MBAs – To Hire or Not to Hire

PER visited the leading business schools across Europe this autumn, including INSEAD, LBS and IESE, and some interesting themes have emerged. With all the uncertainty in the global markets and lack of M&A transactions in the past two years, there has been a flight to enrol in MBA programmes and there will be a talent bulge coming out in 2010 and 2011.

We were pleasantly surprised to find that the PE clubs at all the business schools are thriving with record attendance. Interest in PE has rarely been higher as an increasing number of strong candidates consider private equity as a serious option, given that the traditional routes of investment banking and strategy consulting are limited. The major benefit to recruitment in PE today is that top calibre MBA candidates with backgrounds in consulting and industry are much better educated on the private equity sector than before.

So what impact has this had on the chances of finding good candidates at the business schools? There is talent to be found, but the pool of star candidates with suitable backgrounds is still limited. 

Spotting the top performers with good transaction exposure and relevant industry experience is a major challenge year on year. Many of the 2010 MBA class did not work on a transaction in 2008. And an MBA candidate with a lack of deal experience will not meet your expectations compared to MBA candidates from previous years.

Another theme counting against MBA recruitment is a long familiar one: the best candidates already have offers from either their employers who sponsored their MBA, from banks or consulting firms who offer early in the year or from their internships. The best candidates will always have options.  You may need to consider paying sign-on bonuses to help with student loans as many of the leading banks and consulting firms do. Simply put, they’re more expensive to prise free.

On the bright side, now may be a good time to pick up associate and mid level stars with prior PE experience. The 2009/10 classes contain some impressive candidates who applied for their MBA in the better times of 2006/07 when it was unimaginable they wouldn’t find a new position on graduation. These candidates did two year analyst programmes in leading funds and were highly regarded with good transaction experience, but with headcount at a premium, there simply hasn’t been a chance for them to return.

They’re having to keep their options open and many are considering something a bit more entrepreneurial or in a different part of the market – perhaps at a smaller deal size.  These could provide some useful experience.