To lure and keep young talent when cash is tight, companies of all stripes are appealing to Gen Yers' ambitions for speedy advancement—and their desire to do good while doing well
As career choices go, the hotel business isn't one that will put new college grads on the path to riches. With few exceptions, new employees can expect an annual salary of less than $40,000, a figure that has barely budged in recent years. So when Marriott International (MAR) visited the University of Delaware campus on a recruiting trip, it didn't wave a big wad of cash in front of Claire Pignataro. It didn't have to. It had already hooked her with something she considered far more valuable: a chance to help run a hotel.
A semester at the Courtyard by Marriott hotel, located on the Delaware campus, is required as part of the school's hospitality program. Pignataro, who was among the first students to work there, took part in virtually every aspect of opening the hotel, from developing marketing materials and designing weekend packages to even checking the legal mumbo jumbo posted in every hotel room. After graduating in 2005 and joining Marriott full-time, she entered a three-month management training program at a full-service hotel in Bridgewater, N.J., that put her through her paces again, including brief stints in the restaurant, food and beverage service, and front office. Knowing Pignataro wanted to be a wedding planner—and not wanting to lose her—Marriott gave her the next best thing: a permanent slot as an event planner at the Bridgewater property. "I was doing bar mitzvahs and weddings—all kinds of social and corporate meetings," says Pignataro, who is now in corporate sales. "You can do a lot of that within Marriott."
For companies like Marriott that need to win the talent wars without breaking the bank, opportunities such as those offered to Pignataro are rapidly supplanting pay as a way of luring and keeping the best new college graduates in the corporate fold. While the economy has taken its toll on middle management, many companies are continuing to hire entry-level employees—in some cases at a blistering pace. Even those that are hiring fewer employees for entry-level jobs are competing more intensely for the very best. While traditional perks such as pensions and health insurance still have their place, more companies are finding inventive ways to attract, retain, and motivate their youngest employees—using everything from work-from-home programs to faster promotions to financial benefits that kick in a few years down the road. Says Adam Kling, a workplace consultant with RHR International: "They're using those and other perks to help offset what you're seeing in your monthly paycheck." Or more to the point, what you're not seeing in your monthly paycheck.
No one recognizes the importance of perks more than Ernst & Young, where average salaries haven't increased substantially in at least three years. The Big Four firm still attracts more than 3,000 highly sought-after accounting students each year with extensive training and mentoring programs, performance bonuses, and the promise of face time with top executives—including an annual trip to Walt Disney World (DIS) for all U.S.-based interns, where they get to mingle with the powers that be. It's perks like that, along with a recruiting machine in overdrive and near-certain advancement to a supervisor-level position in just two years, that landed Ernst & Young atop BusinessWeek's third annual Best Places to Launch a Career ranking this year, unseating rival Deloitte.
The ranking is based on three separate surveys: a BusinessWeek poll of career-services directors at U.S. colleges; a survey of 40,000 U.S. college students conducted by Universum USA, a Philadelphia research company; and a BusinessWeek poll of the employers themselves. With a greater number of qualified employers participating, we ranked 119 this year, up from 95 in 2007. (The complete list is available online.) The increased competition, along with shifts in sentiment among students and career-services directors, sent several newcomers, including No. 14 Target (TGT), No. 17 Boston Consulting Group, and No. 19 Anheuser-Busch, vaulting up the ranking, while several favorites from last year came off their pedestals. Microsoft (MSFT) slipped seven spots, to No. 13; Disney fell 20, to No. 27; and Accenture (ACN) dropped 39, to No. 47.
While accounting firms again dominate the top of the list, owing to impressive perks and intense demand, one of the most surprising things about this year's ranking is just how well the investment banks fared. With five banks in the top 50, including Goldman Sachs at No. 4 and J.P. Morgan at No. 10, it was the industry's best showing since the inaugural ranking in 2006, perhaps in part because the surveys were conducted before the full extent of the turmoil on Wall Street had become apparent. High pay and an otherwise excellent reputation on campuses propelled four of the five banks—including beleaguered Lehman Brothers—higher up the ranking.
However, for almost every industry, economic conditions today are far different from those that prevailed last year, when both hiring and salaries were on the rise. Overall, hiring was down 2% in 2007—more than 30 companies had cutbacks—and salaries advanced at a sluggish 2.8% pace, trailing inflation. Demand for accounting, computer sciences, and engineering majors created a few exceptions to the unfavorable salary picture, explaining why the accounting and tech companies fared as well as they did. But for the most part, 2007 was the worst year for the entry-level job market since 2003.
Amid all the gloom, companies are seeking new ways to find and retain new college grads. For many, the effort starts with campus recruiting, a hugely expensive undertaking that, for companies with high turnover, often has a very poor return.
To make the most of their recruiting efforts, many companies are scaling back their scope. In recent years, Philip Morris USA dropped nearly 50 campuses from its program, leaving it with just 34. Philip Morris President Craig A. Johnson says the quality of new hires is up as a result, and that more interns are being converted into full-time hires: 47% in 2007, up from 32% in 2005. PricewaterhouseCoopers pairs a targeted recruiting effort with a beefed-up Web presence that now accounts for 20% of its new hires. Jean Wyer, a PwC partner who was instrumental in developing the strategy, says students who find PwC through the Web site—as opposed to PwC finding them through on-campus recruiting events—have the kind of resourcefulness that results in successful accounting careers. "These are people who are paddling on their own," she says.
One reason companies like Philip Morris and PricewaterhouseCoopers are succeeding in their recruiting efforts is they've done the math. Both companies focus their face-to-face recruiting efforts at schools that have traditionally yielded the most hires, employees with the strongest performance reviews, or those who have stayed with the company the longest, among other metrics. For Philip Morris, one such school is Penn State. As a result of its analysis, the company not only has increased the number of Penn State graduates it hires each year for the last three years but has also broadened its recruiting efforts on the school beyond sales jobs.
A different state school in the Upper Midwest wasn't so lucky. The school, which Philip Morris would not identify, was recently cut from its recruiting roster when the company discerned that the number of interns from the school who were hired for full-time jobs was unsatisfactory. Says Ken Garcia, a company spokesman: "The numbers just didn't pan out."
For many companies, though, the bigger problem—far bigger than recruiting—is retention. Overall, average five-year retention rates for employers that took part in both the 2007 and 2008 rankings began to slip this year, from 55.4% in 2007 to 52.8% in 2008. This was true for some companies in low-paying industries, including insurance and transportation, and industries with relatively high pay, both of which struggled to hold on to their youngest employees. While the accounting industry made modest improvements, companies in other industries took it on the chin: Abbott Laboratories (ABT) saw its five-year rate drop from 83% to 72%, and Intel's (INTC) fell from 71% to 58%. Claudia Tattanelli, CEO of Universum USA, says falling retention is a function of Generation Y's fearless attitude: "They're not going to stay in a job just because the economy is bad."
Indeed, one reason high pay alone is no longer enough to guarantee loyalty is that many members of Gen Y, who have been entering the workforce since 2004, have other priorities. For them, issues such as community service and serving the greater good are among the most important, according to the 2008 Universum USA survey of U.S. undergraduates.
That's an inversion of the baby boomer priorities, and particularly good news for nonprofit and government employers. Some of the federal government agencies in our ranking—including the State Dept. and NASA—mesh well with Gen Y priorities, which helps explain why their retention rates are high even though the pay is nothing special. And with more than 60% of the federal workforce eligible for retirement by 2016 (and 37% expected to actually depart), the opportunities for rapid career advancement—another Gen Y priority—are growing. At AmeriCorps, which each year sends an army of 75,000 to serve nonprofit groups in communities across the country, applications from young adults are up 69% in the last four years. David Eisner, the CEO of AmeriCorps' parent agency, the Corporation for National & Community Service, says AmeriCorps is the beneficiary of a generation intent on giving something back. "It's the kind of demographic shift you almost never see," says Eisner.
But if you can't promise new college grads a chance to save the world—or a seat on the space shuttle—how do you get them to stick around?
A growing number of employers are trying the carrot-and-stick approach. Some companies in recent years have restructured their 401(k) matches and vesting schedules to entice new employees to stay until the richer benefits kick in. Among them: Honeywell International (HON), American International Group (AIG), and Blue Cross Blue Shield, where three out of four entry-level hires leave within three years. The health insurer last year ditched its traditional pension plan and created a 401(k) match that starts at 3% and goes as high as 10%, based on age and years of service.
To improve retention, Ernst & Young in 1999 began doubling its match after four years of service to 3%. Today, it boasts the best five-year retention among Big Four firms: 34%. Although that still leaves a lot to be desired, the savings in recruiting and training expenses are significant. Explains Mary A. Stringfield, E&Y's head of Americas benefits: "Retention was a key factor for designing that match formula."
As incentives go, ballooning 401(k) benefits are a crude but effective way to keep employees tethered to the company. But for a generation that values flexibility, there's something even more valuable that employers can offer: no tether at all. About a year ago, BearingPoint (BE) started a program to permit employees to work from home full-time. Of the consulting company's total workforce of 16,000, some 800 employees ultimately took it up on the offer, including Jenny Fredrickson. Fresh out of college, the 24-year-old marketing analyst started in the company's Redwood (Calif.) office in January 2007 but joined the work-from-home program a year later to be near her family and boyfriend, and to buy a home 360 miles away in tiny Etna, Calif. (pop. 750). Today, she's part of a virtual marketing team with outposts in six states. It's lonely at times, but conference calls and the occasional real-world meeting with her teammates break up the monotony. "There's a lot of flexibility with where you can live," says Fredrickson. "That's one of the main reasons I joined the firm."
It's too soon to determine the success of BearingPoint's work-from-home program. But Tom O'Connor, a senior BearingPoint manager who founded the program, says younger employees like Fredrickson find working remotely more desirable than boomers do, so there's real potential to increase their job satisfaction. "My son is a junior in college," O'Connor says. "The last thing he wants to do is sit in a cubicle all his life."
Programs like BearingPoint's improve retention by making employees more satisfied with the day-to-day aspects of their jobs. But more targeted interventions are sometimes equally effective. By making a big impression when it matters most—in the first year of employment, when a lot of entry-level hires jump ship, or at the three-year mark, when boredom and frustration often set in—employers can get their young charges over the hump and, with luck, motivated to stay on for many more years. More than a dozen companies in this year's ranking did that with cold, hard cash, increasing the size of performance bonuses awarded to entry-level hires in their first year on the job. KPMG paid out an average of $4,300, up from $3,500 in 2007, and to a far larger group of employees—nearly 80% got the bonuses in 2007, up from 53% in 2006.
At IBM (IBM), the average bonus more than doubled, to $3,500, from $1,500 in 2007, but fewer employees received them in their first year on the job: 83%, down from 92%. Laurie Friedman, an IBM spokesperson, says the company purposely raised the bar for awarding the bonuses to increase the amount and make a bigger impression. Says Friedman: "It's one of the ways IBM attracts the highest-quality applicants in today's competitive tech job market."
Money is all well and good, but nothing says "stay for the long haul" like a promotion. So companies are experimenting with ways to accelerate the process. While many companies award promotions only when a vacancy exists, several, including Philip Morris USA, have shifted to a system that considers employees for new positions whenever they're ready—vacancy or not—thereby removing one of the biggest obstacles to promotion. And Whirlpool (WHR) is now giving employees a chance to fast-track their careers by offering them opportunities to work on special projects that will enhance their skills, thus making them eligible for promotions earlier. The projects can be anything from a 60-day stint with HR to six months spent designing a new appliance. The pilot program was started in July, but the company expects it to be popular with young employees and to improve retention, which is already the best among consumer products companies in our ranking. "The more opportunities we can provide our employees to engage in meaningful work and challenging assignments, the more quickly we can help them achieve career goals," says Jeff Beavers, Whirlpool's director of global university relations.
The problem with providing all that meaningful work, however, is that too much can quickly lead to burnout—especially for a generation for whom work-life balance is a priority. This is a major concern in industries such as consulting, where long hours and nonstop travel can take their toll on new grads—driving as many as two-thirds to bolt inside of five years. To prevent that, Boston Consulting Group takes unusual precautions, monitoring employee hours through a formal early-warning system and sounding the alarm when hours approach the burnout zone.
On her first assignment, a stint in Toronto, Allie Melnick averaged 75 hours a week over a three-week period. The 23-year-old associate showed no signs of distress—to hear her describe it, she barely broke a sweat—but the long hours alone triggered BCG's early-warning system. Her project leader pulled her aside to find out how she was handling the pressure, then BCG quickly reorganized the case team, adding staffers and redistributing the workload to give Melnick a break. BCG's response made a big impression on her. "If you're working hard, people notice it," says Melnick. "It was a good feeling."
For many new college grads, however, nothing gets the juices flowing quite like a chance to speak truth to power. Mingling with top executives and having their ideas heard by senior managers is particularly important to Gen Y workers. So providing those opportunities is becoming a priority for many employers. Ernst & Young last year allowed interns aboard the corporate jet for some face time with the chief executive. Mark Kappelman, 24, an Arizona State accounting graduate who chose E&Y over the three other Big Four firms, said senior-level access is typical for new hires as well, and was one of the things that helped him handle all the duties he received in his first few months on the job. Says Kappelman: "It's a very uphill learning curve in the first year. They thro