A cheap way of hiring MBA graduates

New research suggests that an alumni link can sweeten a low offer
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MBA students are adept at putting a value on long-term cash flows. New research suggests this mentality is also present in their evaluation of job offers — particularly if an alumnus of their business school is doing the recruiting.

Professors from NYU Stern and MIT Sloan found that students securing a job through a member of their institution’s alumni network received a starting package worth 16 per cent less than those recruited through more traditional — and more impersonal — campus hiring events.

They took that lower offer after being comforted by the fact it originated from a former student on the same top programme, argues NYU Stern’s Jason Greenberg, co-author of the research — to be published in Sociological Science — with MIT Sloan’s Roberto Fernandez.

“The jobs coming through the alumni channel are perceived as having significantly better growth potential,” he says, linking this preoccupation with long-term cash flow to the net present value calculations that are a staple of MBA courses. “They are willing to take less today for a job that has better prospects in the long run.”

As well as giving a clearer view of what the job entails, an approach from an alumnus can offer a reassuring vision of what the young graduate’s career might look like in a few years’ time. “You get a window into your potential future.”

How can recruiters exploit this bond of trust? Prof Greenberg suggests that smaller employers who cannot afford the hoopla of on-campus hiring could use their MBA graduates to target young prospects in their old classrooms.

But the strategy may not yield long-term savings: even net present value addicts will at some point demand to be paid the prevailing market rate.

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