Not All Halos Are Created Equal

In his book The Halo Effect, Phil Rosenzweig does us all a favor as he defines one of the most intrinsic barriers to learning and performance in the workplace. While there can be several types of “Halo Effects,” essentially the barrier occurs when we make specific evaluations based on a general impression. For example, if we really like the CEO of a company and we see the firm attain great financial results, we might conclude that the company’s leadership and associated strategy is the reason for the firm’s success. In reality, the factors contributing to the firm’s financial outcomes may be unrelated to either the leadership style or strategy implemented by the CEO.

Without going into too much detail, the reason that Halos are all around us is because of our tendency to quickly take in vast amounts of data and to take short cuts in sorting what is important from what is not. While this tendency to generalize has helped humans survive lots of physical danger (that rustling noise might be a tiger in the bushes), it also creates many cognitive problems for those seeking great decisions based on nuanced information.

It turns out that vast amounts of business literature and self-help programs promise to identify the keys to success, but many (perhaps most) of them are based on data, information and assumptions that have been distorted in some way or another by the Halo Effect. As Rosenzweig points out in the following book excerpt, the Halo Effect can also result in other business delusions:

- The Delusion of Absolute Performance: Company performance is relative to competition, not absolute, which is why following a formula can never guarantee results. Success comes from doing things better than rivals, which means that managers have to take risks.

- The Delusion of Rigorous Research: Many bestselling authors praise themselves for the vast amount of data they have gathered, but forget that if the data aren't valid, it doesn't matter how much was gathered or how sophisticated the research methods appear to be. They trick the reader by substituting sizzle for substance.

- The Delusion of Single Explanations: Many studies show that a particular factor, such as corporate culture or social responsibility or customer focus, leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested.

To avoid the adverse impacts of the Halo Effect, I recommend developing a brief checklist prior to implementing important decisions. This list could include questions that force us to review the assumptions that we may have left unchecked throughout our process, including: “What conclusion(s) did I have to accept to arrive at this decision? Can I trust these conclusions or should I revisit them in some way? Where might there be Halos in and around this decision? What new information and data is required to make a better decision?”

If we do this well, we can expose Halos and both elevate the level of discussion within our team and enhance our own capacity to think critically about the variables leading to a decision.