Misunderstanding the Nature of Company Performance: The Halo Effect and other Business Delusions
Phil Rosenzweig argues that much popular thinking in business is shaped by delusions, fundamental errors of judgment that distort understanding of company performance. One of the most important is the halo effect, the tendency to attribute many positive features to successful companies and to make the opposite attributions when they falter. He says the halo effect contaminates the data used in many large-scale studies of company performance, producing a misplaced belief that companies can follow formulas to achieve high performance when performance is better understood as relative, not absolute.
Phil Rosenzweig argues that much popular thinking in business is shaped by delusions, fundamental errors of judgment that distort understanding of company performance. One of the most important is the halo effect, the tendency to attribute many positive features to successful companies and to make the opposite attributions when they falter. He says the halo effect contaminates the data used in many large-scale studies of company performance, producing a misplaced belief that companies can follow formulas to achieve high performance when performance is better understood as relative, not absolute.
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Rosenzweig, P. (2007). Misunderstanding the nature of company performance: the halo effect and other business delusions. California Management Review, 49(4), 6-20. doi:10.2307/41166403.