The Halo Effect, and Other Managerial Delusions

Companies cannot achieve superior and lasting business performance simply by following a specific set of steps.

October 2015 | by Robert Harris

The quest of every high-quality corporate executive is to find the keys to superior performance. Achieving market leadership is hard enough, but staying at the top—given intense competition, rapidly changing technology, and shifting global forces—is even more difficult. At the same time, executives are under enormous pressure to deliver profitable growth and high returns for their shareholders. No wonder they constantly search for ways to achieve competitive advantage.

But many executives, despite their good intentions, look in the wrong places for the insights that will deliver an edge. Too often they reach for books and articles that promise a reliable path to high performance. Over the past decade, some of the most popular business books have claimed to reveal the blueprint for lasting success, the way to go from good to great, or how to craft a fail-safe strategy or to make the competition irrelevant.

At first glance, many of the pronouncements in such works look entirely credible. They are based on extensive data and appear to be the result of rigorous analysis. Millions of managers read them, eager to apply these keys to success to their own companies. Unfortunately, many of the studies are deeply flawed and based on questionable data that can lead to erroneous conclusions. Worse, they give rise to the especially grievous notion that business success follows predictably from implementing a few key steps. In promoting this idea, authors obscure a more basic truth—namely, that in the business world success is the result of decisions made under conditions of uncertainty and shaped in part by factors outside our control. In the real world, given the flux of competitive dynamics, even seemingly good choices do not always lead to favorable outcomes.

Rather than succumb to the hyperbole and false promises found in so much management writing, business strategists would do far better to improve their powers of critical thinking. Wise executives should be able to think clearly about the quality of research claims and to detect some of the egregious errors that pervade the business world. Indeed, the capacity for critical thinking is an important asset for any business strategist—one that allows the executive to cut through the clutter and to discard the delusions, embracing instead a more realistic understanding of business success and failure.

 

Executive Editor

 Ms Anna Sullivan

Ms Anna Sullivan