Crisis Hits the Business Schools

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Meanwhile, about half of the schools said overall full-time job postings and on-campus recruiting this fall was either flat or down 5% during the same period, with some indicating it has fallen as much as 10%.

In the coming year, the job market for MBAs may begin to bear a striking similarity to the period following the dot-com bust when some banks and consulting firms rescinded or renegotiated job offers they had extended to second-year students. That hasn't happened this time around—yet. But many are worried that the situation could change if the economy drifts into a deep and prolonged recession. "The dot-com meltdown was horrific," says Georgetown's Daly. "This has not reached those levels, but I expect it to."

SWITCHING TRACKS

With investment banking the hardest hit, many students are abandoning hope for Wall Street careers and pursuing jobs in consulting instead. At New York University's Stern School of Business—where about 40% of every class typically goes into investment banking—attendance at recruiting presentations by consulting firms has been standing room only, says Gary Fraser, Stern's dean of students, who oversees the office of career development. Attendance at interview preparation sessions offered by the management consulting club is up about 80% this fall. And some consulting companies are noticing a jump in applications from students who have done an about-face on Wall Street. Says Nikki Rath, the senior manager of campus recruiting and diversity initiatives at Booz & Co.: "We have definitely seen an increase in résumés that had a lot of banking on them."

But consulting may not be the haven many think it is. For one thing, the rush of finance students to consulting will make consulting jobs that much more difficult to land. With more students seeking consulting jobs, each one is likely to get fewer offers, making big signing bonuses unnecessary. Tom Rodenhauser, vice-president of consulting at Kennedy Information, which tracks the consulting industry, isn't optimistic. He says top students will get two or three offers this year, down from six in good years. Signing bonuses will dip to $20,000 or lower. The worst-case scenario? A student could receive a token bonus of $5,000 or none at all. Meanwhile, expectations are that 2009 will be a challenging year for many consulting firms as companies determined to trim costs cut back on discretionary projects.

EXPECTED EXPLOSION

All the bad news for B-school students has turned out to be good news for B-schools, which tend to do brisk business when the economy falters. Already, admissions officers say they are experiencing double-digit increases in applications for 2009 and increased interest from students. So far this year, the University of Chicago Booth School of Business has seen a 20% increase in attendance at information sessions worldwide and a surge in U.S. applications, says Rosemaria Martinelli, associate dean for student recruitment and admissions. At the University of Notre Dame's Mendoza College of Business, applications are up 20% from last year and admissions interviews are up 50%.

Meanwhile, worldwide registration for the Graduate Management Admission Test—a required standardized test for business school applicants and a leading indicator of future B-school applications—was up 16% in September from the same four-week period in 2007. The current surge in registration volume is similar to one that followed the bursting of the dot-com bubble, which led to an explosion in B-school applications about a year later. This time, the impact on applications is expected to be even more pronounced, since the downturn is not limited to a single industry. Says Dave A. Wilson, president and chief executive of the Graduate Management Admission Council, which administers the exam: "You are going to see a good surge in application volume next year, and maybe into the tail end of 2010."

Wherever they end up, those new applicants will find a B-school landscape in many ways transformed by the events of the past 18 months.