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Talent Management Column

The Value of Elite Colleges

Does it pay to recruit from -- or even go to -- a prestigious university? There have been a number of studies that follow the careers of students who attended elite universities and those who just missed the criteria for admission.

Tuesday, January 3, 2012
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It's that time of year again when young people send off their wish lists and begin waiting nervously to see what they'll get from that list. I'm talking about college-application season, where the wait for the fat envelope signifying acceptance begins about now and has students and their families on edge through the spring.

Stories about the increasing competitiveness of admissions to elite schools -- the Ivy League, their smaller brethren, and highly selective state schools such as Berkeley and Michigan -- and the lengths that Tiger Moms and even normal parents will go to in order to get their kids admitted get lots of attention.

The flip side to this phenomenon also takes place in the spring -- and that is recruiting season, where companies target college campuses to find the best and the brightest, or at least the best fits, for their organization.

Whether it makes sense to focus on hiring students from the most competitive, elite colleges is a perennial question for employers, and many of them vacillate back and forth about whether it is worth doing.

It may just be me, but I think the vacillation plays out like this: A CEO or a group of top executives decides that it is important to raise the level of ability in their organization by hiring from elite schools. Often this view is related to where they went to school.

The company's recruiters then make a push to hire from those schools. If they don't get enough takers, though, they soon switch back to other schools where they get more love and attention from the students.

All this begs the question as to whether it is really worth it to hire from elite colleges. Even more fundamentally, how much effort is it worth to get into those highly competitive schools? Do the students of those schools do better in their jobs when they graduate?  
 
It's a surprisingly hard question to answer, one that social scientists have banged their heads on for decades trying to address. Here's why: The fact that graduates from these schools do better in their careers seems pretty obvious, and indeed analyses routinely show that. But the real question is, do they do better because of the experience of attending an elite school, or are those schools simply able to attract students who would have done better anyway -- because they are more ambitious, more able or perhaps just better connected in society? 

There have been a number of creative efforts to determine whether attending these elite schools really pays off.

In addition to adjusting for the abilities of the students when they are admitted to these schools, studies have also compared the subsequent careers of students who just missed the objective criteria for admission to selective state universities to those who just cleared the bar.

Other studies looked at students who were accepted at elite colleges but chose not to go and compared them to those who did go.

In all the studies, the effect on one's subsequent careers of attending an elite college drops dramatically once we hold aside the fact that those students were more able -- even before they went to college. Some found no effects, some found modest benefits from attending these schools as opposed to those that were less prestigious.

The most recent of these studies makes similar adjustments and looks at the effect on earnings over a longer period after college -- 18 years.

It finds there are essentially no effects on subsequent success in the labor market from attending an elite institution, according to Estimating the Return to College Selectivity over the Career Using Administrative Earning Data by Stacy Dale and Alan B. Krueger, published in 2011 by the Princeton University Industrial Relations Section.

The exception is for minorities and for students from lower socio-economic backgrounds. Those students do benefit significantly, perhaps because the schools make up for some valuable experiences that more advantaged students already have.

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What do we take away from this/ If you are a recruiter, it still pays to recruit at better schools. It's pretty easy to get access to more capable applicants that way. On balance, they are more likely to succeed. On the other hand, if you're willing to dig around in lesser schools, there are able students there who will do just as well. They are probably cheaper, just harder to find.

For parents and their applicant children, one conclusion is that it is hardly the end of the world if you don't get into these very prestigious schools. At least in terms of your career, ability seems to find a way to get to the top.

There are, however, two other reasons for going to more prestigious schools. One concerns admission to graduate school. We don't know this with any great certainty, but it certainly appears to be easier to get into graduate schools if one attends such schools as an undergraduate.

If you want to be a doctor, a lawyer or a professor, it really seems worth the effort to get into the best school possible. Perhaps that is because academic connections matter more to that process.

The second reason -- a real surprise to many -- is that it may actually be cheaper to attend one of these elite schools than even to go to your state university, especially if your family does not have a lot of resources.

Prestigious private schools have lots more money for financial aid, and it's likely to be cheaper to go to Penn than to Penn State, cheaper to go to Stanford than Berkeley. It may pay off on the front end even if it doesn't pay off afterward. 

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.

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