The MBA Mosaic

A new survey adds color and depth to the picture of Business School grads.

By JANET ZICH

Illustration by Gordon Studer

In 1996 nearly 4,000 Stanford MBAs from the classes of 1965 through 1989 received questionnaires asking them to chart their career moves over the years, indicating the industries they had worked in, size of companies, and their reasons for leaving each position. Some of the early findings were outlined in the December 1996 issue of this magazine and are available electronically.
This early data implied a growing trend toward entrepreneurship, showing that over the years grads had migrated to smaller and smaller companies and that a large number had founded their own. At the time of the survey, nearly one-third of the 2,440 respondents said they worked in firms of 25 employees or fewer. Moreover, one-third of the respondents claimed to have "owned" a company at one time or another in their careers. To the newly founded Center for Entrepreneurial Studies at the GSB, these findings in particular warranted further study.
In 1997 under the direction of the entrepreneurship center, the School sent a second, more ambitious survey--actually two surveys--to MBA alumni/ae from all classes through 1997. Respondents to the pilot survey who agreed to participate again were sent copies of the first set of questions preprinted with their own answers, plus additional questions. Both the original questions and new ones were mailed to those who had not returned the first survey and to 7,000 other MBA alums from all years. In total, questionnaires were mailed to 11,976 alums in 1997; 5,183 were filled out and returned. The response rate of 43 percent is considered extraordinary for a survey of this length and complexity.

PORTRAIT OF A STANFORD MBA. The new survey reveals some trends in the makeup of the alumni/ae body.

WHILE PREDOMINATELY MEN, the number of women is increasing. The composition shifted in the 15 years preceding the survey, with the percentage of women more than doubling: from 8 percent in 1982 to 19.8 percent in 1997.

WHILE PREDOMINATELY WHITE, there is a trend toward
ethnic diversity. The fraction of nonwhite alums increased over 15 years, from 6.5 percent in 1982 to 14.9 percent in 1997. Among current minority alums, Asian Americans are followed by Hispanics and African Americans, in that order.

WHILE PREDOMINATELY FROM THE UNITED STATES, the number of foreign-born alums increased over 15 years--from 12.5 percent in 1982 to 18.1 percent in 1997. Americans are followed by Europeans; alums from Asia, Australia, and New Zealand; and North and South Americans from outside the United States.

(It is worth noting that if enrollment figures for women, minorities, and international students continue at the current rate, these percentages will increase. See "For the Record," for a breakdown of current MBA students.)

       A snapshot of Stanford MBAs in 1997 also reveals that one in five held paid board of director memberships in the five years preceding the survey and that a large minority (44 percent) were involved with at least one professional volunteer organization during that period. The survey also found that two-thirds of alumni/ae are parents, half of them with two children.
       "A second set of findings pertains to the career choices and work experiences of GSB alumni/ae," writes Stanislav D. Dobrev, former GSB research associate, who reported on the 1997 survey under the supervision of William P. Barnett, associate professor of strategic management and organizational behavior. "Not surprisingly, most Stanford MBAs work as professional specialists and managers and occupy positions encompassing a broad scope of responsibilities that entail multiple functions."
      

Illustration by Gordon Studer

The survey found that the current top industry choices are consulting and investment banking, followed by investment management, venture capital, and computer hardware. Taken together, the five areas account for 36.8 percent of industry distribution. Fifteen years earlier the top two were the same but were followed by commercial banking, real estate development, and education.
       Stanford MBAs "are very mobile," Dobrev continues; 28 percent of them changed jobs in 1997 alone. Of these, three-quarters went to different companies. Despite their mobility, they are financially secure. The jobs they held in 1997 had median starting salaries of $75,000 to $100,000. The median ending salary of all the jobs held by respondents was between $100,000 and $150,000, he says.
       "However, strong evidence exists that financial reward is not the strongest motivating factor in exploring the job market," writes Dobrev. "Career advancement and the pursuit of new opportunities are the two primary driving forces behind job mobility. This spirit of exploration is probably at least partly accountable for their high level of job satisfaction and strong positive feeling of fit in their work environments."

THE GSB ENTREPRENEUR. The "spirit of exploration" that Dobrev reports fits a third major area of the 1997 survey findings: the continued evidence of strong entrepreneurial activity among alums. In fact, while 12.6 percent of all alums said that they had been entrepreneurs by 1982, 17 percent identified themselves as entrepreneurs by 1997, an increase of one-third.
      

"Further, in addition to the growing number of those who report their primary role as founder," writes Dobrev, "the most frequent secondary role is that of company shareholder with 5 or more percent equity. This suggests that many alumni/ae occupy positions in start-up firms, a speculation that is corroborated by the finding that more and more respondents are working for smaller and younger companies and have fewer direct reports."
       Fully one-quarter of respondents said they had joined companies with five or fewer employees at the time of hire and half work in organizations founded in the last 20 years (up from 36 percent in 1982). Additionally, the survey found that the number of alums who work part time has increased from 3.6 percent to 9.8 percent since 1982, possibly indicating an increase in entrepreneurial activity.
       Dobrev and Barnett took a closer look at the entrepreneurs among the respondents. Using a subset of 2,742 alums, the two researchers found that by 1997 roughly one-quarter of them had created 1,075 new businesses. They also found noticeable differences in the career paths of women and men, whites and nonwhites, and U.S.-born and foreign-born alumni/ae. In each case, members of the latter group were more apt than the former to become company founders.
       "Historically, men have been more likely than women to start businesses," says Barnett. "However, while the gender gap remains, we find that it is narrowing in the nineties. GSB women are more likely now than ever to start their own businesses."
       "There's a strong tendency for nonwhite alumni/ae to become entrepreneurs--especially early in their careers," Barnett says. "Nonwhites not only have a considerably higher rate of entrepreneurship, but the race gap starts early, by year five."
       This is unlike the national-origin gap. The difference between non-U.S.-born alums and those born in the United States comes much later in their careers, about 10 years out. "While there's a tendency for our foreign-born alums to be more likely to found businesses," says Barnett, "the rate is only mildly higher and it builds over time."
       A fourth gap should surprise no one. Alums in high-technology businesses are far more likely to break out and start their own companies than those not in high tech. Not only does the gap begin early, about two years after graduation, high-tech alums maintain a considerably higher rate of entrepreneurship throughout their careers.
       When you ask why people leave a position in order to found a company, "You'll find that nearly as many leave a company for the new opportunity as leave it because of dissatisfaction," says Barnett. But when you look at those who leave a company because of low satisfaction and then become entrepreneurs, you find that they are likely to have been dissatisfied with their positions from the first day out of school, he says. And their job dissatisfaction only increases over time. Pay is also a factor. Those who make less than $75,000 a year are far more likely than those who earn over $150,000 to leave and start a new company.
       The GSB career survey is important not only for what it reveals about the School's graduates, Barnett believes, but also for what it confirms about our theories of the origins of innovation and entrepreneurship. Business School researchers continue to work with the data to gain new insights into the career paths of professional managers.