Internships: The Best Places to Start

More than just résumé-padding, these summer opportunities have become great tools for students and employers to find that perfect fit

Elana Gerasimova spent the summer of 2006 working as an intern for JPMorgan's emerging markets desk. The University of Pennsylvania senior enjoyed the summer in New York because of the variety of tasks she was given and the executives she had the opportunity to work with. "They really made a point to give us actual projects," says the 22-year-old native of Bulgaria. "I loved it and then I got an offer to come back." Now Gerasimova is a first-year analyst with JPMorgan (JPM) investment bank, No. 8 on BusinessWeek's inaugural 50 Best Internships ranking.

Getting an internship used to mean a 10-week exercise in photocopying, sorting mail, filing, and fetching sandwiches. If you were lucky, there might be a company-wide picnic thrown in. Forget that image. The college internship has become nothing less than a high-stakes tryout to land the perfect first job. Think of it as the job interview that lasts all summer long.

What happened to the days when internships were something put on your résumé—one that usually went to other employers? The answer is simple: Demand is high for entry-level workers, especially the cream of the crop. These days, employers are looking for an edge—any way to get their hands on prime candidates early, particularly in industries such as accounting and investment banking where there is intense competition for top students with specific skills or majors.

Big Four in the Top Five

If you have any doubts, listen to Lehman Brothers (LEH) managing director Larry Band express his company's view of its summer internship program. "It's the primary entry point to full-time employment," he says.

That's why BusinessWeek has created its first annual ranking of the best U.S. companies for undergraduate internships. Our ranking highlights the employers who are doing it right. PricewaterhouseCoopers tops our list, followed by Ernst & Young and Deloitte & Touche. The last of the Big Four accounting companies, KPMG, comes in at No. 5, right behind financial-services powerhouse Goldman Sachs (GS).

Why is it so important for employers to appeal to Gen Y through internships? A solid internship experience can be an effective recruiting tool to identify (and snap up) top entry-level candidates in an increasingly competitive marketplace for the best and brightest college grads. "It's so competitive, there are simply not enough really good students," says Jean Wyer, a principal at PricewaterhouseCoopers. "Internships have become more important, so we look at the availability and quality of ours as an important differentiator in the marketplace."

How We Gathered the Goods

Nearly one-third of all entry-level hires at the companies on our list once worked as interns for their employer. Hiring interns also helps employee retention. According to Claudia Tattanelli, chief executive officer of Philadelphia-based research firm Universum Communications, studies show employees who start out as interns before coming on board full-time usually stick around longer and have better retention rates.

With this ranking, BusinessWeek has put together a guide to the best internships that, unlike any other ranking, provides information on pay, the number of interns each company recruits, and how many interns are offered full-time jobs. To compile our list, we started out with the nearly 100 employers included in BusinessWeek's 2007 Best Places to Launch a Career, our ranking of top U.S. entry-level employers released in September.

Next, we judged the organizations based on three criteria: the internship survey completed by employers, their ranking on Best Places to Launch a Career, and the undergraduate student survey conducted by our partner, Universum Communications.

There are some big surprises on our list. The CIA, No. 21, for example, offers a highly competitive undergraduate scholarship program that includes summer work experience at the intelligence agency and is targeted at high school seniors and college sophomores. One college senior told Universum, "The Central Intelligence Agency offers the best opportunities because they have co-ops, internships, and scholarships combined with job placement opportunities immediately after graduation. Participants gain experience and are able to apply as soon as possible." The super-secret agency won't disclose how many interns it employs, but of the interns who receive job offers, 100% accept. The only other employer to have that high an acceptance rate is another government agency, the U.S. Patent and Trademark Office, No. 23.

Looking for the Highest Pay?

Our list also reflects the realities of the world of business: The best opportunity to make top dollar as an intern is in investment banking. The five investment banks on our list offer their interns the highest pay—an average hourly wage of $26.14.

Clearly, the lot of interns has improved over the years. Not too long ago, many employers were still unsure whether to even have a formal internship program, says Universum's Tattanelli. Now it's a necessity for large prestigious companies and firms if they want to appeal to a Gen Y crowd that craves engaging work. "You can't just have [an internship program]," says Tattanelli. "You have to have one and give them meaningful work."

Next Stop: High School

PricewaterhouseCoopers, for example, enriched its program in recent years by making changes to a four-day conference it holds for its interns at Disney World. The firm asks its partners to tie the conference coursework back to what the interns learned over the summer. It also gives interns an opportunity to do community service (and learn important teamwork skills) through a project that involves assembling bicycles for children in need. Competitor Ernst & Young, has a similar Disney World program and even flies some of its top interns to Florida on the company jet with the CEO.

No wonder more students are interning than ever before. According to a recent survey by the National Association of Colleges and Employers, 62% of entry-level hires have had internships, as opposed to only 49% in 1997. Companies are also starting to recruit interns earlier in their college careers. The next frontier, according to some recruiters: high school.

See BusinessWeek's slide show for a ranking of the 50 Best Internships.

Business Exchange related topics:Career ChangeGenerational Tension at WorkHiring Digital TalentMillennials at WorkRecession Job Search