In business world, things happen fast, markets emerge, markets disappear, and competition is keen. Therefore, business managers would like to find a formula, or at least some factors, to explain the success and failure of corporations and companies. But as the business world is so complicated, and becoming more complicated and uncertain in today's globalized world, it is hard to determine factors and solid solutions to business problems. Even massive data are gathered and with long time of studies, secrets of success are still not easy to uncover. So it is tempting for giving the promise of breakthroughs and secrets and quick fixes.
From journalists to academics, people are searching for …show more content…
The stock price of Fannie Mae from 1999 to 2008 (Source: Bloomberg)
The Halo Effect provides the answers. It is a book to show the common delusions of the business writings. And to show us how to avoid these delusions and be critical to read the business researches. Most management book ask the first-order question: What leads to high performance? But this book tries to answer a different question: Why is it so hard to understand high performance?
A message like, "you, too, can transform your good company into a great one," is very comforting. But the business world is not as simple as that. In this report, we will show that how The Halo Effect leads us to an uncomfortable war against clichés and delusions.
What Does This Book Talk About
The story of Cisco
From the Bloomberg graph in Figure 1, we can see that by the end of 1999 and the beginning of 2000, the stock price of Cisco sky-rocketed to US$80 from around US$30 in few weeks. Then the business press and the academics all praised that Cisco was doing everything right -- Cisco had a great and visionary leader, John Chambers (who is still the CEO of Cisco currently); Cisco was remarkably skilful in acquiring companies (Fortune observed Cisco excelled at digesting acquisitions smoothly); and Cisco was credited with extreme customer focus. Fortune wrote that, “no net-workers have ever had the laser focus on customers that Cisco has had from day one." And John Chambers became …show more content…
So it is hard to blame them for convenient opinions. Sometimes journalists will have their conclusion first and then find the facts to support this conclusion. And they will surely try to write things people love to read. And people love to read story, things with clear causal relationship.
The Halo book explains, it is a natural tendency to make inferences about specific traits on the basis of a general impression. Like the Cisco case, as long as it was growing and profitable and setting record for its stock price, journalists and professors inferred that it had wonderful abilities to listen to its customers, a cohesive corporate culture, and a brilliant strategy. And when the bubble burst, observers were quick to make the opposite attribution. Our evaluations depend on whether we think we're seeing a lady or a flower girl.
Sometimes we may not know whether it is an attribute that makes a company successful, or it is because the company is successful, so it could afford that attribute. Like good people, we don't know whether it is the good people lead to a successful company or it is a successful company which could recruit good people. As so many things we commonly think contributing to company performance are often attributions based on