Discussion – The Anchoring Trap

Discussion – The Anchoring Trap

Trap Name: The Anchoring Trap

What Happened: In my work experience, I encountered the anchoring trap during a budget planning meeting, during which initial cost standards were presented. Even with more information suggesting that delivering the project at a lower price is possible, the team remained anchored to the overestimated values from which we made the final budget. Through this, we fell prey to the problem of defining a budget too broadly and relying on the initial figures, thus allocating more resources than required, which distorted the resource allocation for other projects. The anchoring trap led to the inefficient allocation of our budget, which proved the concept’s influence on choices.

Why It Fits This Trap: The anchoring trap occurs when decision-makers rely much more heavily on the first information received than they should, even if other, more relevant information is later accepted. In my example, the team fixated on the first available high-cost estimates during the budgeting, which had a dominant impact on the formulation of the final decision despite the new information showing lower costs. This illustrates the anchoring trap since people become attached to the first numbers mentioned, disregarding improved accurate information. Thus, the initial anchor influenced the decisions taken, which proved unbeneficial regarding resource allocation. This example fits the characteristics of the anchoring trap because the initial number introduction prejudiced the team’s decision-making, and the result was not the best by far.

Recommendations: To avoid the anchoring trap in the organization, it is recommended to use a procedure where several sets of data are assessed before concluding, thus mitigating the strength of initial figures. Updating individuals’ estimates and data presented during the decision-making process mitigates the anchor (Palombi et al., 2024). Making it a practice to form a review team that questions some presumptions and assesses the new information with the right attitude can also lessen the effect of the trap. Cognitive bias-awareness training that includes decision-making tools will also assist the staff in noting the mistakes and preventing anchoring even in related circumstances in the future.

References

Palombi, G., Nonino, F., & Borgatti, S. P. (2024). The effect of social network structure on group anchoring bias. Journal of Organization Design. https://doi.org/10.1007/s41469-023-00162-w

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This discussion is based on the article, “The Hidden Traps in Decision Making” by Hammond, Keeney, and Raiffa from Harvard Business Review, which can be found in the Purdue Global Library. Make sure to read this article before starting the discussion.

Discussion – The Anchoring Trap

Hammond, J. S., Keeney, R. L., & Raiffa, H. (2006, Jan.). The hidden traps in decision making. Harvard Business Review, 84(1), 118–126.

Learning how to perform analytics is only step one on the road to making correct decisions. There are many traps along the way that may lead you down the wrong path, even if you know which analytical methodology you need to use. In this article, the authors describe various psychological traps that you may encounter.

For this discussion, select one of these traps listed EXCEPT the sunk cost trap. Then, do the following:

From your professional experience, provide one real, specific example where you believe decision makers (you or other managers) encountered the trap.
Explain why you think your example fits the trap you selected. Remember, there are many bad decisions that are not the result of a decision trap. Does your example have the characteristics of the decision trap you selected? Start by providing a definition of the trap according to the article and explain why your example fits.
Provide specific recommendations to your organization to identify and prevent the trap from occurring in the future.
Again, do not use the sunk cost trap.

Please use the format below for your answers so everyone can easily follow your answers to all the questions (copy and paste to your post; using the template below is part of the requirements- you will lose points if you do not follow the template and skip portions of what is being asked).

Trap name

What happened: Describe the event/situation.

Why it fits this trap: First, define the trap based on the description in the article. Then Explain why you think this situation fits the trap definition.

Recommendations: Describe how the situation can be identified in the future or what your organization should do to prevent falling into the trap again. These recommendations should be about preventing the decision trap, not about improving the business operations in general.