RTCrawford’s Weblog

Last night, I came across this review of Phil Rosenzweig’s The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers from Amazon.com. For anyone interested in management and with the study necessary to appreciate its references, this piece possesses uncommon depth, even with its abundant typos.

Nihilistic, Liberating, Iconoclastic Debunkery of Management, November 18, 2007

At the core of the Halo Effect is an impicit piece of mathematics, the Null Hypothesis. The Null Hypothesis has become a foundation of modern statistics, and Null has some very unfashionable things to say about human thinking. Null holds that we must assume that the universe is essentially random, and we will begin with the idea that randomness, or “noise processes” are the true explanation behind many seeming truths and meaningful coincidences. Only through rigorous analysis can we say that there is a probability (never a certainty) that other-than-random forces are at work. Thus we derive the notorious P-value, which says what is the probability that randomness alone *coulld not* account for the outcome ?
Business literature, it goes without saying, is a large and lucrative enterprise which must remain constantly in motion, like certain large fish, by grinding out a steady stream of “state of the art” theories, concepts, perspective shifts, novel vocabularies, often lending a patina of legitimacy to the New New thing which of course supercedes the Old Old thing.
Rozenzweig has scented the unspoken relationship between Business and Inspriational writing, and fundamentally identifies a deep strain of arbitrary, indulgent, and often opportunistic hawking of trivial intellectual novelties packaged as deep insight.
What Rozensweig is demanding his reader to do is “grab the right end of the stick” and not confuse causes with effects, or coincidences with good predictions. This message will probably not be met with much enthusiasm.
If much of what should work consistently, such as obsessive execution models, eventually doesn’t, and there is the inevitable regression to the mean of mediocre performance, what then does work ? What establishes critical perforative differences across business cultures ?
The answer, or a strongly partial answer might be found in Daniel Goleman’s writings, or the executive development at Goldman Sachs or innumerable papers and writings on psychology and behavior.
This essential distinction is self knowledge. From the materials emerging in many contexts, a very high, detailed, and thorough inventory of self knowledge which is consistently honed throughout the promotion ladder, and beginning as early in the executive’s career, will distinguish the brilliantly innovative, the ploddingly mediocre, and the catastropic miscast. This will, inevitably, have the greatest long term impact on the financial and cultural performance of the company. In other words, profit and the quality of the culture are inseparable, and the culture in general and the culture of self knowledge are equally inseparable.
The reason for this is that human behavior has two rough domains, the Proactive, when one is moving according to the established plan and is on a winning streak. We inhabit a culture that fetishizes the proactive stance, places a neurotic worship on “winning” above all else, and yet has an equally neurotic, unconscious disgust for the reactive stance, and “losing”. So, the executive is unconsciously, unwittingly socialized to be forever in the Proactive, Winning mode where he (or she) wears the magical Halo.
However, the Halo is also a crown of lead, because the status of “winner” positions this Halo wearing Proactive Winner into thought processes, behaviors, beliefs, attitudes to keep the Halo exquisitely polished and easily seen from a great distance.
In real life, once one has discarded the remains of infantile omnipotence and a lust for ego gratification at the expense of hard facts and amorphous, fluid realities, one is more ofthen that not forced into the Reactive mode.
Psychology teaches us that humans think and act very, very differently when the high control emotional state of Proactivity is shifted to the low control state of Reactivity, when the halo has to be taken off and melted down for ammunition, so to speak.
When one is then trapped in near-arbitrary linguistic distinctions of “winner” versus “loser” the mind will naturally regress to a more elementary, instinctual class of mental processes, such as obsession with detail and trivia at the expense of the big picture (a.k.a. paralysis by analysis), or cling to nuances and formalities (Freud calls this the narcissism of petty differences), or experience low grade paranoia and creative blockage, or fly into defensive rages, or generally behave in weird, irrational, and confusingly non-linear ways.
The smartest and hottest companies appear to have absorbed this lesson, they want to get under the skin of the Proactive, Winning, Upbeat Can-Do mindset and ask the brutal, vital, self preserving question, HOW does this candidate (for an initial hire, for promotion, for senior position) operate in the maximal reactive state ??? What instincts and unconscious resources does the individual, and collectively, the entire organization have on tap when the game changes, when one’s identity is under seige, when a disruptive technology or business model appears without warning ?
For this reason, and and all organizations with adequate resources should institute aggressive self knowledge programs with an emphasis on identifying the blind spot(s) of each candidate, and from that, providing them with clear feedback and counseling as to how those blind spots WILL, inevitable become the flashing illuminated signs in times of stress, change, or confusion.
The optimal strategy for a rapidly ascending Halo person, a perceived Golden Winner, a “savior figure” come to make it all right again, would be to go off site, away from the corporation, and engage the best, most candid psychological services available for a thorough multidimensional workup of all personal factors, with a particular emphasis on how one’s Defense Mechanisms shpape behavior and perception in times of stress.
Because of employment laws, there is only so much a company can do internally, with the 360 degree reviews, the Caliper tests, etc. all of which are useful withing the allowed limits of the workplace.
If Goleman is right, the seriously motivated executive, the one who will emerge as the long term winner, as opposed to the transient Halo wearer, will be the one who has had the most greuling inquiry into his or her failure modes and how this has formed the Operating Style.
If Goleman is further right, the greater the initial success, the lower one’s desire for self knowledge and self inquiry, especially painful, embarassing, or ego diminishing self inquiry,the more vulnerable he will be to “bolts from the blue”, and yet further studies have demonstrated that at the critical juncture of promotion, it is this very lack of self knowledge, fueled often by a hubristic arrogance (read: a measure of narcisitic personality disorder), that makes the executive drift from Proactive self confidence into Reactive Dysfunction, his or her loathing for self exposure and objective criticism may engender a defensive prickliness, or an avoidant withdrawal, or a paranoid rumormongering, all of which greatly undermine the holistic healthy functioning of the business organism.
In a phrase, this is the genesis of the long noted Peter Principle, one is inevitably promoted to the level of one’s incompetence, where one then remains for a long time, subtly but effectively clogging the arteries of the executive circulatory system.
How many senior executives have believed that they had everything under control, and the next day they find themselves pouring an extra drink and asking “what went wrong”? “how could we NOT see that coming”? “why didn’t anyone tell me”?
Sadly for the executive and his slaved over compensation package, what went wrong wasn’t a specific communication breakdown or ill structured policy, it was an endemic case of “Halo Fetishism” which should have been rooted out early on before the Peter Principle Effect became the normal operating mode. In a sense then the entire company, the enterprise, has to be not only intellectually alive to the world it inhabits, it must also be psychologically alive, it must embrace the HOW of its Reactive Modes, it must allow for lead halos as well as golden halos, it must learn to be comfortable with “negative emotions” such as depression and outrage, and learn to extract value from those not-upbeat-winner emotional conditions as vital sources of reality and internal feedback, and ultimately, worldly realism.
The alternative is obscurity, or worse, extinction.