Halo Effect in Management: Examples & Concept

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Hawthorne Studies in Management: Summary & Conclusions

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:00 Definition
  • 0:29 Halo Effect in Management
  • 1:17 Examples
  • 2:56 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

The halo effect is an important concept to understand because it can create errors in analysis and decision-making. The concept was first developed by psychologist Edward Thorndike in 1920. In this lesson, you will learn what the halo effect is and its application to the business world.


The halo effect describes an error in thinking in which you make specific inferences about a person, thing, or process based upon a single trait or general impression. The halo effect distorts a proper analysis of the subject. It creates a bias in future analysis when you have a preconceived notion of prior performance. The halo effect can be countered by the use of independent data in your analysis.

The Halo Effect in Management

The halo effect often occurs in business and adversely affects the analysis of the performance of employees, management, and the business in general. The halo effect can incorrectly generalize the success of one aspect of a business upon the entire business or generalize a good trait of a manager or employee, assuming complete effectiveness of that manager or employee.

Conversely, the halo effect can cause you to wrongfully blame a failure on a particular trait of a business, manager, or employee that was once considered great. In other words, company performance shapes how we perceive a company's business strategy, leaders, employees, culture, and other elements. In fact, some things we perceive as the 'cause' of performance may really be the 'result' of performance.


Let's go over some examples.

Let's say that your company has been highly successful over the past two years in developing a new social network service. Profits have continued rising, and market share continues to double quarter over quarter. Business journalists hail your company as innovative, visionary, lean, and hungry. Its management was considered brilliant and relentlessly dedicated.

To unlock this lesson you must be a Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use

Become a member and start learning now.
Become a Member  Back
What teachers are saying about
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account