The Halo Effect & Strategy

A well-known topic in psychology, the Halo Effect is defined as the tendency for an impression created in one areas to influence opinion in another area. For instance, if we perceive someone as being good or successful in one category, we might think they will be good or successful in subsequent categories. Likewise, if we perceive someone as being bad or unsuccessful in a category, we might perceive them as being unsuccessful in all categories. Understanding this phenomenon is important because it can create significant mistakes and inaccuracies in today’s companies, governments, and non-profits. How can organizations overcome the Halo Effect when developing strategy?

Success Isn’t Achieved by Following One Path  

In a highly digital world where information is easily attainable, articles exist from many different sources that discuss how organizations can follow specific steps in order to obtain organizational success. These articles typically provide case studies of successful organizations, highlighting the strategies that were used that got these organizations to where they are today. Advice provided by these articles and other sources may lead to success in certain cases, but organizations should avoid falling influence to the Halo Effect learn to take risks and make decisions that reflect their own unique circumstances.

Following guidance from publications and other sources can provide great starting points for organizations, but ultimately decision makers must make decisions that are informed by an analysis of their internal differentiating strengths (e.g. Harley Davidson’s focus on brand management) relative to their external environment (e.g. the aging demographic for heavyweight motorcycles). Ultimately, enacting a diversified portfolio of strategies that balance risks and rewards may be needed in order to sustain an organization’s competitive advantage.

Focus on Short Term Successes

Organizations sometimes make the mistake of focusing only on the long term success metrics. Popular management stories always peddle the elusive myth that success can be sustained for many years, which is unattainable except for only a select few organizations. Focusing solely on long-term success leads to short-term failures and a decrease in momentum.

 A focus on creating short-term success provides organizations an opportunity to build momentum by stringing together small successes that leads to long-term growth. A downfall of many business leaders is a desire to predict outcomes and follow clear guidelines. In reality, today’s complex business world creates uncertainty and therefore requires constant coping and adjusting by leaders. We call this new reality our VUCA World” that is characterized by Volatility + Uncertainty + Complexity + Ambiguity.  Organizations that are able to make strategic decisions in this VUCA world without needing a perfect plan will enjoy greater success than competitors who cannot adapt to this new dynamic reality.

Planning and Adjusting

Instead of restricting decision making with overly prescriptive plans, treating each situation differently generally results in better decisions over time. Leaders should gather information regarding different factors of the decision, including internal and external factors. Gather a wide variety of information that combines quantitative projections with instinct and experience to maximize potential success. Bâton Global has provided clients with research-based internal and external analysis that combine “quants” with “guts” and has given organizations proper data and insight to support strategic decisions.

Highly detailed, planned decision making sets organizations up for success, but decisions don’t always result in desired outcomes. Even the most successful organizations make bad decisions that result in unsuccessful ventures. When this happens (and it will happen), it is important to examine the decision-making process and not just the outcome. A common mistake resulting from the Halo Effect is made when organizations see a negative outcome and instinctively assess every decision preceding the outcome as flawed. Context matters – so clearly understanding the context is also critical.

Bâton Global has a demonstrated commitment to providing objective insight that allows organizations to make strong decisions informed by comprehensive and independent analysis. This process results in a clear understanding of process and outcomes that mitigate the potentially negative consequences of the Halo Effect.

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