Here is an astounding business school factoid: Some 60% of last year’s graduates of the Harvard Business School took jobs in companies that employed 500 or fewer employees. HBS Dean Nitin Nohria says that fact was “one of the most surprising things that I have learned in the last ten years at Harvard Business School.” “The large world of recruiting where people would come and make offers to hundreds of students and take them just seems to be a world that is going to become a minority of recruiting,” he adds.
Nohria made this observation at a recent gathering at Columbia Business School, where the deans of Harvard, Columbia, Wharton and Stanford participated in a pubic discussion on the future of management education. During the hour-long conversation, the deans defended the value of the two-year MBA experience and predicted that the traditional business disciplines that have flourished in silos will became less critical as experiential learning assumes greater importance in MBA programs. They also forecast that technology will forever change how business is taught in business schools and predicted the decreasing importance of the traditional major employers of MBA graduates.
It was a rare public gathering of four of the deans of the so-called M7 elite business schools whose leaders often meet privately. The wide-ranging discussion covered everything from the return on investment of the MBA degree to whether it made sense for entrepreneurs to have an MBA education (not surprisingly, the deans took the view that the ROI on an MBA was strong and that an MBA education could give entrepreneurs an advantage). The unusual symposium, held earlier this month, was assembled to commemorate Columbia Business School’s centennial.
COST OF MBA DOESN’T JUSTIFY ‘LEARNING NARROW DISCIPLINES ONE AT A TIME’
Asked if the escalating cost of the MBA degree was worth it, Columbia Business School Dean Glenn Hubbard and HBS Dean Nohria both defended the two-year MBA experience. Nohria said the return on investment on the MBA was about “20% plus” from a leading business school. “Any transaction is about value,” added Hubbard. “If you are going to any of the very top business schools, the answer to that question is yes–as long as those schools are delivering an experience that brings the best of what we do in a great university like this with the world of practice around us. That is the experience that people are paying for. If it is an experience that is only learning narrow disciplines one at a time, I don’t think that is going to justify it. You will see a smaller and smaller number of schools providing the traditional MBA.”
The most surprising part of the discussion centered on the shift in how their MBAs are hired and by what kinds of companies. “To find a way to help our students find that perfect fit between one student and a company is going to be a new thing that all of us will have to figure out how to respond to,” added Nohria. “We are all evolving toward a world where there are many more employers, and we can’t rely on the big institutions for recruiting.”
At Harvard Business School, the percentage of graduating MBAs who joined startups that are no more than three years old reached 9% last year, triple the percentage of just four years ago. Those startups paid HBS graduates median starting base salaries of $120,000. At Stanford, meantime, only 15% of last year’s graduating class landed their jobs through on-campus recruiting. Some 37% found their jobs through personal networking or a student search that led to a summer internship and a full-time position.
Nohria’s counterparts agreed that they are seeing more graduates want to work for smaller, early stage companies. Wharton Dean Geoffrey Garrett even suggesting that MBA graduates might be better off at early stage and smaller companies rather than many of his school’s most important employers.
COMPANIES GOING FROM 50 TO 500 EMPLOYEES MIGHT BE A ‘MORE INTERESTING PLACE FOR OUR STUDENTS’
“I have been looking up close at the first jobs for our graduates,” Garrett said. If it is Goldman or McKinsey by God, they have a sophisticated HR function and they know how to come to our schools and Hoover up lots of talent. But it’s the company that is going to go from 50 to 500 employees that might actually be a much more interesting place for our students to work and where they could probably add more value. They just can’t find that company. So we can do some affirmative action I think for smaller company recruitment where our students might add more value and have more enjoyable experiences.”
Garth Saloner, dean of Stanford University’s Graduate School of Business, confirmed “it’s been a big change for us, too. Of 800 students-counting first years and second years who take jobs—they go to something like 400 distinct companies. The days when a small number of major employers would show up and drive off with bus loads of graduates, that is just not happening anymore.”