface the author writes
“Most management books try to answer the first order question: What leads to
high performance? This book sets out to answer- Why is it so hard to understand
high performance?” Towards the end the book sets out to give some principles
which are not guaranteed source of high performance but leads to a more
thoughtful approach.
The book in
multiple chapters take case studies of multiple companies whose policies were
lauded when they were successful and then ridiculed for poor performance when
they started showing losses - Lego (Danish toy company), Cisco, ABB, Intel to
name a few.
So what
exactly is Halo Effect – it is a tendency to make inferences about specific
traits on the basis of general impression. As author explains in one of this
example- George Bush’s rating rose after Sep 11 attack as country stood by
their President which is ok. However, on a question related to handling of
economy his rating increased from 47% to 60% as well. Now whether his
handling of economy suddenly became better in weeks after Sep 11 is a question
mark. The American public conferred a Halo on their President and made all
favorable attributions to him. In business there are HALOS every where – in
people, in leaders, surveys. 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.
In the
appendix of this book there are tables showing the performance of the companies
studied in "In Search of Excellence" and "Built to Last",
two great management books of their time. It is interesting to note the
difference in performance in the years before and after these studies.
Overall,
highly recommended!
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