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When a Fancy Degree Scares Employers Away

January 06, 2015


The college degree has been catching a lot of flak lately. Most of the criticism has had to do with the relationship between cost and benefit. Even if a college or grad school diploma has value, it usually isn’t  worth running up a six-figure debt for.

But out here in Silicon Valley you can sometimes hear an even more radical argument. As I reported in an earlier piece for HBR.org:

A software CEO I spoke with recently said he avoids job candidates with advanced software engineering degrees because they represent an overinvestment in education that brings with it both higher salary demands and hubris.

Second to the experience of the program, degrees, diplomas, and certificates become all about signalling the quality of a job applicant. Could it really be that certain prestigious and seemingly valuable credentials (an advanced degree in software engineering is not exactly an MFA) are sending negative signals to potential employers?

To explore this idea of elite degree fatigue — and to figure out what might be driving it — I spoke with entrepreneurs, executives, and hiring managers at a range of tech companies. Their comments about interpreting the value and meaning of degrees varied, but amongst all of them there is the recognition that, increasingly, everyone involved in hiring is trying to look beyond credentials.

What they’re looking for, to a large extent, is what they call “cultural fit.” Specific technical skills are getting increasingly easy to measure, so employers focus instead on assessing whether a candidate understands the context in which the business is operating, will be highly motivated on the job, and will get along with the rest of the team.

When it comes to the college or grad school diploma, what I found is that there are two very distinct hiring mentalities presently coexisting in the tech world. Early-stage startups have a lean mentality, while growth companies are in a well-funded race against time. The way these mindsets, especially their fears, affect how candidates are screened is significant. Prestigious degrees can be a liability with the first group, but still have value with the second.

Early-stage start-ups fear entitlement. The psychology of a good start-up can only be described as relentless scrappiness. When evaluating candidates, the start-up seeks out a commando mentality and a willingness to do grunt work.  In both of these aspects, prestigious degrees are seen as a warning sign if not a negative signal.

“Commandos” do their own thing and are effective as individual operators.  They are self-motivated to a fault, often not buying in to any incentive system that would infringe on their autonomy — promotions, money, grades, or credentials.  It’s rare that someone with such a commando mentality would have a clean track record at school.

Elite degrees, meanwhile, can signal that people excel within organizations and feedback systems, neither of which exist in a start-up.  New founders struggle to provide consistent direction, and very few start-ups have operational procedures for recognition or incentives.  So companies select for candidates who will find ways to create value with no input, feedback, or immediate recognition from management.

Many aspiring candidates fail to appreciate that the companies that get featured in TechCrunch look more like geeky rock bands than companies. Pre-funding, the maximum team size is about five.  After the first seed funding or small venture capital round, the team should hover between six and 15.  At that size, everyone needs to bring a hard skill to the table that is essential to the company.  As a result, at internet and mobile start-ups, most of the headcount is made up of software engineers or product designers. Any non-programmer on the team needs to be willing to do any job that arises.  The work is not glorious, the salaries are below market, and promises of anything better anytime soon are hard to deliver on.

For all of the above reasons, prestigious degrees — even in relevant fields like software engineering — can be looked upon with suspicion in tech start-ups. And MBAs in particular are seen as bright, flashing warning signals. An MBA from a top school is likely to be  perceived as adding limited value at premium cost. Worse, a founder will probably assume that such a candidate will quit as soon as he finds out he has to spend five weeks cleaning junk out of a CRM database, or writing a JavaScript crawler to scrape LinkedIn.

There are caveats, sure.  Young hires with fancy degrees can work on low salaries, particularly if their parents will help them pay for rent in expensive places like San Francisco and New York.  Founders who hail from MIT or Stanford will bring in a bunch of friends who they can assume will be a strong cultural fit and thrive in the lean start-up phase.  But the founders doing hiring are much more interested in character and commando behavior than credentials, and they’re extremely wary of costly hires that might not work out.

Growth companies fear they can’t scale fast enough. A growth company has already raised a significant amount of capital, or is booking revenue faster than they can collect it.  Either way, the company is planning to grow aggressively, sometimes even doubling the team size within a year.  The focus thus moves from scrappiness to execution speed.

At a growth company, the degree holds more weight; there are signals of cultural fit in a degree and especially in a prestigious one.  In particular, growth companies need people that can read situations, infer and interpret expectations, and consistently deliver above expectations with no consistent management structure.  By definition, anyone graduating from a top school has been consistently delivering above expectations (getting an A rather than a C) for nearly her whole life — it’s part of her identity.   And here, understanding the context plays less of a role, because there are enough existing employees to ask questions and get information from.  What matters more is having people who learn quickly — also represented by prestigious degrees.

There are plenty of ways to be an attractive candidate to a growth company besides a fancy degree.  Recruiters are often looking for George Anders’ “rare find” with a “jagged resume.”  Demonstrating consistent hustle, excelling at audition-like projects, glowing character recommendations from folks known to have solid judgement, and having experience at a parallel company or coming from a company that has successfully scaled are all more valued than a credential of any type.

Still, growth companies can afford to be a little snobbier once they have arrived at the scaling and growth part of business creation.  Their venture capital investors show up and give talks about hiring the “best talent.”  Growth companies are willing to pay for the brightest folks they can find, and look to de-risk.  They feel like they can promise glory, power, riches, team creation and management roles, travel, catered meals three times a day, and weekends in Vegas.

Graduates of Ivy League schools and other top universities are attracted to such companies. They follow the Sheryl Sandberg mantra,  “If offered a seat on a rocket ship, get on.” They also start popping out of a resume pile that now exceeds thousands of applicants for a handful of spots. The flood of top candidates arrives, and are put through just the sort of grueling interview processes that top schools help prepare for: smart people asking smart questions and being judgy.   Those  hired then tell all their old classmates that their company is hiring and growing rapidly.

Growth companies can sensibly hire elite degree holders for three reasons: 1) they’re funded to hire ahead of growth, 2) their rapidly growing customer base generates lots of diverse work for new hires, and 3) the pace of hiring allows for rapid upward trajectories.

Here’s the rub. Growth companies hire more people, but there are only a few of them in comparison to start-ups.  The high-end degree, then, still has traction with an important segment of tech employers.  But there’s also widespread awareness that it’s a flawed signal of potential employee quality and fit. In a much-discussed interview in 2013, Laszlo Bock, Google’s head of people operations, said the company had discovered that “G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless,” and Google was starting to hire more and more people without college degrees. As new methods of assessing employees’ potential gain in sophistication and power, one has to think the elite degree will struggle to maintain its current status.

Michael Staton is a partner at Learn Capital, a venture capital firm focused on education. He is also founder and former CEO of Uversity, and a former public school teacher. Follow him on Twitter @mpstaton.