B-schools: the dethroning of the financial sector

Financial firms, such as banks and investment banks, are out; consulting dominates and high-tech firms are in. This trend, which started post the financial crisis of 2007, now stands confirmed, going by two reports, one in the Economist and another in the FT. 

Mr Lewis charted the ascent into investment banking of the most talented graduates in the 1980s, a situation that still held true as the financial crisis struck in 2007. Then, 44% of Harvard’s MBAs landed a job in finance; 12% became investment bankers. Yet in the class of 2013 only 27% chose finance and a meagre 5% became members of Mr Lewis’s master race.
The trend is the same at other elite business schools. In 2007, 46% of London Business School’s MBA graduates got a job in financial services; in 2013 just 28% did, with investment banking taking a lower share even of that diminished figure. At the University of Chicago’s Booth School of Business, the percentage of students going for jobs in investment banking has fallen from 30% in 2007 to 16% this year.

What are the reasons for these trends? One, of course, is that pay in banking is no longer as attractive as before. Earlier, you put in long hours in the hope that you could quickly cash out and enjoy life. Now, this seems less possible. But there are other reasons.

Investment banks expect long-term loyalty. Consultants are happy to see people leave after five years or so- and give them business from the other side of the table. Moreover, consulting opens up a variety of opportunities whereas in banking, you are stuck in one sector.

Thirdly, there is an odour of disrepute about banks now. What young graduates hear about these places and the adverse publicity they attract because of their tangles with regulators does little for their reputation.

Fourthly, consulting firms and tech firms are seen as good training grounds for those wanting to become entrepreneurs. The tech firms' casual culture is appealing. And they too promise big bucks:

Tech firms and consultants both appeal to the growing number of students who want to gain the right experience to start their own business. A survey by the Graduate Management Admission Council, an association of business schools, found that although only 4% of MBAs have entrepreneurial experience when they enter their course, 26% say they want to start companies after they graduate.

How are banks responding? In several ways. By targeting undergrads instead of grads, by using social media and competition games to attract candidates, encouraging a better work-life balance, etc. Some are even heroically attempting an image make over:

Some are running campaigns urging graduates not to believe media stories portraying them as greedy or evil. Others are trying to lure recruits by persuading them they will help make the world a better place. Goldman Sachs’s job portal advertises opportunities to work on community projects alongside positions for analysts: “That’s why you come and work at Goldman Sachs, because you can make a difference in the world,” trills its recruitment video.
A few banks are trying to change their culture, taking a tougher line on sexual harassment of female staff and advocating a healthier work-life balance, perhaps even allowing the odd work-free Saturday. For the business schools’ brightest and best, though, all this may not be enough.