The Best And Brightest Are Turning Away From Wall Street
The stock market is riding high these days. Earnings and cash reserves are better than ever. So why are the big banks feeling so nervous?
No, the banks aren’t fretting over another shutdown (or a new round of subpoenas). Instead, they’re looking at a downward spiral in something more basic: Hiring.
MBA grads are the lifeblood of many financial firms. They’re young, rarely complain, work insane hours, and earn less. What’s not to love? With the lure of six-figure starting salaries and fat signing bonuses, the financial sector had seemingly corned the talent marketplace. They could pick-and-choose from the best-of-the-best. Even with financials embracing more flexible work arrangements, the top MBAs are moving into other sectors in droves. Just look at the stats from Harvard Business School:
- The percentage of new Harvard MBAs taking jobs in financial services fell from 35 percent in 2012 to 27 percent in 2013, the smallest share that Harvard has ever reported.
- The number of 2013 Harvard MBAs entering investment banking has been cut in half, dropping from 10 percent to 5 percent over the past three years.
- Hedge funds have seen a decline in Harvard Business School grads, going from 13 percent in 2007 to 5 percent in 2013.
- While venture capital has consistently hired 1 percent of HBS MBAs over the past three years, that share is still lower than its 3 percent share in 2008.
And it’s not just Harvard. Take MIT’s Class of 2013, where the number of MBAs taking jobs in financial services declined from 27 percent to 16 percent. Or Stanford…where the financial services sector ranks second in hiring Stanford MBAs for the first time in the school’s history. And let’s not forget the University of Chicago’s Booth School of Business, where only 35 percent of the class chose banking, down from 43.2 percent the previous year.
Still, it isn’t all doom-and-gloom in the financial sector. Goldman Sachs reports “slightly” increasing MBA hiring over 2012…and Morgan Stanley expects to ramp up recruiting in 2014. But with more competition for MBA talent, financials will need to adjust their pitches as well as open their wallets.
More Business Grads Ditch Finance
So where are these MBAs heading?
You guessed it: Start-ups and techs. Just look at the stats:
- Harvard MBAs entering the tech sector rose from 12 percent in 2012 to 18 percent in 2013.
- At Stanford, tech drew 32 percent of MBAs, up from 13 percent in 2011.
- At Yale and Harvard, the percentage of MBAs moving into tech has more than doubled in the past two years.
So what’s behind the growing interest? Don’t MBAs prefer established big companies with deep pockets? And don’t start-ups and techs dismiss MBAs as thinkers who can identify a customer, but could never close one? Maybe…but apparently glasnost has been declared on both sides…for good reason. According to The Wall Street Journal, many tech companies “are warming to M.B.A.s who may be able to help lead their fast-growing operations as they mature.” At the same time, MBAs, particularly millennials, are seeking jobs with “autonomy and impact.”
In fact, many MBAs are choosing tech jobs over higher-paying alternatives. Take these numbers:
“Median base salaries for tech jobs among Stanford graduates last year totaled roughly $120,000, with an additional $38,000 in signing bonuses and other guaranteed compensation. Finance jobs, meanwhile, commanded starting salaries of $150,000, with another $135,000 in guaranteed compensation and signing bonuses.”
So why leave so much money on the table? First, many MBAs are looking for a stake, hoping to strike it big through equity stakes or stock options. Just as important, they’re seeking an environment where they can stand out, drive change, and better control their destiny. Just listen to Josiah Filler, a Stanford grad who recently moved from management consulting to heading business development for an emerging luxury travel website:
“If I’m going to be putting hours and hours in, I might as well be doing that for something I’m passionate about.”
A piece of the pie and a part of the action…sounds like the American dream to me.