Fleeing Finance: MBA Graduates Seeking Fewer Jobs in Banking Industry

Jessica Burlingame reports on the rejection of banking jobs by top business students.

“Deaths Draw Attention to Wall Street’s Grueling Pace,” pronounced the headline of a recent New York Times article.

The article describes the apparent suicides of two promising young bankers and the financial industry’s subsequent attempts to improve work-life balance.

These deaths may be the most chilling development in a broader trend concerning the rejection of banking jobs by the world’s top business students.

Recent Harvard Business School graduate Keima Ueno documented the shift away from financial institutions earlier this year in his analysis of a survey circulated to his class by the school. His analysis revealed that investment banks — institutions that have historically dominated MBA recruitment and business students’ aspirations — have lost significant prestige since the financial crisis of 2008.

MBA Graduates Turning to Other Sectors

At Harvard Business School, for instance, 13 percent of jobs accepted by the graduating class of 2007 were in investment banking or trading; for the most recent graduating class, the proportion was only 5 percent.

The Economist reports that this trend also holds true at other top schools, including the University of Chicago Booth School of Business, which sent 30 percent of graduates to investment jobs in 2007, versus just 16 percent this past year, and the London Business School, where 46 percent of graduates joined financial services firms in 2007, as opposed to only 28 percent in 2013.

Banks are losing ground as major consulting firms and tech companies are attracting significantly more MBA graduates. Startups alone hired 16 percent of Harvard Business School’s most recent graduating class.

Work-Life Balance, Greater Mobility

These shifts can partly be attributed to lifestyle factors; one of Ueno’s classmates told BloombergBusiness that at Harvard Business School, “The humble brag is now, ‘Oh yeah, I work 9 to 5, I get paid a ton of money, and I have a great life,’” as opposed to the former tendency to boast about grueling hours and a lack of sleep.

Compensation prospects in banking also lag significantly behind those in the technology sector: Goldman Sachs’ per-employee compensation expenses dropped by more than 40 percent between 2007 and 2014. What’s more, aspirational earnings prospects are more promising in tech than in finance; Mark Zuckerberg’s net worth of approximately $40 billion — at the age of 31 — is a more appealing target for most MBAs than JPMorgan Chase Chairman and CEO (and HBS alum) Jamie Dimon’s net worth of approximately $1 billion, at the age of 59.

MBA students learn that markets and industries are cyclical, and they are familiar with data showing that boom-bust cycles apply to employment trends, as well. But research by Wharton School associate professor of management Matthew Bidwell suggests that national trends in work priorities and mobility over the past several decades — based on data from the Current Population Survey and compiled by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics — support a continued shift away from banking culture and toward consulting, tech, and startups.

Banks’ traditional expectations of long-term commitments from their employees are a key factor in this shift, especially since high turnaround is typically expected of MBA recruits by those other industries.

In a forthcoming study, Bidwell cites analysis indicating that declines in average employee tenure — spanning multiple decades, and taking into account levels of seniority and differences among industries — significantly reflect an increase in voluntary turnover. In other words, while the length of employment declines precipitously during notorious Wall Street layoff periods (including those beginning in 2008) — or what is known as involuntary turnover — workers who possess high-demand skills and have strong networks are increasingly likely to leave jobs voluntarily when more attractive offers arise.

According to Bidwell, his findings “emphasize the importance of paying more attention to societal power as we seek to understand how employment has changed . . . with particular implications for how we think about the future of employment relationships.” As increased regulation of the banking industry limits potential bonuses for the foreseeable future, ambitious MBA graduates who were once drawn to long-term careers with investment banks are likely to exercise their ambition through mobility rather than the traditional model of working their way up through the ranks within a single company and negotiating for greater rewards over the course of a single career.

Future of MBA Programs

What might this all mean for the top MBA programs?

The move away from banking may lead to a greater differentiation between the career paths chosen by undergraduate business majors and MBA students. Some data show that banks are increasing their focus on recruiting, training, and grooming undergraduates, presumably because these younger, less-seasoned employees may demand less upfront compensation. And, with the benefit of more employee-friendly work schedules and policies, many of which were instituted in the aftermath of the 2013 seizure-related death of Bank of America intern Moritz Erhardt after three straight days without sleep, younger employees may be more receptive to entering long-term employment agreements with banks than MBAs. The latter group, who graduated from college during the 1990s and early 2000s, has already had the experience of brutal schedules and demands by their employers.

Current MBA graduates, then, may have more fluid careers than their forerunners. Those earning an MBA now are likelier to hold a series of shorter-tenure positions, ranging from contract work to entrepreneurial endeavors to full-time employment. Those recruited into banking and other finance jobs straight from their undergraduate programs, however, may enter into long-term employment relationships that resemble more closely the arrangements of earlier generations, though with more accommodation of work-life balance.

Schools need to continue investing in curricular and extracurricular initiatives that support successful competition and career management in an increasingly fluid and unpredictable market. Some are already doing this. Programs including Columbia Business School's Leadership Lab (formerly the Program on Social Intelligence) and Wharton’s student-led P3 (Purpose, Passion, and Principles) incorporate disciplines beyond the scope of traditional MBA staples like finance and marketing to help prepare students to define and navigate new job market terrain.

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