Source: Boris Groysberg, Paul Healy, and Eric Lin, MIT Sloan Management Review, July 14, 2021
Changing employers can help narrow the gender gap in executive compensation.
For managers and executives, changing employers has been linked to larger increases in pay. So we set out to explore whether women — particularly those in senior roles — can use external moves to increase their own compensation and perhaps narrow the gender pay gap.
Existing survey-based studies suggest that gains from switching employers are less pronounced for women than for men. These studies broadly compare leavers versus stayers by gender. However, leavers and stayers may have different attributes that drive pay increases — and those differences may vary by gender.
For such reasons, we think it’s necessary to take a finer-grained look at the issue by asking some pointed questions. For instance, in external labor markets, do executive women primarily get paid less for doing the same job, or does the disparity have more to do with getting barred from job opportunities with higher pay? Recent work suggests that access to those plum opportunities is a critical component. Short-listing practices in external search firms have been shown to disadvantage women. But studies also show that once executive women enter consideration pools, they are as likely to be selected as men with comparable credentials. That finding raises another question: Once women are placed in these competitive roles as external hires, how do their pay increases compare with those of men brought in from the outside?
In our analysis, they actually compare favorably. Using proprietary data from a top-five executive placement firm, interviews with search firm executives, and career history information on LinkedIn, we looked at more than 2,000 senior-level external job switches across a wide variety of industries and functions. Surprisingly, we found that among executives who change jobs, women get higher-percentage increases than men overall. In this article, we quantify these differences and explore contextual factors that appear to be associated with the gains for women, shedding light on when women might fare better financially in changing employers.
To be clear: Higher increases are not the same thing as higher pay. In our sample of executive job switchers, women are paid, on average, less than men both before the move and after. But in some situations, external moves do appear to reduce pay disparities.