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The Opportunity Cost of Hiring an MBA from the Employer Perspective (Part 2)

Last week’s column considered the relative value-add of hiring full-time MBA candidates, as opposed to high-achieving undergraduates or Executive MBAs. The goal in adopting a wider horizon regarding the recruiting playing field and a greater appreciation of the alternatives and constraints employers face when hiring MBAs, is not to draw inferences about which professional profile or type of degree program is better, but to help MBAs understand employers’ decision drivers better, and thus to be more effective in the job search process.

In my experience, one area in which MBAs often have a blind-spot is the extent to which companies weigh their per-school or per-capita costs of the recruiting process as part of the expense of bringing an individual student on board. Business school students, primed by their negotiation classes, by news stories about gender wage disparities in the job marketplace, and by the ever-present feeling that another student may be getting a better deal, often take it as a given that they must negotiate their job offers … that they will be doing themselves a disservice if they don’t “drive a hard bargain.”

This perspective might be tempered somewhat by an appreciation of the fact that by the time an MBA student receives a full-time offer, the company hiring him or her has already spent roughly the equivalent of a full-time MBA salary to identify, evaluate, and narrow the pipeline down to that single person.

For large organizations that conduct on-campus presentations, coffee chats, interviews, etc., the total cost of recruiting a single MBA is computed as follows: if you take the sum of expenses involved in travel, accommodations, catering, venue rental, reviewing applications, interviewing, interview coaching and feedback, flying and hosting final round candidates at home offices, retaining a dedicated staff of recruiters, and pulling line managers away from clients and customers to serve as recruiting “team captains,” interviewers, etc., and you divide that figure by the number of students who attend company presentations, minus those who apply for the position, minus those who are invited to interview, minus those who make it through to final rounds, minus those who are made an offer but accept a job elsewhere, you arrive at … well, you arrive at a very large numerator (in the millions), and a very small denominator (in the dozens, for large MBA employers), and the figure that I was quoted in one instance … a minimum of $150,000 as the recruiting process “cost per hire.”

If you are negotiating a job offer, something we will consider in greater depth in next week’s column, it’s helpful to realize that, from the employer’s perspective, even before you receive your signing bonus or spend a day working at the firm (for those who were not summer interns), you’ve already cost the company the equivalent of a year’s salary for an MBA associate.

Being sensitive to these costs, and expressing appreciation for the investment made by organizations to recruit MBAs in your conversations with employers and alumni, can help you seem that much more in-the-know and empathetic. This exercise in thinking from the employer’s perspective can give you an edge as a job candidate, of course, but with luck, it may also pay off someday when you yourself are recruiting MBAs …  it’s always satisfying to meet people who are mindful of your own costs, commitments, and alternatives.

BIO and contact info

Ivan Kerbel is the CEO of Practice LLC, an educational services firm that conducts an intensive, annual pre-orientation program for newly-admitted MBAs, The Practice MBA Summer Forum. Ivan served previously as Director of the Career Development Office at The Yale School of Management and as a Sr. Associate Director at Wharton’s MBA Career Management office. He is a Wharton MBA alumnus and a former management consultant at Katzenbach Partners, a New York City strategy consulting boutique. Ivan can be reached via LinkedIn.