Do corporate awards really mean anything?

Mar 09, 2009 Business Daily, Leadership, Success

“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.