This article was published in TSE science magazine, TSE Mag. It is part of the Autumn 2023 issue, dedicated to “The World of Work”. Discover the full PDF here and email us for a printed copy or your feedback on the mag, there.
It’s not what you know, it’s who you know.’ This popular saying suggests that well-connected job candidates will outcompete more talented and qualified rivals. Since her doctoral thesis at TSE, Marie Lalanne (Joint Research Center, European Commission) has been studying how favoritism operates in the workplace and its impact on diversity. Could differences in personal and professional networks explain why are there so few women in powerful positions?
Despite decades of progress in women’s participation in the labor force, women are still largely absent from senior corporate positions. While women make up 45% of S&P 500 employees, they hold 21% of board seats and represent less than 6% of CEOs. Recruitment to top positions is often an informal process, involving both professional headhunters and word-of-mouth recommendations, so good contacts are likely to be crucial for climbing the corporate ladder.
However, it has proved extremely difficult to provide hard evidence about whether women’s careers are held back by less effective networks. This is because ‘who you know’ is likely to be highly correlated with ‘what you know’. Talented, successful individuals are likely to build more extensive networks, even if their networks in no way contribute to that success.
Jobs for the boys
There is suggestive evidence that subtle differences in networking strategies can make the talents of women less visible. For instance, while women rely more on small, tightly knit networks, the male tendency to build larger groups with weaker ties may be more suited to job searching and career advancement. In this context, large networks of loose connections may provide more useful information, outweighing the cooperative benefits of a small, fiercely loyal sisterhood.
There is also evidence that homophily – a preference for interacting with similar others – may exacerbate the gender gap. If people prefer to recommend their own gender, male-dominated positions will keep being filled by males. Other explanations have focused on differences in behavior within networks. A handful of studies suggest that males reward their contacts more than females, have poorer information about women’s skills, and receive more benefits from men.
Similarly, several subjective studies based on surveys of top corporate individuals reveal that women appear to lack the relevant informal connections to access top positions and reap lower career benefits from their social networks.
Get connected
In a recent paper (‘The old boy network’, 2022), Paul Seabright and I provide a more empirical investigation. We use headhunting data on the wages and former colleagues of nearly 27,000 senior executives from more than 5,000 North American and European firms. We find that the size of an individual’s network has a large positive correlation with their earnings. Much of this is due to unobserved factors like talent or dynamism, but when we control for such factors there’s evidence that a significant positive causal effect of networks on earnings remains. And that effect is larger for men than for women.
This result appears to be due to two factors. First, both men and women are helped more by own-gender connections than other-gender connections, and men have more of these than women. Second, firms that employ more women in senior positions reward networks less than other firms. The recruitment methods of these ‘female-friendly’ firms, which have larger boards and more qualified executives, may rely more on objective criteria than on contacts. However, the scarcity of women in CEO positions suggests this phenomenon is not widespread.
In a subsequent study (‘Network-based appointments and board diversity’, 2023), I exploit data from directors’ CVs and board appointments in large US firms. My results underline the power of networks: Being socially connected to someone on the board increases the chances of obtaining a board seat by up to 41 percentage points. But I find little evidence that this network-based recruitment impacts the diversity of the board. This suggests that efforts to promote board diversity should focus instead on diversifying the pool of candidates.
FURTHER READING
The old boy network: are the professional networks of female executives less effective than men's for advancing their careers? Marie Lalanne, Paul Seabright, 2022.
