After reading various books and magazine articles on management, many clueless managers suddenly become prone to making grave mistakes based on a certain fallacy:
High morale leads to high productivity.
When these managers hear how successful companies manage their employees, sometimes even going to great lengths to provide morale boosting perks, they think that if they do all of that to their employees they’re going to see a drastic improvement in productivity.
Here’s some data on a major U.S.-based retailer used an example in The Halo Effect:
According to the report of independent industry analyst, Alex. Brown & Sons, during the early 1990s, “Qual-Mart” did these things:
- Installed point-of-sale terminals in its stores, which provided better information on sales by item and improved the inventory planning process.
- Expanded central buying to 75 percent of its merchandise, helping to reduce the costs of procurement.
- Modernized its inventory management and thereby significantly improved its “in-stock position.” One result: better management of seasonal inventory, boosting Christmas and Halloween sakes by 60 percent.
- Conducted physical inventory counts more frequently, not just once at year-end, resulting in greater accuracy and efficiency.
- Reduced its expense levels as a percentage of sales.
- Improved its merchandise assortment to match current demand trends, helping to raise sales.
- Installed a toll-free customer service number which led to a sharp improvement in customer satisfaction.
- Implemented a sophisticated client/server technology that led to better merchandise management and savings of $240 million.
Thanks to these many steps, “Qual-Mart” saw an improvement in inventory turns–that is, how many times in a year it sold its inventory, a key measure of retailing efficiently–from 3.45 in 1994 all the way to 4.56 in 2002. That’s a jump of 32 percent, not bad at all.
Then the book asks:
Would you say “Qual-Mart” improved its performance?
All this useless drivel fed to us by the mass media reminds me of the first part of The Halo Effect.
I’m sleepy so I’m going to make this short.
Ever wonder why some popular books are missing from the Personal MBA list? For example, both Built to Last and Rich Dad, Poor Dad are international bestsellers and yet they aren’t included in the list.
I don’t really know the exact process on how they choose books in Personal MBA, but I can see why those two types of books aren’t on the list.
Built to Last, In Search of Excellence, Good to Great, and practically every Toyota, Google, Starbucks, or [Insert big company or CEO here] book has been ripped apart by The Halo Effect. While the latter does not really turn all of those books into paperweights, it prevents you from having delusions that reading and following those books alone will turn your company around. (In some cases, THE does turn those books into paperweights, but I think you get the point. 
)
Robert Kiyosaki’s books, on the other hand, have been criticized by financial experts ever since Rich Dad, Poor Dad was released. Probably the most popular criticisms of RDPD in the Internet is John T. Reed’s criticism. I dare you not to be disillusioned about the book after reading that site. 
As for other books, I think I can safely assume that they either have better alternatives already on the list or the book is still haven’t caught the attention of the PMBA community yet. Either way, if a book is missing on the list, it doesn’t doesn’t necessarily mean that it’s not useful. Continuing with the disclaimers, I won’t claim the list as infallible (I see a couple of books that aren’t applicable to our country).
In the end, whether or not you decide to follow the list when buying books, always read the books you buy with both an open and a skeptical mind.
In the South Seas there is a cargo cult of people. During the war they saw airplanes with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head for headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.
— Richard Feynman
Many of the problems shared by business management and software engineering I mentioned in the previous post stem from Cargo Cult Thinking. As mentioned by noted physicist Richard Feynman in his famous speech to CalTech students that even in these modern times, people resort to blindly following how other people do things in the hopes of reaping the same results.
Dr. Feynman used cargo cults to criticize how many scientists fail to follow the scientific method by merely going through the steps of experimentation but not making sure that their process is scientifically sound. The Halo Effect uses cargo cults in the same manner by exposing the mistakes made by best selling management books in their research. The book basically tells the reader to ignore all those pages detailing how the latter conducted its research because no matter how “rigorous” they were conducted, they were never sound to begin with i.e. there were critical flaws in their process from the start.
Cargo cult thinking in the field of software engineering doesn’t even bother with claiming to follow the scientific method. As Steve McConnell writes in his “From the Editor” article in IEEE Software, March/April 2000, some managers are deluded to think that simply following the culture of highly successful companies will result in radical improvements in productivity. On the smaller scale, many novice programmers (and sadly, software teams in general) are deluded to follow cargo cult programming practices without even knowing why they are used successfully by other coders in the first place.
In my opinion, cargo cult thinking isn’t that bad… if only one or two people are affected. As they usually fail in a spectacular fashion, they make the affected people think twice before doing something like that again. If an entire group, or worse, an entire company is blindly following cargo cult thinking… well… either you ramp up your risk management or you start making popcorn for the drama that will unfold.
Yesterday I was bored and uninspired. To make up for it, I went to Makati today with a simple plan in mind: find a good book and read a couple of chapters over a large cup of green tea latte.
There were a couple of good books in National Bookstore Glorietta 5 and Powerbooks Greenbelt 4, but Fully Booked Greenbelt 5 had both a 20% off on all books and a Starbucks bar(?) inside their store so I ended up with FB. The problem with FB was that they didn’t have the books I wanted to read, How to Win Friends and Influence People and The Millionaire Next Door, both Personal MBA books (with so many flashy business books in bookstores nowadays, that list serves as an easy way to separate the chaff from the wheat).
I was supposed to go for some random “bestseller” business book when I saw hidden in a corner (literally) The Halo Effect. The first thing that popped into my head was:
Personal MBA tells me that this is the only book worth buying here, so I might as well buy it.
And so I picked up the book, and immediately brought it to the counter to pay for it. Then I went over to Starbucks, ordered my latte, and started reading the book. A few chapters later, I was telling myself:
Good thing I trusted Personal MBA.
–
The Halo Effect has a simple message, namely, be skeptical about management bestsellers. But the reasons the book presents as well as the implications of the message covers a broad range of issues, and so I can’t talk about all of them in a single post. Now that’s good for me because I have enough material from a single book for at least 5 more posts.
Anyway, I won’t be tackling the book’s message in this post. I’ll just talk about something interesting from the first few pages of the book.
