The Employer-Student Gap

Research commissioned in June by the Chartered Management Institute (CMI) finds that a whopping 80% of business managers think that graduate employees have ‘unrealistic expectations of the world of work’. This is a pretty big statement and one that reflects quite badly on the educational establishments issuing degrees in business – or does it?

This blog addresses some of the issues around recruitment of business graduates for SMEs. What are the responsibilities of education establishments, and how can business leaders and SMEs get the most out of the graduates they employ?

There are no two ways about it; for prospective students, a business degree is lucrative. The Higher Education Statistics Agency reports that in 2012, a massive 40% of business postgraduates found themselves earning more than £50,000 a year just three years after graduation. That’s compared with just over 25% of doctors, dentists and engineers. Add that to a further 18% earning £40-£49,999 and it becomes clear that business graduates are some of the most highly-paid starters in the world. Despite this, according to the research above, the overwhelming majority of employers feel that – in the beginning at least – their graduates are not well-prepared.

On the whole, they cite a lack of practical skills as the main deficit, with communication topping the list of areas for improvement. According to the CMI, 65% of employers feel that graduates ‘lack the interpersonal skills to manage people’, and 55% are looking for more honesty and ethical behaviour. The suggestion from the research is that business school graduates just don’t have enough exposure to the world of work – only 25% of students take up the offer of a sandwich-year placement in industry (despite the fact that 81% of schools offer one), and 75% offer internships or placements of four weeks to six months. It’s easy to blame the schools for failing to promote these programs and, as the study shows, for the widespread perception that business schools are inaccessible and lacking in a single point of contact. It’s worth bearing in mind, however, that whilst nearly 90% of potential employers say that compulsory work experience would make graduates more employable, only a fifth (22%) of those companies offer placements or internships.

From the perspective of SMEs, it may be especially true that business graduates are not well served by their time in higher education. 68% of respondents said that business school curricula were biased in favour of larger companies, despite the fact that in 2013 there were something in the region of 4.9 million SMEs in the UK, employing an estimated 24.3 million people; about a third of the entire population of the UK. Links between SMEs and business schools seem to be generally poor too. 51% of larger companies use business schools to train their staff compared with only a third of SMEs.

So what does all this mean? Are students really arriving fresh out of business school with a head full of big ideas and two left feet? Or are managers failing to recognise the useful qualities of bright young graduates and trying to shoehorn them into a space that they were never designed to fit? If there is a shortfall in higher education for business, who should shoulder responsibility? Business schools for failing to promote work-based programs, and make themselves open to collaboration with businesses? Students for failing to take advantage of opportunities offered to them? Or businesses themselves for failing to offer the placements they expect new employees to take, and failing to properly utilise local schools in the training of their staff? In many ways, this research raises more questions than it answers.

One thing’s for certain, however; high-quality business graduates can add huge value to a company, particularly to SMEs. In 2012 the Department for Business Innovation and Skills commissioned a report into the factors affecting graduate recruitment to SMEs. In this, they found evidence in favour of graduate recruitment through the addition of new skills and fresh perspectives. They also commented that SMEs are traditionally reluctant to recruit graduates because of perceptions of high salary costs and a tendency for businesses to undervalue the potential contribution of graduates to the organisation. Businesses that effectively use high-quality graduates, however, stand to gain an advantage in terms of management and leadership capability.

Graduates, too, may need some persuasion to see SMEs as a worthwhile step in their career. According to the DBI study, many graduates have poor perceptions of pay, conditions and prospects, many of which are unfounded since SMEs frequently offer much more responsibility, flexibility and autonomy to them than do larger companies. This may go some way to explaining what the report calls a ‘latent demand’ amongst SMEs for graduate employees.

The problem seems to be mostly one of perception – on the one hand, SME directors tend to perceive graduates as lacking relevant and practical skills, but may well be failing to see the potential of the skills that graduates do possess. On the other, graduates themselves have false perceptions of their prospects in SMEs and, in many cases, inadequate exposure to the workplace during their education.

The message is clear, many SMEs, particularly those with a skills gap or who find themselves stagnating, have a lot to gain from employing graduates. These businesses might be well advised to try building closer links with local business schools, offering placements and training workshops, all of which can help to foster relationships with, and even train, individuals, who may prove invaluable to the business in the future, in a low-risk environment. Many schools will offer free ‘think tank’ sessions in which their students collaborate with your employees to solve existing problems, perhaps with a focus on growth. This kind of exercise can be mutually beneficial to both parties and allow the SME to sample the market of potential recruits, and even get low-cost, often high-quality insight.

Pointers

  • Research shows that 80 per cent of business managers think graduate employees have ‘unrealistic expectations of the world of work’
  • Business graduates are some of the most highly paid starters – in 2012 figures showed that 40 per cent were earning more than £50,000 a year, three years after graduating
  • However employers feel they lack practical and communication skills
  • The research suggests this is because business graduates don’t have enough exposure to the world of work
  • Only 25 per cent of students undertake a year-long placement in industry, even though 81 per cent of schools offer one
  • Nearly 90 per cent of potential employers say that compulsory work experience would make graduates more employable, but only a fifth of those companies offer placements or internships themselves
  • Research shows SMEs feel business schools are biased towards larger companies, and links between SMEs and business schools are poor
  • SMEs are undervaluing the potential of graduates and are reluctant to recruit them because of a perception of high salary costs
  • In return, many graduates have poor perceptions of pay, conditions and prospects within SMEs
  • Businesses that effectively use high-quality graduates, however, stand to gain an advantage in terms of management and leadership capability

 

Apr 14, 2015