Firms could find their budget meetings are more productive by using new ‘anchor’ figures.
An anchor is a number that can skew people’s projections on how much money should be allocated to each area, which is why it is so important not to use an irrelevant figure, according to businesses strategy expert Professor Dan Lovallo and McKinsey & Company director Olivier Sibony on Harvard Business Review.
The way to produce a meaningful model is to use fact-based, non-historical criteria, as this prevents current anchors from interfering, thus allowing for a more objective budget, the pair stated. As a result, the dynamics of discussion at meeting venues can change for the better.
Professor Lovallo and Mr Sibony said: “Re-anchoring combats the anchor of history and convention with another anchor, grounded in a different set of facts.”
They highlighted how tests have shown that even completely meaningless anchors can impact people’s views, even if individuals think are disregarding the number – an issue that can influence budget meetings.
The art of negotiation is a skill in itself, CustomerLab Solutions boss M Muneer noted on mydigitalfc.com, adding that people should remember that “knowledge is power” in such meetings.
If people want to be able to argue their corner in a meeting, they must have the figures to back up their requests, whether this is in a budget meeting or any other commercial deal.