Halo Effect Errors

Examples of Halo Effect Errors in the following topics:

• Evaluating Performance: Who, What, and How

  • Benefits of the PA system include increased employee effectiveness, higher likelihood of improved employee performance, the prompting of feedback, enhanced communication between employers and employees, fostering of trust, promotion of goal setting, and assessment of educational and other training needs.
  • Detriments of the PA system include the possible hindrance of quality control, stress for both employees and management, errors in judgment, legal issues arising from improper evaluations, and the implementation of inappropriate performance goals.
  • The most common problems in this area are leniency errors, halo effect errors, and central tendency errors.
  • Employee comparison methods attempt to evade the leniency and central tendency errors.

• Evaluating Employee Performance

  • Benefits of the PA system include increased employee effectiveness, higher likelihood of improved employee performance, the prompting of feedback, enhanced communication between employers and employees, fostering of trust, promotion of goal setting, and assessment of educational and other training needs.
  • Detriments of the PA system include the possible hindrance of quality control, stress for both employees and management, errors in judgment, legal issues arising from improper evaluations, and the implementation of inappropriate performance goals.
  • This method eliminates central-tendency and leniency errors but still allows for halo-effect errors to occur.

• Structuring Employee Feedback

  • Employee Comparison Models: Two of the main culprits of subjectivity are leniency error and central-tendency error (judging to favorably and judging everyone the same respectively).
  • This does incur halo effect errors, however.

• Overview of Statement Changes and Errors

  • Despite best efforts, occasionally an error is made on the financial statement.
  • Please note: an error correction is the correction of an error in previously issued financial statement; it is not an accounting change.
  • Reflect the cumulative effect of the error on periods prior to those presented in the carrying amounts of assets and liabilities as of the beginning of the first period presented; and
  • A counterbalancing error has occurred when an error is made that cancels out another error.
  • While the effects of the error are corrected over a period of two years, the yearly net income figures for year X and year Y were still misstated.

• Impact of Measurement Error

  • Measurement error leads to systematic errors in replenishment and inaccurate financial statements.
  • The two main types of error are random errors and systematic errors.
  • In sum, systematic measurement error can lead to errors in replenishment.
  • As a result, an incorrect inventory balance causes an error in the calculation of cost of goods sold and, therefore, an error in the calculation of gross profit and net income.
  • It is also vital that accountants and business owners fully understand the effects of inventory errors and grasp the need to be careful to get these numbers as correct as possible.

• Standard Error

  • This is due to the fact that the standard error of the mean is a biased estimator of the population standard error.
  • The formula given above for the standard error assumes that the sample size is much smaller than the population size, so that the population can be considered to be effectively infinite in size.
  • The effect of the FPC is that the error becomes zero when the sample size $n$ is equal to the population size $N$.
  • If one survey has a standard error of $10,000 and the other has a standard error of $5,000, then the relative standard errors are 20% and 10% respectively.
  • Paraphrase standard error, standard error of the mean, standard error correction and relative standard error.

• Analyzing Data

  • The margin of error is a statistic used to analyze data.
  • If the exact confidence intervals are used the margin of error takes into account both sampling error and non-sampling error.
  • If an approximate confidence interval is used then the margin of error may only take random sampling error into account.
  • The FPC, factored into the calculation of the margin of error, has the effect of narrowing the margin of error.
  • It holds that the FPC approaches zero as the sample size approaches the population size, which has the effect of eliminating the margin of error entirely.

• Type I and Type II Errors

  • The two types of error are distinguished as type I error and type II error.
  • A false positive (with null hypothesis of no effect) in scientific research suggest an effect that is not actually there, while a false negative fails to detect an effect that is there.
  • Minimizing errors of decision is not a simple issue.
  • For any given sample size the effort to reduce one type of error generally results in increasing the other type of error.
  • This is an example of type I error that is acceptable.

• Type I and II Errors

  • Explain why the null hypothesis should not be accepted when the effect is not significant
  • This type of error is called a Type I error.
  • The Type I error rate is affected by the α level: the lower the α level, the lower the Type I error rate.
  • This kind of error is called a Type II error.
  • Unlike a Type I error, a Type II error is not really an error.

• Cognitive Biases as a Barrier to Decision Making

  • The most common cognitive biases are confirmation, anchoring, halo effect, and overconfidence.
  • Halo effect: This is an observer's overall impression of a person, company, brand, or product, and it influences the observer's feelings and thoughts about that entity's overall character or properties.