Decision-Making Biases

Adjustment Bias

Definition

Adjustment bias is the tendency to make insufficient adjustments away from an initial reference point when estimating values, probabilities, or outcomes. It often operates alongside anchoring bias, where people start from an initial value and fail to adjust far enough from it.

Even when individuals recognize that the starting point is flawed or arbitrary, their corrections tend to be inadequate.

Real-world example

A common example appears in organizational budgeting and planning:

Teams often begin with last year's budget and adjust it slightly up or down for the coming year. Even when major changes have occurred—such as shifts in markets, technology, or workflows—the adjustments remain modest. As a result, budgets reflect outdated assumptions rather than current realities.

Another example involves time estimation: When asked how long a project will take, people often begin with an optimistic first guess and adjust upward. The adjustment is typically insufficient, contributing to delays and cost overruns.

Supplementary perspective

Adjustment bias is closely related to: • Anchoring bias, since adjustments are made from an initial anchor • The planning fallacy, which reflects systematic underestimation of time, cost, and complexity

The bias is stronger when: • decisions are made under time pressure • information is uncertain or incomplete • decision-makers lack experience in similar contexts

Practical advice

Recognize

—Ask whether your estimate is simply a small modification of an existing number rather than a fresh evaluation.
—Notice whether you default to previous figures, norms, or solutions.

Counteract

—Create an independent estimate before reviewing prior data or others' opinions.
—Use outside perspectives or reference-class forecasting.
—Ask: "If we had to start from scratch, what would this look like?"

Ethical use

—Provide helpful starting points in planning and design, but also encourage rethinking rather than incremental tweaks.
—Build in moments where teams are required to reassess assumptions from the ground up.