The halo effect is a term used to describe how a manager can be influenced by a single or outstanding employee characteristic, clouding his judgment on the employee's other traits. The halo effect can impair judgment to such a degree that hiring decisions are negatively affected and the company suffers. The employee pool can end up being one-dimensional rather than comprised of people with multiple layers of talent and ability.
The High-Energy Employee
A bright and cheery employee who always has a positive attitude and enthusiastically tackles projects might be identified as an ideal staffer because of her outgoing personality. Managers might find it difficult to criticize or harshly evaluate this type of employee because the halo effect positions the individual as someone who tries hard, always has the best intentions and is a cheerleader for the organization. Upon closer examination, she might actually take on projects with gusto, yet complete very few of them. While a positive attitude is certainly an excellent employee trait, it can be a damaging situation if the employee lacks the skills or abilities necessary to carry out primary job functions and responsibilities.
Attractive-looking people create a halo effect in which their outward appearance clouds judgment of their performance capabilities. This is especially true for people who are impeccably groomed, dressed and behave in a professional manner at all times. Attractive people often project an image of confidence and capability, wherein the problem lies. If the individual doesn't have the ability to perform job functions, it doesn't matter how good he looks in the office. The company still suffers productivity issues because the halo effect affects both hiring and management decisions.
The halo effect in the workplace can be seen if a manager intentionally or unintentionally favors an employee who shares a similar passion, hobby or professional goal. For example, a manager might think that because Joe is an avid sportsman like himself, he's automatically a good guy because the boss sees himself as a good guy and projects that trait on to the employee. This can lead to overly-familiar workplace relationships with the manager showing favoritism toward the employee because he sees something of himself in that individual.
The halo effect can be seen in how outsiders evaluate business performance. For example, if a company performs well and generates substantial revenue, there's often a corresponding assumption that staffers and management are exceptionally talented. Conversely, if a company is under-performing and not doing well, it can create the perception that the staff and managers aren't very good at their jobs. Both of these assumptions can be wrong, as an objective view takes into consideration extenuating circumstances and outside influences that can affect the company's performance.