The word HALO refers to the circle of light that normally surrounds the head of a saintly or very revered person, connoting his or her holiness.
The HALO Effect
The HALO effect refers to the sudden recognition or appreciation of the positive qualities of a person being evaluated, usually based on one or two positive experiences that the evaluator has had the opportunity to know or experience firsthand. Often, this positive experience occurs shortly before the evaluation, and the "good experience" overshadows everything else. For example, a week before a person's annual appraisal, the individual discovers a serious system flaw and promptly alerts management, who then takes corrective action. During the appraisal by the superior, this single incident can become the HALO EFFECT that eclipses all other inefficiencies, negative traits, or poor performance of the person throughout the year.
Stereotyping
Stereotyping, on the other hand, involves classifying people into our predefined categories. For instance, it is our habit to judge a person and categorize them as inefficient, industrious, stupid, problematic, etc.
I trust that I have been able to bring more clarity to your apparent confusion.
Regards