What is the Signalling Effect? Are degrees worth it?

In today’s social media chatter, a lot of people are of the belief that degrees are dead. There is absolutely no point in

  • completing your education
  • wasting your time doing so
  • and then getting a degree

The question might arise- Should I even consider going to university in this day and age?

Bill Gates and Mark Zuckerberg, dropped out of Harvard. Mukesh Ambani dropped out of Stanford. So what is the point of going to college?

First and foremost, it is important to note that these people had the calibre to get into these esteemed institutions. So that itself calls for credit.

What people are really trying to say is that- today, skills are more important than a degree. 

On one hand people believe that universities, degrees and resume building are dead. There is no point investing your energy into building a resume. This perspective is incorrect.

On the flipside, assuming just because you are from a good undergrad program, your life is set, is also wrong.

This article systematically analyzes the value of going to a good university/building a good resume.

Both sides of the argument will be looked upon.

Now, what is the importance of having a very strong resume?

It generates something called a signalling effect. It simply means that a strong resume acts as a pull factor.

For example, I graduated from INSEAD, and it being a good business school, pulled a lot of brands to its campus for recruitment.

When I moved ahead in my career, I started different ventures.

A lot of investors started reaching out to us because of the pull factor INSEAD brought with it.

Although I can’t credit INSEAD entirely for the aforementioned points, it did play a critical role in my career in terms of:

  • Helping me get a job.
  • Develop a network.
  • Pulling investors to me when I started my ventures.

Can a pull factor be built only by going to a top tier college or working at top tier firms like Dalberg and BCG?

The short answer is no. There is an alternative method of creating this pull factor, which is skill development.

If you put in a lot of effort into honing your skills, you might be able to build that pull factor.

But in order for your skills to become a pull factor, you need to be well-known.

Let’s say you started your YouTube journey and people really admire the way you bring forth your thoughts and analyse things. It will take a significant amount of time for you to build a following. Only then will you be able to create a pull-factor.

If you have very strong brands on your CV in terms of:

  • Internships you have done.
  • Jobs you have done.
  • Undergraduate/graduate programs you have pursued.

All these brand indicators act as a pull-factor. Going to a top university or working with top brands helps you immensely in developing this pull-effect.

You can also do this all by yourself by working really hard, but it will take you time.

Here is a relevant example to consolidate the point above-

In certain industries like private equity, banking, and management consulting, people are pressed on time. They cannot dedicate more than 30-60 seconds to analyse your resume.

The resumes are scanned at a very brisk pace. 

Now, what do recruiters look for when they scan through a resume?

They will look for a strong signalling effect.

If you don’t have brands, that is okay. But you need to demonstrate through your work how you have added massive value to the organisation you’ve been a part of.

Trying to show that you have a very impressive skill-set becomes a hard thing to do if a person is not spending enough time analysing your resume.

If I have a bad resume, what should I be doing?

Let’s say you are in your first year of college and you have not performed well in your exams, not participated in any extracurricular activities and are attending a very low ranked institution.

It is okay. It is not the end of the world.

One thing you could do is get a high standardised test score. A 750 on your GMAT would act as a positive signalling effect when you are scouting for internships.

Remember, that there are multiple avenues for you to build your profile.

  1. Try gaining international exposure.
  2. Work on a research paper with your professor.
  3. Look for strong internships.

If you are in your final year and have completely messed up your undergrad, you have no option but to build your skill-set first.

Try becoming really adept at something. It could be:

  • Public speaking
  • Writing
  • Coding
  • ML/AI

Become a specialist in a certain domain. 

But if you are not from a good college and also refuse to develop skills, you will not be able to build a signalling effect for yourself, which could prove to be immensely detrimental in the longer run.

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