Top MBAs Increasingly Choosing Tech Over Finance

Before reveling in the possibility that finance is finally losing its edge, consider whether the type of people motivated to seek MBAs have changed all that much.

Thus, what their trending towards tech may mean for that industry - and the economy that now depends on it. JL

Laura Noonan and colleagues report in the Financial Times:

Pay and lifestyle are the two biggest deterrents. It’s less pay, more hassle. The deal with banking was that you worked really hard but got paid lots of money. Now the deal is broken people are looking at other paths. Other industries do a better job of selling their social value. This desire to do something of “purpose” reflects this generation’s values.
Hannah Vallerie started her tour of top university campuses about six months earlier than usual this year.The human resources manager for ING bank wanted to steal a march on rivals in an attempt to recruit graduates to the Dutch lender for its international leadership program.

To make the job more enticing, ING, which typically hires an average of four out of 600 US applicants every year, moved the final event of the three-year program from the group’s headquarters in Amsterdam to a remote training camp in Portugal. According to Cliff Belzer, a Harvard graduate who joined the “Orange leaders” program in September 2011, it is stuffed with “fun” extracurricular activities, such as staffing food trucks and painting rooms.

ING’s efforts come as demand for top-flight business school graduates is at a premium as they shun careers in banks for well-paid jobs in technology, engineering and healthcare. One candidate offered a place this year on ING’s leadership program, turned the bank down in favour of taking a job at Google.

“That was an eye-opener for us,” said Ms Vallerie, noting that this was the first time ING had lost a candidate to the tech sector. “We made some changes based on that experience.”

Other banks, like Goldman Sachs and Morgan Stanley have hiked the base pay for junior bankers, some by as much as 20 per cent. Goldman Sachs last week unveiled new measures including faster promotions, guaranteed rotations and less menial work to woo junior bankers. Credit Suisse, meanwhile, has introduced a fast-track program for top-performing analysts, as well as a mentoring program to offer support to junior bankers and keep them motivated.

“There’s a tendency to focus on specific things as opposed to the constant process,” says David Solomon, co-head of investment banking at Goldman Sachs. “We’re trying to make sure that we have the best practices in the context of the way we recruit people, train people and develop people.”Mr Solomon said other banks might follow some of Goldman Sachs’ initiatives, but the bank can do enough to still give itself a differentiating edge. “Races aren’t won by 100 yards, races are won by steps,” he said. “You’ve got to make sure that your relative performance is a little bit better.”

Such measures, however, have done little to diminish the rising appeal of careers in technology relative to banks — as demonstrated by the roll call of top employers for MBA graduates from business school Sloan MIT.

Goldman Sachs was jointly ranked as the fourth biggest recruiter from MIT in 2008, while JPMorgan Chase and Lehman were also in the top 10. By 2014, there was not a single bank in the top hirers, but Apple had joined the list and Amazon had shot up to third place. Consultancies have also grown in popularity, with both Deloitte and PwC joining the list by 2014.According to Harvard Business School, tech employed 7 per cent of its graduates in 2008. By 2014, that figure had increased to 17 per cent. Seven per cent of its graduates went on to internet services, a category that had not even existed in 2008.
Bankers are keen to dispel the myth that graduates can become instant millionaires by choosing Silicon Valley over Wall Street. “Everyone going into Silicon Valley thinks they are going to be zillionaires,” says, Ros Stephenson, UBS’s Head of Americas and chair of corporate client solutions. Technology failures and modest success stories, she argues, still outnumber the stuff of Hollywood blockbusters.

Paul Baron, head of derivative sales at Bank of America Merrill Lynch says niche areas in investment banking are still proving attractive to some graduates because “the product is intellectually rigorous, it’s very interesting, bespoke, creative.”

Analysis by the Financial Times shows that graduates from the world’s top 10 MBA schools are 40 per cent less likely to go into investment banking now than they were before the financial crisis.
Pay and lifestyle are the two biggest deterrents. Alan Johnson, managing director of Johnson Associates, a Wall Street pay consultant, estimates that the total pay pool across Wall Street banks will be down by about 10 per cent this year. “It’s less pay, more hassle,” said Mr Johnson.The cuts are even bigger at some banks — in Europe, Deutsche Bank is reportedly cutting bonuses by 30 per cent after a $6bn loss in the third quarter.
“The deal with banking was that you worked really hard but got paid lots of money. Now the deal is broken people are looking at other paths,” said Lynda Gratton, professor of management practice at London Business School. “
She adds: “Certainly at LBS we have many students who previously would have been banking candidates now starting their own businesses.”
One former junior banker at a top US bank believes that other industries do a better job of selling their social value. She quit banking for the non-profit sector because she wanted “to make an impact in my work”.
Recruiters say this desire to do something of “purpose” reflects this generation’s values. Millennials, or Generation Y, born in the early 1980s to 2000s, are also characterised as possessing less institutional allegiance than their predecessors. Many employers see them as impatient for responsibility and hankering after some semblance of work-life balance.Young people, said Hazel Mulhare, vice-president at Kea Consultants, which helps recruit junior bankers to financial services firms, “don’t want to be a cog in the machine” and are frustrated by doing anonymous grunt work in large banks.

A New York-based banker who helps with recruitment says today’s graduates are “motivated by different things”. “If they started 10 years ago, the juniors would have been saying, yes, I want to work hard but I want the perks to work hard, concierge services, people to run errands, car services,” he says. “Now, it’s protected weekends and time off . . . they say they value that.”

What the numbers say

● Popularity of a banking as a career choice down 41% from 2008 ● Popularity of the wider ‘finance’ category down 22% from 2008 ● Sharpest decline in banking’s popularity is at Harvard, where has declined by 52%. Harvard has about 700 job-seeking MBA graduates a year ● Barcelona’s IESE has highest percentage of MBA graduates going into banking, at 22 per cent of its 202 job seekers ● California’s Haas School of Business has the lowest percentage of would-be bankers, at just 4.4 per cent of its 180 job seekers ● Wharton is the biggest recruiter of MBA students for banks, sending 103 graduates there in 2014. Wharton runs its regular MBA programme out of Philadelphia and runs a separate executive MBA (not counted in the FT figures) from Philadelphia and San Francisco

Leavers are staying within finance
Business school graduates may be turning their back on banking, but those already working in the sector are not moving much further afield, writes Laura Noonan.

More than 60 per cent of workers who leave banking end up in other parts of the financial services sector, according to analysis carried out by professional global network LinkedIn for the Financial Times.

The findings dispel the common perception that large numbers of bankers are quitting for what some may consider more morally rewarding careers such as teaching, or more enterprising opportunities, such as in start-ups.
LinkedIn studied the profiles of almost 24,500 people leaving and joining banks in key financial centres during the first six months of the year. The figures are based on analysis of the 14,500 people who joined the banking sector in the first six months of the year, and the 9,000 who left, in New York, London, Hong Kong, Paris, Frankfurt and Zurich.
Although the research includes only those workers who have LinkedIn profiles and updated them — representing a fraction of the total workforce — the analysis provides a compelling snapshot on the flow of talent in and out of banks.

Despite being far smaller than London and New York, Paris was the most popular area for new joiners, attracting 34 per cent of the total increase in bank workers. France’s banks suffered during the earlier stages of the financial crisis but the country has largely escaped the latest wave of job cuts in the sector, which have been led by UK, German and Swiss banks.
The research also highlights how narrow the recruitment pool for banks is despite their efforts to bring in more diverse talent. The finance sector supplied 52 per cent of workers joining banks for the first time. This includes workers who list their previous industry as “financial services”, accounting, management consultancy, investment management and insurance.
Outside of the financial sector, the IT industry was the biggest supplier of new banking talent, providing 7 per cent of new joiners.