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the-halo-effect-and-business-performance

Posted by: admin 15 years, 11 months ago

I really enjoyed a recent 'manifesto' from the ChangeThis site recently by Phil Rosenzweig called Forget Formulas . In it he points out the flaws in many management books that purport to find a formula for success based on a large quantity of mainly anecdotal evidence. The data is suspect because of the 'halo effect' (also the title of Rosenzweig's book):

The key weakness is the halo effect, a concept that was first identified by psychologist Edward Thorndike in 1920. It refers to the basic human tendency to make specific inferences on the basis of an overall impression. People tend to have an overall evaluation about someone or something, and let that evaluation shape specific features. the halo effect is found in many walks of life, including the way we evaluate job candidates—the graduate from a well-respected school tends to look good across the boards, while a graduate from an unheralded local school tends to look less attractive. Brand building, too, is based on the halo effect—companies know that consumers will attribute favorable qualities to a product from a respected company, and therefore go to great lengths to create positive associations with their brand.

Rosenzweig points out that there is a great amount of uncertainty in the marketplace created by other players: customers, competitors, technical change and internal capabilities. This applies to security because many managers assume that since they have not been successfully attacked, they are making the right choices. In reality, the technology, players and motivations are changing all the time.

Here's another quote I liked:

Wise managers know that business is about finding ways to improve the odds of success—but never imagine that it is a certainty.

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