In the latest Financial Times (FT) rankings of global business schools, the Indian School of Business (ISB) has been ranked No. 20, above Northwestern University’s Kellogg School of Management. This came as a big surprise for me. Before I analyse some aspects of the ranking, let me say I am very impressed by the way ISB has grown in the past three years.
I have been a regular visitor to ISB since it started operations from its Hyderabad campus in 2001. The school has invested close to $50 million (Rs197 crore) in infrastructure and it shows. I even attended one of its classes to have a feel of the pedagogy and felt it truly measures to international standards.
I know ISB dean Mendu Rammohan Rao from the time he was director of the Indian Institute of Management, Bangalore (IIM-B). Internationally known for his research work, he has proven to be the lucky mascot for ISB. When he took charge in 2004, one of his objectives was to reduce dependence on visiting faculty and cultivate a permanent faculty to make ISB a research-oriented institute. He has been partially successful in this objective. Before he joined, there were doubts about the viability of the project. ISB faced problems repaying loans from different financial institutions. The school was also heavily dependent on visiting faculty (it had three permanent faculty initially) and even had a part-time dean who would spend six months teaching abroad. The placements in the first two years were not so exciting and, from a return on investment perspective, joining ISB didn’t seem to be a good proposal for many prospective students.
Things have changed for the better since 2004. Now, it has 25 permanent faculty members, but the number of visiting faculty members is far higher, 105. Most of its permanent faculty members, though, have to their credit publications in reputed international journals. With the increase in batch size from 126 to 418, ISB was also financially stable and has operationally broken even.
Now the big question: Does it truly deserve to be in the top 20 worldwide?
I have my doubts. True, the school has many “star” faculty members teaching on the campus, but the fact remains that most of them are still borrowed from top B-schools abroad, such as Kellogg and Wharton. Rao knows the importance of ranking. It was during his tenure in IIM-B that a workshop on ranking B-schools was organized where directors of top business schools, including all IIMs, participated. I greatly benefited from the experience. It was also during his tenure that IIM-B was ranked first (and also last time as the No. 1 B-school) by an Indian business magazine in 2000, beating IIM, Ahmedabad (IIM-A). It surprised me then, too. We also did a survey during the same period and found IIM-A significantly ahead of IIM-B. The difference in the survey results was because of the parameters used for assessment.
In the case of the FT ranking, too, it’s the parameters of assessment used that I feel are not adequate enough. It is significantly dependent on alumni feedback. In India, we have experimented with this and had to drop it as we found their response was very biased towards their alma mater.
Another parameter where ISB scores very high is weighted average salary. In fact, it has been ranked No. 1 against this parameter, leaving behind the likes of Harvard, Wharton and Stanford. The weighted average salary calculated is $169,355, using purchase power parity of about nine, which is fine. The issue here is that average salary alone can’t be taken as an indicator of the placement performance of an institute. Just a few students who are paid very well can distort the real picture. The average salary figures go down if a B-school has a large batch size. In my view, median salary is a better indicator of the salary that a student gets on an average. Also, weightage needs to be given to the maximum and minimum salary offered to get a clear picture of placements by any B-school. Then there is another issue, especially in India, how an institute calculates its average salary, which sometimes is inflated using CTC (cost to company) gimmicks.
Meanwhile, to be eligible to participate in the FT ranking, a business school must be internationally accredited by a body such as the AACSB, Amba or Equis; that’s the reason why the IIMs were kept out. ISB is yet to be accredited, though it has started the process. About 20 Indian B-schools, including some IIMs, have applied for such accreditation but none has received it, yet. But, whatever might have been the flaws in this FT ranking, ISB has managed to accomplish one of the important components of its vision statement: to be ranked among the top B-schools globally.
Ranking exercises now have different meanings for different people. It can be a tool to elevate the standards of education. It can also be a good public relations exercise to highlight an institute among its principal customers, that is, prospective students and recruiters. The people behind ISB will hopefully use it as an opportunity to further hasten its growth story in true measure.
Premchand Palety is director of Centre for Forecasting & Research (C-fore) in New Delhi, from where he keeps a close eye on India’s business schools. Comments are welcome at businesscase@livemint.com