The Halo Effect is “a tendency to make inferences about specific traits on the basis of a general impression. Some men were thought to be ‘superior soldiers’ and were rated highly at just about everything, while others were thought to be subpar across the board… Thorndike called it the Halo Effect.” In one study, he asked army officers to rate their soldiers on a variety of features: intelligence, physique, leadership, character, and so on. “During World War I, an American psychologist named Edward Thorndike was conducting research into the ways that superiors rate their subordinates. How does this happen? Introducing the Halo Effect. We may ignore facts because they don’t fit into our story.” Our desire to tell stories, to provide a coherent direction to events, may also cause us to see trends that do not exist or infer causes incorrectly. And when the bubble burst, observers were quick to make the opposite attribution. “As long as Cisco was growing and profitable and setting records for its share price, managers and journalists and professors inferred that it had a wonderful ability to listen to its customers, a cohesive culture, and a brilliant strategy. Why does this happen? Because we love stories. When financial performance fell, the same strategy, culture, and CEO were ripped apart as severely flawed. When times were good-strong revenue growth and a soaring stock price-these companies were praised for their exemplary strategy, culture, and CEO. Using the examples of Cisco, ABB, and others, the author demonstrates the phenomenon. Many business books and articles have been written about what Phil Rosenzweig calls “the mother of all business questions… What leads to high performance?” This book explains why much of this analysis is “riddled with errors.” The Halo Effect and the Eight Other Business Delusions That Deceive Managers
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