(FORTUNE Magazine) – Daniel Grossman squirmed on the horns of a career dilemma. The small toy company he worked for had been taken over by industry titan Mattel, and he had been offered a great job at the new parent. A flashy future loomed-an international VP berth, lots of bucks and perks and travel. On the downside, he would spend his professional life forcing endless variations of Barbie Doll and Friends on the world's unsuspecting youth-Geisha Barbie? Eurotrash Ken? That didn't sit well with Grossman. At 37, he's still an idealistic sort, a kind of New Age Geppetto with politically exquisite notions about toys: "They should encourage kids to explore the world around them and add to their self-esteem."

Also weighing in his deliberation: Between getting a BA in Russian studies from Yale and an MBA from Stanford, Grossman had labored deep in the bureaucracy of the U.S. State Department. The thought of joining another large organization held little appeal. In the end he spurned Mattel and, in 1993, started his own company, named Wild Planet Toys. With a handful of colleagues, he now occupies space in a renovated coffee warehouse near downtown San Francisco, and his company will likely bring in several million dollars in revenue this year. "If your aspiration is to be a bureaucratic infighter, you may be well suited for a large organization," he says. "But you've got to swallow more than I care to. On some level, you can't be who you really are during the workday."

Those words would provoke a chorus of mega-dittos wherever young business types gather these days. It is no secret that many Fortune 500 companies have lost their luster as places to work. In a recent study of career preferences conducted by Opinion Research Corp., just 1% of the 1,000 adult respondents said they would freely choose to be corporate managers. Careers that carry a high degree of independence, such as medicine or the law, were far more popular.

Among business school students, ever greater numbers of today's superstars, whose parents and older siblings were content to work their way up slowly in large companies, now want big responsibility--or is it independence?--and even bigger rewards up front, and they are willing to take commensurate risks. Says Ross Webber, chairman of the management department at the Wharton School of the University of Pennsylvania: "There's been a change in the myths that talented people in this new generation guide their lives by, and an entrepreneurial, rather than corporate, connection is a strong part of that mythology."

The changing attitudes of top business school graduates are particularly revealing. These are people who have choices, who usually boast several years of solid experience and receive multiple job offers in all but the very worst of economic climates. In the past many aspired to corporate power, to hold the reins at some giant company. But now more and more of them, especially those at or near the top of their classes, want to carve out a niche of their own rather than slip into one supplied by a corporation. As recently as 1990, a quarter of Columbia University's new MBAs joined large manufacturers; last year just 13% did so. At Stanford nearly 70% of the business school's class of '89 joined big companies, defined as those with more than 1,000 employees. In 1994 only about half did so.

Even those numbers understate the trend. Many of the big outfits that today's hot young talents join right after graduation are management consulting firms or investment banks. About half the students at top schools now choose one or the other, up from a third just a few years ago. But mostly they are becoming consultants or investment bankers with an eye toward pursuing entrepreneurial careers later on. They figure they will make big money for a few years and then find a small company to buy or an opportunity ripe for a startup. The variety of business situations they encounter while consulting or banking will make the search that much easier--but no way will they endure the constant travel or the crazy hours for more than a few years. The annual turnover among junior associates at large consulting firms runs about 25%. According to a recent study, fewer than half of University of Chicago MBAs who became consultants in 1988 were still consulting in 1994.

At Chicago, long a training ground for corporate financial wizards, the zeitgeist has shifted remarkably. Last autumn 350 out of 600 second-year students tried to get into a new course on entrepreneurial financing; only about 130 could be accommodated. When recruiters from large corporations show up, embarrassed placement officials sometimes can't find enough candidates to fill up a day's worth of interviews. Similar situations have cropped up at Northwestern's Kellogg School of Management. A big company will fly in four or five executives for a rah-rah recruiting slide show, only to be met by fewer than a dozen skeptical students. At Harvard some manufacturing companies have stopped coming because even though students showed up at their road shows, they spurned subsequent offers.

Kellogg operates one program in conjunction with the engineering school that is designed specifically to turn out future leaders for large manufacturing companies. Last year 43% of the program's graduates chose to join consulting firms instead. Officials at MIT's Sloan School of Management experienced comparable results with a similar program until they upped the ante at admission interviews. "We now lay out in advance that the moral imperative is that they go into manufacturing," says program official Donald Rosenfield. Nonetheless, last year about 12% of the program's graduates chose consulting.

Does the trend represent a threat to the future competitiveness of large U.S. companies? Yes, but after having helped bring on the new attitudes by the way they have changed over the past decade--downsizing, restructuring--so are they now continuing to change and adapt in ways that may limit the damage. The downsized, no-more-fat companies of the new economy are prepared to hire top talent as needed, bringing in management consultants to iron out operational kinks or shore up marketing plans, and investment bankers when it's time to cut a deal. Outsourcing and strategic alliances with smaller, specialized firms fill in much of the rest of the picture.

Still, there are corporate positions that need to be filled and intellectual capital that has to be built--gotta preserve those core competencies-and here and there the talent pool may be getting shallow. According to the Society for Information Management, a slew of top information-service specialists have defected from company ranks, many attracted by rich startup opportunities. While human-resources types are understandably loath to admit they can't get the good people their organizations need, recruiters from big companies such as AT&T say they sometimes have trouble finding talented folks to fill specific roles, like rolling out new products or marketing to ethnic segments. "There are definitely skill voids," says AT&T human-resources manager Susanne Schrott.

In an ever more competitive world, any decline in talent levels could prove dangerous. Says Albert Bellino, who haunts the best business schools in search of fledgling investment bankers for Bankers Trust: "The way we look at it, the organization that gets the best people is gonna win--it's that simple." Jeffrey Sonnenfeld, director of the Center for Leadership and Career Studies at Emory University, points to United Parcel Service, which five years ago began a massive effort to go global and now operates successfully in dozens of countries. Says he: "You can't pull off a major strategic shift like that, one that is sometimes necessary for your survival as a company, unless you can call on the very best people from within your ranks."

Michael Driver, a professor of management at the University of Southern California who has been tracking the career choices of top business graduates for decades, thinks that more and more big companies are courting disaster by losing out in the race for the best and brightest. Says Driver: "More energized, motivated people are going elsewhere, and these organizations are not going to make it unless they stop the flow. You hate to use the overworked term 'dinosaur,' but it does apply."

Each person has his own reasons for choosing a particular career path, of course, but a number of factors have combined to drive potential leaders away from corporate life. Simple economics plays a role. The big investment banks and management consultant firms offer top grads a first-year package of salary and bonuses of well over $100,000-about $30,000 more than old-line Fortune 500 companies are likely to offer. If a firm really wants some top-school hotshot, it will line up a well-paid summer internship after the person's first year, then offer to pay second-year tuition in exchange for a commitment. For a young professional facing a $60,000 tab for an MBA, such inducements can be powerful motivation.

But money is clearly not even close to everything for today's superstars. The 1993 class at the Harvard business school ranked salary seventh among the reasons for the career choices they made. Leading the list: job content and level of responsibility. Company culture and the caliber of colleagues were close behind. Says Maury Hanigan, a New York consultant who advises major corporations on how to attract the best talent: "These are people who are scared to death of being bored."

According to USC's Michael Driver, big corporations have been culturally out of sync with top young professionals since the social unrest of the 1960s. At that time, he says, nearly all large companies were based on a linear-career concept; success was seen as steady progression up a ladder of defined steps. But the most talented executives had begun to think in different terms about their careers; many had adopted what Driver calls a "spiral" career philosophy. They wanted to spend seven to ten years mastering one field and then move on to another, always building on old skills while mastering new ones. Then, ironically, just when many big companies had begun to flatten pyramids and create cultures more hospitable to spiral careers, on came the yuppies of the 1980s. Many of them yearned for the old linear days of ladder-climbing straight upward, only to be met instead by downsizing and reengineering.

Today students frequently arrive at business school already turned off by the new Darwinism at large corporations. Memories of bloodletting are a stone in their shoes. Robert Berg, 33, a 1993 Wharton graduate now at Coopers & Lybrand Consulting in Boston, recalls with some pain his days at Xerox prior to graduate school: "I thought there was a good dynamic among the people there. But when the time came to close the division I was working with, management left us with the feeling that they were going to take care of us. They didn't. Basically, they lied to us." Says Emory University's Jeffrey Sonnenfeld: "When a big company says nobody has employment security, we don't pay very well, and we stand for continuity, not innovation--where's the payoff?"

Another common complaint among top business-school students with a brief corporate fling in their background: the failure of their former employers to give them--or let them earn--serious responsibility. Some star students say they often found themselves doing narrow, repetitive tasks that offered hardly any challenge. Suzanne Hooper, a second-year Kellogg student, recalls her days as a senior auditor with Arthur Andersen as a series of tightly focused functions that gave her little chance to stretch. "You'd go into some place and spend all your time worrying about one small aspect of the operation," she says. "If you didn't know what the company did, you wouldn't know what the company did."

In contrast, says 1990 Stanford MBA Melanie Dulbecco, smaller companies let fledgling talents test their wings over a variety of terrain. Upon graduation, she took a job as chief operating officer of R. Torre & Co., a small San Francisco company that produces Italian-style syrups to add flavor to coffee and other foods. At first, she says, her role at the 30-person company included answering phones and emptying wastebaskets. Now her days are filled with an energizing variety of business tasks--financial analysis, working with production managers, doing site selection for a new warehouse, setting up a customer-service hot line, inspiring the sales troops. Says Dulbecco: "I get to use everything I have learned--not just some small piece of it."

Young hotshots also grouse that they didn't get the recognition they deserved. The rewards went to the best politicians, not necessarily the most able executives. They contend that innovation often was discouraged in favor of learning how to fit in. Christine Reiter, a 1994 Harvard MBA, worked in a financial-management training program at GE Capital for three years before graduate school, and she felt little pull to return. She's now an associate with Coopers & Lybrand Consulting. "I felt I was always being put into predictable situations at GE," she says. "People were not encouraged to be creative. They really want you to wear the same hat and same coat as everybody else."

Barbara Doran, who graduated from Harvard business school in 1984 after knocking around in the New York publishing world, says she felt continually hemmed in at large organizations by the expectations of her bosses. "It's often not enough to be good," she says. "You've always got to live up to other people's standards"--how-ever idiosyncratic they may be.

Doran sold institutional equities for First Boston and Lehman Brothers for a few years after Harvard, picking up the contacts and expertise to found her own money management firm. Since setting up shop last June, she has been handling about $4 million for 11 limited partners and has posted an 18% gain, mostly by trading in the stocks of small and medium-size companies. Doran particularly relishes the fact that as her own boss, she has the flexibility to work out of her Park Avenue office or the Manhattan apartment she shares with her cat, Cecil.

Internal bickering and bureaucratic thickets at big companies also turn off a lot of top talent. Deborah Fienberg, now a second-year student at Kellogg, worked her way up to product manager after several years at Colgate-Palmolive. She led a major product-relaunch task force and oversaw a $160 million promotion budget. Still, she felt she was constantly inhibited by superiors who second-guessed her every move, and by a reporting system that stifled individual initiative. "You just can't move on things fast enough," she says. "And like it or not, you have to spend a lot of time perfecting ways to work the system."

Impatience is a signal trait of the more talented members of the upcoming professional generation. They have little interest in being at the top of a giant company, and none in inching their way there. "My father worked for Motorola for 41 years, but I'm not going to make that kind of long-term commitment," says second-year Kellogg student Brad Jones. He's leaning toward investment banking, for a while anyway, because "you are given as much responsibility as you can handle right away." Says John Martin, president of Kellogg's class of 1995: "We don't really have a lot of corporate role models here. I don't know anyone who wants to be like Jack Welch or Jack Smith."

The top people in this business generation are also often unwilling to subjugate their personal lives to corporate demands. Even if they or their families haven't been wounded by corporate layoffs or right-sizings, they don't propose to surrender themselves to some entity unlikely to honor the sacrifice. "They interview you," says AT&T recruiter Susanne Schrott. "They want to know whether or not your company will fit in with their lifestyle."

This often means refusing to consider the sort of concessions that were once routine at large companies--logging long hours in obscurity, accepting a transfer to some far-flung outpost. Big manufacturers with plants far away from the bright lights are especially hampered in their recruiting. Says John Flato, corporate director of university relations at AlliedSignal: "They're afraid they are going to get lost, and mainstream manufacturing usually doesn't take place in New York or San Francisco. It takes place in Elyria, Ohio, or some town in Tennessee."

Smart young businesswomen are adamant in demanding workplace flexibility--and many of them despair of finding it at large companies. Says Kristin Snowden, a second-year University of Chicago student who worked for several years as a Price Waterhouse auditor: "There is a way people are supposed to behave at work at large companies, and it's based on a male model that is hundreds of years old. Women cry more often than men, for example; we find that it is an effective way to relieve stress. But you are never, ever supposed to cry on the job if you work at a large company."

All this is not to say that every big company has become a pariah on the campuses of elite schools. Bankers Trust recruiter Albert Bellino says he feels quite confident going head to head for top talent against any large company--"except Microsoft. They have somehow managed to offer some of the same things we do, particularly ownership of ideas and fast rewards."

Indeed, many of the young people who disparage life at most big companies tend to exempt Microsoft and a handful of other emerging high-tech giants. Tim McDonald, a top 1994 Kellogg graduate, has been totally focused on entrepreneurship since graduation. He's involved in a bunch of startup projects, including a scheme to develop interactive educational and training services for businesses. But he still harbors admiration for Microsoft because, he says, "they love to hire people who have tried to start a business and failed--they recognize the lessons that have been learned."

There are signs that other big companies are beginning to get their minds around the upcoming generation's new mood. In a recent 35-minute speech in Chicago, IBM Chairman Lou Gerstner used the word "entrepreneurial" 11 times to describe his vision of his company's future.

Today's best young executives neither expect nor want a lifelong career at a single company. Employers do well to recognize that, and to emphasize the value to the individual of the work experience they offer. Says Andrea Miles, manager of employee selection and staffing at Corning Inc.: "It has become more and more important to let people know that you are offering them a chance to develop skills that are marketable anywhere."

Minnesota-based 3M loses some top talent because of its frigid winter weather. But the company has consistently snared between 70% and 80% of the young stars it attempts to recruit by emphasizing the diverse array of businesses it supports and the varied technologies it pursues. Again, the point is to demonstrate that here is a place where a person can obtain salable skills, where knowledge is king. Says Martin Hanson, manager of staffing and college relations at 3M: "If we can get people to understand that we encourage intellectual exploration, we generally have a good chance of bringing them aboard."

High-tech companies continue to hold something of an edge here, largely because they appear to honor brainpower more than corporate gamesmanship. Still, the top talents will hold back if the role they are offered seems limited to some arcane area of business. "They want growth, variety, challenge," says Steve Brashear, who recruits MBAs for Hewlett-Packard. "Most important: they don't want to get pigeonholed."

Eventually, argues Wharton's management department chairman Ross Webber, the career pendulum may swing at least partway back toward larger companies. He notes that more and more leaders of big corporations are bubbling up from the operations side, rather than from finance or marketing as in the past. The trend, he thinks, will provide better opportunities for the sort of folks who pursue MBAs at the top schools. Says Webber: "I believe that some of these younger people who have veered off into investment banking or consulting, or who have this dream of starting a small business, will simply become frustrated. They will want to lead, to manage, to get into a situation where there's real action."

Perhaps, but USC's Michael Driver has spotted another trend that suggests an altogether different result. Over the past couple of years, he says, an increasing number of students at top business schools say they want a career that involves a high level of social responsibility. The signs of growing campus altruism are increasingly apparent. The most active organization at the University of Chicago business school is the Giving Something Back Club, which is engaged in everything from tutoring poor students to collecting toys for tots. A tableful of Kellogg students foresees an ideal future that combines running a successful small business half the year and doing good works, like teaching in a school for the blind, the rest of the time.

Driver says most big companies haven't a clue about how to relate to such notions. "Let's see," he says, "you've got Ben & Jerry's--and Ben & Jerry's." More big companies may eventually come around, of course, but until then the ice cream business could be hot.