How's this for a one-two punch: First, the MBA class of 2002 struggled to land internships last summer because of the wobbly economy. Now, its members are facing an even grimmer possibility -- graduating next spring without a job.
Business schools around the country report precipitous declines in recruiting by some of the top importers of MBA talent, particularly investment banks and consulting firms. At the University of Virginia's Darden Graduate School of Business Administration, which last year sent 62% of its grads into investment banking and consulting, interviewing by investment banks is down 56% and consulting firms 74%. "This is the most challenging year for recruiting I've seen in my career," says Paul Danos, dean of the Tuck School of Business at Dartmouth College.
Evidence of the disappointments that await many MBAs is mounting faster than the piles of resumes in B-school career services offices. At the University of North Carolina's Kenan-Flagler Business School, interviewing has plummeted more than 25%, says Mindy Storrie, director of MBA career services. Recruiting has taken a similar hit at MIT's Sloan School of Management and other top-tier programs.
JUST FACE TIME. Companies that stockpiled MBAs in recent years are now nixing campus visits, cutting back on interviews, and significantly revising hiring goals. Consider Cap Gemini Ernst & Young. It snagged 135 MBAs from the class of 2001 but has delayed start dates for some of those new employees until next spring because of lousy business conditions. With so many associates waiting in the wings, the firm is looking for just 15 or 20 MBAs this year, all for its health-care management practice, says John Flato, director of university recruiting. Cap Gemini still plans to visit 20 B-schools this fall -- down from 40 last year -- but will mainly put in face time at career fairs rather than interview students.
The recruiting dry spell could be particularly troublesome for second- and third-tier B-schools. Many of these programs attracted employers during the heyday of the New Economy as companies scrambled to fill their Aeron chairs with newly minted MBAs. Now that hiring has cooled, "non-top 20 schools are desperately trying to hold on to employers," says Maury Hanigan, a former consultant who helped companies develop their MBA recruiting strategies.
That reality isn't lost on Nancy Ortman, director of the career management center at Emory University's Goizueta Business School in Atlanta. "When investment banks only go to four core schools, we lose out," she says, adding that recruiting by such companies is down more than 50%. Emory has also lost consulting firm Accenture, one of its top three employers last year. To help cushion the blow, Ortman and her team are courting small local businesses in Atlanta that could hire one or two students. Accenture hired 11 MBAs from Goizueta last year, so Ortman will need several small companies to plug that gap alone.
HEADING SOUTH. The economy isn't the only factor keeping recruiters away from campus. The terrorist attacks of September 11 have led many companies to clamp down on travel, including visits to B-schools. With the number of no-shows rising, some schools are arranging field trips to key cities so students can go meet companies. These meet-and-greet trips aren't particularly new: During the late '90s, when Silicon Valley promised to make everyone an IPO millionaire, B-school students trekked out West and landed multiple dot-com job offers, each more tantalizing then the next.
Now the pilgrimages have shifted south -- to Houston. Peter Veruki, executive director for career planning and admissions at Rice University's Jesse H. Jones Graduate School of Management, fields at least one call a day from colleagues at other schools who are asking for his contacts in the energy business. With the only graduate management program in Houston, Rice has seen a couple of local recruiters bow out this year, including Continental Airlines and Compaq. But so far, energy companies have picked up the slack.
"Two years ago, [other business schools] wouldn't have even thought of coming down here for a field trip," Veruki says. A caravan of B-schoolers from the University of North Carolina will travel to Houston this fall for the first time in years. The trip was sparked by a second-year MBA with a longtime interest in the energy sector. He started asking around to see if anyone wanted to join him, and "lo and behold, 25 students are going at their own expense to visit five companies in Houston," says Storrie.
SUMMERTIME BLUES. Not even an energy company is a sure thing, however. Ask Saul Keeton, a second-year B-school student at Rice, and one of BusinessWeek Online's MBA Journal writers. Over the summer, Keeton interned at Entergy, a New Orleans-based utility holding company with offices in Houston. He loved the work and had a "gut feeling" that he would be offered a job. Shortly after Labor Day, his summertime boss, a senior vice-president, told him that a formal offer was in the works. "I felt very fortunate," Keeton says. "I was already seeing the effects of the employment market on my friends. It was kind of depressing."
Days passed, and the paperwork didn't show up. He phoned his boss for a status report and was told that he would get an offer by week's end. Instead, Keeton received a call from Entergy's human resources department informing him that the company wasn't going to make an offer. A company restructuring, Keeton later learned, had squashed its hiring plans. Keeton is back on the interview circuit and hoping something clicks. "I always have my business cards in my pocket. You never know who you're going to meet."
Other schools report low conversion of summer internships to full-time job offers. "In the past three to four years, about 85% of our returning second-year students had jobs in their pockets," says Danos at Dartmouth's Tuck. "Maybe that's 35% this year." Even students with offers are playing it safe. Storrie knows of one second-year MBA student who has accepted a job with a top Wall Street bank but is still attending company presentations, taking notes, even writing thank-yous to recruiters she meets. "In the past, [students with offers] would have stopped all of that activity," Storrie says. "What you hope is that she doesn't need these contacts for another three to five years, and it's on her own terms. But she's being smart."
OMINOUS SIGN. The goodies dished out to MBAs won't be so plentiful this year, either. Few companies will be talking about stock options or hefty relocation grants, experts say. And while recruiters may still dangle signing bonuses, they won't be upping the ante to stop a student from choosing another employer. "We're telling students: 'Don't get cute this year. Close out quickly. It's not the year to try to get another $1,000 on your signing bonus,'" says Veruki. In one ominous sign, Emory's Ortman knows of at least two companies -- one in high-tech, another in the airline business -- that plan to cut base salaries for newly hired MBAs because their existing employees didn't get pay increases this year.
Foreign students, an ever-growing portion of B-schoolers, will likely be hit especially hard. Some of their best prospects in recent years have been consulting firms, which were building offices around the globe and needed MBAs to run them. Of the MBAs and undergrads hired last year by Cap Gemini Ernst & Young, 40% were international students. But the firm won't be looking for much multinational talent this year. "Anytime the economy softens, foreign students suffer the consequences," Flato says.
With consulting firms and other MBA hoarders avoiding campuses, the door is open for other employers to step in and feast. Pharmaceutical and health-care companies are out in force, for instance. Mike Agnew, assistant dean at the Carlson School of Management at the University of Minnesota, has talked to a handful of manufacturers that are thrilled about the diminished competition for students this fall. Last year, one multibillion-dollar manufacturer wanted to recruit eight MBAs for its leadership rotational program but got four takers. Now it's saying, "We're going to eat a full dinner," Agnew notes.
SPRING HOPE? Despite the glum short-term outlook, a few bright spots are emerging. Summer associate programs, for one, remain largely unaffected. Career-services directors say they haven't heard of companies canceling these internships -- at least not yet.
And come spring, second-year students who remain jobless may have hope. Cap Gemini's Flato says an abrupt turnaround in the economy could warrant a wave of springtime recruiting. "You can go back to the well and still find people who are available," he says. If all else fails, next spring's graduates can always muscle their way back into internships. First-year students -- better watch your backs.
To see which companies hired the most MBAs in 2000, check out BusinessWeek Online's "Who's Hiring" tool. To
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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