'Old-Economy' Firms Are Once Again Hot for Business Grads

By DENISE GELLENE

Feb. 4, 2001 12 AM PT

TIMES STAFF WRITER

Adam Hertzman entered UCLA’s Anderson Graduate School of Management 15 months ago intent on becoming an entrepreneur. Today, the MBA student envisions climbing the corporate ladder at a large, long-established firm such as Clorox or Procter & Gamble.

Entrepreneurship may be another casualty of the e-commerce industry bust. The abrupt crash of once-promising dot-coms has shown such students as Hertzman the less glamorous side of being your own boss. And a slower economy threatens to make entrepreneurship tougher than two years ago, when venture capitalists seemed to be giving money away.

Suddenly, “old-economy” firms out of favor during the recent Internet frenzy are the new hot ticket for ambitious business school grads.

Recruiters who received the cold shoulder from last year’s crop of MBAs are swamped with eager prospects seeking the security of big corporations.

Campus placement officers say students are flocking to presentations by consulting firms and financial services companies.

In Southern California, Accenture, formerly known as Andersen Consulting, plans to hire 35% more college graduates and MBAs than in 2000, in part because so many strong candidates are knocking on its door. Last year, students with similar qualifications went to Internet start-ups.

MBA students are continuing to study entrepreneurship, educators said, an increasingly popular subject at business schools in recent years. But many of those students expect to use their entrepreneurial knowledge to launch divisions or products within large corporations. Or they may eventually buy and reinvigorate existing businesses, thus saving themselves the struggle of starting an enterprise from scratch. Hertzman, 27, eventually would like to run an e-commerce unit of a large marketing-driven corporation.

“My goals have evolved, definitely,” he said.

A former researcher for a Washington, D.C., consulting firm that went public, netting him $30,000 on paper, Hertzman selected UCLA for the city’s entrepreneurial climate. He arrived in town with an idea for a business that would project motion pictures on retail store edifices after dark--a self-styled drive-in movie operation. But after talking with classmates who had interned at start-up companies, Hertzman postponed his entrepreneurial plans.

“It isn’t just the dot-bomb,” he said. “The skills that MBA students are getting at start-ups don’t compare with the training you get at large companies. There is a legitimacy to working for P&G; or Nestle or Clorox that is widely recognized.”

Such students as Hertzman no longer fully accept the notion that dot-coms make ideal career training grounds simply because managers of start-ups must wear many hats. “They are looking at larger firms where they can get stability and mentoring and coaching,” said Tom Hildebrandt, an Accenture partner and recruiter based in Los Angeles. “They are excited about the ‘new economy,’ but they see there are a lot of risks with it.”

Even traditional businesses seen as volatile, such as electrical utilities, are in vogue with MBA students.

When TXU, the largest electric and gas utility in Texas, recently conducted interviews at UCLA, it filled every time slot available. The challenge of utility deregulation “really piques students’ interest,” said Chat York, TXU recruiter and manager of financial planning and analysis. Last year, amid dot-com mania, TXU’s interview schedule was “a little less than half full,” York said.

There are other signs that MBAs have cooled to entrepreneurship. Take the University of Pennsylvania’s Wharton School business plan competition, where entries are down 16% from a year ago. Wharton students account for 53% of the plans submitted, down from 73% in 2000.

Among MBAs “there’s been a change in attitude,” said Anne Stammer, associate director of the annual competition, whose past winners include the co-founders of Pasadena-based PayMyBills.com. “They are going to see trends before other students. [They] jumped on at the high point.”

At USC’s Marshall School of Business, the class of 2001 is shifting toward financial services from entrepreneurship and e-commerce start-ups, a survey shows. In December 1999, 19% of students expressed interest in financial services and 8% in entrepreneurship. By August, 25% wanted financial services careers while 5% leaned toward entrepreneurship. The percentage of students interested in e-commerce jobs fell to 4% from 9% during that time.

Yet even at the height of the Internet bubble, only a small percentage of MBAs embraced entrepreneurship.

Of its 300 graduates last year, 25 Anderson School students launched their own companies, nine of them dot-coms. Typically, between five and 15 students become entrepreneurs, said career center director Alysa Polkes.

Business school administrators said the latest trend isn’t necessarily a bad thing. They said the difficulties of launching a business today weed out entrepreneurs more interested in getting rich than building a business. And the dot-com shakeout reminds students it takes more than a pile of venture capital to create a successful enterprise.

“It takes experience and money,” said Thomas J. O’Malia, director of the Marshall School’s Lloyd Greif Center for Entrepreneurial Studies. “It was a wake-up call.”

Thus, some entrepreneurial-minded students are opting for jobs at large corporations where they can develop the skills necessary to eventually run their own businesses, educators said. Alfred E. Osborne Jr., director of UCLA’s Harold Price Center for Entrepreneurial Studies, said other students have found entrepreneurial opportunities at family-owned firms where younger family members have no interest in the business. Such an arrangement can put the student in a position to purchase the business, said Osborne.

MBA students with goals tied to the Internet are moving cautiously. Rich Hirschinger envisions an online network called DDS.com, where dentists can communicate among themselves and with patients. A dentist until an injury to his left index finger ended his career in 1995, Hirschinger enrolled at the Marshall School to become a consultant. Now he is working on a business plan for DDS.com as a class project under the guidance of his professors.

He’s already acquired an option to buy the domain name, having bargained the previous owner down from an asking price of $3 million to a purchase price in the low five figures.

But Hirschinger, 41, is prepared to ditch the idea if it is not supported by his research and that of a classmate who is working with him. “I’m not naive,” he said. “I will only do this if the market is there.”

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Shifting Gears on Careers

Many MBA students are abandoning dreams of Internet moguldom and opting instead for traditional management careers. The class of 2001 at USC’s Marshall School of Business has modified its goals in the wake of the dot-com crash, which began in April 2000.

Career choice

Financial services

December 1999: 19%

August 2000: 25

Consulting

December 1999: 14

August 2000: 14

Entertainment

December 1999: 13

August 2000: 10

Computer-related services

December 1999: 9