Why Banks Are Losing the Battle for MBA Talent
More M.B.A. graduates are choosing jobs in technology and consulting even as banks jack up starting salaries, a Wall Street Journal analysis shows.
Financial services last year slipped below consulting as the top destination for grads from the U.S.’s top 10 masters in business administration programs as ranked by U.S. News & World Report. Tech firms are fast catching up on banks in terms of popularity.
The share of full-time M.B.A. graduates from the top 10 business schools accepting jobs at financial-services firms dropped between 2012 and 2017 from 36% to 26%, based on a weighted average calculated by the Journal. The share accepting jobs in technology rose from 13% to 20% in the same period. Consulting edged out financial services as the top draw in 2017, as the choice of 29% of grads, up from 27% in 2012.
“Banks face a serious image problem,” said Atta Tarki, founder of Ex-Consultants Agency, a recruitment firm based in Los Angeles. “They are increasingly seen as ruthless moneymaking machines.”
The Securities Industry and Financial Markets Association trade group declined to comment.
Some banks are trying to improve the industry’s appeal to top recruits. They are conducting on-campus interviews and taking students on trips to meet four or five Wall Street banks in one day.
“Competition is certainly fierce. Graduates have more choices now,” said Della Sabessar, global head of experienced talent acquisition at Credit Suisse Group AG . “When you get to the interview stage, you start to see how many options they have on the table.”
Credit Suisse hosts Facebook Live events with students where bankers discuss the application process, as well as deals they have done, to forge ties with recruits.
Banks have also raised starting salaries far faster than companies in rival sectors over the past five years, according to the Journal’s analysis of compensation accepted by graduates from top U.S. M.B.A. programs.
The Journal examined six years of data for full-time M.B.A.s reported by the 10 best business schools in 2017. Salaries were median base starting pay—excluding sign-on bonuses and other guaranteed compensation—accepted within three months of graduation.
For graduates of MIT Sloan School of Management, median starting salaries paid by financial-services firms jumped 25% between 2012 and 2017 to $125,000. Tech- and consulting-firm median salaries rose just 9%—to $125,000 and $147,000, respectively—over the same period.
Still, the share of Sloan graduates accepting jobs at financial-services firms was cut almost in half to 14% over that time, while technology’s share nearly doubled to 32%. At five of the top 10 schools, the share of newly minted M.B.A.s accepting jobs in finance declined more than 5 percentage points.
“Over the last 10 years you’ve had an almost complete flip between finance and technology,” said Jean Ann Schulte, director of employer relations and recruiting services at MIT Sloan. She said one factor cited by students is a workweek of 90 to 100 hours that can be typical in the banking industry. “You can have a lucrative career without those lifestyle costs,” Ms. Schulte said.
Some banks have tried to address those concerns by limiting the number of hours that junior staffers work.
At the University of Chicago Booth School of Business, the share of grads going into banking dropped to just under 30% from 43% over the five years. Over the same period, the proportion taking tech jobs more than doubled to 19%.
Students at certain schools still lean toward a particular industry. Columbia Business School remains a feeder to the financial sector, for instance. MIT Sloan, Northwestern University’s Kellogg School of Management and Tuck School of Business at Dartmouth College have experienced large rises in the proportion of grads heading to tech firms.
At Booth, base salaries offered by finance firms have caught up with tech salaries. At Yale University, they have overtaken them.
The averages in 2012 and 2013 exclude Kellogg because the school said its data for those years aren’t comparable. Its figures include students who attended the business school but were enrolled in programs other than the full-time M.B.A. program.
Banking is still a draw for many students. Consulting ranked as the top industry where M.B.A.s said they want to work, according to a 2017 survey of more than 1,000 students by Universum, an employer branding consulting firm. Financial services, including hedge funds and investment banks, came in second. Software, computer services and multimedia development was a close third.
Alex Hardy said relatively few of his peers pursued tech careers when he graduated from Vanderbilt University’s Owen Graduate School of Management in 2013. “Going to a Facebook or a Google was not very much a well-trodden path,” he said.
He joined Credit Suisse’s real-estate group. The job was intellectually stimulating, he said, but he left in 2015 because he thought he would be “more fulfilled actually building something.”
He said he was also tired of the long working hours. By comparison, his peers working at tech firms, he said, “seemed pretty universally satisfied.”
He now works as chief operating officer at Liveoak Technologies Inc., a software platform based in Austin, Texas. “Of the M.B.A. cohort I started with in banking, probably 70% have left the bank,” he said.