Best B-schools: IIMs badly need reforms to stay relevant and compete globally

About two years ago, Reliance Industries Chairman Mukesh Ambani made his way one day into the Indian Institute of Management, Bangalore (IIM-B) to meet the faculty. Ambani, also the head of the institute's board of governors, was livid. "All of us live in a civil society. We may have differences of opinion but no one should cross the limits of civility," he told the faculty. "The entire IIM-B board is behind me and I am behind Pankaj Chandra. If anyone crosses the limit, it will be dealt with seriously."

Ambani's outburst was in reaction to a vicious campaign by some faculty members against steps introduced by Chandra, then director of IIM-B, to improve the institute's functioning. A PhD from the prestigious Wharton School, Chandra had joined IIM-B in December 2007. To many he seemed the right choice to cure IIM-B of its "public-sector mentality" where faculty members were worried more about job continuity and time-bound promotions rather than teaching or research. When Chandra pushed for reforms, many revolted. Nasty, anonymous emails opposing Chandra also started doing the rounds. The email campaign ended after Ambani's reprimand. Some of the faculty members who had resisted Chandra's measures left shortly thereafter to join other IIMs.

Chandra, whose term ended in September, refused to comment on his tenure at IIM-B saying only that the opposition was a "change management issue". A senior IIM-B professor, who does not want to be named, throws more light. The professor says Chandra tried to build a vision for the institute without taking the faculty into confidence. "He (Chandra) tried to introduce a new faculty evaluation system and younger professors felt threatened," says the professor. "There was excessive emphasis on North American standards and a push to publish in North American journals. He also wanted to start a one-year management programme when the rest of the faculty felt IIM-B was not adequately prepared."

Faculty-related problems when change is introduced are not unique to IIM-B. Other IIMs are grappling with similar issues - all proposed reforms are vehemently opposed by those unwilling to change. "There is always resistance to change in any organisation," Samir K. Barua , a former director of IIM-Ahmedabad, told Business Today via email. He listed four challenges he faced at the institute - placing greater emphasis on knowledge creation, measuring the faculty's contribution through a formal system, aligning the goals of individuals with the goals of the institute, and using faculty time for academic activities rather than administrative work.

In 2010, Ajit Balakrishnan, Chairman of IIM-Calcutta (IIM-C), recommended 150 to 160 hours of classroom teaching a year - the current trend is 90 to 120 hours. He was criticised, even by IIM-C teachers. Pritam Singh, a former director of IIM-Lucknow, proposed a faculty review after every five years. "If they [faculty members] are doing well, there can be increments and if not, they should be under watch for another three years," says Singh. "There was a revolt against me. The idea was totally rejected by the faculty."
So, are our IIMs going downhill?
 
'Comfortable mediocrity'
To be sure, IIMs still stack up as India's best. They occupy four of the top 10 positions in Business Today's latest B-school rankings. But globally, the situation is different. Only two IIMs - Ahmedabad and Calcutta - figure in the Financial Times's list of top 70 global B-schools offering Masters programmes in management (see Way Behind). According to a list prepared by The Economist, only IIM-A is among the top 100 management institutes in the world.

Clearly, IIMs have a lot of catching up to do. The institutes are relying on their past success and wallowing in "comfortable mediocrity," says a former member of IIM-B's governing board. The executive, who does not want to be named, says that, unlike many renowned global institutes, IIMs don't have a digital strategy for the future. The Massachusetts Institute of Technology has put its course material online while Stanford University students can attend a classroom session from anywhere in the world. "If you are talking of producing leaders, you need to have a view of the world five to 10 years out," he says. "That view is missing."

Many of the 13 IIMs are seen as job breeding machines. This view has gained currency after the government opened seven IIMs since 2007 in Shillong, Rohtak, Ranchi, Raipur, Tiruchirappali, Udaipur and Kashipur. Indeed, such proliferation could lead to a set of sub-scale institutions.  "If you want an institution to flourish with lots of ideas, thoughts, and energy, you want a minimum number of people doing research in that area talking with one another and nurturing one another," says IIM-A Director Ashish Nanda. "If the choice is between a few institutions that are at scale and really excellent or a lot of sub-scale institutions, I will choose the former."

While IIMs must continue to produce managers, they can be more than that. With multinational companies looking East, IIMs can play a huge role in thought leadership, formulating management theories and practices as well as local case studies. India has become an important player in the global economy and the challenges faced here are different from the challenges encountered in the US where the bulk of management theory was developed. "We may have to come up with a new or expanded version of knowledge. We have a great opportunity and it will be a pity to miss this opportunity," says Janat Shah, Director, IIM-Udaipur.

Jamshed J. Irani, Chairman of IIM-Lucknow, agrees with Shah. He says it is useless to teach case histories from Europe and the United States at IIMs because their situations are different from those in India. "We have to create our own syllabus. IIMs have been a bit slow in doing research on management in India," he says.
 
Executive programmes
With so many problems to resolve, why does the government not interfere in the IIMs' functioning?

IIMs are autonomous institutions registered as societies under the Societies Registration Act. The governing boards of IIMs, which oversee their functioning, have at least one representative from the Ministry of Human Resource Development. But after 1991 the government exhorted IIMs to be financially independent. The older IIMs no longer receive government funding to the extent they did earlier. So, they conduct short training courses for managers from companies and government agencies to earn revenue. IIMs can charge up to Rs 20 lakh for 25 participants for a five-day executive programme - both the institute and the professor involved make money.

Even the best of educational institutes need funds to meet their goals. IIM-A, for instance, had no operating surplus in 2006/07 after accounting for pension liability. Its performance improved under Barua's tenure, and it achieved an operating surplus for the first time in its history in 2011. In 2012/13, it had a surplus of Rs 7.6 crore.

While executive programmes are necessary from a financial autonomy perspective, they are not adding any intellectual value either to the institute, the faculty or even to participants. These courses are increasingly taking faculty time away from teaching in academic programmes as well as research, the Balakrishnan Committee noted. According to Shah of IIM-Udaipur, many professors spend about 45 per cent of their time teaching in degree programmes, 25 per cent in executive education, 15 per cent in research and 15 per cent in administration. R. Ravi Kumar, who teaches organisational behaviour at IIM-B, says these programmes are not customised as per the needs of participants. "IIMs can get managers from defence organisations but we could explain concepts from consumer goods maker Hindustan Unilever. They will not get it," he says.

A president at a European company operating in India recalls a recent incident that suggests the theories the external world picks up from IIMs can be outdated. The company hired consultants from Bain & Co and also selected IIM faculty to conduct workshops for its executives on strategic thinking as part of its leadership development agenda. "A lot of the methodology used by IIM professors was based on theoretical frameworks which is rarely applied in practice, such as the one where businesses are mapped by whether it is a Dog, a Star or a Cow, and the Porter's framework that talks about the five forces of competition," says the executive, himself an IIM-A student, asking not to be named. "In contrast, Bain had a lot of practical tools leaders could use and readily apply in their day-to-day jobs."

Faculty shortage, competition
IIMs have another problem at hand - attracting quality faculty. Ashok Banerjee, Dean of New Initiatives at IIM-C, says many professors will retire at his institute in the coming three years. In the finance department of IIM-C, 30 to 35 per cent professors will retire. But PhD scholars are hard to come by. Research programmes at Indian universities have deteriorated in recent years. "We have to depend on Fellows from other IIMs or overseas PhDs now," he says.

But IIMs also find it tough to match the salary expectations of overseas recruits. Banerjee says a PhD scholar in finance in the US starts with $200,000 salary (about Rs 1.25 crore) but IIM professors get Rs 18 to 20 lakh a year. "We cannot match the salary because we cannot create disparity. So, we target faculty who come back to India for some other reason," says Banerjee.

Hiring and retaining talent could become a bigger challenge in the future. In September, the government allowed foreign universities to set up campuses in India independently. If the world's best B-schools set up shop, and, to be sure, that is a remote possibility as of now, good teachers will have options. As for students, they already have multiple options. They can study abroad where schools typically provide a wider global perspective of business. There are options within India, too. Many engineers wish to go for an MBA after gaining a few years of work experience, and some companies such as Piramal Enterprises have tied up with B-schools such as the S.P. Jain Institute of Management and Research for management courses for their employees. "IIMs are losing some good candidates to alternative MBA programmes," says Srinivas Chunduru, President of Group Corporate Strategy and Human Resources at Piramal Enterprises.
 
The road map
So, what should IIMs do to prepare for the future?

Depending on who you speak to, the to-do list can range from three simple points to 21 pages, much like the Ajit Balakrishnan Committee report. There is consensus that IIMs must press ahead with more research and publications in top journals to establish thought leadership. This could mean freeing up teachers' time from administrative work. Some IIMs have started linking promotions to research output. The institutes also need to hire more people with industry experience. An example is Prakash Bagri, who quit chip maker Intel as its marketing director for South Asia. He is now a guest lecturer at IIM-A, IIM-B and IIM-C.

The pay scales of professors also need correction. "If you want a good professor, you need to pay him reasonably well," A.M. Naik, Chairman of IIM-A, said at a recent press conference. "When students graduate at the age of 23 or 24 from IIMs, the minimum salary they draw is Rs 19 lakh. And the top 10 to 20 per cent get more than Rs 1 crore. And what are you paying to your very experienced professors? This is the fundamental issue that needs to be addressed," he says.

A more difficult task would be to build emotional quotient in students. The executive from the European multinational quoted earlier says students his company hires from IIMs are not as good at networking as his foreign MBA recruits. Building emotional quotient will help students become team players. IIMs, he adds, need to increase the global mix of talent to help students better understand cross-cultural relationships required in multinational companies.

The institutes must also push through reforms in teacher evaluation. Otherwise, complacency could set in. Complacency in education, writes Hamish McRae in his book What Works: Success in Stressful Times is a catastrophe. He says even in Harvard, arguably the world's best university, teachers do not take their jobs for granted. "There is the outside scrutiny of appointments with young junior professors knowing that the odds of gaining a higher position are against them, for there are always several good candidates for each tenured post."

That's what IIMs must strive for to stay relevant and become a more competitive place.

Additional reporting by N. Madhavan, Suprotip Ghosh, Arunima Mishra and Anik Basu