Banks' new strategy for hiring after dot-com impact

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The last year has made many of them critically aware of all aspects of assessment, recruitment and retention, and most are actively looking at their MBA recruitment programmes.

There has been a tendency by the US banks to put an emphasis on recruiting from US-based schools, but there is an increasing recognition of the importance of the European perspective.

Derek Walker, head of graduate recruitment at Merrill Lynch in London, says: 'In the past the emphasis has been on traditional US schools and a couple here, mainly Insead and the London Business School (LBS). But American schools are a long way away, and only a small percentage of students are interested in working in investment banking in Europe. It makes sense to look closer to home, where you also have more chance of finding the right language skills.'

Based on sheer demographics

- a falling birth rate and rising demand for bright young things

- broadening the net is commonsense, he says.

However, business school standards here are also rising. 'We have been encouraged by what we have seen in Europe,' says Walker.

Nadia Capy, marketing manager for graduate recruitment at Deutsche Bank, says: 'I wouldn't say that we are broadening the net any more than before. Our increased presence across MBA campuses in Europe is a reflection of the fact that the programmes are becoming more reputable.' She cites the Insead campus in Singapore and the development of the programme at IESE, the University of Navarra's business school in Spain, as cases in point.

Last year Deutsche hosted an MBA-focused recruitment event for the first time, and invited Cranfield, Warwick, Manchester and City University business schools to attend. Deutsche takes a huge number of people through MBA recruitment, between 50 and 70 in London and some 150 globally. Along with the other investment banks, it has regular meetings through 'relationship managers' with a variety of business schools to share information.

The London head of recruitment at a big investment bank says: 'There are some schools now that are producing interesting candidates, and three to five years down the line they could be much further along. Six years ago LBS was predominantly a UK business school.'

Although some of the best investment banks say they will not proactively recruit until a business school builds up a strong reputation, they still get the resumé books each year and review every one of them. But despite this trend, lists of core target schools are unlikely to disappear.

Katie Crawford, who at JPMorgan Chase looks after MBA recruitment with Justine Ingram, says: 'We look for rigorous selection criteria and so focus on 10 generally global business schools. They are among the top 20 in the FT ranking, which tend to be focused on the US. We look for a skills base, as well as depth of experience.'

In Europe, JPMorgan and Chase Manhattan took a relatively small number (20 to 30) of MBA students as summer interns, compared with levels in New York.

This means most of the selection at JPMorgan in Europe has been done up front. Out of those 20 or 30, between 50% and 75% can expect to have a job offer at the end of their internship.

Experience has shown that individuals from the targeted schools are the ones who tend to accept the job offers, she says. A critical factor in the bank's choice of schools has been the depth of experience they require before a candidate does an MBA.

Other heads of MBA recruitment are adamant that there must be no narrowly targeted list of business schools. The head of MBA recruitment at another bulge-bracket bank says: 'European schools are certainly getting better. As the merits of each school come to light, you have to see. For a diverse workforce in terms of experience, age and nationality, it is absolutely necessary to extend your net as far as possible and be recruitment-specific rather than MBA-specific.'

It takes a very high proportion of MBAs through its summer internship programme, which it uses to ensure cultural fit. 'MBAs are making life choices when they finish their degrees, and 'the people factor' is very high in the decision-making process to both parties in MBA recruitment,' she says.

Rising awareness of 'the people factor' as well as an increased emphasis on skills are at the forefront for banks that are actively re-thinking recruitment strategy. Commerzbank Securities is in the process of setting up a global graduate recruitment system to attract graduates and MBAs for a variety of positions within investment banking. It is trying to move away from the idea of recruiting only from certain academic backgrounds and certain business schools.

Steve Kitching, the head of graduate recruitment, says: 'Competencies and skills are very important now. We are aware that there are very good people out there. We will be looking at course content very carefully and at what the individual has to offer the company.'

Retention concerns are also leading the investment banks to forge ever-closer relationships with schools. Goldman Sachs recently hired the ex-Dean of Insead, and heads of MBA recruitment are watching with interest to see whether Carlos Cavallè of IESE and John Quelch of LBS, both deans who resigned in the last few weeks, move to similar in-house advisory roles.

The need for co-operation in this competitive hunt for talent means that investment banks meet twice a year to share knowledge about MBAs and business schools. Sometimes they suggest changes in course calendars and deadlines to fit in with their cyclical recruiting needs.

When IESE planned a careers recruitment fair in February, for example, it was told that most investment banks would have completed their headcount by then and there would be no point.

Instead, it had a careers fair in Barcelona last October that was attended by all the large investment banks, including Goldman Sachs, Merrill_Lynch, Deutsche Bank, Société Générale, HSBC Investment Bank and others.

At their biannual meeting, the investment banks also set salaries for MBAs, and agree to maintain them at specific levels.

'Then we all go away and break the rules, because it comes down to meeting the demands of the business,' says the head of graduate recruitment for a bulge-bracket investment bank.

'There is a lot of shared information because the MBA recruitment market is so sophisticated,' says Michelle Mendelson, who has recently moved to the role of European campus relationship manager for Credit Suisse First Boston in its newly reorganised recruitment operation.

The head of MBA recruitment at another investment bank says it is a case of 'you scratch my back, I'll scratch yours' when it comes to those who are involved in turning out students with MBA degrees and those who need them.

The level of MBA recruitment is testimony to banks' staffing needs.

Neil Hoskins, head of training and development at Lehman Brothers, says: 'We have been recognising that there may be a smaller number of good quality candidates at other than core traditional schools.

'Even if the market hardens and the numbers come down, we are still likely to maintain our linkages with these non-core schools.'