The understanding of how our mind works, and how behaviour arise from this have been discussed since the begging of civilisation. In todays world we are mainly interested in how to use this understanding in business, right? Marketing, decision making, work force dynamic, team- building, communication, politics and all the stuff we do today. We all know somewhat how our mind is put together, at least we think so. We look at tools, analysis and understandings of various things. But often forget to look at the flaws and cracks, that makes us so vulnerable. We are affected unconsciously by it every day.
What will we look at?
- How can you use these biases, or flaws in our mind to manipulate others.
- Or how to be aware of them, so you avoid getting involuntarily influenced.
That is up to you how you would like to use this information. But either way where your intentions are, I advice you to read and share. Ill try to not use so many advanced science words, and make it as easy for people from other professions to understand as possible.
How you rely too heavily on one piece of information in decision making
How do we tend to rely too heavily on an initial piece of information? During your decision making, many processes take action, and sometimes errors occur in this process. With various outcome. I am relating real life business with common cognitive bias effects, feel free to read trough all the related articles.
So how do you make decisions based too heavily on one piece of information? This effect occurs when we place to much importance to one single aspect of an event, this causing an error in being able to accurately predicting the value of a future outcome.
Once the value of this aspect/ information is set, all future negotiations, arguments, estimates, etc. are discussed in relation to the anchor. Often the first offer, or information that comes on the table. This bias occurs when interpreting future information using this information.
So how does this apply to business?
The anchoring effect has many uses. I would say in general communication, and especially negotiation it is a great tool. It is good to take in use to achieve what you want, in combination with other negotiation methods. And being aware of the effect in your own mind, can save you some “bucks” in your negotiations.
People tend to be attached to the first piece of information they hear.
For example, the initial price offered for a project or purchasing of a company, set either before or at the start of the negotiations, sets an arbitrary focal point for all following discussions. Prices discussed in negotiations that are lower than the anchor may seem reasonable, perhaps even cheap to the buyer. Even if prices are still relatively higher than the actual market value, when we are biased we can tend to focus to much on the anchor. Taking in use this effect can for many be game changer.
If you negotiate salary, who ever makes the first offer has established the reasonable possibilities in each persons mind. So any offer there after will automatically be compared to the anchor.
We are often thought that we should never make an opening offer in negotiation. But the fun thing is that much research point to that the one who makes the first offer, often gets out of the negotiation with the best offer.
Best of luck in you negotiations.
Tim has background as is business psychologist and work sociologist with expertise in building organisations and teams to solve problems for the future. Tim has expertise in technology and the symbiosis between human interaction and technology in operational processes.