In what is generally regarded as the toughest MBA recruiting environment of the past decade, HBS students are having to work increasingly hard to secure a preferred full time or summer career opportunity.
Newly released statistics for the HBS Class of 2002 suggest that the incoming RC and returning EC will have to react to what can only be described as significant changes in key recruiting trends.
A Change in Mix
First, the mix of opportunities available to HBS graduates has shifted considerably. In particular, there are fewer opportunities to enter the traditionally popular industries of consulting and investment banking.
In a recent interview with BusinessWeek, Matt Merrick (HBS ’96), Director of HBS’s MBA Career Services, estimated that “consulting companies took the mid- to upper-30s [percent] of the Class of 2001, and are going to be in the lower- to mid-20s for the Class of 2002.”
Anecdotally, the number of investment banking summer internships available to the Class of 2003 was around one-third of that offered during the peak years of 1999 and 2000. To compensate, there have been greater opportunities for HBS graduates in marketing, general management and not-for-profit functions.
In an interview with The Harbus, Merrick pointed out that 12% of the Class of 2002 accepted full-time offers in marketing, compared to 8% of the Class of 2001. The equivalent figures for general management functions were 11% and 17% for the Classes of 2001 and 2002, respectively.
“8% of summer internship opportunities for the Class of 2003 was in the non-profit sector”, Merrick continued. Not-for-profit opportunities comprised a far smaller proportion of the full-time placements for the Class of 2002 (approximately 1%).
Median Remuneration Trending Downward
With consulting firms and investment banks paring their cost bases to the bone, it is not surprising that MBA remuneration packages for these industries, which historically have trended upward at a compound annual rate of 8 to 10% per annum, are being cut.
“Median base compensation [for the Class of 2002] is likely to come down by 10%, with further pressure on signing bonuses,” explained Merrick.
This, combined with a change in mix toward (at least initially) less remunerated functions, will result in lower aggregate headline compensation statistics for the Classes of 2003 and 2004.
In August 2002, a survey of more than 4,000 recruiters by the World MBA Tour concluded that the average MBA graduate salary (across graduates from all schools) had fallen 7.5% year-on-year from $80,000 to $74,000.
Networking and “Just-in-Time Hiring”
According to Merrick, HBS students can no longer rely on the formal campus recruiting season. “Networking to find the right opportunity is a key career skill,” he continued. While current HBS students are dissuaded from explicitly asking alumni for a job, MBA Career Services are quick to point out the many advantages of the School’s broad and deep network of alumni advisers.
Companies that traditionally have not hired from HBS tend to manage their recruiting on a much shorter lead time than companies hiring only during the formal on-campus period. This means that some EC and RC students will have to play a longer waiting game to apply and interview for those positions – something MBA Career Services terms “just-in-time hiring.”
HBS’s Relative Strength Still Intact
The raw statistics on placement at graduation are unquestionably sobering. At graduation, 18% of the Class of 2002 had not yet received a full-time offer. Additionally, 4% of the graduating Class had an offer outstanding that they had not yet accepted.
This combined total of 22% compares to a figure of 14% for the Class of 2001, and 8% for the Class of 2000. According to Merrick, the Class of 2000 figure was comprised almost entirely of students considering open offers.
Despite these trends, there is no evidence that HBS MBAs are losing their relative appeal to employers. The recruiting story at other leading business schools is similar, if not worse. For example, Crain’s New York Business recently reported that 25% of Columbia’s MBA Class of 2002 was jobless at graduation.
Unlike some other schools, HBS has not seen a falloff in the number of traditional recruiters coming to campus to recruit (albeit most arrive with fewer vacancies to fill).
Merrick points out that the proportion of HBS MBAs entering the venture capital and private equity industries is approximately constant, as is the percentage pursuing careers in finance as a whole (fewer opportunities in investment banking are offset by increased opportunities in investment management).
Near Term Outlook
In a move that can be read as a sign of the times, MBA Career Services last week distributed a circular to the returning EC class setting expectations, and counselling flexibility and tenacity as key to conducting successful job searches.
The letter characterized the broad MBA hiring market relative to last year’s as “relatively flat, with a moderate chance that it could decline by a small amount.” In a cautionary tone, the circular added that “[no recruiters] are expecting to increase hiring, and a small number have expressed concerns that the market may decline further.”
In spite of the somewhat bleak outlook, the circular concluded on a positive note, “many graduates from the Class of 2002 who pursued network opportunities have found great jobs in investment management, general management, private equity, marketing and a host of other areas. The opportunities are there … they just have to be found.”