9 Common Delusions About High Performance

o you really know what contributes to your company's high performance - or are you making assumptions based on faulty logic? It turns out that most of the data regarding why one company succeeds and another fails is rife with errors in thinking and researcher bias.

For all of the business bestsellers that proclaim to share the secret formula of successful companies and heroic CEOs, the drivers of performance in business are as elusive as ever-especially at a time when global competition and technology are evolving at unprecedented rates.

But this doesn't stop consultants and business school professors from writing "authoritative" books that claim to have the formula for driving company success. High performance cannot be attained by simply applying the best practices of General Electric, Toyota, Starbucks or Google to your own enterprise.

For the last 20 years, managers have bought into popular business books such as In Search of Excellence, Built to Last and Good to Great. Writing in The Halo Effect...and the Eight Other Business Delusions That Deceive Managers (Free Press, 2007), Phil Rosenzweig claims many books that focus on company success are based on flimsy research and delusional thinking: "For all their claims of scientific research, for all their lengthy descriptions of apparently solid and careful research, they operate mainly at the level of storytelling. They offer tales of inspiration that we find comforting and satisfying, but they're based on shaky thinking."

Delusion #1: The Halo Effect
Psychologist Edward Thorndike researched the ways superiors rated subordinates during World War I. If a soldier was given a high rating for one trait, his superior officer usually provided high ratings for all other traits. And if a soldier was rated sub-par on a trait, he usually garnered low ratings for all other traits.

Thorndike called this the "Halo Effect": our tendency to make inferences about specific traits on the basis of a general impression. It's difficult for most people to measure discrete traits; we tend to blend them together.

For example, after the 9/11 attacks, George W. Bush's overall approval rating rose sharply. The percentage of Americans who approved of his handling of the economy also rose. There's no reason to believe the latter suddenly improved in the weeks after Sept. 11, but it was hard for Americans to separate these issues. When companies are profitable and sales are growing, we routinely attribute positive evaluations to other performance particulars. Numbers don't lie; we trust them. So, when we make inferences about company culture, customer outreach and core strategies based on financials, we succumb to the Halo Effect.

Delusion #2: Correlation and Causality
To identify high performance, you must gather data using independent variables. But even when rigorous research standards are applied, there's still a tendency to apply faulty reasoning. We continually infer causality from correlation. It's logical to assume that having satisfied employees leads to high performance.

A more reliable statistic may be employee turnover. A low turnover rate may correlate with the numbers of employees who report job satisfaction. The challenge is to untangle the direction of causality. Does lower employee turnover lead to higher company performance? Or does higher company performance lead to lower employee turnover? Pinpointing the distinction is critical to determining how much you should invest in achieving greater levels of satisfaction versus other objectives.

Delusion #3: Single Explanation
Most studies look at a single explanation for performance and cast the others aside. The problem is that other factors-a strong company culture, customer focus or great leadership-are correlated.

This is why it's so difficult to identify what drives performance. Even if you avoid the Halo Effect, you must still consider alternative explanations. So many factors contribute to performance that it's hard to accurately differentiate between the various considerations.

Delusion #4: Connecting the Winning Dots
If you pick a bunch of successful companies and attempt to search for what they have in common, you'll never isolate the reasons for their success. That's because we have no way to compare them with less successful companies.

Delusion #5: Rigorous Research
If you have poor-quality data, it doesn't matter how much you've gathered or how sophisticated your research methods may be.

Delusion #6: Lasting Success
Almost all high-performing companies regress over time. The promise of a blueprint for lasting success is attractive, but unrealistic.

Delusion #7: Absolute Performance
Company performance is relative, not absolute. A company can improve, yet fall farther behind its rivals, at the same time.

Delusion #8: The Wrong End of the Stick
It may be true that successful companies often pursue a highly focused strategy. This doesn't mean highly focused strategies often lead to success.

Delusion #9: Organizational Physics
Company performance doesn't obey immutable laws of nature and cannot be predicted with the accuracy of science, despite our desire for certainty and order. We'd like to believe there are governing laws that would make the business world less chaotic and more precise. But we cannot put companies under a microscope or run exact experiments. The best studies of business - the ones that carefully follow strict research methods, avoid the Halo Effect, control for variables and avoid confusing correlation with causality - can never achieve the precision of physics.

What Wise Managers Realize
Once we've swept away common delusions, what remains?

Here are five lessons wise managers need to learn:

1. Any good strategy involves a certain amount of risk.
   
   
2. Execution, too, is uncertain. There are just too many variables. What works in one company with one workforce may yield different results elsewhere.
   
   
3. Chance often plays a greater role than we ever imagine, and most managers don't like to admit this.
   
   
4. The link between inputs and outcomes is tenuous. Bad outcomes don't always mean managers made mistakes. Good outcomes don't always mean they acted brilliantly.
   
   
5. In the end, the best managers act with persistence and tenacity, dismissing the role of chance as irrelevant.

Do you wonder if your behaviors are helping or hurting you?

Visit my website and click on "Take a Free Assessment" for your free behavioral assessment. 

"If you want to sell more, go where your customers are, the target rich environments.. My father always told me never to marry for money. Just go where money is and fall in love. Good advice for anyone looking to succeed in challenging times."

The Anatomy of Peace
The Arbinger Group, Berrett-Koehler Publishing, Inc.

What if conficts at home, conflicts at work and conflicts in the world stem from the same root cause? Through a story of parents who are struggling with their children and with problems that have come to consume their lives, we learn from once-bitter enemies the way to find peace whenever we bring war upon ourselves.

This is the follow up to Arbinger's "Leadership and Self Deception" and while great as a stand-alone, is better served when you read the two sequentially. The concepts that were introduced in “Self Deception” are more fully defined and illustrated here. What is most important is that it becomes eminently usable and easily applied in your daily life.

If your relationships could use a bit of polish, this is a good start. As the book says, the choice between peace and war is within us all, and at all times. Choosing peace may not always be easy, but is always possible. The book offers a unique solution to the conflicts that cause pain in our lives.

The Anatomy of Peace: Resolving the Heart of Conflict