Dressing for Success: How Wealth and Status Cues Affect Business Negotiation

The question of whether you should dress up or down for business negotiation is more complex than it first appears, recent research suggests.

By — on / Negotiation Skills

business negotiations

In business negotiations, we know we’re supposed to focus on substance: which issues matter to both sides, what each party can afford, what each side’s outside alternatives are, how to build a strong relationship, and so forth. Yet we’re often swayed by more superficial, often irrelevant aspects of negotiation, such as the shape of the table, whether we shake hands, and whether food is served. Markers of social status, such as nice clothes or a fancy car, also affect our thinking—likely without our conscious knowledge. Yet status and wealth cues don’t always influence negotiators in the direction we’d expect, according to new negotiation research.

Driving a hard bargain with sharp dressers

Imagine that you’re an event planner who is meeting with a man who’s interested in hiring you to organize a birthday party for 50 guests. The man shows up to your meeting wearing a nice-looking suit and tie. You discuss what he’s looking for, and then it’s time for you to make the first offer. Now imagine that he showed up wearing a casual shirt and jeans instead. Would you make the same offer you did when he was wearing the suit?

For Israeli participants in a 2018 study published in the journal Group Decision and Negotiation by Yossi Maaravi (Adelson School of Entrepreneurship, Israel) and Boaz Hameiri (University of Pennsylvania), the answer was no. Some participants were shown a photo of a potential client wearing a suit and tie. Others were shown the same man dressed casually. Participants quoted the client wearing a suit a significantly higher price for the same party plan than they did the man wearing jeans. A pilot study showed that people judged the man in the suit to be significantly wealthier than the man in jeans. Participants appeared to believe the well-dressed man could better afford an expensive party than the casually dressed man, and they padded their opening offer accordingly.

Interestingly, however, when participants in this scenario were asked to imagine, before making their first offer, what alternatives their counterpart might have to doing a deal with them, they made similar offers whether he was dressed formally or casually. The thought exercise appeared to prompt participants to consider that a well-dressed, seemingly prosperous person might have strong alternatives and therefore might reject an extreme opening offer.

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In another of Maaravi and Hameiri’s experiments, cars, rather than clothing, were used to indicate relative wealth. Israeli participants were asked to imagine they owned a car wash where they sometimes negotiated the price of special detailing services. Next, they were shown a photo of a car—either a new Mercedes Benz or an old Mitsubishi—and asked to quote the owner a price for such services (identical for each car). Here again, participants quoted a significantly higher price to the person they perceived to be wealthier—the luxury-car owner.

Displays of status, such as a nice suit or a fancy car, may lead your counterpart to think you have money to burn and won’t mind overpaying, the study’s results suggest. The results also remind us of the risk of drawing the wrong conclusions from superficial status cues in business negotiation. Because wealthier counterparts may have strong alternatives to dealing with you, they may be less tolerant of aggressive offers than you might expect.

Status envy and sabotage

Status symbols, such as designer clothes and nice cars, are also likely to highlight class and wealth disparities between negotiators, which can trigger feelings of envy in those who feel less fortunate. Indeed, that’s what Francesca Gino (Harvard Business School) and Lamar Pierce (Washington University, St. Louis) found in a 2009 analysis of actual data from a vehicle emissions testing facility in a U.S. metropolitan area. The results showed emissions inspectors were far more likely to allow standard vehicles to fraudulently pass emissions tests than luxury cars.

In a follow-up lab experiment, Gino and Pierce found that emissions inspectors’ empathy toward those who seemed more like them (owners of standard cars) and envy toward the wealthy (luxury-car owners) triggered the illegal favoritism. In a lab study, the researchers found further evidence that envy of others’ wealth triggers unethical behavior: The mere presence of a stack of money on an experimenter’s desk led participants to feel envious and cheat more frequently on a written task.

Overall, this line of research suggests that cues of wealth and status in a business negotiation (such as nice clothes or an expensive car) can backfire by prompting envious counterparts to try to cheat seemingly high-status individuals or to favor those who appear to be of more modest means.

Should you conform or stand out in a business negotiation?

In the corporate world, employees often dress up or down to conform to their organization’s or industry’s implicit or explicit dress code: Think of bankers in well-tailored suits and dresses, or start-up workers in T-shirts and jeans. Such unofficial uniforms take hold for valid reasons. The designer labels of financiers suggest that they’re good at their jobs and that their prosperity will rub off on customers and clients. In the tech world, casual attire conveys creativity, youth, and a single-minded focus on innovation.

When negotiating with people from different industries, should you conform to their style of dress? If a potential client actually manufactures clothes, the benefits of conformity are obvious. In 2007, when several banks were vying to lead the initial public offering (IPO) of yogawear company Lululemon Athletics, some of the deal teams showed up to meetings with the prospective client wearing “form-fitting yoga pants, track suit tops, and sneakers,” Dana Mattioli reports in a 2014 Wall Street Journal article. (“It was pretty embarrassing, actually,” one banker told her.) In another case, a banker told Mattioli that she found out she had lost a deal with a shoe retailer because she had worn a competitor’s shoes to a pitch meeting.

Conformity of dress in a business negotiation is usually a safe choice even if you’re not trying to win over a clothing company. So is dressing up to show respect. In certain contexts, however, dressing down can actually signal high status. Harvard Business School researchers Gino, Silvia Bellezza, and Anat Keinan studied this phenomenon after noticing that attendees at academic conferences tended to dress more casually over the years as they gained status.

When Gino wore red sneakers along with a conservative suit to teach high-level executives, she noticed that they seemed more attentive and laughed more than when she wore more traditional dressy leather shoes. After a class where she wore the red shoes, executives rated her status at Harvard Business School and in her field as being higher than did executives who observed her teaching in conventional shoes. Gino said that she herself felt more confident and less self-conscious when wearing the sneakers, which may have affected the executives’ reactions.

The researchers found evidence of what they eventually dubbed the “red sneakers effect” in the field and in the lab. They found, for instance, that clerks at designer boutiques in Milan tended to assume that a hypothetical shopper wearing gym clothes would spend more at their boutique than one wearing a dress and a fur coat. We confer high status and confidence on people who dress unconventionally because they seem to be above the rules.

Dressing down isn’t always wise, of course. When Facebook CEO Mark Zuckerberg met with investors in the lead-up to the company’s 2012 IPO, he wore his signature grey T-shirt and hoodie. But when Congress brought in Zuckerberg for a hearing on Facebook’s user-privacy breaches in April 2018, he swapped his hoodie for what the New York Times called his “I’m sorry suit.” Dressing up communicated to “suspicious, establishment lawmakers” that “I am in your house, I will accept your rules,” Times fashion director Vanessa Friedman wrote. “It took away one of the signifiers of difference between the old guard and the new.

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Managing status cues in business negotiation

  • Consider all parties’ alternatives. To avoid overestimating how much those who appear wealthy will be willing to pay, take time to think about their alternatives to the current deal.
  • Acknowledge envy. Recognize when you feel envious of a counterpart who seems to have something you lack— and remember that envy can lead to behavior that would violate your ethical principles. On the flip side, don’t favor others just because they seem more like you.
  • Add flair with care. Flaunting conventional norms of dress may give you a status boost in certain situations, but your default should always be to show respect.
  • Look beyond the surface. Be aware of the common tendency to give too much consideration to superficial cues of status and wealth in negotiation. Research, contemplation, and conversation can lead you to identify more important concerns.

Avoiding status sabotage

As human beings, we have an innate compulsion to assess our social status by measuring ourselves against others. Negotiation, often treated like a purely competitive enterprise, heightens that instinct. We automatically compare ourselves to our counterparts throughout our negotiations—on financial success, attractiveness, popularity, victories and setbacks, and a host of other measures.

We’re most likely to compare ourselves to those who appear to have less or to have achieved less than we have, according to Cornell University professor Robert Frank. Such “downward social comparisons” can leave us feeling better about ourselves. By comparison, sizing ourselves up relative to someone of higher status can leave us feeling frustrated, envious, and ashamed. Not surprisingly, envy and distress resulting from social comparisons can lead to impasse in business negotiation, according to Harvard Kennedy School professor Iris Bohnet.

We can lessen the negative impact of disappointing social comparisons on our negotiations by measuring ourselves against our peers rather than against those who have had more experience, money, talent, or lucky breaks. For example, when negotiating for a raise, don’t expect to match the salary of a colleague who has five more years of experience than you do. Moreover, look for value-creating tradeoffs that satisfy your counterpart’s status concerns, advises Bohnet. A job candidate might be willing to accept lower pay in exchange for a corner office or a high-visibility assignment, for instance.

Do you dress for success in business negotiation?

Claim your FREE copy: Negotiation Skills

Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.

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