For MBAs, a Brave New World

When trying to explain the regression that usually follows a chaotic event, Albert Einstein once said, "I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones." While the MBA job market may not revert to "sticks and stones," its future is likely to be quite different from what came after the last recession in 2001.

There is no doubt that the current recession will also be followed by an increase in MBA recruitment, but the nature of the opportunities offered to freshly minted MBAs will change. In the period following the dot-com crisis, companies sought MBAs with special skills and knowledge of niche areas, such as structured finance and private equity, as they strove to extend their business and gain market share by offering their customers sophisticated products and services. This strategy resulted from the flourishing capital markets, available funding, stiff competition, and increased consumer demand. Both MBA students and business schools were quick to seize upon these new market needs as many students chose to specialize in things such as financial real estate, financial engineering, advanced securitization, structured finance, and other exotic courses. Many MBAs saw business school as a gateway to a niche area instead of the place to develop leadership and general management skills like corporate finance, marketing, and operations. In our current recession, however, this approach is bound to change.

The main impact of the financial crisis is the deterioration of investor confidence in capital markets and distrust among financial institutions. Therefore, many companies and industries will be forced to adapt their business models. This could eventually lead to the exodus of both companies and investors from over-sophisticated products and services. Many financial services and other industries are now being devastated by this over-sophistication while their more conservative competitors that concentrated on core competencies are doing better.

Looking for Leaders

As companies will mainly concentrate on increasing efficiency and leveraging their strengths, there will be many career opportunities available to MBA graduates—and they'll bear little resemblance to those that flourished in the post-dot-com era. The ideal MBA candidate will probably be a well-rounded leader who understands the basics and possesses corporate finance, marketing, and operations knowledge. Leadership, transparency of skills, and flexibility especially in a continuously changing environment are going to be the major criteria for successful job candidates in the near future.

For business schools, this shift represents a return to form. Business schools were originally founded to educate leaders in core functional areas as well as to develop and practice their leadership skills. The idea behind this model was to provide the business world with a pipeline of leaders and managers to satisfy increasing demand. It is only recently that the business world pressured this model to adjust to market trends and, in so doing, distorted the overarching goal of management education. Nowadays it is more crucial than ever for students to use their time at business school wisely and obtain the qualifications and skills required to add value to companies. For example, students can practice their leadership skills through school activities, professional clubs, as well as working with external companies on various projects.

Another area in which employers are placing more attention is risk management. Given the new regulations that are expected to follow the current recession, along with investor expectations for a revamping of risk-management practices, it is clear there will be increased demand for personnel in risk-management departments at many firms.

These opportunities will be similar to those that arose in the wake of the 2001 recession, when the Basel and Sarbanes-Oxley regulations increased the demand for compliance practices and services. Many business schools have already identified this trend and are offering risk-management courses and cases in their curricula.

But training for the new, post-recession economy doesn't end at graduation. Business school graduates should consider the leadership programs that are being offered by many top companies. These programs, which are often rotational, offer several functions to choose from and are usually sponsored by the company's senior management as part of the organization's leadership pipeline. Participants get to practice and learn the different functions of the business, work in and with different teams, and network intensively with senior management. These programs are also less affected by recession. Although companies sometimes scale back recruiting efforts during downturns in the business cycle, the leadership programs are still highly valuable as long-term investments in human capital. And not just for the companies. For business school graduates confronting a changed economic landscape, such programs are a rare thing these days: an investment with positive returns.

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