Analysis: More Top MBA Graduates Shunning High-Paying Finance Jobs for Culture-Rich Tech Ones

December 14, 2015

Up until a few years ago, graduating from a top MBA program generally led to a high-paying, high-profile job at one of the top finance companies in the world.

However, since 2008, that’s becoming less and less true. And Silicon Valley is to blame.

According to an analysis by the Financial Times, graduates from the world’s top 10 MBA schools are 40 percent less likely to go into financial services than before the recession in 2008. Instead, many are going into tech.

Take Harvard Business School for example, which has been a feeder for top financial firms like JP Morgan Chase and Berkshire Hathaway for years. In 2011, 39 percent of their MBA graduates went into finance and 11 percent went into tech. But in 2015, 31 percent of their graduates went into finance, whereas 20 percent went into tech.

Stanford Business School is another example. In 2011, 36 percent of the school’s graduates went into the financial sector; 13 percent went into tech. In 2014, 29 percent of their graduates went into finance; 21 percent went into tech.

How financial recruiters are reacting to this new phenomenon

What’s interesting is it doesn’t appear that money is behind this trend, as MBA graduates who go into finance still generally earn more than MBA graduates who go into tech. For example, Harvard Business School graduates who went into finance in 2015 earned a median salary of $140,000 a year, whereas graduates who went into tech earned a median salary of $125,000.

Those numbers haven’t changed much lately. In 2011, HBS graduates who went into finance earned a median salary of $125,000; compared to a $115,000 median salary for those who went into tech.

Instead, the Financial Times chalks up this MBA migration to tech to better work-life balances and richer cultures at software companies, as opposed to the more traditional, work-from-the-ground-up approach taken by most banks. Financial recruiters have taken notice and have started to adjust.

First off, some banks have decided to make the salary contrast between finance and tech even starker by paying recent graduates more. Specifically, the Financial Times reported that Goldman Sachs and Morgan Stanley have both increased salaries for junior employees by up to 20 percent.

More interestingly though, some financial companies have tried to change the culture within their organizations as well. No better example of that is Goldman Sachs, which announced a new program this November for junior employees that includes less menial work, more rotations and earlier promotions.

Something worth noting though is that if someone is hired into banking straight from college, they tend to stay in the financial sector. A LinkedIn analysis of banking talent in six of the world’s largest financial centers such as Paris, New York and London showed that if someone does leave the banking industry, they are twice as likely to take a job in “financial services” as opposed to any other sector.

That same analysis also showed that the banking industry in those six cities has grown recently, as approximately 29,500 professionals took on new positions in those six cities in the banking industry, whereas only about 21,000 left. The difference is there’s less of a chance those positions are being filled by MBA graduates.

What this means to recruiters

It’s quite the juxtaposition to see big banks known for demanding jobs and three-piece suits competing for talent against software companies known for ping pong tables and employees wearing jeans to work. But it isn’t surprising.

The fact is, the Silicon Valley culture is quickly permeating throughout the world. As the numbers show, people are becoming more and more drawn to more laid back organizations where employees feel empowered, as opposed to the top-down hierarchies where new employees work grueling hours.

To compete for talent, even companies that offer the pay and prestige of a Goldman Sachs are having to take on more and more of these Palo Alto principles. Like it or not, your company will soon have to too (if you haven’t already) or there’s the distinct chance you’re not going to be able to get the best people to work for you.

Just ask Wall Street.

*Image from Stanford Graduate School of Business

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