For the elite of the six Indian Institutes of Management, India’s premier business schools, "Destination Wall Street" was not only a highly enticing career move but also an unspoken quest for permanent residency in the U.S. But with Wall Street’s recent upheaval, students are cautiously looking at alternatives that offer more security. Perhaps unprecedented in India, salaries now have taken a back seat to stability.
Wall Street firms Lehman Brothers, Merrill Lynch and Goldman Sachs have been the largest recruiters at India’s schools, hiring the best talent for investment banking jobs. The companies have lured IIM’s talent with lucrative pay packages and incentives, offering starting salaries of $120,000 to $360,000.
"Investment banking was the most sought-after career option. Its unfortunate fate will be a big setback for students working toward a job in these firms," says professor Sushil Kumar, placement chairman of IIM Lucknow.
As of March, 34 percent of the 290 students at IIM Calcutta opted for financial services. Thirty-two students received offers at investment banks. The highest pay package was reportedly $330,000.
Just two weeks before Lehman announced bankruptcy September 14, two students from the graduating class of 2009 had received pre-placement offers for its London office. But then news of Lehman’s demise surfaced, and their discussions quickly turned to "if only" and "now what?"
"I was obviously shocked and disappointed when I saw the news, but now I have come to terms with it," said Rounak Agarwal, one of the two students selected by Lehman. "I will now wait for the final placements in March 2009 and try to bag an offer from any investment bank. If not, consulting would be my second choice. An assessment of the risk factor of the firm will take precedence over brand and salary package."
Like Agarwal, other students are doing their research as they come to grips with the changing global hiring market.
"Earlier, just an IIM degree was enough for a long-term career. Now, sustainability at the company would depend solely on your performance," Agarwal says.
Preferences also have changed in recent weeks. Students who sought international placements now seem to have a growing interest in Indian job postings as the country’s consistent economic performance maintains relative stability.
"Many students seem to be opting for postings in India as the country’s financial sector looks good. Even if investment banking is compromised, there is a sustained demand for other banking services," says Ananth T, a student at IIM Lucknow.
There also are concerns regarding competition from ex-Lehman employees flooding the job market with résumés. Students have decided to scale back plans for salary packages and job options. While many will have to realign their career path with market forces, others have resigned themselves to the fact their salaries might not be as lucrative.
"As we don’t expect much recruitment for the U.S. market, salaries will automatically take a cut," Ananth says.
"No stratospheric salaries this year and moderate or no hiring by global banks," says R. Shankar, executive director of PricewaterhouseCoopers, India. "Employers will be able to recruit talent at a lesser price and candidates will take what is offered without much fuss."
Companies and hiring firms agree with Shankar.
"There is a thaw in compensation levels," says K. Sudarshan, managing partner of EMA Partner International, a global executive search firm. "There won’t be any mass euphoria with companies trying to outdo each other in terms of salary offers. It’s a good time for companies in the traditional sectors to make their presence felt to these students."
"I see that [campus hiring] at IIMs would be similar to last year. We would like to hire quality resources to match our talent pool requirements linked to our growth requirements," says Subhro Bhaduri, head of HR at Kotak Mahindra Bank Ltd. "However, I don’t see hiring at incremental cost over last year."
Yet, there’s a silver lining for students. Industry insiders say demand for IIM students far outweighs supply. Though salaries may be limited, bonuses could be hefty.
"Salaries at guaranteed levels may sober, but bonuses would continue to be shown as an opportunity to earn," says Ganesh Shermon, partner and head of people and change advisory services at KPMG India.
With most students willing to ride out the storm instead of changing course, bonus negotiations may help calm the waters, Shermon says.