In this episode of Business Casual, the hosts discuss the current state of MBA job market trends and employment reports. They delve into the implications of the delayed and unflattering employment data from notable business schools like NYU Stern, UVA Darden, Georgia Tech, and Vanderbilt. The conversation highlights a shift in the kinds of jobs MBA graduates are taking, with many moving into sectors like healthcare and retail, which typically offer lower salaries but may align more closely with their career aspirations. The hosts also explore the potential impacts of artificial intelligence (AI) on future employment trends, suggesting a rebound in consulting roles as firms seek to navigate AI integration.

The episode reflects on the cyclical nature of MBA recruitment and emphasizes the importance of viewing career paths as long-term journeys.

Episode Transcript

[00:00:04.390] – John

Hello, everyone. Welcome back to Business Casual, the weekly podcast of Poets and Quants. I’m John Byrne, and my co-hosts here are Caroline Diarte Edwards and Maria Wich-Vila. They are in the house. There’s plenty of news to report. This is the time of the year when business schools release their telltale employment reports. I got to tell you, there’s a real lag this year in schools that would routinely report in early and late November who have yet to disclose how their Class of 2023 graduates have done. I’m thinking it’s because the numbers aren’t all that flattering. The numbers that we already have from NYU Stern, UVA Darden, Georgia Tech, and Vanderbilt, which are the only four notable schools that have put out numbers, all show a decline in average or median starting salaries for MBAs, as well as a decline in placement. I think it’s worth talking a little bit about this and what it really means. At NYU Stern, for example, offers at graduation were down nearly 5 percentage points to about 80.6%, while offers by three months after graduation were down by more than 8 points to 86.1%. In many cases, these kinds of numbers and the slight declines in base salaries, and we’re talking single digits, are coming off record highs.

[00:01:48.810] – John

We’ve seen in the past 5, 10 years, unprecedented increases in MBA pay, which for a little while was static. So the numbers do reflect select a slight fall from record numbers. The other thing that’s happened, of course, is the uncertain economy led many consulting firms to hire fewer MBAs last year. And of course, tech Companies were trying to rightsize after a hiring binge over a number of years, so employment there was down. What that meant, too, is that a lot of MBAs, for example, had to go and take jobs in healthcare, in consumer products, goods, in manufacturing companies, and the like, retail, that typically pay less, but in fact, may be the kinds of careers that young MBAs would like to join. That’s part of the context. The other thing that’s going on, I think that makes these numbers less worrisome is AI. Companies are very anxious about AI. They’re eager to employ young people to figure it out, and oftentimes, they will employ consultants. We would expect that the consulting industry is going to bounce back very strongly in terms of MBA recruitment in 2024 because more companies will be turning to the consulting firms to figure out how to use AI in a proprietary way for smarter and quicker decision making and for analysis.

[00:03:24.270] – John

So we think this is a temporary thing. Caroline, you’ve been through these ups and downs in the economy, and so have you, Maria. What do you think?

[00:03:32.600] – Caroline

Well, as you say, it is a cyclical pattern that we see in MBA recruitment, and that has always been the case, and it’s correlated with the economic climate. And there was a downturn in recruitment last year, but it was not a major downturn. It was not a big recession. And as you said, historically, the long-term trend has been very positive. And I think that in the long term, that trend will continue. So yes, it’s a small downturn, but I don’t think that it’s, as you said, it’s not a major concern. Often, graduates are able to shift to other firms if the company that they were targeting or their plan A career path was not immediately available, often they still have other fantastic opportunities, like you say. It does happen sometimes. The MBA graduates don’t get their dream job straight out of business school, but that doesn’t mean that they won’t get there eventually. I often see that MBA graduates will take a job immediately post-graduation that was maybe not their top choice. But then within a year or two, they’ve managed to make a shift. And so often, their career path means that they will take…

[00:04:47.540] – Caroline

There’ll be a stepping stone post-MBA that will then help them get to exactly where they want to be. And so I’m sure that will happen with some of those graduates from the 2024 class.

[00:04:59.920] – John

We’re really talking about slight decreases in pay. For example, at NYU, the average starting salary in 2023 was 168, 182. In 2024, it’s 166, 148, so it’s off by $2,000. And signing bonuses are off by about a thousand. The average was 37,000 in 2024. It was 38,2 in 2023. So these are not major declines, they’re slight declines. There’s slight declines, and it’s really a function of the mix of jobs that MBAs were taking in 2024. Maria, you’ve seen these ups and downs as well.

[00:05:41.030] – Maria

Yes, absolutely. I mean, as Caroline said, as the economy has its changes from time to time, those are going to be reflected in the graduation opportunities that people pursue. But I also agree with her that your career is a marathon and not a sprint. I do I think that if you are graduating into a market situation where maybe that first choice dream job isn’t available, take something that is adjacent. Take something that will still give you some of those foundational skills that you would need for that dream job. So that way, when that opportunity does present itself in one, three, seven years, whatever it is, you can just grab it. So I do think that the Career Services offices of the schools are probably being very strategic with students if those students are not getting their first choice to think about, Okay, well, how can you set yourself up so then that way, you will be ready to grab that job when it eventually does become available to you because it eventually will. I also thought it was interesting that a lot of the shift in NYU, just because that’s the data that we have the most of right now, there did seem to be an increase in the consumer package goods and retail, general retail, which was interesting for me.

[00:06:52.990] – Maria

Maybe people were taking those jobs because they didn’t have a choice. But I also think that there’s definitely a lot to be said for going to work for some of these larger traditional companies. They might not be as shiny or as sexy as some of the more recent tech companies, but I think they offer tremendous opportunity for growth. I think they offer tremendous work-life balance. I do think that a lot of these traditional industries are now about to start implementing AI. They’re about to start becoming much more digitally savvy to use the digital aspects of, let’s say, optimization or data analysis to take a new technology, shiny technology, but to adapt it to their more old-fashioned business. There may be some really interesting opportunities at these companies that maybe 15 years ago, you would say, Well, who’s going to go Walmart? Something like a Walmart or a Parker & Gamble or what have you might not be very exciting. But now, if Procter & Gamble is coming to me and saying, Well, we want you to optimize our supply chain for whatever it is that we make. I mean, who knows? That actually might be really compelling.

[00:07:54.020] – Maria

It was interesting not to segue us to another topic that we have on deck for today. But you guys also have an article at Poets and Quants about some of the best companies to work for if you want to become a leader in the future. I thought it was really interesting that Procter & Gamble, Pepsi Company, Johnson & Johnson, those are all in the top 15 to 20. Walmart is number 26. I wonder if there might be some… Some students are, in fact, looking at their careers more as a marathon and saying, Well, if I start my career at a Procter & Gamble, for example, maybe that will set me up in the longer term for this job and this influence that I want to have. So obviously, we’re only speculating, but I wouldn’t be surprised if there’s some element of that occurring as well.

[00:08:40.300] – John

And that pattern at NYU Stern was repeated at UVA Darden as well, where more students were going into retail and consumer products, goods, and health care, where the salaries tend to be slightly lower than they would be in consulting or investment banking. That’s really true. I think this brings to mind one my pet peeves about students who look at ROI based solely on the starting compensation they’re likely to make when they graduate. This is a long-term journey. Your MBA is going to change your trajectory in many different ways. And the investment return can’t be measured by a single year in what you make when you graduate. It’s really over a lifetime of earnings and a lifetime of opportunities in the network that you graduate into, which expands your opportunities and lets you see many that would otherwise be invisible to you.

[00:09:37.110] – Maria

I was going to also argue that there’s total compensation, but I think another metric that I personally like to look at, and I think more and more people of this generation are looking at as well, it’s not just what your total compensation, but what’s your compensation per hour worked? So it’s true. Look, management consulting, investment banking, those jobs are going to pay a lot of money, but you might make, I don’t know, 30 100% more money, but you might be working twice as many hours or something along those lines. So we have friends who have been working at an IBM or a Microsoft for 20 years. And if they had spent those 20 years at McKinsey, would they be making more? Sure. But they have also had to work. They have the 40-hour work week. They have those more sane and humane, perhaps, corporate policies. I think, I don’t know. Again, speculation, but I wonder if you look at total comp, that will push you in one But if you look at if another metric that’s important for you is more, okay, compensation per the actual amount of hours that I have to work, I think that a lot of these other industries and functions can provide excellent opportunities along those lines as well.

[00:10:44.600] – John

Yeah, That’s so true. I mean, a number of years ago, we actually ran a story that counted this up. It showed that MBAs, for example, at McKinsey typically work around 60 to 80 hours per week, and the average is 72 hours per week, maybe making it one of the most demanding work schedules among any MBA-type jobs. And true enough, at tech firms, consumer product companies, health care, other fields, people don’t put in 80 hours, 72 hours a week. So you’re right. If you took out your calculator and you figured out, Okay, how much am I making per hour? You might actually make more at a Pepsi, a Procter & Gamble, a Microsoft, dare I say, United Health care at this moment than you would at a McKinsey of Bain BCG or Goldman Sachs or Morgan Stanley or JP Morgan. I mean, that’s just the reality of it. This list that Maria was referring to is interesting. It was conjured up by Time magazine with a consulting firm. And what they did is they searched the backgrounds of a number of what they call influential leaders in companies. And then they saw which companies were in their background that got them to those influential positions and came up with a list of the best companies for future leaders.

[00:12:12.010] – John

Mckinsey is number one, IBM is number two, Goldman Sachs is three, Accenture is four, Procter & Gamble is five, PwC, six, PepsiCo, seven, Deloitte, eight, Bank of America, nine, and Ernst & Young, 10. Notice that none of the big tech companies not Apple, not Microsoft, not Meta, not Alphab, or Amazon are in the top 10, which is interesting to me. Microsoft does show up at 11, and Alphab is in there at 13, so it’s not like they’re far away. But, Caroline, what do you make of this list? Is this poppy cock?

[00:12:50.090] – Caroline

Well, I think there’s some interesting data in there, and it’s not terribly surprising. Consulting firms do very well, and we know that they are very good at recruiting outstanding candidates and giving them fantastic work experience, great exposure, as well as developing them and offering great opportunities to learn and grow through their careers at those firms. So I don’t think that’s terribly surprising that they would be there. I think it’s a shame that it’s a US only list. Far too often, rankings, in my view, are very myopic in just looking at the US perspective. And yes, okay, it would have been a lot more research, much more expensive to take a broader perspective, but still, I think that’s a missed opportunity. And then it does seem that younger firms seem to be at a disadvantage in this ranking, given the way that they’ve structured it and given that people who’ve joined younger firms, often the tech companies, who may be still at a younger age but have progressed very rapidly in their careers, they may not be well-reflected in this ranking because the ranking doesn’t take into account their current position. Taking the sample, they look at the current position, but when they calculate the ranking, they don’t look at the current position.

[00:14:15.910] – Caroline

And some people from tech firms may have progressed very rapidly and therefore may not have so many years of leadership experience because they may have just risen up the ladder much more quickly. And so I think that it doesn’t fully reflect actually the picture today. It is a historical perspective. So I wouldn’t encourage candidates looking at which firms they want to target for their job opportunities. I wouldn’t encourage MBA graduates to set too much store by this ranking.

[00:14:51.350] – John

Yeah, true. I mean, places like BP, Volkswagen, Siemens, and many other companies that are great places to work, including things like even the Japanese and German automakers, all excluded from this list. And how they did it is interesting. I mean, they apparently identified, and I’m not sure how, 4,000 of what they call the most influential leaders from various areas of the US society. Then they scoured their CVs to determine where they had worked in the past and basically then assumed that these companies would be great ladders for one to climb on to reach into this influential stratosphere. Now, Maria, what do you make of this?

[00:15:43.120] – Maria

Well, I think similar to MBA rankings, we should take it with a grain of salt. But I do like similar to when MBA rankings do this as well, when it does bring to folks attention, the fact that there’s more than just three firms out there that are worth working for. More than just five schools or seven schools out there that it’s worth going to, that are worth going to. So for example, when the MBA rankings come out, it might help people realize, Oh, actually, if I go to a school that is ranked top 20, top 25, top 50, it’s still going to be an excellent school. It’s the same with this. I like this in the sense that it does, I think, imply or give the message to folks who might be getting their MBAs right now. Like, yes, sure, if you want to work at McKinsey, you want to work at Goldman Sachs. But in case you don’t get that job, right? Coming off of the topic we were just discussing, in case you don’t get that job, there are so many other excellent companies out there that are going to give you fantastic training.

[00:16:42.760] – Maria

Look at how these are going to serve as launching pads for the rest of your career. Think about the skills that you’re going to develop and acquire in that employer. So I do like very much the fact that I would almost start sharing this, I think, with folks who are getting ready to graduate just because this give that message of like, Oh, look, it’s not McKinsey, BCG, Bain, JP Morgan. Of course, those elite firms are in there, but there are so many other excellent companies as well. My one wishlist, I have several wishlist for this, but one in particular that I would really like to see, because I think this is true when we see this with MBA rankings, when MBA rankings pull out the schools into specialties or into certain industries. So the best MBA for real estate, the best MBA is for sustainability, the best MBA is for healthcare. I do think that this list would have been a little bit more interesting, perhaps not by industry, but by function. For example, the fact that Deloitte is number 8 and Ernst & Young is number 10, I wonder, a lot of times, those companies do have consulting, strategy consulting firms, digital consulting firms, but they also started primarily as accounting firms and auditing and CPA firms.

[00:17:53.040] – Maria

I think that a lot of CPAs and accountants leave that couple of years of auditing training, enter the corporate world, and eventually become CFOs. So when we look at that list of the 4,000 influential leaders that time shows, if a number of them are CFOs, as one of the many C-suites that are influential, that makes a lot of sense that Deloitte and Ernst & Young would be there. They are the two main factories of CPAs. And so I do think that that, breaking that out into maybe one more level of granularity would be that much more useful. But aside from that, it’s It’s fascinating. It’s a fascinating study and it’s really interesting.

[00:18:34.760] – John

Yeah, and it’s fun to look at the list. There are quite a few companies on there, and many… I think you’re right. It broadens your view of all the different opportunities that are available to you If you’re an MBA or even an undergraduate business student, for that matter. Maria, of course, mentioned rankings, and I got to tell you that we just came out with our composite ranking for US MBA programs. We will, in the next few days, our international list. Just to remind you how we do that, it’s a composite, meaning we take what we think to be the five more credible rankings. We weight them by what we think is their authority or credibility in the space, the five of our US news, the Financial Times, Bloomberg, Business Week, LinkedIn, and Princeton Review. We mash them together and we come up with an overall rank. This year, for the first time in 15 years that we’ve been doing this, Northwestern Kellogg is number one, Stanford is number two, Chicago Booth is three, Harvard, four, UVA, Virginia had its highest rank as well as Kellogg. They came in at five, which makes them the number one public business school on the list.

[00:19:46.840] – John

Here’s the benefit of this list. In one small glimpse, you can see where any given school ranks across these five different programs and then see how we match them up. So As opposed to going to one list or another list and looking at them in isolation, you can see if there’s an anomaly among the ranks across these five lists, you could see if there’s consensus, which would give you greater confidence that that school is indeed at a certain rank. We give you the top 100 in the US and the top 50 outside the US. If If you’re going to play with rankings and look at rankings, this is a good list to look at because you can look at them all in one fell swoop. I know that there’s been independent research that has shown that after US news, this is the most sought after and looked at ranking even ahead of the financial times, which is interesting. But I think it’s because you get it all in one place, which is helpful. There’s a ton of data and a ton of analysis in the story. Do check it out and do be aware that all three of us are fairly cynical about rankings in general.

[00:21:09.450] – John

You’ve heard Caroline, Maria, and I discount a lot of this stuff, but it’s a helpful list just to see where schools are, what schools have momentum, what schools are on a decline. And you could all find this out in the 2024, 2025 MBA ranking that we just published. Then look for the international list as well, which is about to come out in a couple of days. All right, so there you have it. Don’t worry about those declining employment rates and starting salaries for MBAs. We think it’s an aberration and temporary. Check out the list of companies that time came up with, which are in the background or on the resumes of people who’ve achieved a fair amount of responsibility and power in the US companies. And then check out our ranking and see where your target schools way. Meantime, I know you’re putting the finishing touches on your round two apps. We covered that really well, I thought, in our last podcast. If you missed it, go and listen to it. It’ll be helpful to you. This is John Byrne with Poets and Quants. Thanks for listening.