Halo effects in subjective performance evaluation: The influence of data gathering costs and relationship preservation

In this study, we use proprietary data from a retail organization to examine whether subjective ratings by supervisors exhibit patterns reflective of a “Halo effect” and the extent to which this Halo effect is affected by information gathering costs or efforts to preserve personal relationships and avoid conflict. We find evidence consistent with prior experimental research that subjective ratings are consistent with a Halo effect and show that this Halo effect declines over time, consistent with supervisors avoiding significant information gathering costs in early subjective ratings and, instead, anchoring on other, readily available information cues found in the objective measures and general ability impressions. We further find that the level of the subjective performance rating is positively associated with the strength of the supervisor-subordinate relationship, consistent with supervisors showing a desire to preserve a strong relationship and avoid conflict. Moreover, the association between subjective ratings and the DM’s general ability impression decreases when the supervisor-subordinate relationship is stronger, such that concerns about relationship preservation play a larger (smaller) role in supervisors’ tendency to give higher subjective ratings for low (high) ability subordinates. This study contributes to prior research by documenting in a field setting the presence of a Halo effect and providing theoretically-based evidence to distinguish between a costly information gathering reason for the documented effect and a social reason related to the preservation of personal relationships and conflict avoidance.