Who Employs the Most Harvard MBAs?

by John A. Byrne on

For years, the joke about the Harvard Business School was that it funneled so many MBAs into consulting and investment banking that it should be renamed the Harvard Consulting and Investment Banking School. This year, for instance, 52% of the Class of 2010 took jobs in either management consulting or financial services, including venture capital and private equity.

So if you look at the largest single employers of Harvard MBAs, it should be no surprise that the list is dominated by the international consulting outfits and the big name i-banks. Unlike other business schools, Harvard declines to identify the top employers of its MBAs each year. But an enterprising 2010 graduate and Baker Scholar with access to the school’s alumni database did some number crunching recently and was able to name the top ten companies that employ the most Harvard MBAs.

At the very top of the list is McKinsey & Co., the prestige international player in consulting, which currently employs roughly twice as many MBAs from Harvard than Goldman Sachs. Bain and Boston Consulting Group are respectively the number two and number three employers of Harvard grads. (See table below from the person who crunched this data for his blog Inside HBS). Interestingly enough, one of the top ten employers is Harvard Business School itself–which is listed in the ninth spot just ahead of IBM.

Why do so many Harvard grads end up in consulting? It’s not because they have a burning passion to enter the profession. “Relatively few people come to HBS because they genuinely want to be a consultant or an investment banker, yet the overwhelming forces here places most people either in those positions or on the edge of them,” says a current Harvard student who graduates with his MBA next year. The former military officer opined on the topic recently on his blog MilitarytoBusiness. “It is a very difficult force to fight. About the only thing HBS students are less passionate about than consulting is doing investment banking, so it is very ironic those are the top two most common jobs coming out of HBS. These truths may be rarely discussed outside of business school, but they are readily recognized from within.”

To a great extent, of course, the constant flow of Harvard MBAs into consulting is driven by compensation. McKinsey, Bain and BCG typically pay among the highest starting salaries and bonuses of any MBA employers. The median base salary in consulting for Harvard MBAs this year was $120,000, with a median signing bonus of $20,000, according to HBS placement records. Only three other industries paid more for Harvard talent in 2010: hedge funds, private equity shops, and venture capital firms. MBAs who landed jobs with hedge funds bagged median starting salaries of $137,500 with a median signing bonus of $27,500. Those who took jobs with private equity or leveraged buyout shops received median salaries of $135,000 and median bonuses of $30,000, while MBAs who accepted jobs with venture capital firms received starting salaries of $125,000.

The anonymous Inside HBS blogger, who says he currently resides in Cambridge, MA, and works at an early stage biotechnology firm, also took a look (see chart below) at the “vintage” of Harvard MBAs entering the three top consulting hirers: McKinsey, Bain and Boston Consulting Group. His conclusion: “McKinsey’s hiring this year (2010) is far below the normal rate.  Given typical attrition rates, they’re 3-4x below where they should be to continue the high mark set in 2006. The numbers also show that McKinsey’s trend is “unusually volatile.  You’d expect a consistent downward march (as new hires learn the “McKinsey Way” then depart for better opportunities + work/life balance elsewhere).”

McKinsey vs. Bain vs. BCG on Harvard MBAs

McKinsey vs. Bain vs. BCG on Harvard MBAs

“A possible explanation for some of the volatility,” he adds,” is that there are major retention issues at McKinsey after hires hit the key promotion dates (called out by dotted lines).  The first dip corresponds to the time of an Associate -> Engagement Manager promotion.  The second is around EM -> Principal.  The third is around Principal -> Partner. While Bain tends to generally follow McKinsey’s trend, BCG runs a bit counter-cyclical.  Probably due to BCG competing more directly with McKinsey?”

And finally, Inside HBS produced one additional chart (see below) that suggests that Goldman Sachs offers a more stable career path than McKinsey with its up-or-out promotion policy.

Goldman Sachs vs. McKinsey & Co. on Harvard MBAs

Goldman Sachs vs. McKinsey & Co. on Harvard MBAs

  • john doe smith

    I don’t get the top chart.. 500 per graduating class go to mcK?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    All the data is from HBS’ alumni database so this would not be a single graduating class but rather all the Harvard MBAs currently employed or who say they once were employed by these firms. I would think based on the number of MBAs hired by McKinsey from Harvard each year that these are highly conservative numbers because not all alums keep their files updated with the school.

  • john doe smith

    Ah ok. Got it. Still waiting on that Tuck vs Kellogg smackdown ;)

  • http://www.accepted.com Linda Abraham

    It will be interesting to see if there will be a change in the employer stats if the trend you reported in PE vs PC proves to be true and long-term. I suspect that the employers will push back if they don’t see applicants with the qualifications they have been looking for in the past, and PE may well win over PC in the long term. It will be interesting to see how this plays out.

    Best,
    Linda

  • AzhakMansor

    John, what are the hedge fund, private equity and venture capital big names that hire MBA graduates?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Azhak,

    Outside of KKR, Blackstone, Cerberus, these firms tend to hire in very small numbers so they don’t show up in employment reports as top hirers. And as I pointed out in the article, HBS does not reveal its top hiring companies. In contrast, McKinsey hired 44 Wharton MBAs this year while BCG took away 43 Wharton MBAs. Those are huge numbers.

  • Arthur Dullsworthy

    Are you saying that McKinsey took more Wharton grads? Weird!

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Arthur,

    Nope. Because Harvard doesn’t break out the number of MBAs hired by individual companies, it’s not possible to know for sure. I would assume that McKinsey hires more MBAs from HBS rather than any other business school. But we don’t know the number because this is something that Harvard doesn’t make public.

  • Arthur Dullsworthy

    Sure looks to me as though the insideHBS guy violated HBS’s TOS.

  • AzhakMansor

    Thanks for your clarification, John.

    In addition, what’s with an up-or-out policy? Does it mean that you will get fired if you didn’t get promoted within a period of time? And is this a universal policy for all top consulting firms?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Azhak,

    Yes. An up or out policy essentially requires that you leavebthe firm once it becomes clear you are not promotable and will never make partner. It’s fairly common at the prestige consulting firms but has long been a core attribute of McKinsey’s culture.

  • Tsen C

    Hi John, these top B schools cost over 100K for 2 years. Unless the families are rich, how do these candidates afford these tuition?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Tsen,

    Going to a full-time, two-year MBA program is a very expensive proposition. For almost all, it’s the second highest cost ever incurred in one’s life after the purchase of a home. There are scholarships and fellowships that help to offset some of the costs. At Harvard, for example, nearly 50% of every class receives an average of approximately $25,000 per year in need-based fellowships. But the bulk of the expense comes from borrowing the money to go to school. The average debt burden of a Wharton MBA, for example, is in excess of $105,000. You can see a story we did on this called the MBA Debt Burden here: http://poetsandquants.com/2010/08/17/the-mba-debt-burden/.

    Ultimately, the vast majority of people who get the degree think the cost is worth it. They get jobs that often would be unavailable to them and they earn far more money than those with only an undergraduate degree. The payback period on an elite MBA is especially good.

    Forbes looks at return on investment in its rankings. It found that the Stanford class of 2004–the last one it surveyed–had a median salary of $82,000 before entering school, which tied with Harvard for the highest of any MBA program. So the typical student made a $235,000 investment, including two years of forgone salary as well as the cost of tuition. But Stanford MBAs reported that their median salary five years after graduation had jumped to $225,000. The typical cumulative gain for this class of Stanford alumni was $85,000.

  • http://poetsandquants.com McK

    The explanation of the variation in McKinsey’s hiring is really ridiculous. McKinsey has incoming classes every 2-3 months, why would we have 2 year cycles?

    Think about it. IF retention issues are to blame, THEN all McKinsey peer group classes would suffer the retention issues, and SPIKES and DROPS in hiring would be spread out across MOST incoming classes.

    The idea that the dips mentioned are the result of our promotion cycle or up or out is really ridiculous and extremely poorly thought out. Dips and raises in hiring are the result of several factors:

    1.) General economic condition. Say the global economy is doing very poorly and demand for consulting services has dropped, then that would be an excellent time to not hire on new consultants who would subsequently have little to do.

    2.) Changing regional needs. Say business is really picking up in a certain foreign office / region, say Australia, then Australia is going to be doing the majority of hiring and you’ll see hired MBA’s profiles shifting to profiles Australia tends to draw from.

    3.) Variations in the annual classes at B-Schools. Say one year there are just fewer people interested in consulting at HBS or some other MBA program, or say the PE industry suddenly decided to give a big boost to signing bonuses and base comp to hire away talent, or say HBS grads just did a -particularly poor job- at case interviews that year, then all of those would contribute to a lower amount of consultants hired.

    McKinsey does not set annual targets per school, while the number of MBA’s hired each year stays relatively constant, barring during 08 which had a dip, where these MBA’s are sourced from varies over the years. Looking at any one school and imagining that that is a statement on retention is completely ridiculous.

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