At any modern business, both employees and leaders alike are required to make numerous decisions — often under tight deadlines and with limited information. While we strive to make these decisions as objectively as possible, cognitive biases can subtly influence our thinking. One such bias is anchoring bias, a mental shortcut that can significantly impact how we perceive information and make decisions.

What is anchoring bias?

Anchoring bias occurs when individuals rely too heavily on the first piece of information (the "anchor") they receive when making decisions. This initial information creates a mental reference point that influences subsequent judgments, even when that anchor may not be relevant or accurate. Anchoring can skew our decision-making process by causing us to give disproportionate weight to that first piece of information and overlook other important factors.

How Anchoring Bias Manifests in the Workplace

Anchoring bias can show up in various aspects of workplace decision-making, from hiring and salary negotiations to project planning and performance evaluations. Here are some common examples of how this bias might influence workplace decisions:

Hiring Decisions

When hiring managers are presented with an initial impression—whether through a resume, cover letter, or first interaction—they might anchor on that impression and allow it to influence their overall assessment of a candidate. For example, if a candidate’s resume lists a prestigious company as a previous employer, the hiring manager may be swayed by this information and overlook red flags during the interview process.

Example: A candidate with a high starting salary at their previous job might be perceived as more competent, even though salary does not always correlate with skill level.

Salary Negotiations

Anchoring bias often comes into play during salary negotiations. If an employer or employee presents an initial salary figure (the anchor), that number becomes the starting point for negotiations, and both parties may unconsciously focus on it, even if it’s not reflective of the market rate or the employee's true value.

Example: An employer might offer a low starting salary as an anchor in negotiations, causing the employee to lower their own expectations and settle for less than they deserve.

Performance Reviews

Anchoring can also affect performance evaluations. If an employee started off strong at the beginning of the year but their performance has declined, a manager might still give them a higher evaluation because they are anchored to the initial positive impression. Conversely, if an employee had a rocky start but improved significantly, their overall performance might be rated lower because of the negative anchor created by their earlier struggles.

Example: A manager might rate an employee based on their initial project performance, even if subsequent work was much stronger, causing the evaluation to be skewed.

Project Planning

In project management, anchoring bias can affect how teams estimate timelines and resources. If the first estimate of how long a project will take is overly optimistic or pessimistic, subsequent estimates may be anchored to that initial number, even when there is evidence that suggests a more realistic timeline.

Example: If the first person on a project team estimates that a task will take 10 days, others may unconsciously adjust their expectations around that number, despite contrary data indicating it could take significantly more or less time.

The Impact of Anchoring Bias on Workplace Decisions

Anchoring bias can have serious implications for decision-making in the workplace. When employees and leaders are influenced by initial information without thoroughly evaluating all relevant factors, it can lead to poor outcomes, such as:

  • Hiring the wrong candidate: Anchoring on a superficial trait like educational background or previous employer can lead to overlooking candidates who might be a better fit based on their skills, experience, or cultural alignment with the company.
  • Inequitable salary offers: Anchoring bias in salary negotiations can result in employees being underpaid or overpaid compared to market rates, leading to internal inequities and dissatisfaction.
  • Skewed performance reviews: Anchoring on early impressions can distort performance evaluations, leading to employees feeling undervalued or unfairly judged, which may affect their motivation and engagement.
  • Inefficient project planning: Anchoring on inaccurate timelines or resource estimates can lead to project delays, cost overruns, or under-resourcing, impacting productivity and profitability.

How to Mitigate Anchoring Bias in the Workplace

While it’s impossible to completely eliminate cognitive biases, there are strategies employers and employees can use to reduce the impact of anchoring bias in decision-making:

  1. Encourage Objective Criteria: One way to reduce the effects of anchoring bias is to establish clear, objective criteria for decisions like hiring, salary, and performance evaluations. By focusing on measurable factors—such as skills, experience, or performance metrics—decision-makers are less likely to be influenced by initial, subjective impressions.
  2. Challenge Initial Assumptions: Actively questioning initial assumptions can help mitigate the anchoring effect. For example, during hiring or salary discussions, decision-makers should ask themselves whether they are being influenced by the initial anchor and whether it is truly relevant to the decision at hand.
  3. Delay Judgments: Giving yourself or your team more time to make decisions can help reduce the influence of anchoring bias. Instead of immediately accepting the first piece of information, gather more data, compare multiple sources, and avoid making hasty conclusions.
  4. Use Multiple Reference Points: In situations like salary negotiations or project planning, using multiple reference points rather than focusing on a single anchor can lead to more balanced decision-making. For example, when determining a salary offer, reference industry benchmarks, internal pay scales, and the specific qualifications of the candidate rather than solely relying on the anchor provided during negotiations.
  5. Involve Diverse Perspectives: Involving a diverse group of people in decision-making processes can help reduce the impact of anchoring bias. Different perspectives can challenge the initial anchor and bring new considerations to the table, leading to more well-rounded decisions.
  6. Leverage Data and Analytics: Data-driven decision-making can help counteract the effects of anchoring bias by providing objective, evidence-based insights. In areas like hiring, compensation, and project management, data can be used to validate or challenge initial assumptions and ensure decisions are based on facts rather than bias.

The bottom line

Anchoring bias is a subtle but powerful cognitive bias that can affect decision-making in the workplace. Whether in hiring, salary negotiations, or project management, relying too heavily on initial information can lead to skewed judgments and suboptimal outcomes. By recognizing the influence of anchoring bias and taking steps to mitigate it — such as using objective criteria, questioning assumptions, and involving diverse perspectives — organizations can make more informed, equitable, and effective decisions.