Last week, I wrote about my visit to the Indian Institute of Management, Kozhikode, and why the Indian government should think hard before setting up an IIM in a place like Shillong. Mint got an overwhelming feedback for the column. Most of it was from stakeholders of IIM-K who didn’t agree with my assessment of what is reality.
They have some valid points, noting that I didn’t substantiate some of my statements with data. Before I respond to that, I must acknowledge the kind hospitality extended to me by the faculty of IIM-K during my two-day stay, which I immensely enjoyed .
I also have very personal high regard for Krishna Kumar, the institute’s director, who has done a great job in building the institution, under the given circumstances. He is responsible for building the Management Development Programme Centre, and the new water harvesting plant, without which the institute would have faced perennial water shortage. In spite of the heavy monsoon rains, the Kunnamangalam soil there doesn’t hold much water.
Now, the data of IIM-K, which I could access using the Right to Information Act.
The faculty strength of IIM-K in 2006 was 17, now it is 18 (this is based on the latest data they sent me two days ago). They didn’t author a single case study in 2006. This year, they have developed three cases. For 2005-06, their earnings from consulting services was Rs2 lakh and their earnings from management development programmes (MDPs) was Rs35 lakh. This year, the figures are Rs17 lakh and Rs46 lakh, respectively. They undertook only one joint research project with industry.
Now, compare these figures for the last academic year with a second-rung business school, such as Alliance Business Academy in Bangalore, a private B-school that came into existence in the same year as IIM-K, and charges lesser fees than the IIM.
Their permanent faculty strength is 45 and they have developed 63 case studies. Their revenue from MDPs was Rs1.1 crore, and revenue from consulting projects was Rs97 lakh. They also did 27 research projects with industry. All this in 2006-07. Further, for comparative analysis, the faculty strength of IIM Ahmedabad is 84. For last academic year, their revenue from MDPs was Rs9.9 crore and from consulting projects was Rs15.2 crore, allowing them to refuse government aid. They also did 94 research projects with industry and have developed 88 cases.
Some more facts. The construction cost of IIM-K was at least Rs40 crore. Today, the same structure would cost about Rs100 crore, and this doesn’t include the cost of land. Every year, the institute gets between Rs5 crore and Rs10 crore of aid from the Centre. That has gone on for 10 years now and is likely to continue for some more years.
Now, a new IIM will be put up in Shillong. If, after 10 years of existence, IIM-K has only 18 faculty members, how many potential faculty members will be eager to join a new IIM in Shillong? What will be their level of competence? What will be the learning outcome for students at least in the first decade or so? If a reservation policy is implemented, half the class would have entered using the caste crutch. Will Indian industry be enthusiastic in picking up such students? These are all serious concerns and need to be openly debated.
When the Top 3 IIMs were in their growth phase, they didn’t have to face competition and were amply supported by industry. Moreover, they were all located in major cities. But the future won’t be so generous with the new IIMs that are to be launched. The environment is—and will be—much more competitive. And if the government gets its act together, foreign universities are also likely to start their campuses here and the first set will likely want to start business schools. Under such circumstances, location is going to be a critical differentiator.
If the prime objective of setting up an institute is the social development of the area, then the IIM model is not appropriate as most of the students have corporate jobs in mind. A different model has to be adopted. I have already written about such a model in my earlier column in Mint, titled Change rural India into vibrant wealth creator. (www.livemint.com/rural.htm) This model will be much cheaper and more effective than an IIM-based model.
By establishing an IIM near an industry belt, our scarce resources will be optimally utilized. It will be easier to attract good faculty.
Moreover, institutes such as IIMs should be at the forefront of creating new knowledge and skills which can be gainfully adopted by industry. Any faculty, but especially an IIM’s faculty, has to constantly update itself with the challenges that the new emerging economies are posing to the industry. Strong industry interface will make them truly integrated institutes and they can generate substantial revenue from training, research and consultancy. In fact, it should be a policy goal to make them financially independent within within five years of their existence, and not be perennially dependent on taxpayer’s money for keeping them alive.
In such a scenario, IIMs will grow much faster and can crowd out the many dubious B-schools that have mushroomed post-liberalization, and be truly competitive.
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