He cautions that many things we think lead to company performance —including corporate culture, leadership and strategy—are instead attributions based on company performance. In other words, even smart people confuse cause and effect.
His argument: You can’t measure cohesiveness, communication or motivation by asking people to rate them after knowing something about the outcome. Once people think an outcome is good, they make positive attributions about how it came about. If they believe the results are bad, they’ll make negative attributions.
Take IBM. In 1983 and ’84, it topped America’s most-admired companies list. Asked to describe IBM’s strengths, chief executive John Opel credited his people as smart, creative, hard-working and supportive.
During those same years, IBM failed to realize that its mainframes and minicomputers would soon become obsolete. How to explain this? The people and culture, of course. The press criticized IBM’s “button-down culture,” “rigid bureaucracy” and “complacent executives.” Those were the same people Opel had praised.
Had they changed? Probably not. They simply missed the turn when the industry changed. A very different performance— and attribution—resulted. Says Opel: “The hero of today can become the bum of tomorrow.”
Nothing lends itself more to the halo effect than leadership. Rosenzweig points to how cowboys in white hats always lead prosperous companies, while losing firms get stuck with black hats. In the book Authentic Leadership, the authentic leaders exhibit “a burning passion for their missions” and “a laser-like focus on overcoming barriers.” Couldn’t that describe certain black hats, too?
The professor suggests that students of leadership ask themselves if any successful companies have “inauthentic” leaders, and vice versa. Wasn’t former GE exec Robert Nardelli considered a savior at Home Depot until he lost his halo?
Lesson: Leaders suffer from delusions, the most basic being the halo effect. Guard against “research” that’s highly subjective.
—Adapted from The Halo Effect … and Eight Other Business Delusions That Deceive Managers, Phil Rosenzweig, Free Press.