Knocked Down the Mountain: How Covid-19 is Disrupting a Future Generation of Leaders

August 19, 2020

The impact of Covid-19 has been jarring.

Much of the U.S. economy has yet to resurface after the pandemic sunk the country into the fastest recession of its 244-year history.

A full return to traditional business activities remains unlikely for the foreseeable future. While the long-term ramifications are still unknown, such a catastrophic event leaves little hope for an expedited return to normalcy.

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College students are being severely impacted. Academic institutions are struggling to reopen safely, leaving many students to choose between potentially dangerous on-campus living, underwhelming remote learning, or temporary holds on their education. The typical career-related anxiety among higher education students has been amplified by what is shaping up to be one of the worst job markets in recorded history.

Certain professions all but require college students to land and succeed in specific internships. While it may not seem college students losing internships or taking gap years is a big deal at present, these setbacks create the potential for serious, life-altering impacts. This is especially true of industries where a strict college and early-career trajectory have long been considered a prerequisite for entry and advancement – namely the financial services industry, including private equity.

A common path into an “Associate” role at large private equity firms starts with an undergraduate summer internship at a major investment bank. A successful internship leads to a fulltime IB Analyst position post-graduation. After two to three years, a jump into PE becomes a viable option. While smaller PE firms are more likely to poach Associates from middle market or boutique banks and management consulting firms, entry-level roles in these fields frequently require specific undergraduate internship experience, as well.

While not always explicitly required, these internships provide a rare window of opportunity into the highly competitive financial services industries. Covid-19 has significantly disrupted many students’ ability to achieve those crucial early steps of the ideal career trajectory.  

A Falcon survey conducted among current undergraduate and graduate students from institutions including Dartmouth College, Colgate University, Ohio State University and the University of Cincinnati indicates a clear disruption to the traditional college and internship experience.

Of the 44.2% of respondents who had internship or job offers secured before March 2020, more than half eventually had their offer rescinded. Among that group, just 6.6% were able to find replacement work in their desired field, while 50% could not find any replacement work, paid or unpaid.

In many instances, the pandemic is having an outsized impact on the education and early-career trajectories of those students who are already underrepresented in financial services. Even under normal circumstances, breaking into the financial industry (its executive class, in particular) poses unique obstacles for those from non-wealthy families. There’s reason to believe Covid-19 will make that uphill climb even more difficult.

Current data shows the pandemic is having an outsized impact on communities of color and low-income households. In New York City, for instance, lower-income boroughs such as Queens have been ravaged by the virus while the city’s wealthier communities have been significantly less affected.

This is in part because essential workers, among the lowest-paid workers in the U.S., are more likely to live in working-class communities. These individuals cannot do their jobs remotely and often must rely on public transportation to commute to their place of employment. They also often lack access to quality medical care and are more likely to live in overcrowded housing. This confluence of factors has greatly increased disadvantaged communities’ overall exposure to Covid-19 whilst also increasing their likelihood of severe illness or death.

Compared to those who are more affluent, working-class families have also been found more likely to experience job loss or food insecurity as a result of Covid-19.

It’s not just low-income families dealing with this disparate impact, as the pandemic has also hit middle-class families more harshly than the upper class, albeit to a lesser extent.

The result is that college students from non-affluent backgrounds are more likely to be confronted with critical familial or personal issues related to the pandemic. In such instances, the student’s bandwidth to focus on long-term career trajectory is often greatly diminished.

The aforementioned Falcon survey highlights instances of students giving up unpaid internships to take jobs as essential workers amidst pandemic-related familial financial struggles. Those most impacted by the pandemic describe a state of unbridled anxiety, with words like “trapped” and “overwhelmed” peppering their responses.

As fall approaches and the virus continues to surge, more students may be forced to put their academic and career plans on hold. Those who are still several semesters away from the summer preceding senior year (widely considered the most vital time to obtain the “right” internship), will likely find their candidacy for these highly competitive tryouts further hindered by the disruption.

Those students fortunate enough to be largely insulated from Covid-19’s impact are better poised to press on with their pre-pandemic plans. They have better odds of achieving the standard trajectory required for these hyper-competitive roles in financial services or consulting, meaning PE employers may not necessarily need to break from traditional hiring practices in order to land top talent.

However, if PE remains rigid in college and early-career trajectory expectations, it will only favor those privileged enough to have continued their educational credential progression and career tracks as if the pandemic never happened. Recruiters and hiring managers who write off candidates based on academic or career gaps related to the pandemic risk overlooking potential future leaders with less-traditional backgrounds.

These gaps could look different depending on individual circumstance. Gaps in academic years may lead to five-year college experiences (or more) as opposed to four, or summers spent working close to home as an essential worker/caregiver may replace IB internships or consulting externships. There will be fewer cookie-cutter paths that “check all the boxes” recruiters or hiring managers look for.

Yet gaps in career trajectory or changes in academic planning do not necessarily make candidates less prepared for a rigorous, competitive profession. In fact, these challenges may make them more prepared for the grit and resiliency needed to succeed in an industry like PE, as well as providing experiences that prepare candidates to integrate and analyze information in unique ways. Passing over these candidates at first glance will lead to missing out on high-potential talent that would also add diverse values and perspectives to the organization.

With this in mind, it would be advantageous for firms in the finance, private equity and consulting industries to rethink their traditional recruiting practices and expectations.

Recruiting practices such as unbiased testing, game simulation, and 1:1 conversation can help firms assess a candidate beyond their resume and better identify the true best athletes. Creating more robust guidelines to define the firm’s culture, such as organization-wide cultural pillars or mission statements that include values the firm seeks to uphold, can also provide important benchmarks that lead to more thoughtful hiring decisions.

Unlike the 2008 financial crisis, the current downturn was not sparked by an economic event. Its continued impact relies on the spread of a hyper-infectious virus that we still know relatively little about. The economy will continue to suffer long after the discovery of a vaccine and a v-shaped economic recovery seems unlikely. Students graduating over the next several years must therefore prepare for the aftershocks of Covid-19.

This pandemic is changing how society operates on the most fundamental of levels. Recruiting must evolve and adapt to a new generation of talent transitioning into the job market with trajectories that skew from the traditionally favored background. 

Private equity is an industry where only the best and brightest can succeed. Their reputation for top-notch talent acquisition can continue in tandem with an adjustment to the reality many upcoming candidates will have been unable to achieve their conventional trajectory due to Covid-19. The appropriate response requires the industry to look beyond traditional recruiting mindsets and dig deeper into the impact this pandemic has had on many of today’s college students and tomorrow’s future leaders.

Falcon provides C-suite talent solutions for middle-market private equity firms across North America. Follow us on LinkedIn.