Why It’s So Hard to Switch Careers
“Boy, did I make a mistake.”
Sound familiar? Many college graduates voice those doubts after a year on the job. If you’re teaching 6th graders, you’re weary from the parents blaming you. If you’re slaving at an investment bank, you wonder if there’s life beyond the almighty dollar. If you’re pitching software, you dream of sitting on the other side of the desk. It’s natural. You gravitated towards a major with visions of big paychecks or making a difference. Eventually, it hits you: Change is slow. The system is rigged. And you’ll rarely get a shot to flash your real talents.
So where do you go? Business school, baby! After a few years in the trenches, you’ve probably found your passion. Chances are, you convinced an adcom that you had a vision to go along with it. After earning an MBA, you’d think employers would laud you for following through and investing in yourself. Companies should be chasing after you, with an MBA symbolizing your brainpower and dependability. According to a new study, that’s not necessarily the case.
This week, the National Bureau of Economic Research (NBER) released a working paper called “Exploration for Human Capital: Evidence from the MBA Labor Market.” Authored by Kenan-Flagler’s Camelia Kuhnen and Stanford’s Paul Oyer, the paper finds that employers consider some MBAs far from a sure bet when hiring. Since many employers value past performance and expertise in hiring selections, MBAs transitioning to a new career are deemed to be hiring risks.
According to Quartz, which conducted an analysis of the study, “employers explicitly look for certainty about productivity and fit in their new hires.” To put it another way, the more experience someone has in an industry or function, the higher the certainty an employer has (and vice versa). In the research of Kuhnen and Oyer, companies were nearly twice as likely to hire the candidate who remained in an industry than the one who’s transitioning into it.
Let’s put it another way. Using odds – where a 1 would mean an employer has no preference one way or another – experienced MBAs were 1.83 times more likely to get the job than less experienced MBAs (i.e. career switchers).
Kuhnen and Oyer also break the data down by high-prestige and low-prestige firms. At the latter, career-switching MBAs are regarded as an even bigger risk, with those firms 2.58 times more likely to make an offer to an ‘experienced’ MBA (compared to 1.57 at a prestigious firm).
The reason? Quartz cites that more prestigious firms have “a steady stream of applicants.” In other words, they have the scale and budget to more easily replace hiring mistakes. More prestigious firms – which often serve more diversified clients – may also require a broader range of industry experience and skill sets. As a result, they are more apt to take a flier on someone with limited industry experience.
Conversely, low-prestige firms are generally more focused on survival, where training and development are luxuries. As a result, experience is premium to them. They simply cannot absorb the cost and risk of hiring a potentially weak performer who may need to be replaced.
That’s particularly evident with internships. At low-prestige firms, high certainty interns are 3.57 times more likely to receive an offer than low certainty candidates. That number drops to 1.74 at high prestige employers.
Every hire comes with some uncertainty. But MBAs are often six-figure hires. While they may own successful track records in other industries, that prowess may not translate to new markets, practices, and expectations. And some companies simply cannot afford to stand back while these hires find their way. So here’s the lesson: If you’re an MBA who lacks industry experience and referrals, you might be better off targeting larger and more prestigious firms.
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