How Important Is a College 'Pedigree?'

Martha C. White
University of Pennsylvania
Margie Politzer | Lonely Planet Images | Getty Images

As part of her push to turn around Yahoo, Marissa Mayer has taken some popular steps (like doling out free food and iPhones) and some not-so-popular ones (like making employees come into the office if they want those goodies—or their jobs). Now, insiders say Mayer's fixation on college credentials is hindering Yahoo's ability to hire top talent.

Recruiting experts say focusing on an applicant's "pedigree" may seem like a shortcut to hiring only the cream of the crop, but this practice can have a negative impact in the long term, especially for tech companies whose survival depends on innovation.

On the company's fourth quarter conference call in January, Mayer discussed implementing "rigorous hiring protocols"—a phrase unnamed company employees cited by Reuters say is code for a newfound zeal for high grades and degrees from prestigious universities like Stanford. (Yahoo declined to comment on what a company spokeswoman characterized as "rumors.")

"Given the tight supply of tech talent ... I think it's a rather risky strategy to limit your talent pool with that kind of filter," said Asa Sphar, vice president of recruitment and profiling at technology search firm CSI Executive Search.

"It doesn't in any way mean there aren't extraordinary people coming out of [less prestigious] colleges," said John Challenger, CEO of executive outplacement firm Challenger, Gray & Christmas.

Some companies do use the college question as what Challenger called a "sorting mechanism" for sifting through resumes for entry level positions. "The name on the diploma really matters most in your first couple jobs." To fill more senior positions, he said, "only looking for grads from certain schools would be short-sighted."

"There's an advantage in this kind of plan in terms of speed, but there's a big disadvantage in this plan in terms of innovation," said Eric C. Peterson, manager of diversity and inclusion Society for Human Resource Management. Hiring people who have been educated the same way can make it easier for people to work together in teams, but it curtails the infusion of new ideas and perspectives.

Still, Challenger pointed out that some companies want their people to have similar educational backgrounds. "There are obviously companies that have cultures where a lot of people come from certain schools," he said.

Feeling like the name of the school matters more than an individual's achievements can be particularly frustrating for the rank-and-file today. It touches on a larger debate as to whether a college degree is worth the investment when student loan balances are soaring and new graduates often struggle to find jobs.

According to a 2011 report from Georgetown University's Center on Education and the Workforce, people with just a high school diploma earn an average of $32,600 a year, which adds up to $1,304,000 over the course of their time in the workforce.

By contrast, college graduates with four-year degrees have average lifetime earnings of $2,268,000—nearly a million dollars more. Computer software engineers do even better than that, with an average lifetime paycheck of $3,554,000. Ironically, Yahoo's last CEO, Scott Thompson, left the company after it was discovered that his claim to hold a bachelor's degree in computer science was false.

But hiring exclusively from prestigious universities can backfire, as Northwestern University assistant professor of management and organizations Lauren Rivera found in a 2011 paper. When evaluating job applicants who graduated from a "top five" school, companies "attributed superior cognitive, cultural, and moral qualities to candidates who had been admitted to such an institution, regardless of their actual performance" after they were actually hired.

Denise Lidell, founder of IT search and recruiting company High-Tech Professionals, said limiting the pool of potential candidates to a short list of schools has other down sides, too: It leads to positions staying unfilled longer, because there are fewer potential candidates. "They're probably eliminating some top candidates," she said. And when companies do find people that meet their specifications, they are more likely to be lured away by a competitor, given the high demand for tech talent.

There are some small indications that this hiring practice may be falling out of favor. An annual survey conducted by the National Association of Colleges and Employers about hiring attributes did find that the importance of school name has risen slightly, but the good news is that leadership positions held, major and grades earned, and extracurricular activities taken were all considered more important.

Rivera also noted that extracurricular activities could be a more valuable assessment tool for potential new hires, saying, "Participation in formalized extracurricular activities has become a new credential of moral character that has monetary conversion value."

Focusing on elite schools to the exclusion of other factors like extracurricular participation is an especially bad idea for a technology company that needs a steady supply of cutting-edge ideas. "A lot of organizations out there want to be more creative, more innovative than their competitors," Peterson said. "Hiring a whole bunch of people who think exactly the same way is not going to get you there. ... Groupthink is the antithesis of innovation."