#4: The anchoring bias

Bias number four is called the anchoring bias, also known as focalism. It is another cognitive bias that affects the way people make decisions.

The anchoring bias describes a person’s tendency to depend too heavily on a certain piece of information offered to make subsequent decisions. Once the mind is set on the anchoring piece of information, all future decision-making processes refer back to this anchored thought.

Before we look at how the bias might work in business, let’s discuss the imagery itself. What comes to mind when you think about an anchor?

For me, immovability comes to mind. An anchor is designed to keep a boat stationary in a dynamic environment, namely water. It serves a useful purpose.

In disciplines like hypnotherapy and NLP, anchoring is a technique that therapists use to ground certain helpful thought patterns into the body. By taking an action such as touching the index finger and thumb together, the body memory activates the beneficial thought pattern as a programmed response, enabling a person to create stability in moments of emotional turbulence.

So, how does anchoring a thought become a problem?

In this case, it’s the immovability of focus on the anchoring piece of information that can keep a person stuck.

Let’s look at it in terms of a real world example. Suppose you are in the process of negotiating the salary for a new job. When asked about salary expectations, you put forward a figure. It clashes with the salary band set by the prospective employer.

If you track back to the days before you discovered the mismatch of expectations, think about where you arrived at the figure you put forward. Did the job ad provide salary expectations? Did you research the market? Did a friend who works for the company tell you what you should request?

Consider that the figure you put forward in a salary negotiation is anchored on the first piece of information imparted to you. You obtained that piece of information from what you thought was a trusted source.

So what happens when you realise that the information from your trusted source turns out to be inaccurate?

It creates the problem of mismanaged expectations. Perhaps your prospective employer is willing to offer you the job at £20k less than you had anticipated.

How does that sit with you? What do you do?

You might accept the job but from a state of dissatisfaction. It's not a great place from which to embark upon a new position, is it?

You might look for a job at another company, determined to find the same role at your anchored salary expectation. In this case, you could remain unemployed for several months seeking out the role that meets with your anchored set of mismanaged expectations.

How did this happen? It happens because you anchored your salary expectations to a figure that, in this example, exceeds what people are willing to pay you for your set of skills.

It is actually difficult to avoid the anchoring bias altogether. There are a variety of conditions that affect anchoring — mood, prior knowledge, experience, personality traits and cognitive ability.

The truth is that psychologists themselves have yet to reach any definitive conclusions about the real reason for the anchoring bias. They just know that human beings do it.

In my mind, anchoring is a natural approach to decision-making when you're looking for certainty. Benchmarking your expectations using information provided by trusted sources makes logical sense.

The issue arises when you put your faith in one source of information and fail to adjust your position despite receiving new, trusted information that veers away from the original piece of data.

It’s the fixation on a piece of data or the reliance upon source data that creates rigidity. In these fast-moving times, rigidity compromises your ability to stay relevant.

So how can you effectively deal with anchoring? I recommend you try on a process called iteration, a quality of an agile mind. Iteration is a key part of an agile approach to design and technology projects. And it is an approach that has gained a lot of traction in recent years.

Taking an iterative approach to development of anything — a new job, tech development, business transformation — enables you to respond to changes quickly. How? It's a process of creating, testing, adjusting and adding in small chunks.

Let's explore it further using the analogy of the high seas. As a child, you may have ambitions to pilot a yacht. However, it's very unlikely that your first encounter of open waters is behind a ship's wheel. It's more likely you start exploring your sailing and navigation skills in a rowing boat on a lake.

Being close to the elements might be scary. However, it gives you an intimate and accurate understanding of the forces of nature — in this case, water. The next step might be to steer a motorised boat through a river. You gain some mastery at each level, incrementally expanding your skills until eventually you arrive at being captain of an ocean-going vessel.

Imagine what it would have been like had you insisted on starting at the level of yacht. Well, you might have done OK, except that what you'd lack is the appreciation of water as a force. This kind of understanding becomes invaluable when you encounter the volatility of the high seas. Missing out those intermediate steps means you miss out on a whole raft of experience that proves invaluable when the waves strike the bow.

Business is no different. It’s very rare these days that people are born into the role of captains of a ship. Taking an iterative approach to business makes a difference to your quality of life.

Take yourself back to the salary negotiations at the beginning of the article. If you committed to taking an iterative approach to the task, how might it have looked differently?

You might have checked out several sources of salary information before anchoring your thought on one figure. You might have called up the company to confirm the salary band before the interview. You might have decided to position transferable skills in a way that made you attractive for a different role altogether.

In gathering information from a variety of sources, you create a well-rounded view that's just not possible when you pin your expectations on one source.

What experiences like this offer you is a voyage of growth and self-discovery. Learning to flow with the tides doesn't mean you're at the mercy of them. It means you recognise that business is a journey. To arrive at your destination, you must learn to adjust course if you want to experience life as a pleasure cruise.
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When will you lift your anchors and set sail?

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