Jun 27, 2007

On business fads

Why is having a blog such a great thing? One can respond quickly to questions by readers. Consulting thought leader and author David Maister responds to a question by one of his readers about Phil Rosenzweig’s book The Halo Effect . As David agrees:

My book, Practice What You Preach, is not covered by Rosenzweig (it wasn’t a best-seller) but I have no doubt he would make a similar critique of my methodology. I surveyed people in 139 businesses on 74 questions and explored the statistical relationships between that opinion data (on what was and wasn’t going on in their office) and the financial performance of those businesses.

I think I would argue two relative strengths of my study: By allowing the statistics to tell me which of the 74 questions had explanatory power, I allowed the data to be discriminating between which aspects of office culture was correlated and which wasn’t.

If you were nit-picking, you COULD argue that all I discovered is which characteristics have a high halo effect (i.e. are given high ratings by employees when things are going well) and those that have a low halo effect. But that’s a pretty complicated argument.

Secondly, I did use a statistical methodology (structured equation modeling) – used by none of the authors Rosenzweig examines – which allows you to test for causality (and the direction of causality) not just correlation. (Which is one of his big concerns.)

So, net, net, net – I think he’s written a terrific book to remind all managers to beware of quick fad conclusions, and to remind all researchers and consultants that many (if not most) relationships in business that we think we know for sure actually don’t have much of a solid research backing to them.

Hmm... Rosenzweig’s book is on my reading list (thanks to the blog hunt prize) and I intend reading it soon. For people interested in more such "fact based business research" you can follow management professor Bob Sutton's (co-author of Hard Facts, Dangerous Half-Truths and Total Nonsense) blog here and the related website here.