Wednesday, March 26, 2008

Indian Institute of Management (IIM): Dedicated to the service of conning the nation

IIM Bangalore, an institute I had the privilege to study, announced today it has increased its annual fees by 60% to 4 lakhs a year thereby making a 2 year PGDM course in IIM Bangalore worth 8 lakhs . One wonders at the justification of such a hike and one questions too in the same breadth the autonomous character of the IIM. .

Before we discuss how banks are falling one over the another to finance a candidate selected by the IIM, let us first look at the character of the institute and the course.

Today, IIMs are spoken about in the same breadth as the IITs. (Although the brand name of the IITs has been unquestionably established by the Silicon Valley entrepreneurs in USA. IIMs do not have a brand name to speak about globally)
What makes an IIM special ? Does the course it teaches make it special?

PGDM or MBA claimed its fame as a professional course in the post-depression period in Chicago in USA to acclimatise management professionals with the nuances of business. Its core was based on economics and its shell was filled with ornamental courses like marketing, operations and finance.

An MBA is essentially a “con” course which has no fundamental pre-requisite for admission. A graduate in “any discipline” with marks as little as 50% is eligible for the course.
Does it give you a hint ?
Can you compare a Masters course in Computer Science or Biochemistry or Bio technology or Engineering with MBA ?
You cannot. Because the acquisition of knowledge in the graduations courses of more fundamental disciplines like science make you eligible for the Masters course in the same discipline. While you can be a mediocre graduate of any discipline with little knowledge to be eligible for a MBA.

A research paper in the M.Sc or M.Tech has to be original in its contribution towards progress of knowledge. But , a research paper in MBA can be empirical in nature (as you so often see in Marketing papers ) and still be accepted for publication. There is no theory which comes out of experimental laboratories in MBA. All you require to write a paper is either to draw a 2x 2 or 3x3 matrix of variables (like demand, cash flow, profit etc..) and postulate a hypothesis or commission a research of consumers and do an esoteric statistical analysis to prove some obscure point of how consumers spend 10% of their income on aphrodisiacs while they talk on their cellphones during their evening visit to the loo.

The IIMs have perfected this con. Do you know how ? I shall come to that later.

Firstly, why are the IIMs famous ? Are they famous because of their elaborate infrastructure , faculty etc or because of their successful alumni in various sectors of the economy ? The answer for obvious is latter. 200 thousand people take the CAT entrance test every year for the IIMs and only about 1500 qualify to get admitted in the 7 IIMs. That’s 0.7% . Roughly speaking 1 out of every 100 students applying for IIMs gets selected . In top grade universities in USA , the ratio is 1: 10 to 1:15. The IIMs have successfully resstricted the supply of seats to create an exclusivity where only the cream of graduate students in India can be eligible. Obviously, bright students that they are , they pick up any course like a jiffy. All they need is some guidance and not reputed faculty. Roughly , 40% of the students rise to become CXOs of organisations within 10-15 years of passing out and glorify the name of their alumnus.
Bottom line : It’s the students that make IIM famous and not the faculty. Having studied under some faculty, who could not even articulate their thoughts properly , I know that for certainty.

Consider a situation where you have 20 IIMs and 10,000 students graduating out of IIMs.(Incidentally the requirement of managers in India today are annually near about 30,000. This supply gap is being commercially exploited by the mediocre private institutes like IIPM & ICFAI). That would mean an admission to application ratio of 1: 20 , which is decent and closer to the international standards. But in a such a scenario, the IIMs would loose their exclusivity and the brand value as the students by themselves would not ensure success and the institutes would have to put in a much harder work from the faculty.

What is the quality of faculty in IIMs? Pathetic by international standards. The Indian business houses probably have 0.01% of such faculty as their business consultants while in the USA, faculty of A-grade business schools would either sit in the boards of multiple number of top corporate or consult them regularly. How many of these IIM faculty can claim to have to come out with original theories or postulates or formulae that deserve mention in textbooks? Negligible numbers.

So, what have the IIMs done apart from perfecting the “con” that goes by the name of MBA?

So long, the IIMs probably forgot to cash in on the demand for their seats. Now they have remembered their folly and are attempting to correct the same by raising the fees . Isn’t this a case of charging the market what it can bear to pay? Just because, the banks are ready to roll the money? What incremental value are the IIMs giving by raising the fees by 60%?
Better-paid top-grade international faculty ? No.
Better courses? No.
Better audio-visual infrastructure in the class room? No.
Free books ? No.
Larger number of scholarships ? No.
Then what ?

Just because the students are receiving an average annual salary of 15 lakhs or more in the placements , IIM Bangalore decided that its is best to make hay while the sun shines and thereby forgetting the fact that with a course fee of 8 lakhs the IIMs will now be that much more difficult and risky for a middle class academic student to get into.

So much for academic progress in higher education!

Its time that the students stand up and refuse to pay the unjustified hike and demand the value that a 8 lakh course deserves from a national institute.

Get us the best faculty of the region .
Get us the best infrastructure .
Throw out the junk faculty from the institute based on student feedback.
Reduce excess staff.
Abolish relative grading.
Increase student intake.
Have arrangement with reputed foreign universities for an one semester
residential exchange course.
Have free text books.
Have 50% scholarships.
etc. etc.

Otherwise, when the recession strikes the global market, IIMs will find it difficult to place students at even a decent average salary and Indian students will increasingly opt for the Whartons and the Harvards and the Dukes rather than pay an obnoxiously overvalued course fee for a mediocre post-graduate course .

P.S : If you did not know, IIMs are also not-for-profit organisations (NFP). An NFP charging 8 laks an year where their cost is probably 1.2 lakhs only per student. If this is not an unaccountable rip-off, what is ?

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