Certain to create a storm of controversy, veteran corporate manager and business school professor Phil Rosenzweig exposes the delusions that pervade so much of the business world -- from management consultants to academia and the business press.
Too many of the most prominent management gurus today make steel-clad guarantees, based on claims of irrefutable research, promising to reveal the secrets of why one company fails and another succeeds, and how you can become the latter. Combining equal measure of solemn-faced hype and a whole body of delusions, statistical and otherwise, these self-styled experts cloud our ability to think critically about the nature of success in business. Like a virus, these fundamental errors of thinking infect much of what we read, whether in leading business magazines, scholarly journals, or management best-sellers.
Central among these delusions is the Halo Effect, the tendency on the part of the experts to point to the high financial performance of a successful company and then spread its golden glow to all its attributes -- clear strategy, strong values, brilliant leadership, and outstanding execution. But should the same company's sales head south, the very same attributes are turned on their heads and derided for poor decision-making across the board -- suddenly the strategy was wrong, the culture was complacent, and the leader became arrogant. In fact, the things the experts claim that driver performance are simply attributions based on prior performance. 'The Halo Effect' is just the first of several delusions. Some of the others include:
- The Delusion of Single Expectations: Many studies show that a particular factor -- strong company culture or good 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.
- The Delusion of Rigorous Research: If the data you've gathered isn't good, it doesn't matter how much you have or how sophisticated your research methods appear to be.
- The Delusion of Absolute Performance: Company performance is always relative, never absolute. A company can get better and still far further behind its rivals.
- 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.
- The Delusion of the Wrong End of the Stick: It may be true that many successful companies pursued a highly-focused strategy, but that doesn't mean a highly focused strategy usually leads to success.
The combined effect of these delusions is fatal to any real understanding of what contributes to company success. Some of the biggest blockbusters of recent years -- including Jim Collins' mega-seller, 'Good to Great' -- contain not one or two, but several of these delusions. For all of their claims of scientific rigor, for all their lengthy descriptions of apparently solid and careful research, they operate mainly at the level of story-telling. They offer tales of inspiration that managers may find comforting, but they're based on shaky thinking.
'The Halo Effect' not only points out the delusions that keep us from understanding business performance, but also suggests a more accurate way to think about leading a company. This approach -- focusing on strategic choice and execution, while recognising the inherent risk of both -- clarifies the priorities that mangers face.
Irreverent and witty, Rosenzweig is uncanny in his ability to puncture the pretentious balloons of some of our most sacred management cows.
