B-Schools Wary on Lehman, Merrill Impact

As the financial landscape shifts, B-schools are busy reaching out to nervous students whose job prospects are suddenly far from certain
Worker leaving Lehman Brothers Andrew Popper/BW

These are usually the days when business school students are settling into their class routine and awaiting the arrival of recruiters on campus. But with the downfall of two of Wall Street's investment houses and fears that other major companies are on the brink, it's a nervous time at B-schools.

How bad will it be? Most business schools contacted this week say it's too early to tell, but Alan Johnson, CEO of Johnson Associates, a compensation consultancy. predicts hiring will be down by as much as 50% this fall, with students entering what will be one of the most fiercely competitive job markets in recent years.

"While most banks will not admit it, we expect to see few people hired in the fall and banks waiting to see how the environment evolves," Johnson said on Sept. 16.

About that Job Offer…

Since the collapse of Lehman Brothers (LEH) and the rushed sale of Merrill Lynch (MER) over the weekend, school career services officers have been busy reassuring students, reaching out to those who had job offers lined up with the firms and organizing campus-wide events to discuss the overall impact of the events on job prospects.

One thing is certain: Career services officers at business schools are bracing for rough waters ahead, said Kip Harrell, board president of the MBA Career Services Council, the umbrella group of school career placement officers in a Sept. 15 interview.

Students who interned at Merrill Lynch over the summer and received a job offer are among the more fortunate ones—so far. Their jobs appear to be surviving Merrill's sale to Bank of America (BAC). "We are standing by all of our offers," said a spokesperson at Merrill Lynch on Sept. 16.

The outlook at other firms is not so clear. A spokesperson at Lehman Brothers declined to comment. A call to insurance giant American International Group (AIG), which faced failure until a government rescue plan was reached Tuesday night, was not returned.

Recruiting Nosedive

Deans of business schools are also preparing for tough times ahead. The new dean of the University of San Diego's School of Business Administration, David Pyke, is expecting recruiting by investment banks to take a nosedive this fall. "I think it's going to be bloody." But he said it will probably not hurt his school too much since few students go to Wall Street; most end up in corporate finance positions.

The schools likely to be hardest hit are those known for their strong finance offerings, where large investment firms like Lehman and Merrill have tended to recruit heavily. Mark Zupan, dean of University of Rochester's Simon Graduate School of Business, said he believes that the top five business schools, which are key feeders for top financial firms, will be the most impacted by the turmoil. "It's going to be a tough market for Wall Street-related jobs," Zupan said.

Second-year jitters

Indeed career services officers at those top-ranked schools said they are anxiously awaiting word from Lehman, Merrill, and AIG on whether or not they plan to honor the job offers they extended to second-year students, as well as their plans for fall campus recruiting.

"We don't know the impact yet on recruiting for second-year students," Julie Morton, associate dean for career services at the University of Chicago's Graduate School of Business said in an e-mail. "We do know that as of Friday afternoon the outlook was solid." Most of the Wall Street firms hire mainly from their internship classes, she added.

In response to student concern over the events, the University of Pennsylvania's Wharton's MBA Finance Club held an impromptu meeting on Sept. 16 led by some of the school's senior finance faculty, said Michelle Antonio, director of Wharton's MBA Career Management. Plans are also under way to hire more career services advisers to help students with their job hunt this year, Antonio said.

"In light of this weekend's events we are working in close collaboration with our partners in the industry to assess the current situation," Antonio said via e-mail. "Our office was already focused on current economic challenges and is in the process of adding three new positions to our staff to provide direct support to students and alumni."

Reaching out to students

At the University of Virginia's Darden School of Business, career services officers have spent Monday and Tuesday reaching out to students who worked at the beleaguered firms this summer, said Jack Oakes, director of Darden's career development center. The school has strong relationships with Lehman and Merrill, both of which have been "long-time recruiters" at the school, he said. He has not heard yet from recruiters at either firm, he said.

"There certainly will be a direct impact on students," Oakes said. "In fact, we're meeting with some of our affected students…to see what they've heard directly from the company, to hear their thoughts and concerns and advise them accordingly."

In the meantime, career services officers are advising students to cast a wide net as they conduct their job and internship hunts this fall, especially those who intended to go into investment banking. They should consider jobs in other areas of the financial services sector, such as corporate finance or internal auditing, and consider jobs at small boutique investment firms, said the MBA Career Services Council's Harrell.

"We're being very honest and upfront with our students," said Harrell, also the associate vice-president of Thunderbird School of Global Management's career management center. "They're asking lots of questions, but we're telling them that New York may not be the best place to look right now. For those counting on investment banking, they are going to need to beef up their plan B."

With reporting by Louis Lavelle