B-School Slump

Dec 17, 2013 by

Source: Financial Chronicle via India NewsWatch, October 19, 2013

The economic slowdown has hit smaller management schools in India big time as campus hiring drops sharply, forcing many of them to shut shop. “Business schools are closing down due to poor quality of education, lack of right kind of faculty and dearth of proper infrastructure to run them,” said N K Dhooper Professor emeritus, IMT Centre for Distance Learning, Ghaziabad.

It’s a piquant situation for those managing or running B-schools in India. And there are over 3,500 of them. A majority of these schools had come up over the past decade or so on the back of the economic reforms that ushered in large-scale foreign direct investment into manufacturing and other sectors. These schools came up to cash in on the increasing demand for management graduates. But the demand has been sluggish in the recent past, due to the economic slowdown.

On one hand, there is a severe shortage of trained faculty, which varied industry estimates place at a high 50 per cent of the actual requirement. As a result, several of these schools are opting to fly down experienced faculty from developed markets to conduct core classes as well as short-term courses. Even some of the top-notch B-schools in the country seem to be facing this problem, albeit of a lower degree.

On the other hand, a number of B-schools have either been closed down or are facing closure due to their inability to attract sufficient numbers of students to get enrolled year after year.

While many B-schools have been closed down due to lack of basic infrastructure, a few others had to beat a retreat due to their inability to place their students with leading companies.

With the economic slowdown hitting corporate balance sheets across the board, a large number of B-schools other than the top 15-20 institutions like the IIMs are going through hard times on account of a sharp 40-50 per cent drop in campus hiring and a similar decline in the number of students opting for fresh admissions, said a recent study conducted by the Associated Chambers of Commerce and Industry (Assocham).

Campus recruitments have fallen drastically. As a result, a large number of B-schools are unable to attract students. About 190 B-schools were closed down in 2012 in major cities like Delhi-NCR, Mumbai, Bangalore, Ahmedabad, Kolkata, Lucknow and Dehradun, among others.

Another 165 are struggling for survival, said the study.

The number of B-school seats for MBA programs in India grew almost fourfold from 95,000 in 2006-07 to 3,60,000 in 2011-12, resulting in a five-year compounded annual growth rate of 30 per cent. A lot of B-schools have either been closed or are facing closure due to their inability to attract sufficient numbers of students to get enrolled year after year. Apart from the IIMs and a handful of other top B-schools, it will be difficult for other business schools to get 100 per cent placements in the future. This capacity was built based on the projection of a 9-10 per cent economic growth. Unfortunately, job opportunities for MBAs have not grown in the same proportion during this period, thanks to the global financial crisis and the economic slowdown that followed.

“Business schools are closing down due to poor quality of education, lack of right kind of faculty and dearth of proper infrastructure to run them. Over the years, B-schools mushroomed minus the credentials and without verifying the potential for the right kind of students,” says N K Dhooper, professor emeritus & adviser at IMT Centre for Distance Learning, Ghaziabad.

Sankaran P Raghunathan, professor of international business and dean of The National Management School, Chennai, puts it in perspective. “B-schools are no different from businesses. The supply needs to be bought by the consumers for it to survive,” he says.

According to him, B-schools think they are making MBAs and students are the consumers. Whereas in reality, education is the product here and the industry, which recruits these management graduates, is the consumer. As a result, there is a mismatch between the expectations of the industry and the actual product being offered to the market.

The Assocham study said the global uncertainty affected placement patterns at B-schools. The number of placements has been fewer and average pay packages have been flat. Apart from the IIMs and a handful of other top B-schools, it will be difficult for other business schools to get 100 per cent placements in future.

B-schools have to improve infrastructure, train their faculty, work on industry linkages, spend money on research and knowledge creation and pay their faculty well in order to attract good talent, the study pointed out.

From the student’s point of view, the way one looks at an institution has changed in the present scenario. He is looking for a 1:1 match between the fee he pays for a course and the salary he is likely to get after the degree.

As a result, B-schools that charge low fees do not attract students, who think they will end up getting a lower salary. On the other hand, institutions that charge higher fees do draw students, but there are not enough jobs that offer high salaries.

“There is a complete mismatch in expectations among the three segments – B-schools, students and the industry. The expectations of each segment simply do not match that of the other,” says Sankaran.

A part of the blame also lies with the pathetic undergraduate education system. About 67 per cent of general graduates are not employable. Having wasted four years of their prime and finding themselves unemployable, they turn to MBA programmes. “But the B-schools find it difficult to make them learn in two years, especially after wasting four years. Hence, the input itself is a problem,” Sankaran points out.

Questions have also been raised as to whether the B-schools are doing a good job of imparting education and if they are delivering it in the right format?

People who run the undergraduate institutions also end up running MBA courses. As a result, the problem persists. “We as a country have failed to groom quality teachers over the past 25 years, because the system itself runs on approvals, and not on accreditations. As a result, anyone can teach anything in India. Thus, there is an input problem, process problem and hence an output problem,” Sankaran explains.

On its part, the industry needs to join hands with the B-schools to decide on what needs to be imparted to make these management graduates employable. The faculty problem has been there for several years, and it is only going to magnify over the next 10 years. In the US, people are trained to teach; India has failed to do this. Singapore focused on this area long before and it took 25 years for that country to establish itself as a leading player in the international education market. An estimated 44 million students study outside their home countries every year and industry estimates pegs the revenue potential of this industry at $44 trillion. “As a result of the country’s failure in establishing a proper system, we are now a leading importer of this service, instead of being an exporter,” Sankaran points out.

Education can be an economic engine, not only to meet our demand but also to take it to the overseas market, as it happened in the case of the IT industry, which today accounts for seven per cent of the country’s GDP and 30 per cent of exports. It should be noted that even the IT industry suffered for the initial two decades due to lethargy on the policy front. “Let us not do that mistake on the education front. The need of the hour is to invest on creating the right system,” says Sankaran.

According to Dhooper, when there is a shortage of really competent faculty, the recruitment of the right faculty becomes even more difficult for institutions. At the same time, it becomes very difficult to retain good talent. “In fact, recruiting faculty through references is a more reliable mode of recruitment; but finding such reference is not an easy task,” he feels. As for the newfound trend of flying down overseas faculty, Dhooper says this could at the most be an interim arrangement and not the end solution. Flying down professionals may be a temporary solution or maybe an add-on flavour to teaching.

“B-schools should look for industry experts having a taste for teaching on sabbatical or on a visiting basis, besides recruiting academicians from other B-schools or universities. They can also have arrangements for exchange of faculty to supplement or complement their pool of talent” says Dhooper.

NSB’s Sankaran is not so enthusiastic about using industry experts. “Institutions recruit people with industry experience in order to overcome shortage in faculty. But these people end up sharing only anecdotes, which do not really add much value,” he says.

Technology could be an option for B-schools to focus on in order to overcome faculty crunch, feels Dhooper. “Faculty shortage can be overcome by B-schools to a great extent by using technology and internet by having bipartite arrangements to help each other, wherever they can through exchange of faculty, without loss of time and without physical presence in the class through video conferencing,“ he says.

TCS Insights: This article highlights the growing gap between the top tier and the next level of academic institutes. It also highlights how Tier 2 institutes are not able to address student expectations such as quality education delivery and employment opportunities.

This presents an interesting opportunity for Canadian colleges to tap into those students who have not been successful in getting into the top Indian institutes due to limited intake. It also represents an opportunity for students as potential recruits for quality programs in Canada.