The surprise in BusinessWeek's second annual ranking: Accounting firms have raced to the head of the pack
Accountants used to be spoofed as bean counters—dutiful, middle-aged, gray-suited men with considerable analytical expertise but little charisma. That was during the good times. After their uninspiring performances in the corporate scandals of recent years, accounting seemed like a profession without much of a future, and the firms certainly no place to launch a career. Scratch that. This year accountants became sexy. Accounting firms dominated BusinessWeek's second annual ranking of the best companies for new college graduates: Deloitte & Touche is No. 1, followed by PricewaterhouseCoopers and Ernst & Young. The last of the Big Four, KPMG, moved up four spots, to No. 11.
Why did the accounting firms do so well? Enormous demand. Across industries, there is a mad scramble to recruit the best and brightest of a new generation, the much-maligned, heavily scrutinized Geny Y. Nowhere is the pressure more intense than in the Big Four. The Sarbanes-Oxley Act has so greatly increased the need for their services that the firms are facing an epic talent shortage.
That has put them in an unusual position: They are among the first to rethink how to recruit college grads, keep them happy on the job, or just keep them at all. Ernst & Young uses Facebook to let prospective employees talk freely with real ones. Deloitte will show a rap video about office life—made by interns—to give students a realistic view of the company. And PwC requires some bosses to get a second opinion on their evaluations of new hires to make sure the feedback is clear enough, the goals ambitious enough for kids who are uncomfortable with ambiguity. Welcome to the post-millennial world.
THE GOOGLE EFFECT
Our ranking is based on three extensive surveys: of career services directors at U.S. colleges, the employers they identify as the best for new graduates, and college students themselves. This year we were able to examine the records of many more companies, which allowed us to expand our list of employers from 55 to 95 and broaden our view of the corporate landscape. Several newcomers, including PwC, IBM (IBM), and Microsoft, (MSFT) eclipsed last year's favorites. Walt Disney (DIS) had been No. 1; this year it fell to No. 7. Last year's No. 2, Lockheed Martin (LMT), slipped to No. 9.
There were a number of surprises beyond the rise of the accounting firms. Only nine companies in the top 50 last year offered starting salaries of at least $55,000. This year twice that many pay big money; among them are the brand-name tech companies, where, thanks to the Google effect, first-year salaries now average $60,000 to $65,000 (and that's before bonuses). We also saw the three pharmaceutical companies surveyed last year fall in the rankings. Merck & Co. (MRK) (No. 49), which was in the news because of its problems with Vioxx, did poorly in the student poll.
Our survey shows how some of the smartest employers are starting to deal with a new generation that expects a very different workplace from the one of their parents. The intense desire to hire young graduates is prompted by the retirement of the boomers, of course, but also the dead certainty among executives that their success marketing to youthful consumers depends on the insights of IM-ing, YouTube-watching twentysomethings who are often heralded for their tech savvy, if not much else.
The employers that did best in our ranking recognize that they have to accommodate this new generation. Many of them are trying to appeal to Gen Y by making themselves more transparent, flexible, responsive, even nurturing. Their initiatives range from the conventional (more vacation) to the questionable (a faux sitcom about office life).
So who are these people? Officially, this generation comprises the 78 million born between 1982 and 2000 who began entering the workforce three years ago. They are supposed to be the hothouse kids: praised and coddled from infancy and watched over by their parents well into adulthood. As employees, they are said to have high expectations and demand meaningful work, constructive feedback, and positions of influence within their organizations. In other words, they want a seat at the table, or they'll walk. "It is crucial for us to meet the students partway," says Ernst & Young's director of campus recruitment, Dan Black. "If you don't make an effort to provide an environment in which this generation can do their best, they're going to find one where they can."
Naturally, there are managers who don't think the special treatment is necessary. At Microsoft Corp. (No. 6), for example, interviewees visiting its headquarters are offered concierge services. A few lucky interns at Ernst & Young get to fly with the chief executive on the corporate jet to a conference in Orlando. And there are experts who believe companies are making empty promises about how much a 22-year-old can really contribute. "I don't care how brilliant you are, when you start out in a job, you're not going to run things," says Courtney E. Anderson, founder of Courtney Anderson & Associates, a firm that provides workplace consulting.
You won't hear that note of skepticism at the accounting firms. Indeed, few are trying harder to connect with Gen Y than they are. Deloitte alone estimates it will need to hire as many as 50,000 employees in the next five years. Luckily for them, the Enron era left an impression on some Gen Yers that few expected: Accountants don't have to labor thanklessly and out of sight; they can be vital to the fortunes of a company. "I thought those occurrences would cause people to shy away from the discipline. Instead it's done the opposite," says John J. Fernandes, the president of the Association to Advance Collegiate Schools of Business International. "I think that people want to be in an important position that's visible."
Indeed, the number of U.S. students graduating from college with accounting degrees has risen almost 29% since 2002. But accounting firms are also competing with high-paying, bonus-giving investment banks as well as major corporations. So the Big Four are falling over themselves to win the favor of Generation Y. "The ability to recruit and retain younger workers will become critical," says Barry Salzberg, CEO ofDeloitte & Touche USA. "In many ways, Gen Y is our future."
And in facing that future, one of the most important lessons the accounting firms and others have learned is that Gen Yers appreciate straight talk about what they can expect from the workplace. "It's all about authenticity," says Andrea S. Hershatter, the director of the undergraduate business program at Emory University. As consumers, these twentysomethings expect that the promise of the brand will match the reality. If it doesn't, they'll try something else. Same goes for the workplace.
New York Life Insurance (No. 47) is one of those experimenting with a real-world introduction to corporate life. Last year it faced up to a dismal reality: Only 3% of corporate interns accepted full-time positions, one of the worst rates in the industry. So instead of showering this year's interns with frivolous perks and other goodies, it did the exact opposite—it took away their Friday afternoons off, ordered them into classes on business etiquette, and put them to work brainstorming about how to make the company's products more appealing to Gen Y. The company says it may use elements of the winning marketing campaign, which targeted young people during critical periods in their lives.
New York Life doesn't know if its new approach worked, but more than 90% of the interns said they would like to receive an offer. "They want a challenge," says program head Elizabeth King. "We don't treat them as kids, we treat them as employees." Employees, that is, who in their first weeks on the job get to make suggestions about how to improve operations.
Other companies are taking more risks, wandering way out of their comfort zones to meet Gen Yers on their own turf. At Ernst & Young, the recruiter, Black, launched a Facebook campaign in July, 2006, which now brings together some 10,000 employees and job seekers in an open forum to discuss the application process and prospective workplace. "This lack of control is something that is very new and makes a lot of larger organizations uncomfortable," he says with considerable understatement. He has received calls from other recruiters asking how he persuaded management to go along with the idea. "It was difficult for that group because clearly FaceBook was a new concept, but they thought the reward of reaching Gen Y in a meaningful way would be worth the risk."
The message board is generally full of serious questions and enthusiastic responses. There is, however, the occasional skeptic about the forum: "This is the lamest thing I have ever seen," wrote one student. Black can live with that. "We knew going in we would get feedback that wasn't exactly positive," he says.
JPMorgan Chase & Co.'s (JPM) investment bank (No. 17) might be tempted to use as its recruiting pitch the $68,000 average bonus it handed out in 2006 to first-year employees. Instead, it is actually trying to give Gen Yers a realistic sense of what they have to do to earn that money. It allowed a New York University film grad to shadow three young employees for a documentary-style film that will be posted online this month. After, that is, company officials approve it.
Deloitte has also opened up a bit in an effort to present a real picture of working life to potential recruits. It asked employees to create short videos describing what the company means to them. Nearly 400 videos were judged by a group of interns and employees of all ages. The dozen or so best will be part of Deloitte's campus recruiting efforts. One of them is a rap video. If the head of the selection panel, a partner at the firm, no less, had any reservations about rap, he kept them to himself. Instead, ever so gently, he expressed concern about the video's references to long hours and difficult work assignments: Wouldn't that dissuade students? A few interns didn't hesitate to set him straight. "You want to be busy," said Cindy Quintanilla, an intern in Dallas. Steve Mai, an intern in New York, added: "If all they did was talk about the good stuff, then I'd be skeptical."
But when it comes to asking older managers to set aside their doubts and get involved, PwC has gone even further than Deloitte. It has justlaunched an online recruiting campaign that includes a faux sitcom. Called The Firm, it features real employees acting out scenarios in which the female Gen Y star has awkward interactions with older employees. That's right, real, older employees. Senior partner Bob is "kinda scary," and Blake, a senior associate, apparently smells. "We hear all the time that students are interested in what it's like in the workplace," says Amy Thompson, PwC's national director of campus recruiting. "This is a funny way to talk about a serious subject."
Aside from giving up control, putting themselves in uncomfortable positions, and in general spending an awful lot of time thinking about how to please kids who would like nothing more than to have their jobs, managers are also expected to relearn how to manage. Specifically, they are supposed to deal with young employees who have lived in a constant feedback loop.
It has been said that Gen Y needs buckets of praise. In fact, in many cases these folks are looking for honest appraisals of their work. Boeing Co. (BA) (No. 14) is starting to move in that direction. The aerospace giant has one of the lowest retention rates in its industry (59%), and one way it hopes to improve upon this is by teaching managers how to deliver criticism—harsh, if necessary—along with praise. "We're starting to tell our managers that we want them to have very clear and candid conversations with their employees," says Julie-Ellen Acosta, vice-president for leadership development. And that's for employees of all ages. The company is retooling its training to reflect the new philosophy. The goal: more ongoing and personalized feedback and more honesty. "The managers are worried about hurting people's feelings," says Richard Stephens, senior vice-president for human resources. "We want to let them know it's O.K. to have those conversations."
Here's another thing about Gen Y that managers are starting to figure out: Twentysomethings want not just honest feedback but also routine conversations about their progress and their career paths. This generation, says Emory's Hershatter, feels "entitled to have others support them in their efforts to accomplish and achieve." And that means right from the start. Abbott Laboratories (No. 15) recently began an extended orientation that includes goals for the first, second, and third months on the job, as well as the promise of consistent dialogue with managers. "People have the expectation of a more planned and deliberate approach," says Ann Johnston, director of learning and development.
PwC is taking this approach even further. A few years ago the company resolved to let employees themselves decide when during their first 90 days they would sit down with their boss for a performance review. (After that, they could do so every month if they choose to.) And, get this, a second reader is supposed to review the initial written evaluation to make sure it is sufficiently clear.
Some companies are even giving employees more say over how their careers will unfold. In the first two months after KPMG launched a Web-based training program to better prepare young employees and their managers to talk about career building, more than 9,300 employees logged on. Some 2,500 created their own (ideal) career paths.
As a concession to the expressed desire of some millennials to do good before they do well, 15 companies and investment banks are allowing new hires to defer employment for two years. During that time they teach at troubled high schools around the country through Teach for America (No. 10).
Some companies have decided it makes more sense, and is less costly, to test their new programs on a few lucky souls first. At DHL (No. 78), executives weren't sure about training people "so new you had to tell them how to tie their shoelaces," says Paul Read, the director of sales training. The company, which usually hires experienced salespeople, decided to offer an 11-week program to recent college grads—but only to nine. Pooja Shambhu, a 24-year-old Purdue University grad who went through the intensive course, says: "The first time I went out on my own, the feeling was unbelievable. Within two weeks, I won my first account."
DHL executives aren't complaining anymore. They say the new hires generate more revenue and more shipments per sale. This year the company expanded the program to 19 people. "They were hungrier and more easily moldable than the other reps," says Read. Now he just hopes these well-trained salespeople stay for a while.
Of course, some companies are establishing policies that everyone can take advantage of. IBM (No. 4) introduced ThinkPlace, an online suggestion box to help it cull the best ideas from its global workforce. And over at that other tech company, Google Inc. (GOOG) (No. 5), there are free lunches and on-site massages. But perhaps the most popular perk is that employees, all of them, are allowed to devote one day a week to developing new ideas.
And the accounting firms, for all of their out-there experiments, are making use of some more traditional incentives, too. PwC has instituted an extra 11-day firmwide vacation. Ernst & Young offers four-day weekends several times during the summer. And KPMG declared that every summer weekend starts at 3 p.m. Friday. You don't have to be under 25 to qualify.
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