How to Recruit Harvard Grads Away from Goldman Sachs
A number of recent articles have returned to the question of why such a high proportion of graduates from elite U.S. colleges take jobs in management consulting and investment banking. (When I graduated from Harvard in 2005, it was nearly 50% of the class; today it’s more like 30%.) The general consensus of these writers is that this allocation of the supposed best and brightest (and certainly most advantaged) young people is bad for society. It diverts smart, motivated people from potential careers in science, engineering, politics and government, the military, public interest work, the academy, and entrepreneurship. Why do so many Ivy Leaguers choose consulting and banking jobs right out of college? Surely high school seniors don’t chose Yale with the dream of becoming an analyst at a investment bank four years later.
Several explanations are commonly offered, all plausible. I will argue—by comparison with another common postgraduate path, Teach for America—that banking and consulting firms use specific, highly successful recruiting tactics that can be adapted by other employers.
1. The most straightforward argument is economic: blame the invisible hand of the market. Investment banking and consulting are so much more remunerative than any other entry-level job that it would be irrational for students to choose other jobs. (Total compensation for first-year banking analysts is well north of $100k.) In The Trap, Daniel Brook argues that elite students are increasingly driven to choose high-wage jobs due to their rising indebtedness (due to tuition increases) and the high cost of living in cities (as rising income inequality prices out those without corporate jobs). (In the 1970s New York City schoolteachers and investment bankers had similar starting salaries!)
However, the salary argument has difficulty accounting for the recruiting success of a surprisingly similar program: Teach for America. TfA sends a significant fraction of the graduates of these same schools off to teach in inner city schools for two years at low wages; 17% of Harvard seniors applied in 2010. Some wage premium might be expected in selling out and working for the Man, and I suspect few Ivy grads would sign up for TfA if the tour were indefinite in duration, but here is an example of graduates choosing against their naked economic self-interest.
2. The second explanation blames the colleges: today’s graduates have no marketable skills! Four years of fancy schooling, and they have no real-world experience to convince an employer to hire them. In this view, consulting and banking firms take these unpolished diamonds and give them a real education, spinning them off in a few years to go make a difference in a field of their choosing.
If these graduates have so few skills, though, why do these firms (and by extension their clients) pay them such high salaries? And why do they recruit entirely from elite schools? Further, while analyst jobs provide exposure to business culture and reasoning, much of the actual entry-level work is jockeying Excel and Powerpoint files–not exactly tasks requiring sophisticated technical training. In the case of TfA, even fewer concrete skills are transferable to a non-teaching context.
3. The final explanation, voiced by recent grads as well as David Brooks, looks to the psychology of the students. In this scenario, students are hugely uncertain how to choose a career and don’t have firm values or goals to guide them. They’re probably also overcommitted with other activities and have little time for reflection. Therefore, they fall back on the pattern that got them where they are: looking for the next prestigious competition to enter and win. The commonality of TfA with banking and consulting thus becomes clear: they are highly selective programs that recruit heavily. With a well-defined recruiting process, they provide a way to defer the question of what’s next for a few years while earning a good salary and gaining business experience. (In the TfA case, the promise is of making a difference through service, proving that the rewards need not be financial.)
I think all three explanations are valid, but my own experience leads me to weight the third most heavily. Law and grad schools are populated in similar ways, although decreasing demand for lawyers and the overproduction of PhDs make these poorer choices. (Medical school is somewhat the opposite, demanding singleminded focus during the undergraduate years in exchange for near-guaranteed employment if one is admitted to and survives med school and beyond.)
While the aggregate career choices of elite grads may be a failure requiring correction, I suggest that it also represents an opportunity: The TfA example suggests that an organization can gain access to a pool of the best and brightest with smart recruiting. With the post-crash backlash against investment banking and the general downsizing of the financial sector, now is a good time to recruit at the most selective schools.
What are the recruiting strategies used by these companies?
- Prestige–some aspect of the job which can be bragged about to peers and parents, whether money or interesting work or social impact.
- Selectivity and exclusivity–competition for scarce slots makes the job seem valuable and getting an offer an achievement.
- Short-term commitment–jobs are presented as something one does for a few years before moving on with new skills, lessening commitment anxiety.
- Personal recruiting and networking–recent grads come back to describe the work, giving individual students ego-boosting attention and providing social proof that the career path is a good one.
- A well-defined timeline–recruiting season happens in the fall, so students can try it out “just in case” and get job offers well before the looming uncertainty of graduation.
Already, the technology sector is taking pages from this playbook. Startup incubators like Y-Combinator provide structure, competition, prestige, and the promise of a big payday, pulling in former consultants and bankers as well as new grads. A new data science fellowship is trying to intercept PhD scientists turning off the academic track.
I even think PhD programs could benefit from this approach. While grad school has long been a refuge for those uncertain of their next step, the cost in lost opportunities to students spending five to seven years earning a PhD which won’t land them a permanent academic position is significant. What if we acknowledged this from the beginning, and positioned grad school as training for a wide variety of careers? The allure of scientific discovery would remain a draw, but schools could recruit based on expanding valuable technical skills and encourage more direct interaction with industry. Time to degree would probably be shortened, lessening the commitment. Professional science masters programs are a step in this direction.