UCLA Anderson’s Perez-Truglia: The Old Boys’ Club Still Promotes Its Own

UCLA Anderson’s Ricardo Perez-Truglia is our Professor of the Week

Why do women still lag in pay and promotions? There are many theories, from stingy parental leave policies to extended career breaks many women take to care for children to plain old discrimination.

But the simplest explanation may be hiding in plain sight: Men like to hang out together and tend to promote each other. Call it the “old boys’ club” and it appears to be as strong in 2020 as it was when male graduates of Eton and Harrow awarded each other plum sinecures in the British upper class. 

That was the finding of a new study by Poets&Quants’ Professor of the Week, Ricardo Perez-Truglia of the UCLA Anderson School of Management, along with Zoë Cullen of the Harvard Business School. The latest version of their working paper, “The Old Boys’ Club: Schmoozing and the Gender Gap,” was published in December.

WOMEN HOLD JUST 5% OF ALL CEO JOBS

Perez-Truglia and Cullen start off by noting that among U.S. corporations, women make up nearly half of entry-level employees but their representation drops precipitately as they move up the ladder, comprising only 5% of all CEOs, according to McKinsey & Company. To see why this happens, they got access to the employment records of a giant Asian commercial bank, whose identity they kept anonymous, 65% of whose employees were female. At this bank, three out of every four entry-level employees were women but that percentage dropped sharply, to 25% at the C-Suite level and 0% at the very top of the pyramid—the CEO and the board.

Perez-Truglia and Cullen examined four years of the bank’s administrative data (2015-2018), covering 10,101 “events” (changes in manager assignments) involving 6,536 unique employees and 751 unique managers. At this bank, compensation for men and women working in the same position was pretty much the same; the gender cap came from the number of male employees who were promoted and the number of females who weren’t.

The researchers were particularly interested in what happened to male employees who moved from a female manager to a male manager and vice versa. Their findings: “Male employees are promoted faster after they transition from a female to a male manager: at 10 quarters after such a manager transition, male employees increased their pay grades by an additional 0.53 points…, roughly equivalent to 13% higher pay, compared to male employees who transitioned from a female manager to a different female manager,” they write. “Male employees who transition to a female manager (relative to transitioning to another male manager) end up with a pay grade 0.38 points lower 10 quarters later, whereas the evolution of pay grade for female employees is unrelated to the manager’s gender…”

MALE MANAGERS HELP MEN ADVANCE FURTHER

In other words, male managers helped men advance further, but whether they had a male or female manager made no difference to women employees at the bank.

Why? The researchers believe it has everything to do with social networking or “schmoozing.” Men more easily “schmooze” with other men about things like sports and in the process get to know each other. 

“This advantage is concentrated in positions where male managers and employees spend time in close proximity,” Perez-Truglia and Cullen write. “When a male employee transitions from a female manager to a male manager, the share of breaks taken together rises significantly.” That time spent together and “schmoozing” ultimately leads to promotions and higher pay for male managers—but not for women.

USE MORE OBJECTIVE METRICS FOR PROMOTION DECISIONS

Perez-Truglia and Cullen say organizations can mitigate the effects of the old boys’ network by involving several managers in promotion decisions or using more objective indicators, such as sales revenues or hours worked, as criteria for advancement. But the research suggests that as long as there’s schmoozing and male bonding, women will have trouble closing the gender gap.

Perez-Truglia, 36, is an assistant professor of economics at UCLA Anderson. (He’s also a visiting professor at the Haas School of Business at UC Berkeley.) His research focuses on how social image and social comparisons shape economic behavior. “What do others think of you?” he writes. “The desire to shape these opinions is a powerful driver of human behavior.” He teaches the core MBA Managerial Economics course.

A native of Argentina, he grew up in the suburbs of Buenos Aires and got his BA and MA in economics from Universidad de San Andres. He got his Ph.D., also in economics, from Harvard and then worked for two years as a postdoctoral researcher at Microsoft Research New England. He has taught at Anderson since 2016.

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