Adapted from “Status Anxiety,” by Iris Bohnet (professor, Harvard Kennedy School), first published in the Negotiation newsletter.
Sometimes in negotiation, we’re forced to deal not only with the issues on the table but also with concerns about status. One famous instance took place in the late 1980s, when Robert Campeau, head of the Campeau Corporation, tried to acquire Federated Department Stores, the parent company of the prestigious department store Bloomingdale’s. A bidding war over Bloomingdale’s escalated between Campeau and R.H. Macy. Campeau won with an irrationally high offer—and had to declare bankruptcy shortly thereafter.
In his book Going for Broke: How Robert Campeau Bankrupted the Retail Industry, Jolted the Junk Bond Market, and Brought the Booming 80s to a Crashing Halt (Beard Books, 2000), John Rothchild suggests that status concerns drove Campeau’s desire to break into the retail industry and beat R.H. Macy at any cost.
Like it or not, concerns about status pervade negotiations. Most people are less likely to accept a job offer, even one that would be a substantial improvement on a current job, if it is worse than an offer made to a peer. The desire to achieve better outcomes than others—from friends and coworkers to competitors—can cause you to leave value on the table.
Too often, negotiators make implicit comparisons with others and then fail to understand why the other side finds certain demands offensive. In times of economic decline, we’re all especially vulnerable to making unrealistic social comparisons. Before and during your negotiation, think about who you’ve chosen as a reference group against which you measure yourself. Did you select the group purely to enhance your own status, or did you try to make a more appropriate comparison? Be honest with yourself. Are you reaching for the stars, making agreement virtually impossible, or are you accurately assessing your odds of having an offer accepted?
It’s also important to consider who or what your negotiating opponent has chosen as a reference group. In all likelihood, she chose favorable comparisons, which may cause her to be overly optimistic about what she can achieve. If so, try to help her adjust her aspirations and work with her to agree on reasonable comparisons.
It often helps to have a “middle man” who can provide negotiators with accurate comparisons. This is one of the important roles that agents play. While home sellers’ agents tend to choose somewhat pricier comparable properties than do buyers’ agents, they usually have enough experience to know that an overly optimistic assessment will not help a client reach a satisfactory deal.
Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a FREE copy of our Business Negotiation Skills: 5 Common Business Negotiation Mistakes special report from Harvard Law School.
