Reality check for executive factories

The IIM’s have long justified the rapid and unchecked increase in their fees on the grounds that students are assured of a good placement. Consequently, the institute and its dependents (the teaching staff) should charge “appropriately” to deliver “quality” education. In the case of IIM A, fees have increased from approximately Rs 1.5lakhs in 2004, to Rs 6lakhs in 2009 (CAGR of an astounding 32%). The unstated position appears to be that rather than being non-profit institutes of research and education, IIM’s should now be viewed as glorified placement agencies and finishing schools for graduate students. Incidentally, IIM’s make in excess of Rs2crs per year from placement fees alone.

The recently concluded placement session has been a much needed reality check for the IIM’s. Placement was slow, and students witnessed a salary drop averaging 30% across most IIM’s.

Maybe this will lead to some serious, and much needed soul searching. If the argument is that rising salaries are in some ways related to the “value add” that the institute delivers – then, one has to conclude, that the institute has actually added lower value to the current crop of students. I wonder if the students then entitled for a refund in fees!

The IIM’s seem to suffer from unbridled greed - that has been at the bottom of the current meltdown in the US. No justification can be offered for a 30% increase in fees year-on-year for over a decade (it started well before 2004). Linking fees to salaries ensures that students may need to take loans, and this restricts their ability to explore options of entrepreneurship and of working in socially relevant, but poorly paying jobs. This, when as a public institution, the IIM’s are adequately supported by the State (they have existed for over four decades, and have built their reputations over 3 decades of public support). Operating independence for a public institution cannot be divorced from responsibility to the public and its government. Rather than competing on increasing salaries and costs, it would be more appropriate if the IIM’s focused on creating a management education paradigm suited for the needs of a diverse and uneven economy as India.

The key success factor for the IIM’s has been their ability to draw within their fold, the cream of aspirants – and government ownership, a merit based entrance and low fees have each played a significant role in this. Change one, and the IIM’s will not be the same again. I hope the IIM’s are listening.