Friends in High Places: The Effects of Social Networks on Discrimination in Salary Negotiations

Administrative Science Quarterly,  June, 2000  by Marc-David L. Seidel,  Jeffrey T. Polzer,  Katherine J. Stewart

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Some candidates may have used more than one referral channel (e.g., a candidate might see a job advertisement in the newspaper, then call a friend in the company to inquire about it), yet they were restricted by the survey methodology to check only one method of referral. This limitation of the referral variable makes our hypothesis testing more conservative. That is, candidates who checked a non-friend referral method but also had a friend in the company should have accrued the advantages of having this friend when negotiating their salary. This would dampen the difference in negotiated salary increase between candidates referred by a friend and those in the non-friend referral categories, decreasing the likelihood of finding network discrimination effects.

Our test of the hypothesis that minorities have smaller networks across organizations was limited to a sample of network contacts from a single organization. Nevertheless, if, as we believe, this organization is representative of the larger population of U.S. organizations, the finding that minorities have fewer friends in this organization should generalize to larger samples of organizations. Although using data from a single company also restricts our ability to generalize the other findings to other organizations, the company we studied was progressive during the time from which data were drawn in that it attempted to ensure that minorities were not disadvantaged. Because using data from such a company provides a conservative test of our hypotheses, we may find much stronger effects in other organizations. Despite these limitations, our data provide a unique test of the effects of differences in social networks across minority groups on negotiated outcomes.

A troubling policy implication of these findings is that unbiased company policies are not adequate to prevent systematically lower salaries for racial minorities. For example, suppose a company has a policy that a candidate's request for a higher salary will only be granted if the company has no other viable candidates for the position and if there is a short timeline for filling the position. There is nothing inherent in this policy that should provide advantages to any particular demographic group. But this policy will only take effect if a candidate requests a salary increase. The candidate may perceive risk in requesting a higher salary, however, because it may strain relations with the company representatives, making it advantageous for the candidate to be able to assess the likely success of such a request (Walton and McKersie, 1965). A friend may provide information not only on the availability of other viable candidates and on the company's timeline but also on the company's policy about fulfilling s uch requests. The inside information a friend provides may allow the candidate to make an accurate estimate of whether a request will succeed and, therefore, whether it is worth the risk. In this way, while the company's policy by itself is not discriminatory, the candidate may know when to press for a salary increase, and when not to, based on knowledge of the company's policies gained through the candidate's social network. If social networks differ by race, then having specific policies designed to standardize the negotiation process may still inadvertently help candidates from the majority use inside information to tailor their negotiation tactics.