Final answer:
The Central Tendency Bias is where raters tend to rate most employees as average, avoiding extreme ratings. This leads to a concentration of scores in the middle of the scale, which can distort actual performance levels.
Step-by-step explanation:
The effect occurs when raters avoid using extreme ratings and tend to rate most employees as average is known as the Central Tendency Bias. This bias is a form of assessment error in performance appraisals or ratings, where the evaluator avoids using the full range of possible scores and gravitates towards the center of the scale. In other words, raters might be reluctant to assign extremely high or low ratings to employees, even if those ratings could be justified, leading to a bunching of ratings in the middle, or 'average', category, which can distort true performance measurements. This differs from the Leniency/Strictness Effect, where a rater consistently gives higher or lower ratings across the board, and the Halo Effect, which occurs when a single trait or overall impression unduly influences the rating of all other traits.