Most of us have heard the old adage, “it’s not what you know; it’s who you know,” but for women, it might just be what you know.
A new study suggests that career advancement for women isn’t dependent on social connections in the way it is for men. Instead, professional success for women is dependent on “documentable and measureable competence” or basically, a proven track record.
The research focuses on the interplay between gender and connections among 1,815 Wall Street analysts and the 8,242 firms they covered between 1993 and 2009. Researchers Lily Fang, an associate professor of finance at INSEAD, and Sterling Huang, a PhD candidate while working on the study, wanted to see if alumni networks led to more accurate earnings forecasts, more impactful stock recommendations, and whether analysts were more likely to get elected as “star analysts,” which would affect their salaries by sometimes threefold, according to Fang, who is also a visiting associate professor at MIT. In the dataset used, there are over 41,000 analyst-firm connections. The researchers chose Wall Street as their testing ground specifically because of its known “boys’ club” culture.
Prior to their own research, Fang and Huang were inspired by another study which found that “connected analysts”–those who went to the same universities as the senior officers of firms they covered–outperformed in their stock recommendations, making them, ultimately, more effective in their jobs than those without connections.
“That paper showed that connections are valuable and we wanted to see if there is a difference between men and women,” says Fang. “We’re not really looking at, ‘do men do better than women?’ That’s a much more mundane question. We’re looking at the differential impact of connections in women and men’s jobs, performance, and their career trajectory.”
The first part of the study examines the analysts’ forecast accuracy and how impactful they are in moving prices within two days of issuing buy and sell stock recommendations. The findings show that for connected men, forecasts are typically 4% more accurate, but for connected women, there is no difference. The same results are seen in buy and sell recommendations. For men, recommendations have an impact immediately, but for women, again, there is no difference.
In the second part of the study, Fang and Huang examine how associations affect a more subjective assessment of performance: the chance of being “elected” as a star analyst, a title given to a small number (less than 8%) of analysts.
“This is a really important career trajectory thing for analysts because if they are chosen as a star analyst, their salaries can be three times higher than everyone else’s. So, they are totally coveted celebrities on Wall Street,” says Fang.
The most influential analyst ranking, according to Fang, is the one by Institutional Investor magazine, which finds its star analysts by sending out thousands of surveys and asking managers to nominate key players in the finance game. The winning analysts, called “All American (AA)” analysts, are announced in the October issue every year.
Again, the study finds that connected men have much better odds of being elected, whereas for women, “connection has a negative and insignificant coefficient,” says the study, and instead, it’s women’s “Ivy League education and accurate past forecasts” that matter. Despite these unsettling results, the good news is that women are not underrepresented when it comes to being nominated, but they have to work for it because their connections won’t matter.
The study also found no significant difference in the level of school ties between men and women.
“In general, [women make up] 12% of the overall [analyst] population, but they are 14% of the star analysts so it’s not like people are not awarding women,” says Fang, “but the factors for them to be selected are very different than men.”
Since this paper is an academic report, Fang doesn’t include her speculative interpretation of the findings, but she tells Fast Company that her own reading is that men tend to be evaluated on potential and women on actual performance.
“The findings could help explain the very persistent gender gap in the top echelon of the business world because it’s all about whether people are comfortable with you,” says Fang. “If a man–and most boards are men–look at another man, they’re able to interpret what it means if this guy is connected. They’re very comfortable relying on that information. But if they look at a woman, they don’t know how to interpret that (information).”
“The type of gender bias that we document, I think is more subtle, but perhaps even more insidious than the simple numbers game. We’re not finding women are underrepresented. We’re finding that they’re evaluated in different ways. How do you change people’s subjective interpretation? That’s a much more difficult [issue], I think. It probably has more to do with social norms and the ways people see things.”
What does all of this mean? According to Sarah Green, an editor at the Harvard Business Review, “we need to stop telling women to follow a male playbook” because “it doesn’t work for women” and it doesn’t work for companies, either.
Should women stop networking and just spend their time working? Probably not. After all, connected people are the first ones to hear about new opportunities and are able to navigate their careers more strategically. But at least in the finance world (and probably in many other industries), being a connected women still isn’t enough. You have to work hard and you have to be connected so that people can see that you’re working hard.