The time taken to reach top positions plays a critical role in determining pay for both men and women, but especially for women, according to a new study by IESE’s Marta Elvira and Isabel Villamor, with Cristina Quintana-Garcia.
The authors found that executives who had shown early promise and been promoted younger earned more than those who had followed a more typical timeline. And this “aging" effect was stronger for women than men.
While youth is rewarded, the reverse also applies: employee age negatively correlates with earnings and upward mobility. When promotions to executive positions occur later in life, women tend to receive less financial compensation than men. In other words, there’s a penalty for women who are late professional bloomers.
The main culprit was variable compensation – performance-based remuneration that frequently makes up the lion’s share of executive salaries. Variable compensation is largely subjective and lacks transparency, allowing bias to creep in.
Such thinking applies to women in particular because it overrides negative gender stereotypes. These positive perceptions can lead to further promotions, creating a virtuous circle: the early vote of confidence creating a cascade of subsequent, self-reinforcing success.
Men can face bias too, usually relating to commitment – “Is he already looking for his next job?" Still, this doesn’t hurt their career prospects as much.
As leaders, recognizing these biases is important because of their impact on people’s careers. Previous research has demonstrated that young men tend to be assigned to complex jobs quickly after graduation, setting them up for the virtuous circle and improving their salary expectations throughout their careers. The opposite is true for young women, especially in male-dominated fields, where they tend to be assigned to more clerical jobs within their teams, limiting their experiences at the time of promotion.
Getting into the virtuous circle early is therefore key for women, in a world where they need to consistently go above and beyond to reach the top levels of management.
Leaders should be aware of biases in task assignments and early promotion decisions, increasing transparency of variable compensation and sticking to objective evaluation criteria. Mentorships and sponsorships could also be instrumental in helping – and keeping – women on the virtuous circle.
And to all motivated women reading: lean into those promotions as soon as you can. Positioning yourself for advancement now can have salary repercussions throughout your entire career.