And very closely related to that is the anchoring bias.
The anchoring bias means that when we have some sort of number in our head,
we tend to anchor from that number and then only make small adjustment
as we see appropriate, as opposed to rethinking those items independently.
And the anchoring bias cause is prior to the root of that spillover bias, where we
only adjust from a prior year's or a prior measurement period's evaluations.
And it's also related, of course, to the halo and the horn bias.
Whereas we think and we get anchored on those very high,
very low ratings, but then we only make small adjustments from there.
Another concern about performance evaluations are the so-called evaluations
death spiral, and
this can be especially salient when we're tying performance evaluations to pay.
So the first step is ratings inflation.
So there are several cases about companies that try to implement performance
evaluations and tie them to pay, and managers, in an effort to avoid conflict,
would try to rate their employees as highly as possible.
That way they avoid conflict and
they maintain a good working relationship with their subordinates.
But after this ratings inflation, ratings start to lose their meaning.
That is, everyone comes to see the highest ratings as an entitlement.
And when the organization is trying to tap the very top performers for
something like a promotion, then it becomes very hard to tell,
because everybody has a very high rating.
And so the second step is that those ratings start to lose meaning.
And then third, because everybody thinks that they're getting this message that
they're doing their job well, the purpose of development also declines.
And so in kind of the final stage is that as performance declines because
the development declines, pay rises more quickly than is sustainable,
because ratings inflation is causing people to become eligible for
very large pay increases.