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Indian Institutes of Management: Overdue autonomy bonus

EducationWorld December 10 | Cover Story EducationWorld

Following recommendations of three expert committees, Union HRD minister Kapil Sibal has given in-principle approval to the country’s show-piece IIMs — hitherto closely tied to the apron strings of theministry — to rationalise their boards of governors, improve faculty pay scales, and establish formal fundraising offices to augment their incomes. Dilip Thakore reports

Better late than never, the winds of liberalisation and deregulation are beginning to blow through the country’s 11 Indian Institutes of Management (IIMs), particularly the pioneer ‘ABC’ IIMs sited in Ahmedabad, Bangalore and Calcutta (aka Kolkata). Recently three separate expert committees have submitted detailed reports suggesting ways and means to improve the IIMs’ governance (chaired by former Maruti Udyog managing director R.C. Bhargava), faculty and research (headed by Ajit Balakrishnan chairman of and fundraising (chaired by Hari S. Bhatia, chairman, IIM Raipur).

In light of the recommendations of the expert committees, Union human resource development (HRD) minister Kapil Sibal has already given in-principle approval to managements of the country’s show-piece B-schools to rationalise their boards of governors, improve faculty pay scales, and establish formal fundraising offices to augment their incomes, a natural exercise which curiously, was hitherto taboo. Although formal implementation of the recommendations will require amend-ment of the enabling legislation and charters of the IIMs, with Parliament preoccupied with weightier matters such as the Commonwealth Games and the 2-G spectrum allocation scandals, technical amendments to the Acts establishing the IIMs are likely to be passed without fuss or bother.

Loosening the apron strings of the HRD and its predecessor education ministry, to which the vintage ABC IIMs (IIM-Calcutta and IIM-Ahmedabad were promoted way back in 1961) were tightly bound for over four decades, was on the agenda of the reformist Kapil Sibal after he assumed charge of this ministry following the general election which returned the Congress-led UPA (United Progressive Alliance) to power in New Delhi in May 2009. But the tipping point for reform of the IIMs which enjoy high visibility and awesome reputation in India, is their poor standing in recent global higher education institution rankings.

None of them have featured in the top 200-500 league tables of the world’s best universities published annually by the London-based higher education research and rating agency Quacquarelli Symonds (QS), THE (Times Higher Education Supplement) or the Shanghai Jiao Tong University. The only top-ranked Indian higher education institution is the Indian Institute of Technology-Bombay, ranked 187 in the league table of the QS World University Rankings 2010.

However, absence of the IIMs and India’s B-schools in the league tables of the world’s top varsities is probably because they are not ‘universities’ but specialist institutions of professional education. Although none of the IIMs figure in the 2010 league table of the world’s top 100 business schools of the London-based Financial Times, this is attributed to classification issues. The prerequisite for inclusion in the FT B-schools league table is affiliation with European Quality Improvement System. Moreover the FT league table rates and ranks B-schools which offer the intensive 12-month postgrad progra-mme, while the IIMs offer 24-month postgraduate diploma programmes in business management. This perhaps explains why the Indian School of Business, Hyderabad (estb.1999) which offers an intensive 13-month MBA programme is the only Indian B-school included (and ranked a respectable No. 12) in the FT league 2010  table.

However, the IIMs which admit a mere 3,000 of the 300,000 college /university graduates who write their Common Admission Test (CAT) annually, are undoubtedly respected by corporates and employers around the world. This is testified by the growing number of foreign and multinational companies making their presence felt in these premium B-schools’ annual campus placement jamborees, and the stratospheric (by Indian standards) start-up salaries they offer mint-fresh IIM graduates, most of whom with no actual work experience.

Moreover even the international rating agencies are beginning to acknowledge the high quality of business management education they offer. In September 2010 for the first time ever, the Financial Times ranked IIM-Ahmedabad eighth among B-schools offering the “pre-experience Masters programme” in business management.

The London-based university information and rankings agency QS which claims its annual B-school rankings are heavily influenced by corporate HRD managers, is more conscious of the quality of Indian B-schools. Its 2010 Asia Pacific league table ranks IIM-Bangalore No. 5 among Asia and Australasia B-schools with IIM-Ahmedabad ranked No. 6 and ISB, Hyderabad No. 9 (Download userfiles/How Indian B-schools Compare.pdf ).

Quite obviously over the past half century since the first IIM was established in Calcutta, the country’s 11 Central government promoted IIMs have built themselves excellent reputations and are not without honour in India, even if not commensurately abroad. Miraculously, despite being government-promoted institutions, thanks to several strong early leaders such as John Mathai at IIM-Ahmedabad and Prof. N.S. Ramaswamy at IIM-Bangalore who asserted their academic autonomy, attracted competent faculty and constructed globally-benchmarked campuses and conducive learning environments, these B-schools have earned the respect of Indian industry which is ready to pay sky-high salaries for IIM graduates. But whether this is due to competent faculty and curri-culums (as their managements claim) or to their ability to attract (by way of excellent campuses and subsidised tuition) the country’s 300,000 most ambitious graduates to write the CAT and admit the cream of talent every year, is a moot point. Contemporary informed opinion seems to prefer the latter hypothesis, given that IIM professors have failed to earn reputations for original thinking or research.

Nevertheless despite — or perhaps because — of the good reputation they have earned over the past five decades, instead of being encouraged and celebrated, directors and managements of the country’s show-piece IIMs have been shabbily treated by New Delhi and most latter day ministers of the Union HRD ministry, which has the power of life and death over these nominally autonomous B-schools distinguished by their manicured 100-acre plus campuses, well-stocked libraries and excellent infrastructure.

In this context, it’s pertinent to note that although the three pioneer ABC IIMs were promoted in the 1960s, they became nationally prominent more than a decade later, and got into their stride in the 1980s when your correspondent was providentially appointed editor of Business India and Businessworld — the country’s first business-focused publications. As such I had the oppor-tunity to closely monitor the growth and development of these three IIMs.  At that time it became painfully obvious that because of tight government control of faculty remuneration which was closely aligned to government pay scales, and heavy subsidisation of students’ tuition fees which obliged the institutes to rely greatly on government funding, the IIMs couldn’t attract the brightest and best faculty with indep-endent research capability. And if since then the IIMs have established transnational reputations, their main achievement has been to attract the country’s best and brightest graduates. Within the infrastructurally well-equipped and enabling environments of the IIMs, these students have flowered through the spur of ambition and excellent self-study capability.

Yet, it was only a matter of time before the good reputation of the IIMs attracted the attention of the country’s interventionist and populist politicians who have almost destroyed India’s higher education system which in the 1950s was perhaps the most advanced in Asia and the third world. In 1999, Dr. Murli Manohar Joshi, a hardline stalwart of the BJP was appointed Union HRD minister of the BJP-led 22-party coalition National Democratic Alliance govern-ment which swept to power in New Delhi.

A former physics professor at Allahabad University, Joshi was widely expected to be sensitive to the real needs of Indian education. Instead he proved himself a veritable bull in the china shop of Indian academia. Shortly after taking charge at Shastri Bhavan, he blatantly initiated doctoring of social sciences school textbooks published by the National Council of Educational Research and Training to reflect dubious hindutva mythology; sacked the chairmen of the Indian Council of Historical Research and the Indian Council of Social Sciences Research, and stymied the promising independent fundraising initiatives of the country’s globally-reputed Indian Institutes of Technology (IITs), decreeing that all alumni donations and other funding raised by them should be deposited in a specially constituted Bharatiya Shiksha Khosh trust controlled by the Central government.

Moreover on February 5, 2004 the HRD ministry issued a terse note ordering managements of all IIMs to slash the tuition-cum-residence fees from the “exorbitant” Rs.1.5-1.75 lakh (US$ 3,340-3,890) to a uniform Rs.30,000 per year. This diktat was based on the tenuous reasoning of a Dr. U.R. Rao committee which argued that the world over public university fees were fixed at 30 percent of national income. Therefore the tuition fees levied upon students by the IIMs were much too high. Inconvenient facts such as the student body was largely middle and upper class and the actual cost of education provision to them was over Rs.3 lakh per capita per year and that upon graduation, students’ pay packages tended to be well above their annual tuition fees, were glibly  overlooked by the Rao Committee.

The Rao Committee’s report on the IIMs gave Joshi a perfect opportunity to tighten control over the IIMs by eroding their financial autonomy, a suspicion confirmed by Joshi’s move to pack the boards of the institutes. Fortunately this conspiracy which prompted an EducationWorld cover story (‘Outrage! Joshi’s IIM-grab angers middle class India’ — EW March 2004) came unstuck when the BJP-led coalition was unexpectedly defeated by the Congress-led United Progressive Alliance in the general election of May  2004, in which the overweening Joshi also lost his Allahabad seat. But unfortunately despite the IIMs being providentially saved from becoming  handmaidens of the HRD ministry by the general election, septuagenarian leftist Congress party stalwart Arjun Singh — the next incumbent of Shastri Bhavan (which houses the HRD ministry) — didn’t make life easier for the beleaguered managements of the IIMs.

In April 2005 hardly a year after he was given the HRD portfolio which he reportedly perceived to be incommensurate with his self image as prime ministerial material, Singh staged a spectacular intra-cabinet coup by resuscitating a report of the Mandal Commission (1980) and unilaterally decreeing an additional 27 percent (i.e in addition to the already 22.5 reserved quota for scheduled castes and scheduled tribes) for other backward castes (OBCs) in Central government universities and institutions of higher education (including the IIMs).

Given that OBCs reportedly constitute 53 percent of the population, neither the Congress high command nor the opposition parties dared to oppose the minister’s proposal and following the 93rd amendment to the Constitution, a new Article 15(5) making provision of reservations for OBCs, was unani-mously approved by Parliament in December 2005. The constitutional validity of the 93rd Amendment (Article 15(5)) was approved by the Supreme Court with the rider that Central government universities should expand their student intake capacities by 27 percent to ensure that the number of students admitted under the merit quota doesn’t decline.

For the managements of the IIMs whose number had now grown to 11 with the addition of IIM-Indore, IIM-Kozhikode and IIM-Shillong, the 93rd Constitution amendment translated into additional expense and faculty workload, although capacity expansion was permitted to be spread out over three years. Moreover soon after the new law became effective in December 2006 Arjun Singh demanded that the new reservation quotas be made applicable to faculty recruitment as well — a proposal which was unanimously opposed by managements of the IIMs. Presumably angered by the opposition to his extension of reservation demand to include faculty, in 2007 the minister constituted an expert committee under the chairmanship of R.C. Bhargava, a former bureaucrat who migrated into industry and morphed into the successful chief executive of Maruti-Suzuki Ltd — the country’s largest passenger car manufacturing company — to review the governance structure of the IIMs.

In January 2009, the Bhargava Committee submitted its report which recommended the establishment of a pan-India IIM board to protect the “IIM brand” which in effect would drastically reduce power and autonomy of each individual IIM; ruled out their establishing centres beyond their ‘regions’ within the country and made them subject to supervision by a ‘super board’ rather than leave them free to develop their own institutional personal-ities. The Bhargava Committee’s report was sharply criticised by directors of the IIMs, because it replaced HRD ministry interference with even closer supervision by the proposed pan-IIM super board, prompting a whistle-blowing special report feature titled ‘Bitter medicine for IIMs’ in EducationWorld (EW February 2009).

Yet once again just when it seemed like curtains for the IIMs, Indian democracy again saved the day for these beleaguered B-schools. In the general election of May 2009 the Congress-led UPA coalition was returned to power. However the communist parties whose support was critical to survival of the UPA-I coalition — and who were strongly supportive of Arjun Singh — were routed. In the UPA-II government sworn in on May 22, 2009, Arjun Singh was dropped from the cabinet and Kapil Sibal who had served effectively as science and technology minister in the UPA-I administration was sworn in as the new Union HRD minister.

Since then over the past 16 months, Sibal — formerly a front-rank Supreme Court lawyer cast in the liberal reformist mould — has moved with alacrity to clean the augean stables of India’s moribund, if not obsolete, education system across the spectrum.

The long-pending Right to Free and Compulsory Education Act, 2009 (aka the RTE Act) became law on April 1 this year and several other path-breaking legislation including the Foreign Educational Institutions (Regulation of Entry and Operations) Bill 2009, National Council for Higher Education and Research Bill, Education Tribunals Bill 2010, Prohibition of Unfair Practices in Education Bill 2010 and the Medical Council Amendment Bill 2010, are pending approval of Parliament.

Unfortunately these widely awaited reformist Bills have been languishing in Parliament which has been suffering almost daily disruption because of the Commonwealth Games, Adarsh Society and 2-G spectrum allocation scandals. Nevertheless the general expectation is that Parliament is likely to pass the Foreign Educational Institutions Bill without prolonged debate, clearing the path for relatively well-funded foreign universities and B-schools to establish branch campuses in India. Against this backdrop, there is virtual unanimity within academia that India’s few world-class indigenous institutions of higher education such as the IIMs and IITs, need to be urgently given greater freedom to augment their revenue by raising tuition fees, initiate fundraising drives and improve the remuneration and service conditions of faculty, to forestall their flight to newly arrived foreign institutions. Hence the in-principle freedom given by the HRD ministry to the IIMs to get their act together.

To their credit some IIM directors have moved fast to exercise the operational freedom conferred upon them by the ministry. IIM-A and IIM-C have raised tuition fees substantially with both of them eliminating the subsidy element embedded for over four decades in tuition fees. For instance IIM-A increased its tuition-cum-residence fee for its two-year postgraduate diploma in management (PGDM) from Rs.12.5 lakh in 2009-11 to Rs.13.7 lakh for the batch of  2012, and IIM-C from Rs.9 lakh to Rs. 13.7 lakh.

Ironically, the top brass of IIM-Bangalore which has been given the clearest green signal to prepare for a new autonomous regime, is the most unenthusiastic of the ABC business schools about the new era of liberation about to dawn for the IIMs. While the chairman of IIM-Calcutta and director of IIM-Lucknow warmly welcomed Sibal’s new liberation charter for Indian’s premier B-schools, despite a rain of telephone calls, e-mails and letters, Dr. Pankaj Chandra director of IIM-B, refused to speak with your correspondent on the issue. Accor-ding to his office, he is awaiting the official minutes of the meeting which IIM directors held with HRD minister Kapil Sibal on October 13 when in-principle clearances to exercise greater autonomy were given.

Chandra’s excessive caution in keeping the public informed about the future course of IIM-B in which several hundred crores of taxpayers’ funds have been invested is ironic, because of all the country’s 11 IIMs, the Bangalore-based B-school has been given the clearest go-ahead to prepare the ground for full autonomy in anticipation of enabling legislation. “It has been agreed to (sic) in principle in the case of the board of IIM-Bangalore that they would have powers to create posts within approved norms, to open centres in India and abroad, to amend rules within the framework of Memorandum of Association and Rules, to approve their own budget and manage own funds generated by the institute etc,” says a HRD ministry press note dated October 11 released through the PIB (Press Information Bureau). Chandra’s lack of social skills and ignorance of elementary public relations raises doubts about his ability to conduct negotiations for establishing campuses abroad, and manage fundraising drives permitted under Sibal’s liberation charter for India’s premier government-owned B-schools.

However unlike career academics cast in the traditional bureaucratic mould (Samir Barua of IIM-A and Prof. Sekhar Chaudhuri of IIM-C also failed to respond to phone calls and e-mail messages), Ajit Balakrishnan chairman of and the IIM-C board of governors who was tracked down while travelling in Central America “with scant internet connections”, expresses refre-shing enthusiasm about the imminent liberation of IIMs. “Although final policy pronouncements have not been made, in IIM-C we are busy implementing plans to add faculty, complete campus expansion and step-up own-funded research,” he informed EW’s Kolkata correspondent Sujoy Gupta in a brief e-mail message.

Likewise, Dr. Devi Singh, an alumnus of IIM-A who took charge as director of IIM-Lucknow in 2003 after serving with MDI, Delhi as director and lecturing at McGill University, Canada, is also enthused about the freedom charter in the offing for India’s show-piece B-schools which have hitherto been denied natural progression to academic and administrative autonomy. “Although these freedoms have always existed in the charters of the IIMs, now they have been re-confirmed and clearly extrapolated. Therefore they should not be looked upon as new advantages, but as an opportunity to conso-lidate, expand and develop IIMs. By clearly defining our freedoms to recruit faculty, start foreign campuses and initiate fund-raising drives, a great initiative has been taken by the HRD ministry,” acknowledges Devi Singh.

Ironically, the reaction to the liberation charter of IIMs of heads of independent B-schools which should fear compet-ition from newly energised autonomous IIMs, is more enthusiastic than of plodder career academics who have risen to the top of the country’s 11 IIMs which urgently need to jettison their government-style bureaucratic culture.  Dr. Bala Balachandran, formerly distinguished professor at Carnegie Mellon University and the Kellogg School of Management of North-western University, USA, and latterly founder and dean of the Great Lakes Institute of Management, Chennai (estb.2004) is enthused by the liberation of IIMs from the stranglehold of government and the HRD ministry.

“This is a step in the right direction taken at the right time. Kapil Sibal has rendered great service to the IIMs by preparing them to take on B-schools around the world. The HRDministry has cleared the decks for entry of foreign universities, including B-schools to establish campuses in India under the Foreign Education Institu-tions Bill. Therefore it’s only fair and right to ensure that India’s best institutions such as the IIMs and IITs are not handcuffed or shackled. I’m all for free markets and free competition so the best can succeed, and the under-serving B-schools are shown their place. The Great Lakes Institute is ready for competition and we are happy to let the market dictate our ranking and outcomes,” says Balachandran.

With the Bhargava Committee’s recommendation to establish a pan-IIM super board to ensure IIM brand uniformity a non-starter, and each IIM now free to develop its own identity and manage its own finances, almost half a century since the pioneer ABC IIMs admitted their first batch of students, the path has been cleared for them to chart their own courses without micro-management by the HRDministry. Yet administrative and operational freedom inevitably imposes new responsibilities upon these B-schools to engage with the real Indian economy (see Prof. Ramaswamy’s critique p.41), break free from the government mindset and devise innovative ways to augment their revenue streams by inter alia, mounting Harvard Business School-style fundsraising drives to build respectable endowment corpuses.

These imperatives may require leadership changes and adoption of new management cultures to enable India’s show-piece B-schools to trim their sails to negotiate the stiff winds of competition that are beginning to blow their way from within the country and foreign climes.

With Hemalatha Raghupathi (Chennai); Sujoy Gupta (Kolkata) & Vidya Pandit (Lucknow)

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