Commodity Trap: Tragedy of Private B-School Education in India

Henry Chesbrough introduces the term ‘commodity trap’ in his book Open Services Innovation (Joey Bass: 2011). This term pretty much reflects the state of affairs in Indian B-Schools. Commodity trap arises from firm becoming vulnerable when it neither is able to prevent others from imitating or adapting its business/manufacturing process nor can prevent ceding its shelf space to its substitutes.

It would be suffice to state the private B-schools mushroomed post liberalization of 1991. In recent years, the number of B-Schools has increased to more than 4500 compared to less than one thousand in the year 2000. Equally true, is the increasing number of B-Schools that are closing shop. Furthermore, on an average only around 70-75% of the seats are getting filled. Question marks are being raised on the employability of the graduates. Moreover, many job profiles on offer apparently do not require postgraduate qualification in business administration. Given many private B-Schools charge around Rs5-8 lakhs as fees, the salaries on offer (Rs. 10-15,000/- per month in quite a few cases), prima facie do not seem to justify the investment by the students.

Before proceeding further, a note of caution would be in order. Firstly, the analysis covers a large mass of B-Schools that emerged post 1991 phase and serve the large bulk of students who see MBA as an essential step in the climbing the corporate ladder. It however, excludes the premium schools like IIMs and few others. Secondly the analysis and conclusions are based on the author’s experience in the industry for close to a decade.

What Ails B-Schools

A cursory understanding of management literature indicates the current outcome to be a possible result of the natural product life cycle. Initial fragmentation is now giving way to shake out. Going forward this will result in consolidation and maturity. Yet this would be too simplistic given the direction B-School entrepreneurs have travelled in the past two decades.

B-School entrepreneurship emerged broadly from two different sources. One, the existing educational societies and trusts viewed B-Schools as a natural brand extension. Secondly lot of new generation entrepreneurs set up B-schools, predominantly autonomous, seeking to build their legacy on being ‘industrially relevant’. This was in contrast to University affiliated institutions that perpetually seemed to be in a state of bureaucratic inertia implying an inability to keep pace with changing industry practices and processes. Yet, evidence points to similarity in outcomes barring honorable exceptions.

To a good extent, the academic entrepreneurs will have to shoulder the blame for the current state of things. To many, B-Schools often viewed as extension of other profit driven activities, the inherent unique academic system is a premium. While profit making is not bad, the functioning of the system is a cause of concern. Fee based revenues (driven by student numbers) is a major source of revenue (and in some cases sole source). Ancillary activities like hostels etc contribute to the remainder. In a system thus driven by numbers, intellectual stimulation takes a back seat.

Faculty often teaches 15-20 hours per week and thus left with little time to keep abreast of contemporary domain knowledge. Further at any given point of time, they often find themselves handling more than three subjects. Naturally over dependence on text book and PowerPoint material offered by publisher leaves very little scope for discussing practical applications. Book publishers take advantage in pushing books by promising teaching material thus creating a spill over. In addition, the academic administrative work often imposed on the teachers take away even the time they may have been left with. In the whole scheme of things, it is the quantity of teaching hours that matter and not the quality of content that gets delivered. An era of information abundance and consequent creation of an academic information surplus, students no longer agree to remain passive recipients of information. As the faculty unable to deliver to their expectations, discordant notes begin to emerge.

To attract students, institutions try to introduce new subjects often glamorous but may not be of relevance or interest to everyone. In the process, the students end up learning more than 10 papers per term and in a trimester system results in writing around 60 examinations over the two years. Add to this pot pourri ‘certification courses’, ‘soft skill courses’ and what not one get the picture of what the student goes through. Very little time is given to internalize the learning or even learn through projects and assignments. The course content and delivery starts resembling horse with blinders. Thus the quest for breadth sacrifices depth resulting in superficial understanding of fundamental concepts and in the placement season, a handicap. The academic advisory councils or faculty councils are often are mere rubber stamps in terms of academic curriculum development.

To remain at the top-of-the-mind of the prospective students, institutions seek to obtain higher rankings. Rankings while prima facie separate wheat from the chaff, yet in practice, turn out to be another exercise in administrative jugglery. It is no longer usual to find B-Schools trying to influence rankers and even accommodate rankers as part of their academic council resulting in conflicts of interest. There was a B-School which sought to differentiate itself as being ‘anti-ranking’ but paradoxically used its own ranking to promote this! A leading ranking agency introduced sub categories in the course of releasing its ranks and was soon followed by others. Needless to say, almost every B-School found itself in top 10 of some sub category or the other and thus could go to town boasting this achievement. In fact, the objective of B-School activities now appears to be pursued for the sake of obtaining a certain rank rather than as a mean for generating academic value or surplus. As rankings give way to international accreditations, similar stories are being heard and are likely to accentuate in the coming years.

The struggle to attract students has spawned a host of intermediaries. These intermediaries are normally the coaching institutions or educational consultants. Naturally their interactions with students make them ideally positioned to influence student decisions on taking admission to particular B-Schools. B-Schools often find themselves forced to accede to the wishes of these intermediaries. The educational fairs organized by intermediaries are a cottage industry in themselves. Even institutions which pride themselves on quality are forced to trade off as these intermediaries extract their pound of flesh in getting admissions for few of ‘their candidates’.

Further, the role of B-Schools is being increasingly seen as glorified placement agencies. It is an outcome of ‘we offer 100% placements’ a positioning strategy adopted invariably by almost every B-School. In practice however, things are pretty different. B-Schools often struggle in attracting good companies and their position has been made more difficult thanks to recent economic slowdown and consequent drop in recruitments. Companies which do recruit, offer propositions, that at least to the students, are not attractive relative to their commitments in terms of student loans or even profiles promised etc. Thus frustration builds up among the student fraternity particularly against the management.

Ranking driven practices result in institutions publishing their own journals and also organize conferences. Yet in the absence of rigorous review process, the sanctity of conferences and journals gets compromised. As publications become necessary for further promotions, faculty strives to publish in one of these conference proceedings or journals. New cottage industries of journal publishing and conference organization have mushroomed but very little ‘worthwhile’ research emerges from these. Acceptance rates are 100% in many cases. Most of the time, papers are largely ‘cut and paste’ exercises. Even PhD is a cottage industry and seen as an end in itself and not as a beginning of a research career. Intermediaries promise PhD from the diploma mills that have sprung up in all corners of the country. To be fair, given the institutional priorities as mentioned earlier, faculty hardly have incentives or resources to undertake research high on original content. Very little leeway is given in terms of funding or time to spend on primary research. Good research that emerges is primarily driven by individual initiatives than institutional initiative. Similar story exists for consulting and corporate training and other related activities.

Is there a Way Out?

The solutions lie in the academic entrepreneurs themselves. Bring back the academics in. Shift from cost cutting to academic value creation is the first step. Revenue diversification in terms of research and development, corporate training and consulting happen through creation of congenial environment for faculty to facilitate developing their competencies. Implied is also creating a career path for the faculty, hitherto absent by and large. Many seek refuge in academics as easy way out to mileage and traction. Quite a number are themselves industry rejects with very little substance to offer. This has led to what one of my professors and colleague termed the rise of ‘pseudo academics’. Secondly are the ‘rehabilitated’. Mostly in their fifties or early sixties, these view academics as post retirement job. Thirdly, we find second earners, mostly women who find academics relatively relaxing as they seek to balance their professional and personal lives. In recent times, these three categories have proved to be attractive catchment areas for B-Schools. No doubt, in both second and third categories, quite a few are highly motivated, passionate and deliver their best, yet, unfortunately their numbers are few and neither do they have sufficient freedom to make substantial difference. Finally, the career teacher, who by passion or interest seeks to be in this profession, but normally, remains ignored in the hierarchy. It is this group that needs to be nurtured if B-Schools have to work their way in.

Measures are required in improving transparency and accountability. Almost all private B-Schools function through a system of control through trusts and societies, an outcome being very little or no financial disclosure. The Mandatory Disclosure norms of AICTE do not go far enough in terms of financial transparency. Periodical financial fillings on part of B-School Management and accessible to all stakeholders will go long way in strengthening corporate governance in the institutions. Equally pressing is a need to allow for-profit institutions to start B-Schools. The current system of viewing higher education as a societal non-profit goal is a hypocrisy. Openness, sharing and integrity need to be key principles in B-School administration.

Each industry has its own unique intricacies and thus need to develop its ecosystem. B-Schools are no exception. Simple replication of industrial information systems into academics has to end. Each school has to discover its own way of building an environment wherein mutual exchange of knowledge both within and outside the class has to happen. As a matter of fact, faculty-student interaction outside the classrooms be it in form of projects, assignments has to be developed and nurtured. Personal experience suggests lot of hidden talent gets discovered during these interactions. B-school system simply cannot be held hostage to a 9-5 culture. It needs to discover its own dynamics in terms of work environment and interaction.

Besides, transparency also mandates students should not be promised the sky when the abilities of the institution are itself constrained either through internal limitations or fluctuations in external environment. Honest interactions with prospective and current students do promote trust and heal the frustrations. A direct line of communication between students and institutions disregarding the intermediaries can go long way in building mutual trust. Placements while nevertheless very important cannot be an end in itself and at most are means to an end. A shift from placement centric to academic centric paradigm needs to be recognized. Students should be encouraged and motivated to focus on their careers and ecosystem that exists within the institution should focus on that. Placements should be natural outcome of the learning they experience in the two years and not an exclusive activity independent of the learning.

Student events especially management fests have turned out to be clones with little difference among each other. Breaking this mould require a movement towards ‘academic events’ facilitating long interaction between students and corporates and might result in student achievements being effectively portrayed before the corporate world. The process of familiarization between corporates and students would help in placement season. A drastic overhaul in terms of subjects offered both in quantity and quality and repositioning the obsession with specializations to strengthening of fundamentals is a sine qua non. If students are strong in fundamentals and core subjects, extensions into specialization should not be a problem. If the degree itself is means to a placement, a question unanswered is the need to have add-on courses and certifications.

B-Schools have become prisoners of the very market forces that created it. If they have to break out of the commodity trap, they have set out on new unchartered paths and breaking conventional moulds. Yet the desire or even recognition of need to do so is absent barring few exceptions. The outcome thus is inevitable. Markets punish and punish badly.

(The views expressed are the author’s own views and do not reflect the views of the organization the author works for or is associated with)