The Anchoring Effect

From Maria Simpson’s Two-Minute Training

The anchoring effect is a form of bias in favor of the first piece of information we hear during a negotiation, often the other person’s goal. It sets the range of negotiations in and around that number (or other goal), when that number may not be founded on anything but the other person’s day dream. 
 
It’s important to have your own anchor clearly defined. Whether you’re in a formal negotiation or a stalled conflict, being clear on your ultimate goal will help to focus your efforts for resolution and evaluate the offers that are made, theirs and yours.
 
Let’s say you are talking about a raise. The number offered is much lower than desired, but you negotiate around that number and get more than offered but less than desired, mostly because the initial offer is accepted as a boundary set by the other person. Depending on your frame of mind, you might still be disappointed even though you got more than was initially offered because there is that nagging voice that wonders if you didn’t get what was possible because they started from a low point.
 
On the other hand, sometimes we ask for something (ask any consultant) and the number is accepted quickly. The first thought is often, ”If I had known it would be that easy, I’d have asked for more,” so deciding whether to identify the other party’s anchor first or state yours first can be a tricky decision.
 
The best approach takes some work, and the outcome is not guaranteed, but here are some things to consider in thinking about anchors.
 
1. As in any negotiation, find out as much as possible about the other party’s circumstances and goals. It will help to explain why that position was taken and what supports it. Then you have a basis for accepting less than you would like or asking for more, and you have the information needed to make your argument or accept theirs.
 
2. Set your own anchoring point. Be clear on what your own goals are and why. Unless you are clear, you won’t know what’s important enough to fight for and what can be given away, assuming you get something valuable in return. Think of the options as a package, not individual items to be negotiated.
 
3. Start with a challenging or ambitious but not impossible goal. Challenging means you might get more than expected; impossible means you might shut down the negotiation entirely. It’s possible that the other party will become defensive and/or insulted, and stop talking to you if your position is way too high or low, that is, too far from their anchor.
 
4. Don’t get personal. Stick to organizational goals and don’t describe offers (or the person making them) as “ridiculous” or stupid” or in other judgmental and colorful but damaging ways.
 
While challenging or ambitious goals help to define your own position, there are downsides to be avoided by focusing only on that one ambitious goal.

First, if “success” is defined only by achieving that one goal, then not achieving it but being pretty successful in other ways can result in disappointment with the whole process and outcome no matter what was achieved. Making your ambitious goal the only satisfactory outcome is designed to leave you feeling frustrated and disappointed. Be aware of what you have won.
 
Second, having unreasonable goals might actually result in an obsessive effort that results in achieving them in unethical ways. Want a perfect score on a test? Have someone take it for you. Not meeting sales goals? “Adjust” the records.
 
So, before your next negotiation, whether that is over a raise or where to eat dinner, remember the anchoring effect and remember, too, that just because someone else puts something out there, you don’t have to be bound by it as a starting point. A reasonable response would be something like, “I had something else in mind” or “Here’s what I was thinking.” Don’t judge the offer or say no, at least not out loud; stay calm and keep analyzing the offers, what they represent, and how they fit into your ultimate goal. 
 
Planning, then, what you do in advance of the negotiation, is the most important part of the process.
 
Many thanks again!

                       

Maria Simpson

Maria Simpson, Ph.D. is an executive coach, consultant, trainer and mediator who has worked extensively with the corporate, non-profit and conflict resolution communities to promote incorporating conflict resolution into organizational systems and training people in the skills and approaches of mediation. MORE >