Bleak Times Ahead

• Compared to last year, top B-schools expect rise in number of companies and positions for placements

• Start-ups have taken the backseat while conventional companies are opening up more profiles for hiring

• Best recruiters this year—FMCGs, pharma companies, consultancy, manufacturing, banking & finance

• IT companies are now hiring fewer MBA graduates because of rising dependence on technology

• Core companies to go to only top B-schools. This will lead to a crunch for those in tier-2 and tier-3 B-schools.

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A recent poll conducted by a business daily asked a question many business graduates have been mulling over: “Are start-ups losing credibility as a career option?” Surprisingly, in the age of start-ups, an overwhelming 75 per cent replied with a hard yes, clearly reflecting how the hiring landscape has changed drastically in the past five years. In the last few years, B-schools across the landscape have been facing placement issues not just from the start-ups, but also from regular brick-and-mortar companies, where too there is a clear slowdown.

As the season for campus placement nears, colleges as well as companies gear up for the process—sometimes for a day and sometimes stretching over weeks, to identify and employ talented individuals. The boom in the start-up sector in the past few years made it an evident choice for most MBA graduates to start their career.

But, this year, it is no longer the case because of mass failure of start-ups. The current slowdown and correction in the sector has, after several years, led to a situation where fewer companies are choosing to hire people directly from business schools. “Start-ups, especially in the e-commerce space, have evidently lost flavour this season,” says Pinaki Dasgupta, dean of placements at the International Management Institute, New Delhi. “Colleges are now looking elsewhere for placements because of a steep decline in the performance and accountability of such companies.”

The recurring instances of start-ups looking to reduce their employee base through firings as well as the frequent alterations in the running dynamics have manifested in severe distrust for such start-ups within colleges. The decision by the IITs to blacklist about 30 companies from placements points towards this distrust. A recent meeting held in Mumbai by the directors of IIMs also discussed the possibility of banning a list of start-up companies from different B-school campuses.

A major cause for such extreme steps is the inability for such start-ups to keep up on promises. E-commerce companies such as Flipkart and Food Panda have either deferred joining dates or cancelled employment for several students they picked up during placement season. “New age start-ups tend to overpromise students during placements, but are eventually unable to fulfill their commitments at the time of joining,” says Amitabh Kodwani, faculty-in-charge of placements in IIM Indore. “Thatís because such companies often tend to over-hire due to an inability to visualise their requirements in the backdrop of a changing economy.”

Such start-ups, on the other hand, attribute the lack of hiring from colleges to a simple demand-and-supply shortage. The constant changes in the economic climate have led to many companies looking to grow in a more prudent manner instead of continuing with the radical approach they took earlier. E-commerce players say such changes increase the demand not for lower-level managers, but for experienced people to join and handle the growth strategy.

The unique scenario of growth within the economy without generation of jobs has been seen as a huge contributor to what might seem a bleak fut­ure for several business grads. The last quarterly survey by the Labour Bureau showed that India has never created fewer jobs since the survey started in 2009.

Hiring problems are not limited to the start-ups alone. “Among core companies, the IT sector is one of the biggest hit sectors,” says Abbasali Gabula, deputy director at SP Jain Institute of Management. “IT has been facing huge problems since a while because of technological advancements. Such companies now have an automated info management system that has made several jobs redundant. Companies are also looking at growth without increasing head count. This too is directly affecting jobs both in the IT as well as management sector. This is why only 24 per cent of business graduates in the country are eligible for jobs after graduating.”

While start-ups take a backseat, placements have come to depend once again on the core companies. In fact, given the downturn and changed demands of the job market, summer placements this year, according to most colleges, have exceeded expectation both in the number of people hired as well as the positions offered. According to Kodwani, this is because of the capacity of conventional companies to play with the market to their advantage. “While the primary focus of start-ups was to capture the market, conventional companies work in a more balanced manner where the rate of hiring goes up gradually,” he says.

The current boost in more data-based conventions in the market has opened up opportunities for many managers in consultancy. R. Raman, director of Symbiosis Institute of Business Management (SIBM), Pune, says this has meant a boom in the sector, resulting in more jobs for entry-level managers. Sectors such as FMCG (fast-moving consumer goods) and pharmaceuticals have also seen a rise in employment levels.

Students too are looking to land more stable jobs and many have stopped considering management positions in start-ups. The rising attrition rate in such companies—almost touching 60 per cent in some cases—is a major reason. Varun Rao, a student at SIBM, who is also part of the placements team, says he has noticed a diminishing interest among students to join e-commerce companies over the past year. “Even as early as last year, students were quite taken in by the glamour that came with start-ups,” he says. “But with so many start-ups showing a lukewarm response, many students are now opting for more conventional companies for the greater stability they offer.”

The fall in the number of jobs in the economy, however, persists despite the growing interest of core companies to hire more. Many B-school graduates might find it difficult to find jobs. A rise in placements will only be seen in top-rung colleges, points out Surojit Chattoraj, director of ABC Consultants. “Barring tier-1 colleges such as the IIMs, everyone else will face issues in placements,” he says. “Companies tend to fulfil their requirements where the talent is the highest and most choose not to waste time or resources by going to colleges and sieving through a talent pool to pick people.” In other words, companies that choose to hire more will more likely go only to the more reputed colleges.

Compared to the aggressive acquisition of managers by start-ups, the hiring by core companies still remains much lower despite the spurt in the number of positions offered by consultancy firms, banks and others. Gabula points out that the increase in class sizes in more reputed colleges in the past few years has also contributed to a decrease in placement opportunities for the less-known ones. “A batch that used to have 150 students is now double the size,” he says. “Competition among colleges has increased so much that any college below the top 20 is unlikely to get good placement opportunities.”

The Outlook of the industry, though, seems positive, with many colleges expecting a healthy increase in placements compared to the previous year. The long line of MBA students graduating this season are sure to face the brunt of the start-up crunch, but many will get absorbed by new opportunities in the core sectors.