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Top-Tier Firms Turn To Second-Tier Schools

Newsletter • volume 5 • number 1

For the first time in nearly a decade, enrollments at the nation's elite business schools - Stanford, M.I.T., Dartmouth, and the University of California, Berkeley - are down, in some cases by as much as 11 percent. In addition, more and more students are leaving M.B.A. programs after the first year, and those who do graduate are shunning traditional employers such as investment banks and consulting firms.

It should come as no surprise that all this is due to the irresistible lure of the Internet. Entrepreneurial students, afraid that start-up fever may suddenly cool, are bypassing graduate school completely or signing on with dot.coms once they have their degrees. Last year, 33 percent of Stanford M.B.A.s took jobs with consulting firms or investment banks, compared with 43 percent in 1998.

This trend, along with the seemingly unstoppable economic boom, has left firms such as PricewaterhouseCoopers, Andersen Consulting, and Goldman Sachs scrambling for employees. It has also led them to recruit where no big-name firms have recruited before: the campuses of second-tier schools. "The top seven or eight schools just cannot satisfy our needs," says Stan Miranda, a recruiting director at Bain and Company. "We're growing very, very fast and cannot find enough people to support the growth."

Needless to say, students at less prestigious schools are elated. After all, they're being courted by firms that only a few years ago barely knew they existed. For many, this attention is long overdue. Jennifer Lawrence, an assistant dean at Boston University says, "I have these incredible students who have been severely undervalued by the marketplace."

But if students are benefiting, so are some firms. Recruiters accustomed to wooing M.B.A. superstars are usually pleasantly surprised by the enthusiasm of students at second-tier schools. Often, they are even more surprised by their abilities.

Although they may have to look a little harder and recruit more selectively, recruiters are finding second-string candidates who are just as talented as those from elite universities. As Lenny T. Mendonca, a director at McKinsey & Company points out, "The notion that all the world's talent comes out of three business schools…[is] hilarious."