The halo effect is defined as a cognitive bias where a positive overall impression of an entity, such as a person, company, or brand, influences one’s feelings or opinions about that entity in unrelated areas. It is essentially the inability to evaluate individual attributes separately from a general impression, leading to trait ratings that are more highly intercorrelated than objective measurement would reveal. This concept was formally coined by Edward Thorndike in 1920.Research spanning various fields has confirmed and explored this bias:Foundational Psychology: Early research by Sheldon J. Lachman and Alan R. Bass utilized a direct method correlating general liking with specific trait ratings, finding stronger correlations (.60 and .76) when initial general liking was extreme. Learning from sources suggests the effect is pervasive, though training can lead to more analytical judgments and reduce the halo error. However, the effect is robust and not easily mitigated, even when individuals are forewarned about it.Corporate and Marketing: The halo effect influences consumer brand attitudes, especially when product familiarity is low. In corporate crisis management, a favorable prior reputation can act as a “shield” against reputational damage, though this benefit is often limited to organisations with very favorable reputations. Similarly, Corporate Social Responsibility (CSR) activities can generate a positive halo, acting as a buffer against negative publicity, particularly when the CSR activity is highly congruent with the company's image. One study found that higher CSR scores led to $2 million less in fines for Foreign Corrupt Practices Act violations, demonstrating the effect on prosecutors who are susceptible to a general positive image.Evaluation and Perception: The "attractiveness halo effect" shows that physical attractiveness can lead to inflated ratings of unrelated positive characteristics like intelligence or competence. In management accounting, objective performance can create a halo effect that mediates perceived employee morality, influencing subjective decisions like ex-post bonus reductions following misconduct. This bias can be reduced when managers are prompted to provide justification for their decisions, increasing accountability and deliberative thought.Healthcare: Hospitals benefit from a halo effect of hospitality, as patients weigh room and board aspects (like nurse communication and quiet rooms) more heavily than objective medical quality or patient survival rates when determining satisfaction. This is because hospitality serves as a visible proxy for hard-to-observe medical quality.

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