February 2000
The Best of Times
Hot Job Market
As industry and academia battle for OR/MS talent, one question remains:
How long can it last?
By Peter R. Horner
Ron Rardin, chairman of the Industrial Engineering Faculty Search Committee at Purdue University, doesn't know whether to laugh or cry.
On the one hand, he's happy that the economy is booming and that both industry and academia are clamoring for grad students armed with just the kind of analytical skills that his department is known to produce.
On the other hand, as the person in charge of finding candidates to fill two tenure-track positions at Purdue's School of Industrial Engineering, Rardin is concerned because he knows he's competing against virtually every other IE department in the country for top talent. And that's not even counting the practice sector, which would love to get its money-making hands on these same people, and, in many instances, is willing to do whatever it takes (can you say sign-on bonus and stock options?) to land the right person.
Welcome to the OR/MS job market, circa 2000, arguably the hottest market for the analytically inclined since they coined the terms "operations research" and "management science" more than 50 years ago.
How hot is it? It's so hot that companies are hiring folks right out of grad school, starting them out at $50,000 and up (and up and up, in some cases), and immediately sending them back to campus — to recruit others just like them. And how is the view from the ivory towers of academia?
"As far as the academic side is concerned, I would have to say this is the best job market for OR/MS people I've ever seen," says Rardin, who earned his Ph.D. in 1974. "In my role as chair of the search committee, I keep files on all the other IE programs. Right now I couldn't name a top school that isn't actively recruiting faculty."
The operative word here is "actively." Before the recent boom, all a search chair like Rardin had to do was publish a job notice, sit back and watch the resumes pour in. One ad would garner several hundred resumes, including dozens of first-rate applicants.
"Now, because of the job market and the competition for good people, you have to be proactive," Rardin says. "We made a list of all the leading professors in the field. We called or wrote every one of them, asking for candidate names. We then sent every one of those names an invitation to apply. We also went to events like the INFORMS Student Colloquium and Job Placement Center in Philadelphia, trying to pick out people. You can't just sit and wait for them to come to you. Frankly, I'm scared to death by this big stack of documents I have on my desk."
What's in the stack?
"A list of all the other schools out there recruiting."
The Gold Rush
Pat Harker, the interim dean of the Wharton Business School at the University of Pennsylvania and the immediate past editor of Operations Research, compares the turn-of-the-century job market greeting his school's grads to 1849.
Huh?
"It's 1849, it's the gold rush," Harker says. "There is no other way to describe it. I've never seen anything like this. The amount of entrepreneurial energy is incredible." Harker, who has taught a course in service operations at Wharton for many years, says that entrepreneurial energy is powering alums as well as students.
"I get calls from former students all the time," he says. "They're sitting in a bank somewhere three or four years into a successful career, but they have a business plan for a start-up they want to talk about. It's amazing."
When Wharton redesigned its curriculum 10 years ago, it was one of the few business schools in the country that retained a course in management science. Wharton also offers two courses in operations management that are heavily focused on applied OR.
"In the last few years, I've noticed a trend where both our undergraduates and increasingly our MBAs want quantitative stuff," Harker says. "It's one thing to think, 'I'm going to go to work for a big company and I won't need to know all this because I can hire somebody to do it for me.' Well, if you're going to be an entrepreneur, that's not going to happen. It's not the money; the way the venture capital market is these days, you can get the money. Rather, it's the realization that there aren't enough bodies out there with these quantitative, analytical skills. I'm getting a strong sense that the students are saying, 'You know, I better really know some of this stuff myself.' That's the world they're entering."
Engineering and business school grad students — OR Ph.D.s, MBAs, whatever — could not have picked a better time to enter the real world. It's as if all the stars and the moons and the planets aligned in just the right way to make an ideal environment for just the sort of skills they bring to the table.
For openers, there's the economy. Business is booming. Profits are up (except at those crazy dot.coms where profits never seem to materialize and no one seems to care) and interest rates and unemployment are at, or recently visited, historical lows. We're riding the longest bull market in the history of the United States; every time some "expert" says it surely has to stop, the bull interprets that as a spur to the side and roars off to another record.
When the economy is strong, people buy stuff. The sales tax from all that buying swells state coffers. The states turn around and spend money on things like education, giving universities the green light to add faculty.
A strong economy also encourages corporations to add staff. After shedding a few layers of middle management fat during the past decade, however, businesses are careful where they strap on their money belt. In order to stay competitive, they have to become highly efficient at everything they do. That plays right into the hands of operations researchers and management scientists, the original "Efficiency Einsteins," who earn their living optimizing operations and systems.
While the economy sets the tone for this historical OR/MS job market, it doesn't begin to tell the whole story.
On the academic side, student bodies are growing (we're talking numbers, not height or weight). More people attend college than ever before. There are more children in elementary schools right now than ever before, and that provides the base for continued growth at the college and university level. Do the math: more college students equals more college classes equals more college professors.
The demand for industrial engineering and business school faculty is particularly acute, and again, that plays right into hands of the academically oriented among the OR/MS crowd. It's important to point out that not all boats are lifted by the rising seas. A recent article in the New York Times detailed the plight of English and foreign language Ph.D.s who have been forced into dead-end positions with low wages because of a glut of scholars in their areas of study. The marketplace has spoken: business analysis is in, book analysis is out. Put another way, who are you going call to fix the bottom-line, Gene Woolsey or Walt Whitman?
Finally, consider the "Sputnik Effect," a theory put forth by Purdue's Rardin. When the Russians launched Sputnik I back in 1957, it spurred Congress to allocate a bunch of money for science, including fellowships for those who pursued advanced degrees in technical subjects like engineering. Rardin theorizes than many of the scientific boomers who earned their doctorates in the early 1960s and wound up at engineering departments across the country are now nearing retirement. Replacements are needed. Voila! Instant job market for IE faculty.
Show me the Data!
Of all the factors driving the demand for operations researchers and management scientists (and those analysts related to OR/MS by background if not by name), perhaps none is as important, certainly in the long run, as the proliferation of data. Operations researchers can live longer without oxygen than data. The mother's milk of every operations researcher ever born, relevant data was in relatively short supply up until fairly recently. Now, thanks to computerized information systems in virtually every office, store and home in the country, we're swimming in the stuff. No wonder operations researchers are thriving.
The omnipresent Internet and its entrepreneurial cousin, e-commerce, are the biggest and best data-generating machines ever made. Sting had it right: Every breath you take, every claim you stake, every move you make on the Internet turns into electronic information and winds up in a database somewhere. Forget e-tailing. The real trick is turning all of that data into something useful. Say it with me: That plays right into the hands of operations research and management science.
"These are going to be the heydays for OR/MS," Harker says. "We're used to running around with models in search of data. Now the world is flooded with information. People don't know how to make sense of it. People don't know how to handle it. People don't know how to think about it. People don't know how to manage it. People don't know how to use it to make decisions.
"The people who do have the ability to deal with information, to model it, to analyze it, are golden. You can't get enough of these folks. Using data to help make decisions is going to become THE skill as we go forward. Period." Raj Nigam, the leader of the internal management science group at Merrill Lynch in Princeton, N.J., agrees that the proliferation of data creates a tremendous opportunity for the OR/MS community. With the opportunity, however, comes accountability. In other words, it's time to put up or shut up.
"Analysts in general, and operations researchers and management scientists in particular, used to cry about the fact that we didn't have data to run our models," Nigam says. "Now we're seeing the other side of the coin. The permeation of computer chips has created more data — by factors of 100 and more — than we've ever had before. Now the challenge for OR analysts is to stop whining, and go out and show the world that we can use this data to give some real business insight and boost profitability."
Nigam practices what he preaches. His eight-person department helped Merrill Lynch win the 1997 INFORMS Prize for the effective use of OR/MS throughout an organization. Just last year Merrill Lynch offered its clients a revolutionary pricing structure that has changed the face of the industry. Instead of charging a commission for each and every trade, Merrill Lynch rolled out a program that provides clients all the advice, research and trades they can take or make in exchange for a small percentage of the assets in their account.
Guess who did the analysis for the program and removed much of the uncertainty in the minds of upper management before they OK'd the program? Nigam and his band of merry management scientists.
Nothing breeds succeeds like success. Thanks to his nice work on the pricing plan and other problems, Nigam has been authorized to triple the size of his group and take on even more projects.
Ten years ago, Nigam would have brought in freshly minted grad students to build his staff. He'd work with them, show them the ropes, bring them up to speed. Not anymore. Now he prefers Ph.D.s with two or three years of real-world experience. "We're willing to pay the price (for experience) because we need people who can hit the ground running," he says. "We can't afford to move slowly. Things are happening too fast."
Master's vs. Ph.D.s
In the real world (i.e., non-academic), there are two schools of thought when it comes to hiring OR grad students: Should we bring in the focused knowledge and research skills of a Ph.D., or should we go for the broader knowledge and problem-solving skills associated with the master's degree candidate (who, by way, also comes cheaper)? Most companies opt for the master's-level grad.
"I don't know if I would say there is a bias against Ph.D.s," says Luke McCahan, an OR recruiter for Smith-Hanley, "but the majority of companies want someone who is a quick, hands-on, down-and-dirty problem-solver. It depends on the company. Some clients really require a deep theoretical knowledge in a particular area."
New York-based Smith-Hanley specializes in placing quantitative professionals in OR, statistics, marketing science, logistics, financial services and other high-tech fields.
Deserved or not, the real-world knock on Ph.D.s is that they are more concerned about developing perfect models than solving business problems. But perceptions change along with the job market. In an ironic twist, many universities now value Ph.D.s with real-world experience, while companies are no longer adverse to hiring Ph.D.s who have spent some time in academia. The key is, don't spend too much time (say three or four years, max) in one camp if you really want to live in the other. You might get branded.
Merrill Lynch's Nigam has no qualms about hiring Ph.D.s for his real-world work. "A Ph.D. shows me two things, and neither one has anything to do with theory or equations," Nigam says. "First of all, a Ph.D. tells me you are capable of working independently. Second, it tells me you are capable of creating and thinking of new things at a very high level. That's what I'm looking for."
Regardless of the degree, Nigam and everyone else on the practitioner side is also looking for first-class communications skills to complement the technical chops.
"The solid background in terms of statistics, finance, mathematics — those are basic requirements," Nigam says. "In addition, I'm looking for people who can talk, make eye contact. I'm looking for people who can listen. I'm looking for people who can communicate. That's my next skill level. You have to know how to listen to decision-makers in order to find out what's bothering them. And then you have to communicate your analysis to them in plain English so they will understand it."
Remember that report Nigam handed over to the vice chairman of Merrill Lynch that ultimately helped alter the face of the entire brokerage industry, the one that was based on a ton of analysis and modeling over a six-month period? It was exactly one page long. No mathematical equations, no OR/MS jargon. Just the analysis, in plain English.
"OR/MS people tend to think the world is driven by mathematical equations," Nigam says. "I've got news for them. It's not."
Mud Wrestling
To make his point, Nigam recalls a piece of advice he received many years ago when he was fresh out of grad school. "I had just joined RCA and Franz Edelman and Newt Garber were my mentors," Nigam explains. "I was focused on the purity of my equations and assumptions. Franz Edelman said to me, 'Raj, who is going to use this? Go wrestle with the data and get muddy and dirty.' Here I am many years later, having the time of my life, wrestling in the mud."
Everyone in the OR/MS community, it seems, is having the time of their lives these days, especially those seeking employment. How long the good times last is anybody's guess. Certainly, there are reasons for long-term optimism. The explosion of data is here to stay. The question is, can the OR/MS community capture a significant piece of the e-commerce pie, for example, and ride the next "big wave" of technology to even more prosperity?
The track record is mixed. The OR/MS community basically missed the boat on computer programming, computer science and econometrics, and it probably oversold expert systems, process reengineering and data mining. On the plus side, operations researchers are jumping on the supply chain management bandwagon in record numbers (i2 Technologies in Cambridge, Mass., has filled up several wagons with OR types all by itself). Then there's yield management, which the OR/MS folks at Sabre Technologies invented and turned into a company core competency at airlines, hotel chains and cruise lines around the world.
How many times have you heard the phrase, "These things run in cycles"? The economy could go bust. Interest rates are already creeping back up. The financial markets could decide that dot.coms really should make at least some profits in order to justify their stratospheric stock prices, setting off some serious retrenching. Universities could initiate hiring freezes, recalling the early 1990s when an academic job for an OR/MS scholar was harder to find than a babysitter on New Year's Eve.
Purdue's Rardin, for one, remembers the dark days for OR/MS grads.
"I had a friend who was a department head and we were at an INFORMS meeting back in 1991 or 1992," Rardin says. "At the time, his was one of two IE departments that were hiring faculty. Students were grabbing him by the arm in the hallway, saying you have to interview me. There was panic in their eyes.
"About that same time, I had a student come into my office and he was literally crying because he had put five years of his life into getting a doctorate. He thought he was going to have a nice job in academia only to find there were no openings."
And now?
"Now those same students would be getting five or 10 interviews and several job offers," Rardin says. "It's really quite amazing how much things have changed."
| A Core Competency At Level 3 To better understand why operations research is finding the welcome mat out at more and more companies these days instead of getting the door slammed in its face as in the not-so-distant past, consider the case of Level 3 Communications. Based in Broomfield, Colo., Level 3 describes itself as a "communications and information services company" that is "building the first international network optimized end-to-end for Internet Protocol (IP) technology." How do you do that? You start with a visionary leader, in this case James Q. Crowe. Next you go out and raise a reported $4 billion in venture capital. And then you develop, as Crowe puts it, "operations research as a core competency within (the) company (that) will allow Level 3 to maintain and enhance its competitive position. We are building an OR organization that is strategic, enterprise-wide and research-focused." Those words come right out of a full-color, two-page advertising spread Level 3 has run in this publication for the past year. Mark Reynolds, the director of Level 3's Business Optimization Group, says Crowe means every word he says about OR. "I'm an OR guy myself," Reynolds says. "I spent half my professional career trying to convince senior management that operations research is appropriate and the other half trying to teach them what OR is all about. "Here, it's a different situation. We have a CEO who understands optimization. He comes from an engineering background. He became interested in optimization on his own and started reading books about it. He understands how important it can be within the context of this business he started." Reynolds, who worked on optimization problems in the airline industry before joining Level 3, says having access to top management is critical to the success of any internal OR group. As an example, he points to Sabre Technologies at American Airlines, where Sabre chief Tom Cook used to meet with AMR CEO Robert Crandall on a regular basis. Although Cook and Crandall are no longer with AMR, together they built the most successful OR/MS group (Cook) and airline (Crandall) in the world. "That's the sort of visibility we're looking at within Level 3," Reynolds says of the Business Optimization Group. — Peter Horner |
| Five Things Every Grad Student Should Know Luke McCahan, an operations research recruiter for Smith-Hanley Associates in New York, offers the following advice for grad students contemplating a career in the practice sector:
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Peter R. Horner is the editor of OR/MS Today.
OR/MS Today copyright © 2000 by the Institute for Operations Research and the Management Sciences. All rights reserved.
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