Companies and their leaders get good press when things seem to be going well and bad press when it is not. Cisco, for example, was lauded in its early days as a shining beacon of success. When it hit some rocks later, the press was damning.
The point, however, is that the quality of leadership has probably not changed. People draw the wrong conclusions from such outward signals as high sales figures. Rosenzweig says that a company's performance can improve and fall behind at the same time.
"Competitors imitate and advantages erode," he says. Other delusions to watch out for are the delusion of single explanations such as the notion that one thing like corporate culture can lead to higher performance; the delusion of correlation and causality - the erroneous view that one thing leads to another; and the delusion of rigorous research.
On the latter point, classic management books like In Search of Excellence: lessons from America's Best Run Companies (looked at today many of these companies are "not even average") and Good to Great are criticised for misinterpreting the components of success.
1. Good strategies involve risk
2. Execution is uncertain
3. Chance plays a big role
4. Bad outcomes do not always occur because of mistakes; successes are not always a result of good decisions
5. Persistence and tenacity is key.
The Halo Effect: Debunking some hot business books with one of his own
February 28 2007
Review by Morice Mendoza