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This past year, the McKinsey Center for Government released the second report in its “Education to Employment” series titled Education to Employment: Designing a System that Works.

The numbers are somewhat staggering: 75 million young people worldwide are unemployed because they do not possess the skills that industry demands. These young people are three times more likely to be unemployed than their parents. The labor force is available and the jobs are open, but the skills are lacking.

The question is complex: exactly how can we better synchronize the stakeholders–i.e., the students, the universities and the employers— to improve this situation and put more qualified grads into the workforce? Before we consider solutions, let’s take a closer look at some sobering statistics.

“75 million young people worldwide are unemployed because they do not possess the skills that industry demands.”

McKinsey surveyed 8,000 stakeholders including 2,700 employers, 900 educators and 4,500 students from nine different countries and examined 100 cases studies that addressed the issue. Among the findings that are interesting is that far and away the most important factor for employers is work-readiness, with 91% citing that as their number one concern. In addition, employers are more inclined to value the results of education above the reputation of a school, with 44% saying a candidate’s competency is more important than the institution from which they graduated.

The fracture in the education-to-employment process is evident in the report, as 74% of education providers feel their graduates are work-ready, while only 38% of students and 35% of employers agree. The parties clearly do not share the same definition of work-readiness.The Technology Council of North America (TECNA) released similar findings in December in the report National Survey of Technology, Policy and Strategic Issues 2014. A survey of C-level Illinois technology executives shows that 47% believe the talent shortage could contribute to slowing economic activity. This condition has worsened since the 2013 reading of 39%. In addition, 74% of survey respondents feel there is a moderate to significant shortage in the quantity of talent, and 69% feel the same is true for the quality of talent. In terms of education, the survey shows policies that promote STEM (Science, Technology, Engineering and Math) for both higher education and K-12 are preferred more than policies that address taxation or state funding.So what’s the answer?As already stated, the question is a complex one, but the reports say the first step is to work together more closely. The McKinsey report states, “To improve student prospects, education providers could work more closely with employers to make sure that they are offering courses that really help young people prepare for the workplace.” In similar fashion, the TECNA report states that university alignment with tech industry needs is considered a contributing factor to a healthy tech environment in Illinois.

Communication, Collaboration and Cooperation: Three Sides Creating the Perfect Triangle

Through the TT CampusConnect program, we assist universities that are open to collaboration with businesses. That is what brought TT to the Master of Science in Financial Engineering (MSFE) program at the University of Illinois-Urbana Champaign. Although the program officially began in 2010, it was a few years earlier when TT received a call asking for input as to what a good financial engineering program should include.

Right away, it was clear that the end product was going to be something special. Instead of housing the program under either the business school or the college of engineering, Illinois chose to create a joint program under both the Department of Industrial and Enterprise Systems Engineering in the College of Engineering and the Department of Finance in the College of Business. So instead of operating within a particular discipline or silo, the MSFE program fully integrates all necessary disciplines from both business and engineering to empower graduates.

QuantNet immediately recognized the financial engineering program as being one of the country’s best, ranking it 20th, and more recently The Financial Engineer ranked it 15th in their 2015 MSF Rankings.

TT had an opportunity to sit down with Professor Morton Lane, the director of the MSFE program to discuss the program and how industry collaboration helps graduates.

Q: What is your definition of financial engineering?
Professor Morton Lane
Professor Lane: Financial engineering is simply the application of quantitative techniques (which include, for example, mathematics, statistics, numerical methods and computing) to detecting opportunities in financial markets.
Q: The first FE programs began in the mid-1990s. Your program began in 2010. What did you learn from those who preceded you?
Professor Lane: I visited several ranked programs and discussed with each how they structured the programs, optimal length, faculty mix, etc. Some emphasized theory, some emphasized statistics; essentially they had the DNA of their host department. It seemed to me the best ones had multiple host departments.
Q: What is the benefit to having the program fall under BOTH the business and engineering schools?
Professor Lane: Directly we get the best of faculty from each department and college. Indirectly, and more subtly, we get different perspectives on many common issues. It makes students open-minded to attacking topics with the best tool in their arsenal, not just the one that they learned in a specialty.
Q: What disciplines does the MSFE program require upon graduation?
Professor Lane: We want graduates to be able to a) identify financial opportunities, b) model those opportunities (or problems), c) program and execute those models and d) assess the risks and rewards of what they’ve investigated. Finally and probably most importantly, they must be able to articulate their results to technical and non-technical peers.
Q: How do industry partners contribute to the process?
Professor Lane: They are vital. Just as I visited existing FE programs when we started, I went to visit old friends in the financial industry. What we heard was that while they appreciated and wanted theoretical rigor in their employees, they also wanted to have students who could better “hit the ground running.” Hence our practical approach. However, that advice was not their most significant contribution. We have a series of Practitioner Speakers, an active Advisory Board from industry and, most importantly, financial industry partners who provide us with live projects and weekly “face time” guidance to student teams during a whole semester. Student teams are required to complete these projects as a graduation requirement.
These projects have another effect. They allow me and the faculty to know what is currently at the cutting edge in the industry and where we should concentrate or redirect our efforts.
Finally, we have also begun to have elective courses taught by qualified people who are active in industry – i.e., they have day jobs.
Q: What industry feedback have you received?
Professor Lane: Industry likes to contribute. They know what to expect from their recruits, and it exposes them to potential recruits who have worked on a project that they are directing. It seems to work. This year, more than 30% of the 2014 class had jobs prior to graduating. Historically, 95% of students are placed within 180 days of graduation.
More and more finance departments are enabling their students to explore how their degree can be enhanced by integrating relevant disciplines like engineering and computer science. In the same spirit, they are seeking collaboration and feedback from the industries that recruit their graduates to ensure they are empowering students for the workplace. This helps flatten the learning curve and makes it easier for both graduate and employer.
In addition to his duties as the Director of MSFE at the University of Illinois, Professor Morton Lane also runs his own consulting practice (Lane Financial LLC) offering advice on the securitization of (re)insurance risk and catastrophe risk portfolio management. He was actively involved in the original development of exchange-traded financial futures and options derivatives and the securitization of insurance.  His appointments have included President of Discount Corporation of New York Futures, a financial futures broker; President of Sedgwick-Lane; Head of the Commodities Division at Bear Stearns; President of Lind Waldock and Portfolio Manager at the World Bank. Professor Lane co-authored two books on financial futures and two books on (re)insurance securitization. Professor Lane received his Ph.D. from the University of Texas in Business Administration, Mathematics and Computer Science.  
NOTE: This article was originally published in EdTech Digest.