| Confusing outcomes with inputs |
| McKinsey Classics | December 2017 |
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| The halo effect, and other managerial delusions |
| If a company does well, we assume that it must have good strategies, leaders, and execution. If it later tanks, we think that they went bad. Yet they may not have changed at all. Performance, good or bad, creates an impression, a halo, that shapes our perceptions. Why? Many business concepts—leadership, corporate culture, customer orientation—are ambiguous. We get our notions about them from something more tangible: financial performance. In fact, many things we regard as contributions to performance are really inferences from it; we confuse outcomes with inputs. |
| This awkward truth exposes the fiction at the heart of much of today’s business literature: the idea that companies control their own destiny and that it isn’t shaped significantly by external factors, particularly competitors’ moves and the overall economy. Learn why good decisions don’t always lead to good outcomes and why bad outcomes don’t always result from mistakes. Read “The halo effect, and other managerial delusions” (2007). |
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