In his column for the Harbus, Professor Trevor Fetter shares his thoughts on the issues facing HBS students.
It is a scary season, and not just because I am writing this on Halloween. The markets are volatile, the election is next week, and we are still in the midst of a global pandemic. You are also worried about finding the right summer or post-MBA job! I am happy to provide my advice on this topic, given what the editor politely calls my “mature voice.”
Before we begin, a request: please don’t stress too much about this decision/topic. It is not healthy or productive. Your summer job and/or first job out of HBS will not determine your fate. These are merely early steps in a journey that will be informed by people you have not even met yet, sheer luck, and unforeseeable circumstances.
The first step in finding the right role is to take time and reflect on a few important questions that only you can answer:
- What matters most? Is it the impact you can have (on a system, on an organization, on an industry, on a community, on the world)? Is it money? Is it working in a style that infringes less on the other aspects of your life? Is it the people you work with?
- What kind of work do you want to do? Do you want to lead others or be an individual contributor who performs high-value work? Do you want to serve others and experience success through what you enable them to do? (This idea of serving others is not incompatible with leadership, of course, but I am referring to the idea of advising others or investing in their work).
- With whom do you want to work? Is it important to work with people who have similar backgrounds and educational experience to yours, or do you thrive on working in an environment that is diverse in every respect?
- Where do you want to be? On the surface, this may seem like the least important of the opening questions. But as we get deeper into our careers, location can matter a lot. Certain industries, like my former industries of investment banking and entertainment, exist only in a handful of places. Others, like my former industry of healthcare, exist everywhere in the world. And if you are flexible or indifferent to location, are there people you want to be near? For most people, this question becomes more important with each decade of life. With only two-ish decades behind you, at least give location some thought. There are few things worse than working somewhere where you do not want to live, and the best business leaders become deeply engaged in their communities.
Ask yourself these questions and take plenty of time to reflect on them. Think about what is right for you. You are surrounded with noise right now, from classmates, recruiters, and trendy ideas like search funds and AI/Machine Learning. In separating the signal from the noise, look within. Listen, and don’t be unduly influenced by what everyone you know is thinking of doing.
Let’s dig into that second question a bit more: what type of work do you want to do? Here is an analogy to help you approach this question: imagine you are on a freeway called HBS. There are three lanes in your direction of travel, and you have to choose one and stay in it for at least a while. The lanes are labeled advisor, investor, and operator. These are what professor Kevin Sharer, who wrote this column before me, called the “Primary Colors” of the career spectrum.
The advisor lane leads principally toward banking and consulting. The investor lane includes private equity, investing in public markets, and venture capital. The operator lane leads you to run something. It might start as leading a team or even a department, and ultimately a division or an enterprise. The basic idea with the operator lane is that it is about having responsibility for your own work and the work of others, and that the amount and scope of your responsibility grows over time. It applies equally to for-profit organizations and alternatives like not-for-profit entities, NGOs, and government.
As you think about which of these lanes to choose, think about the opening questions, because the answers will guide your choice. For example, if you are drawn to work amidst people who most closely resemble those of your HBS section-mates who most closely resemble you, then do not take the operator lane; you will be happiest in advisory work. There is absolutely nothing wrong with feeling this way. Some people find stimulation in working around people with whom they have little in common. For others, it can make them feel alone. They thrive on the energy and exchange of ideas with people who have similar educational or work experience and common aspirations.
Being motivated primarily by money carries a big downside: it is very likely that there will always be people you know and compare yourself to who have more. Those for whom this is not the primary source of motivation will enjoy a greater sense of freedom to pursue whatever they want, but if deep down you feel that wealth is most important, the decision of which lane to choose gets more complicated. The range of outcomes is probably greatest for operators, especially for founders and CEOs. The highest initial compensation goes to advisors, and the greatest risk-weighted present value may belong to investors. Among my peers who graduated from HBS in the 1980s, my sense is that over the past few decades, almost anything with the word “capital” in the title has tended to work out pretty well, specifically private equity, venture and investment funds, and real estate development or investing. Thirty years ago, this path was a bit risky, in part because these industries were smaller and less well defined. If that path is appealing to you in 2020, please just consider that the last three decades have been exceptionally favorable for these businesses because of rising equity valuations combined with declining interest rates and enormous tax preferences (in the US). Change those inputs to the business model and you will get a very different result. The most important advice I can give on the financial question is to avoid, within reason, making a decision based on initial compensation. Even the lowest-paying job post-MBA will enable you to repay your student loans. It is important to know how much financial reward means to you and to have confidence in yourself and think of the long term more than the short term.
If you want to have impact, nothing is quite as rewarding as leadership. Through the cases at HBS, you will experience this hundreds of times—literally every time you are asked what a protagonist should do. You can have enormous impact by advising or investing or through philanthropy using resources you have acquired in your career, but it is different than the impact from leadership. If you choose those lanes, your impact comes from helping and enabling someone else to make a direct impact. You will have a higher chance of success than the operator, because you can spread your impact investing or advising over a broader set of organizations, but it is rewarding in a way that is different from the operator. It is essential, but it is indirect. It is rewarding, but it is a different reward. Just know yourself well enough to know what kind of impact, direct or indirect, matters most to you.
Let’s turn to the possibility of changing lanes after you have made your initial choice. Students often ask me about this, specifically about whether these paths are mutually exclusive. The question makes sense because advisory jobs are plentiful, and the recruiting process is very well-organized and supported by the school. Usually when I get the question, though, I hear a concern: “If I take this consulting offer, can I become an operator later?” The clear answer is “yes.” Advisor-to-operator lane changes are common, especially early on in one’s career.
I started out after HBS as an advisor (investment banking) and two years later joined a client, switching lanes to operator. Outside of teaching at HBS, I am now an advisor (board member) and investor. If you study the guests we have had in the “Life and Role of the CEO” Short Intensive Program, many of them started out their careers as advisors in finance or consulting, then joined an operating company. Sometimes you have to dig a bit to find that, because after a while the first jobs get dropped from someone’s bio. Advisor-to-operator lane changes also happen with bankers or consultants becoming treasurers, strategic planners, or CFOs of client companies. And advisor/investor switches happen all the time in both directions, generally with bankers joining private equity firms and vice versa.
It is less common, but not unusual, for investors to become operators. Where I have seen this most is within private equity, when an investment team member joins a portfolio company or an industry expert in a public market investment firm joins a company in a financial operation (investor relations, treasury, CFO) or strategy role.
So, as lane changing is concerned, the advisor and investor lanes offer optionality. Is that true for operators? Moving from advisor or investor to operator is feasible, so what about the reverse? It is more like a solid yellow line. You don’t see it much. Perhaps the reason is that the advisor and investor lanes are more like a track. In investment banking and consulting there is a well-defined funnel from newly hired associate to retired partner (or equivalent). These businesses are organized that way for good reasons. They hire almost entirely from schools and their competitors, not from operating companies. They invest extensively in training and forming a strong culture, which outside hires can disrupt. There is an important exception for the operator, though. It occurs later in an operator’s career, when their industry expertise and network is valued by investors. Becoming a “senior advisor” or “operating partner” at a private equity firm is the most obvious example. In this role, an experienced operating executive acts in an advisory capacity to help with sourcing, evaluating, or managing portfolio companies. It is not the same as being a partner of the firm, though. That role, and the compensation opportunity that comes with it, is generally reserved for people who have chosen the investor lane and have worked their way up the ranks of the firm.
This has been primarily about the private sector. As you gain experience and subject matter expertise, switching from the private sector to the non-profit or public sector becomes relatively easy. Moving from public to private is more unusual unless one’s career started in the private sector.
I have given you four important questions that only you can answer. Three primary lanes you can choose with differing degrees of optionality. The unknowns of opportunities and sheer luck. Variables of industry dynamics, global economics, business cycles, and pandemics. You are launching and re-launching careers into a very uncertain world. But it is a much bigger and more interconnected world with far greater possibilities than the one faced by your MBA predecessors. In my class, more than half of us went into investment banking and consulting, and the rest generally went into manufacturing, consumer goods, or retail. Microsoft went public two months before we graduated. Tech meant making chips or computers. Private equity was not a term and was not really a thing. Capital was scarce, very expensive, and markets were regional. In comparison, for you the possibilities are endless and global, and you will graduate with a business education, a network, and a credential that will provide you with tremendous advantages, no matter what you choose to do first.
Trevor Fetter (MBA ’86) is a Sr. Lecturer in General Management at Harvard Business School. He teaches FRC, LCA, and the SIP: The Life and Role of the CEO. Before joining HBS, he was Chairman and CEO of Tenet Healthcare Corporation, a Fortune 150 company. Earlier in his career, he was CFO of the movie studio MGM and an investment banker. In addition to teaching at HBS, he serves on corporate and non-profit boards and advises several early stage healthcare companies.