Recruiters at Harris Williams & Co. usually spend July and August handling a small stack of résumés and gearing up for the fall hiring season. But this summer, things have been far from quiet at the boutique investment banking firm in Richmond, Va. More than 300 résumés have landed on Stevie McFadden's desk this summer—and that's not counting the dozens of casual inquiries she's received from prospective job applicants and MBA students.

"Suddenly, there is so much opportunity," says McFadden, the firm's recruiting director, who flew to New York this week with her COO, Dena Moore, to conduct interviews with promising candidates. "The summer is historically a dead time in recruiting, so this has definitely changed the way we're looking at how we fill our talent need."

Boutique investment firms and middle-market banks, which typically handle transactions below $1 billion, are finding themselves in an enviable position this summer. As the big financial firms tighten the number of internships and job offers they are giving to MBA students, smaller firms that often get overlooked by MBAs during the job hunt are suddenly in demand. In response, many are increasing their hiring quotas and becoming increasingly selective about candidates they do decide to hire.

"The smaller shops are realizing this is a great time to pick off talent," says Jeff Fischer, director of the career management center at University of North Carolina at Chapel Hill's Kenan-Flagler Business School. "I think an average MBA interested in investment banking is thinking he or she may need to look more broadly and I think the boutique firms will capitalize on that."

Expanded Horizons

The move comes as career-services officers like Fischer are encouraging students to broaden the scope of their job searches to include financial companies they may, in the past, have overlooked. While the early job outlook for the fall does not look dire—schools are reporting full recruiting schedules and most large firms said they plan to be on campus—there is still lingering uncertainty about the stability of the MBA job market, according to conversations with half a dozen MBA career-services officers around the country. Apart from jobs that evaporated when Bear Stearns (BSC) was absorbed by JPMorgan Chase (JPM), most companies have not rescinded job offers to 2008 MBA graduates, though some schools have reported isolated incidents of promised jobs being pulled.

"There's a general anxiety among students now. I don't think anyone trusts any of the companies, whether it's an investment bank corporation or a commercial bank. Anything could happen," says Patrick Perrella, senior associate director of MBA career development at University of Notre Dame's Mendoza College of Business. "We had a job offer rescinded from someone in the automotive industry, so certainly there is risk across all the industries this year."

Hiring Caps?

Still, most companies, including those in the investment banking industry, said they plan to go forward with business as usual this fall. "We are back on campus in the fall for 2009 recruiting because the analysts and associates are our 'pipeline' for officer levels in three years," Elizabeth Wamai, head of global campus recruiting at Merrill Lynch (MER), said in an e-mail.

"At this point, we don't have a hiring cap for the associates," says Angela Marchesi, the recruiting program manager at Deloitte, referring to the firm's current intern class. She also says the firm plans to visit the 30 or 40 MBA campuses it visits annually this fall.

But even if the major banks are on campus, that doesn't necessarily mean they'll be hiring at the same levels as in previous years, says Kip Harrell, board president of the Career Services Council, the umbrella group of school career placement officers. "Some of the things the Career Services Council members are speculating with the investment banks and the financial-services companies is that they may be hedging a little bit," says Harrell, who also serves as associate vice-president of professional development and career management at the Thunderbird School of Global Management. "They are very reluctant to go first in terms of saying they are going to cut back on MBA hiring."

Meanwhile, second-year students are just a week or two from completing their summer internships, and most have not found out yet if they have been offered a full-time job at the company. Most career-services officers said they expect banks will do most of their hiring from within their internship classes, but offer few, if any, full-time jobs to second-years this fall.

Leadership Development

This is why middle-market firms are emerging as an increasingly attractive option for students, especially those who may not land full-time offers from their summer internships. Working at a smaller firm can have its advantages, career officers said. Students have more senior-level interaction with executives, can be more directly involved in projects, and face less competition in moving up the corporate ladder.

Perhaps more important, many of these smaller firms have been shielded from the fallout from the subprime mortgage meltdown and haven't cut back hiring levels dramatically, says Gary Fraser, the dean of students who oversees the office of career development at NYU's Stern School of Business. "They can provide a little bit more of a stable option for some of our students," Fraser says.

Peter Kies, a managing director at Robert W. Baird, a Milwaukee-based boutique investment bank, says his firm is one of the "rare ones" trying to increase their headcount. He is trying to take advantage of the edge the sluggish economy has given his company's recruiters, he says. "My mandate to the team is, let's look for the rock stars because now is the time we can lock them down," says Kies, who oversees MBA recruiting for the firm's investment banking division.

Winston-Salem (N.C.)-based BB&T, a regional bank, has noticed more MBA students and graduate students expressing interest in its leadership development program and wanting to build careers within the company after they go through the program. The company has hired a "significantly" greater percentage of students from the program in 2008, up 20% from 2007, says A.-C. McGraw, a spokeswoman for BB&T. "We have had fewer declinations of our offers from this group and, at the same time, our recruiting efforts are the same as we've always had," McGraw says. She declined to say how many students the bank has hired.

Exploring Options and Competition

Some students are actively seeking out the middle-market boutique firms, even as they simultaneously court larger companies. Joseph DiFilippo, a 2008 MBA graduate from the University of Southern California's Marshall School of Business, had to decide between accepting a job as a consultant at Deloitte—where he interned in 2007—or accepting a job from BTS, a small consulting firm specializing in simulation-based training in Stamford, Conn.

For him, the decision came down to where he could get the most hands-on experience and access to top executives. He picked BTS, where he will be starting his job as an associate consultant on Aug. 11. "At a larger consulting company, when you're fresh out of business school, you don't get that kind of access. You're kind of the low man on the totem pole and you're expected to put your time in doing consulting grunt work," says DiFilippo, 30, who served in the army as an officer for six years before going to business school. "I wanted access to partners and I wanted to be able to work closely with clients. I thought working here would be a fast track in helping me to make a career transition."

One unexpected twist in this year's job hunt is that MBA students may find themselves competing with alums from their schools for similar jobs. Some of the middle-market firms, including Harris Williams, said they also are seeing résumés from MBAs who worked at major banks and have been laid off in recent months. Other competition will come from those currently working at large investment firms who want to move to smaller boutique operations.

"This is a sad reality," says Dena Moore, the COO and managing director at Harris Williams. "The MBA class of 2009 will have a lot of competition from the class of 2008 and 2007 looking for the same jobs."