The Halo Effect

by Gary Hamel (with Bill Breen)

                                          
 

This book critiques in forensic detail those popular management consulting books such as In Search of Excellence and Good to Great. It is a must read for anybody that wants to understand how to examine the performance of major companies and how our view of what creates good performance is clouded by our knowledge of results. The halo effect is that good results result in glowing reports on a company regardless of what really happened, which may include just being at the right place at the right time.

In one example the author quotes a study where groups of people were given the task of analysing the financial reports of companies and providing a report on present and future performance. When this was complete the researcher threw all the reports away (unknown to the participants) and randomly allocated each group a “great’ or a “poor” rating on their analysis. He then got the groups to self rate their teamwork within the group. The groups that were randomly told that they were great rated their teamwork far higher than those that were randomly told they performed poorly. This is an example of what we call retrospective coherence – people feel a need to make sense of what they see and great teamwork does not make sense to people in the situation of a poor result even if that result was totally made up.

The halo effect and retrospective coherence are important factors of how people view the past, and how they reached the present. This affects how they think about the future and needs to be taken into account when working with people on thinking about future strategy.