“At the end of 2007, Marks & Spencer was lauded as Britain’s Most Admired Company, ranked as the best among 220 companies in a survey conducted by Management Today. Not only did it receive the highest score overall, Marks & Sparks was rated best on five of the nine survey categories…
Marks and Spencer’s triumph was especially remarkable given that just two years earlier – in 2005 – it had ranked a mediocre 124th…
Thanks to strong sales and profits, in 2007 Marks & Spencer enjoyed a halo whose magical aura extended to just about everything it did.”
Phil Rosenzweig, ‘The Halo Effect’ (2008)
I am about to lose quite a few friends with my next sentence, but here goes anyway. I don’t believe in corporate awards; I think they are shallow, fickle and pointless, and we should not pay too much attention to them.
Phil Rosenzweig, iconoclastic author of The Halo Effect, agrees. His hard-hitting book pulls no punches and has caused a real stir in the world of management since it was published. His central thesis is that when a company is enjoying high sales and profit growth, a ‘halo’ appears around it. Everyone – its managers, peers, shareholders, even the business press – now imagines that the company can do no wrong, and in fact does everything right. But this is a temporary delusion. As soon as the company encounters some difficulty and its numbers no longer look as good, the halo slips – and now the same firm is deemed doomed, a managerial mess.
Larger-than-life CEOs are often the cause of the Halo Effect. When a leader with a strong personality emerges and seems to take his company to new financial heights, the halo shines strongest. But when the financials slide, that same leader can now look like a sap who didn’t get it, who didn’t stay ahead of the game. Often, the company’s leadership style, its management ethos, its strategy are exactly the same – but what was once thought excellent is often dismissed as execrable.
Examples abound. M&S has alternately worn a halo and a dunce’s hat, often with the same leadership and strategy in place. BP could do no wrong in 2002, when it was Britain’s Most Admired Company, and its leader, Lord Browne, was competence epitomised. In 2007, an explosion in Texas and allegations about poor safety policies shattered the halo. BP fell precipitously in the popular rankings, and Lord Browne now had to endure leaks about his private life and resign.
We can see the Halo Effect at work in Kenya. EABL was for several years the Most Respected Company, when its sales and profits set the pace. It was displaced by Kenya Airways, which briefly enjoyed dramatic profit growth. KQ was in turn knocked aside by the Safaricom juggernaut, whose mammoth revenues and profitability could not be denied. Watch this trend in future: whichever company has the big numbers will earn the respect. The problem? We are no closer to identifying what causes these companies’ success. We assume that a great bottom line means great, innovative management practices are at work. But often, firms could be reaping the benefits of monopolistic positions, of industry-wide upturns, of independently booming demand. When those things change, the halo goes.
Leadership DOES make a difference, but awards will never capture the difference. It is a shame we fixate on awards as much as we do. Business performance is a complex and nuanced thing, and dishing out gongs is no way to reflect it. Awards ceremonies should be seen for what they are: shoulder-rubbing events where people go to see and be seen, a chance to inject glamour into the humdrum of business life. They rarely have any more depth than that. I have only ever attended one in my time, and regretted it immediately.
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I recently worked on a mini documentary for the Most Respected Company award winner for Uganda. during my various interviews with the CEO’s 90 percent of them said their criteria for selecting the winner was financial performance, Granted the reason for venturing into business is to deliver a profit, however i agree with you that this is not the best yardstick for measuring the respectability of a company or wether it is a *top* company as some of these awards are refered to. just because a company has a huge marketing budget and can those saturate the television, radio, outdoor and print media does not mean it is a performer. how about the small business man, with a fraction of the huge budgets at the disposal of these companies who manages to beakthrough into an industry, create value, create jobs and inspire hundreds of other budding entreprenuers? surely this is also worthy of respect? however these individuals are rarely ever recognised. sad but true. i think instead of financial performance focus should be placed more on service delivery, customer satisfaction, because it is the customer we are here to serve so they should have a say!
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Hi Sunny,
Your articles continue to open new horizons in my thinking never imagined. Hongera!
Quick query, describe current management techniques applied in running modern business in Kenya?
Keep well.
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Farai, Peter:
Business performance is complex, has many angles, and is very, very difficult to sustain, even for the best companies. Witness the rise, fall, rise of Starbucks, Cisco, GE, Apple, GM, Toyota, Samsung, Sony et al. So dishing out an award in a given year because profits happen to be high is a facile exercise.
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