The Halo / Horns Effect and Organizational Decision-Making

What happens when "B" doesn't follow "A?" Nothing good.

Here's the thing about philanthropy. The only way to be in a position to be a philanthropist requires work that runs in the exact opposite philosophical direction as philanthropy.

No one who becomes a billionaire is motivated by the public good. If they were, they'd have stopped amassing their personal fortunes long ago, reinvesting into the compensation of the employees who got them there, and discounting for the customers who have come to rely on them. Sacrilegious? No, philanthropic.

But no matter. All it takes is one photo op with an oversized check making a donation, representing less than 1/100,000th of 1% of their fortune. And with that, they're counting on the halo effect kicking in.

Of course, if we did some digging into how they amassed their fortunes, in most cases we'd conclude the exact opposite. But that's the point. We're not going to do any digging. In fact, we're very unlikely to show even a hint of skepticism.

Why do we do this? Because easy categorization is one of our favorite things. The faster we can categorize someone, the more content we feel.

Now let's imagine a very different story, about a billionaire CEO triggering massive layoffs following a year of record-breaking profitability.

Is anyone interested in learning the backstory and understanding the various forces at play behind this decision? Nope. What's the company's debt situation? Don't care. What did the company communicate to employees, and when? Doesn't matter. The CEO is evil.

And that's why CEOs invest so much in public relations. They fear the horns effect, in which people take a single piece of negative information and create a full profile based on that alone. Why do people do this? Same reason.

There's an open secret in many powerful circles. The people who publicize their charity work the most aggressively also treat their staffs the worst. Perhaps there is an unconscious desire to counter their lived reality with a conflicting piece of data that allows them to draw different conclusions about themselves. It's hard to think you're a good person when you spend your days treating people atrociously, unless you give yourself a conflicting piece of data on which you can focus. Like a picture with an oversized check.

But the more people are prone to the halo and horn effects, the more these types of strategies work, and the worse the decisions people make as a result.

Fortunately, the steps to account for the halo and horns effect in decision-making are fairly simple to take. The real challenge is getting people to actually take them. Why, especially for high-stakes decisions?

As with all cases of systemic irrationality, the answer lies in biases, heuristics and behavioral science.

The Brain's Limitations

The human brain has enough mental energy to process only a tiny fraction of the information available to it. Were people to try to think through every decision, they would become mentally depleted, and effectively paralyzed, by breakfast.

To compensate, human beings have adopted what Daniel Kahneman calls The Dual Systems Theory. Kahneman suggests that people engage in two very different types of thinking: System 1, which is fast, easy and unconscious, and System 2, which is slow, difficult and effortful.

By necessity, we spend the overwhelming amount of our time engaging in System 1 thinking (estimates typically reach 90% and above), reserving System 2 thinking for the relatively rare moments in the day in which we really need it.

If people are spending 90% of their time in unconscious autopilot, it begs another question: who's flying the plane? The answer to that is, "Biases and heuristics," the foundations of behavioral science.

Biases and Heuristics

Biases are mental tendencies, and heuristics are mental shortcuts that help us make decisions without expending mental energy. They fly the plane while we are in autopilot.

Fittingly, people have a bias against the word "bias," because they conflate it with racism, sexism, ageism, and all of the other isms that are worthy of our scorn.

Biases, however, are neither good nor bad. I have a positive bias for people who wear Canvas Chuck Taylor sneakers. As soon as I see them, I feel as though we have shared values and feel a kinship. It's just a mental tendency that helps me avoid spending any of my precious System 2 thinking.

Of course, bias can lead to all sorts of awful problems, especially when we perceive threats where there are none. But the answer is not to eliminate bias, because that is impossible. We could not survive without relying on biases. The challenge is learning how to recognize and mitigate the biases that our rational minds can understand are dangerous.

Heuristics face no such stigma, but play just as big a role in flying the plane in autopilot. Heuristics are mental shortcuts on which we rely when pressed to make decisions we can't "afford" to think through. The affect heuristic describes how we rely on emotions, or "our gut," to make decisions, rather than an extended thought process. Anchoring describes how we hold onto the first piece of information as our reference point in negotiations, without re-evaluating for accuracy or relevance. And the availability heuristic describes how ease of recall affects our perception of probability.

So, what is the cognitive purpose of the halo and horns effects? The same as every other bias or heuristic: to save mental energy. On the plus side, it sure saves a lot of research time.

The Emotional Purpose of the Halo and Horns Effects

Maslow's Hierarchy of Needs is one of social psychology's breakout hits. It's like the most reliable thing that people remember from Psych 101, which speaks to its resonance. Fun fact: Maslow's Hierarchy is not science and has never purported to be. It's never been validated. How could it be? It's simply his vision, and we all seemingly know intuitively that he's right, which is why we keep talking about it.

Maslow quite correctly points out that our most fundamental human needs are physiological: air, food, water, clothing and shelter. But once the most basic fundamentals to our survival are accounted for, the next most important need we have is for safety, and that's a lot trickier than air, food and water.

From an evolutionary perspective, it was only a moment ago that we emerged from caves to discover there were other people, and we'd have to figure out a way to live together. I'm sure some of those early pioneers assumed that everyone was operating in good faith, and almost certainly ended up dead prematurely.

So, is it any surprise that people are looking for clues by which to determine whether someone is "good" or "evil?" That knowledge keeps us safe, whereas a lack of knowledge requires us to maintain a constant vigil, which we hate doing. So, if we see a clue on which we can base a disproportionate conclusion, we are delighted to do so.

In this regard, the halo and horns effects work similarly to stereotypes, in that it helps people reach fast decisions and eliminate uncomfortable ambiguity. The difference is that the halo and horns effects are based on witnessed behavior, as opposed to stereotypes which are based on pre-existing, non-behavioral attributes.

So, hey - even if the halo and horns effects can lead us to some pretty bad decisions, at least they're better than stereotypes!

Uncertainty undermines our sense of safety. So, we are motivated to do whatever we can (perceptually) to mitigate uncertainty and feel more comfortable, even if we are fooling ourselves. And the Halo and Horns Effects provide exactly that.

Common Examples and Effects

The Halo Effect shows up in our personal lives in countless ways. Celebrity endorsements are based around it. ("If I like him, and he likes X, then I like X!") It explains the inherent advantage that physically attractive people have in almost all cases. ("If they look good, they must be talented.") It explains why great writers are expected to be great at everything. (*clears throat*)

The same can be said for The Horns Effect. It's why a bad first impression can torpedo a relationship. It's why a bad experience at a restaurant usually ruins it forever. Or why dressing casually to a formal event can create a label of "unserious" that is very hard to shake.

Professionally, the Halo Effect:

Meanwhile, the Horns Effect:

The Halo / Horns Effect and Organizational Decision-Making

"Organizational decision-making" usually evokes images of C-Suite boardrooms or start-up garages, but it almost always triggers the assumption that we are talking about the top of the organization.

And yet, organizational decision making happens at every level, every day. It happens when people prioritize their tasks. It happens when people interview entry-level candidates. And it happens when people decide how to respond to each other, especially when angry.

Organizational culture describes, "the way things get done around here," and decisions are a huge part of that, determining whether metrics are hit and how collaboration happens.

The Halo and Horns effect run rampant through every organizational layer every single day. For example, when dealing with organizational conflict, certain pieces of advice almost always apply.

But that doesn't mean The Halo / Horns Effect does not apply to the C-Suite. Quite the opposite. In fact, adding the dynamic of Groupthink only exacerbates their power. A positive or negative employee story shared at a C-Suite meeting has a life-altering impact for the employee. One example of company succeeding means that approach is always right, or failing means that approach is always wrong. And if someone succeeded somewhere else, they would obviously succeed here as well.

There's an obvious solution - slow down and do more research before drawing conclusions – that could not be any more unappealing to 99% of the population.

The Existing "Solutions" for Halo / Horns Effect

The solutions most commonly offered to combat the halo / horns effect are very much aligned with most biases. Maintaining awareness during decision-making, using tools and processes to counter bias and heuristics, and relying on data to do so are among them.

And these solutions, when attempted, tend to produce great results. The problem is that these solutions are so infrequently attempted.

That is understandable for a number of reasons. For starters, that degree of evaluation is far too much work given the sheer number of decisions we have to make, and we have far too little mental energy to do so.

For individuals, better decision-making requires intention and discipline, while groups require coordination and facilitation. But even those not enough to overcome the availability heuristic, because they still fail to address the most powerful obstacle of all: emotional resistance.

The New Solution for Halo / Horns Effect

If following a structured decision-making process might make someone's past or current decisions seem foolish, it eliminates their motivation to do it. No one wants to appear stupid, to themselves or especially to a group. If forced into a group structured decision-making exercise, they will be concerned exclusively with impression management, muddying the waters for an honest and objective evaluation.

The point must be made forcefully and effectively upfront: errors in judgment from biases and heuristics are as universal as breathing. Every single human has and will make countless of them, both consciously and unconsciously. And hindsight is always 20/20. To feel foolish for making errors in judgment is, quite literally, foolish. And it is a huge blocker to growth and improvement.

This mindset is a requirement for better decision-making, and facilitators must be skilled in making the point. But even that is not enough.

People's status and positions are often tied to certain decisions and/or supportive of the status quo. As such, they are strongly motivated to avoid or muddy any exercise that might threaten that order. This resistance must be eliminated as well. Fortunately, there's a framing to get us there.

Stories of agility success, like Play-Doh, Frisbee and Netflix, and of agility failure, like Kodak and Blockbuster, help to drive the point home.

What makes this the "new" solution to the halo / horns effect is that it addresses the emotional blockers before proceeding to the cognitive exercises. Solutions are meaningless for people not motivated to use them.