Critique of "The Halo Effect"

Topics: Business books, Built to Last: Successful Habits of Visionary Companies, Good to Great Pages: 8 (2300 words) Published: July 27, 2008
Introduction: A War Against Clichés

In business world, things happen fast, markets emerge, markets disappear, and competition is keen. Therefore, business managers would like to find a formula, or at least some factors, to explain the success and failure of corporations and companies. But as the business world is so complicated, and becoming more complicated and uncertain in today's globalized world, it is hard to determine factors and solid solutions to business problems. Even massive data are gathered and with long time of studies, secrets of success are still not easy to uncover. So it is tempting for giving the promise of breakthroughs and secrets and quick fixes.

From journalists to academics, people are searching for ready-made answers, plug-and-play solutions and marriage of convenience. When a company adopts a new initiative, a new strategy, it would a brilliant strategy if it is successful, and would be concluded as a bad move when it fails. So when Lego, the toy firm, failed its launching of Harry Potter figures, people criticized it was drifting from its core. But when GE successfully went to launch the financial services then, nobody criticized it was straying from the core. So whether it is a good thing or bad thing to stray away from one's core business?

There are lots of business writings, no matter they are from press or academic journals, use the ends to justify the means. We see what we want to see. And we are deceived by delusions. The fundamental problem is we all like to read stories, not only reports. Many good researches about company performance, which are carefully done, tend not to provide clear and definitive guidelines for action. These are reports to show the facts we don't like to read. We want clear implications for action, we want to explain things.

A bestselling business book, Good to Great, which brings fame and fortune to the co-author Jim Collins, is one of those business books full of halo effect. One of the “great” companies focused by the book is Fannie Mae. But we can see from Figure 2, its stock price soared sharply before the book was written and reached its peak during when the book published. But after that, the performance of Fannie Mae was quite disappointing. Even we don’t include the current sub-prime mortgage crisis which made its stock price dived to new low, the stock price was in a downward trend. The good to great strategies featured by Jim Collins wasn’t effective at all. Are all those promises, strategies and focuses suggested by one of the best selling business books are only delusions?

Figure 2. The stock price of Fannie Mae from 1999 to 2008 (Source: Bloomberg)

The Halo Effect provides the answers. It is a book to show the common delusions of the business writings. And to show us how to avoid these delusions and be critical to read the business researches. Most management book ask the first-order question: What leads to high performance? But this book tries to answer a different question: Why is it so hard to understand high performance?

A message like, "you, too, can transform your good company into a great one," is very comforting. But the business world is not as simple as that. In this report, we will show that how The Halo Effect leads us to an uncomfortable war against clichés and delusions.

What Does This Book Talk About

The story of Cisco

From the Bloomberg graph in Figure 1, we can see that by the end of 1999 and the beginning of 2000, the stock price of Cisco sky-rocketed to US$80 from around US$30 in few weeks. Then the business press and the academics all praised that Cisco was doing everything right -- Cisco had a great and visionary leader, John Chambers (who is still the CEO of Cisco currently); Cisco was remarkably skilful in acquiring companies (Fortune observed Cisco excelled at digesting acquisitions smoothly); and Cisco was credited with extreme customer...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The Halo Effect Essay
  • Essay on The halo effect
  • Essay about Halo Effect and Recency Effect
  • critique Essay
  • The Halo and Devil Effect Research Paper
  • The Halo Effect Essay
  • Halo Effect Case Essay
  • Halo Effect Essay

Become a StudyMode Member

Sign Up - It's Free