The Halo Effect refers to the idea that, if the company is financially successful, people tend to ascribe all kinds of other good things to the company. If the company is financially unsuccessful, those identical activities are given negative connotations. Basically, you can't rely on people within a company to give unbiased feedback about the company. Unfortunately, popular business books do exactly that when gathering their so-called data: they survey people within the company, asking subjective questions about how good or bad the company is doing such vague things as "establishing a good corporate culture." It turns out to be a lot easier to do such "research."
The author, Phil Rosenzweig, points out that the reason some business books are so successful is that they tell a good story -- a story that people in management want to believe, which is usually some form of the "rags to riches" fable wherein the hero is able to control his or her own destiny. "You too," these books say, "can make your company successful if you just follow our formula!"
The Wikipedia Article and this analysis and this one review the book fairly well and I don't need to try to better them. There is, however, a portion of the book where I feel Rosenzweig lost his focus a bit. The last of his Nine Delusions is "The Delusion of Organizational Physics," wherein business-book authors claim that everything is deterministic and if you pull the right levers (following the formulas described in their books) you will absolutely get your desired results, every time, as reliable as dropping an object in a gravitational field.
This is straight from Frederick Winslow Taylor, who decided he was "the father of scientific management," for some alternate universe where "science" means "making up data to support whatever you want to at the moment." Taylor was "successful" because people paid him money for his stories, so others followed his lead. And managers really liked the story that they had complete control over their own destiny, which was Taylor's gift: the belief in deterministic management.
Rosenzweig debunks this but only replaces it with "strategy and execution," which is on the same level as saying "a company must make a profit to stay in business." Yes, you have to plan things, and you also have to do things. But can't we know something a bit more than that, something that will at least slightly tip things in our favor?
Rosenzweig points out that there are far too many variables to be able to either measure or control the actual effect of changes. And he also notes that running a business is significantly affected by chance, but he doesn't quite shift over to the thinking found in The Black Swan: that being in a world containing risk and unpredictability doesn't mean you're helpless. Taleb says on page 368 of The Black Swan:
"... people do not realize that success consists mainly in avoiding losses, not in trying to derive profits. ... Positive advice is usually the province of the charlatan. ... Linked to this need for positive advice is the preference we have to do something rather than nothing, even in cases when doing something is harmful. ... in many instances it was better -- and wiser -- to have no models than to have the mathematical acrobatics we had."Such a world is certainly not as comfortable as the imaginary one where everything is deterministic, but it doesn't mean we can't do anything about it. The change in perspective is significant, and might be too big for most (many people seem determined to remain in fantasyland) and doesn't promise absolute power over everything -- but at least the results are real.
In his RSA presentation for his follow-up to The Black Swan, Antifragile, Taleb lays out this strategy, which I've paraphrased here:
- There's no guarantee of success, so treat everything as an experiment.
- Assume most experiments will fail.
- Assess the risks on each experiment, and make sure that if that experiment fails, it won't take the whole enterprise down with it.
- Realize that even if an experiment is successful, environmental (market) conditions might not favor it.
- Sometimes you will experience "luck," when an experiment succeeds and positive market conditions produce a popular product.
- Thus: Look for experiments that have a very positive upside with a non-disastrous downside.
- Do as many of these experiments as you can manage.