Cover Story: The Best B-Schools

Reputation and recruitment, starting-salaries and waiting-lists -- they tell half the story. However, only by combining objective data with the subjective perceptions of stakeholders can the standing of management institutes be determined. BT presents India's definitive B-school rankings.

IIM, Calcutta, The Highest Rated Faculty by Students

It's becoming a dirty three-letter word. For, management education in India is being mismanaged. Even as courses in business management mushroom across the country in general universities as well as specialised schools, the quality of education, reflected in the knowledge-base and skill-set of the MBA they churn out, is plummeting. With permission for setting up Business Schools -- or, to use state-of-the-management shorthand, B-schools -- being handed out virtually indiscriminately, control over quality is conspicuous by its absence. No one denies any more that the resources that create an organisation's knowledge-capital -- and, by logical extension, its competitive-strength -- must, necessarily, be outsourced from management institutes today. But, as in any buyer-supplier relationship, the inputs must fit the corporation's need-matrix precisely. That's where the majority of our B-schools aren't delivering. Admits D.N. Khurana, 63, Director-General, All India Management Association: ''We're very concerned about the state of management education in the country today. Many are in it only for the money.''

Indeed, outside the mainstream, most management institutes simply represent business ventures aimed at cashing in on the rising demand for MBA degrees. With average batch strengths of 60, and average annual fees of Rs 50,000 in the non-university-run courses, each such school rakes in revenues of Rs 30 lakh a year, translating into high returns on the modest investments made in buildings and faculty -- and little else. Of course, bereft as they are of adequate infrastructure, trained faculty, and corporate expertise, most of the B-schools that dot the country's large and small towns can scarcely be expected to offer the course-content or the teaching-prowess that are necessary for imparting state-of-the-art management education. Observes Ramaswamy P. Aiyar, 61, director, Institute of Financial Management & Research, and former director, Indian Institute of Management, Calcutta: ''The basic issue, with so many B-schools coming up, is sourcing the right kind of faculty. Management cannot be taught by people who do not have adequate exposure to academia and industry.''

In the process, these B-schools are actually displaying poor business sense. They're ignoring their real customer: the corporate recruiter. That could be fatal since only the continued patronage of corporates, translated into job-offers for their graduates, will earn the B-schools a reputation among prospective students. Thus, recruiters' choices are widening only in numerical terms. Although there were as many as 487 B-schools in the country offering post-graduate degrees or diplomas in business management approved by the All India Council of Technical Education (AICTE) on April 1, 1998, no more than 50 make it to the serious recruiter's list. That's not surprising considering the AICTE's approval process: it only requires a physical inspection of the class-rooms and the library -- none of which is a surrogate for standards.

Qualitatively, corporate India can rely on only a handful of B-schools to imbue their students with the skills that managers really need. Concludes Cyrus Guzder, 52, CEO, Airfreight Express: ''The B-schools are not sufficiently in touch with the real world, and the pace of change, which is challenging management thought today, is threatening their credibility.'' As a result, the gap between the demand and supply for top-class MBAs is widening steadily, standing, according to BT estimates, at 36 per cent of the requirement last year. As more B-schools spring up to bridge this gap, without bothering about their standards, the managers' quality can only worsen.

Complains J.N. Mehra, 58, the CEO of the Rs 2,371-crore Essar Steel: ''With B-schools mushrooming, we just don't know where to go to recruit the right management graduates.'' That explains why dismayed and disillusioned corporates are even setting up their own B-schools -- integrating backwards, as it were -- to ensure greater control over tomorrow's managers. Among them are the the Rs 32,351-crore Tata Group, the 11,732-crore Kumaramangalam Birla Group, Rs 1,567-crore Crompton Greaves, the Rs 9,004-crore Reliance Group, the Rs 3,602-crore Mahindra & Mahindra Group, the Rs 3,771-crore Bajaj Group, the Rs 1,872-crore Godrej Group, the 3,086-crore Kirloskar Group, and the Rs 923-crore Nirma Group. Of course, they will be joined in the next century by the two new IIMs at Indore and Calicut. So, this honour roll holds the key to your company's future.

For, it rates the country's B-schools on their ability to grow, and provide the managerial expertise that your company needs. That was the mandate for the pioneering survey of management institutes, commissioned by BT to the Consortium For Strategic Management & Organisation Development (COSMODE), the Hyderabad-based organisation design and strategic management consultancy. The result: India's Best B-Schools, 1998 -- the first comprehensive and rigorously numbers-based as well as multiple-perspective study in the country, using a methodology specially designed after six months of research and consultations for identifying the key parameters of quality. Crucially, instead of adopting a unidimensional approach, the study ranks the B-schools on the basis of 360-degree feedback: from customers (a.k.a corporate recruiters), students, and teachers, and marries these perceptions to hard information on facilities, course-content, and placement-ratios to arrive at the final ratings. From auditing the talent-quotient of teachers to evaluating the infrastructure, from gauging the perception of practising managers about their alumni to checking the satisfaction-levels of corporates, India's Best B-Schools, 1998, tells you, and tomorrow's MBAs, who's leading and who's lagging in the race to become the country's finest management institute.

XLRI, Jamshedpur, The Highest Rated Faculty by Alumini

THE MAGNIFICENT SEVEN. Sixty per cent has long been the perceptual dividing-line between the good and the mediocre. Going by that convention, only 7 B-schools make that grade by posting scores over 600 out of a maximum of 1,000: the four Indian Institutes of Management, at Ahmedabad (IIM-A), Bangalore (IIM-B), Calcutta (IIM-C), and Lucknow (IIM-L); the Xavier Labour Relations Institute (XLRI), Jamshedpur; the Faculty of Management Studies (FMS), Delhi; and the Jamnalal Bajaj Institute of Management Studies (Bajaj), Mumbai. Significantly, the scores of the seven are not clustered together: they range from 669 (Bajaj) to 918 (IIM-A), showing the vast gap even at the top.

Extending the cut-off to 500 -- 50 per cent at the graduate-level, incidentally, is a pre-requisite to admission in all 50 institutes -- sees only 8 more schools entering the list. By these standards, there are just 7 A-class and 8 B-class schools in the country. With a few good, a few more mediocre, and many indifferent representatives, the universe of the B-schools does not adhere to the traditional bell-curve distribution. With scores of less than 400 (actually, between 364 and 215), 29 schools don't really make the grade. The reading: the overall state of management education in the country could be better.

The hot list of the Ten Best B-schools throws up few surprises. The IIMS are all there. Only, IIM-B is placed ahead of IIM-C -- a pointer to the shape of things to come? -- and IIM-L comes in fifth, just behind XLRI. The relatively unexpected inclusion is that of the Gurgaon-based Management Development Institute, which is placed eighth. And the surprise exclusion is that of the Pune-based Symbiosis Institute of Business Management (Symbiosis), which ranked 16th.

THE RECRUITER PREFERENCES. Over time, the best B-schools have managed to carve out successful niches for themselves. Thus, if XLRI and Punjab University are the best hunting- grounds for companies seeking hr professionals, IIM-C and IIM-l produce the most sought-after operations management recruits. If, however, most companies seem to display an overall numerical bias towards the established B-schools, the reason could be a desire to maintain cultural homogeneity: a company most of whose managers belong to one particular school prefers to remain brand-loyal. Their recruitment from other schools are, typically, few and far between, influenced primarily by the quality of individual students.

But as some corporates follow their noses for lower prices (read: starting salaries for on-campus recruitments), the other B-schools are beginning to seed companies with their students. That's why, by 2005, for instance, the Symbiosis Centre For Management, Pune, or the Manipal-based T.A. Pai Management Institute could well compete with the IIMs. Already, they're ranked 9th and 12th, respectively, by recruiters, proving that the best students from these schools are already being hired by many companies that target IIMs. By the time these students reach the middle-management level, they are likely to be opinion-influencers in their organisations.

THE DIRECTOR PREFERENCES. A comparison of the ratings attributed by the B-school directors (to schools other than their own) and recruiters indicates a slight dissonance. For instance, the Tiruchirapalli-based Bharathidasan Institute of Management is ranked 19th by recruiters, but 9th by directors. But then, it is different factors that are being judged here: while recruiters rate a school on the basis of how well its students perform in the business environment, directors look at issues pertaining to administration and curriculum development. However, the perceptions of directors, rather than those of recruiters, are more indicative of the internal strengths of a school besides being the closest thing to a peer review. To that extent, they measure the potential of, in particular, the B-schools that haven't yet become the favourite of recruiters. After all, the ability of a school to produce good managers is a function of the quality of its faculty, infrastructure -- and curriculum.

THE INFRASTRUCTURE ELEMENTS. Infrastructure is the fount of a B-school's strengths. No wonder there is a high degree of correlation between a school's total score and its infrastructural score. The latter rates a school on library facilities, students' access to computers, and classroom and residential facilities. The surprise entrants into The Infrastructural Top Ten are the Tiruchirapalli-based Regional Engineering College and the University of Calicut. However, their overall positions of 28th and 46th, respectively, indicate that while infrastructure might be a necessary criterion in rating a school, it isn't the most important. And the theory of diminishing returns applies here too. Till a certain level of investment, infrastructure has a proportionate influence on the quality of the school. Once the threshold is crossed, additional investments yield, at best, only incremental benefits. Of course, it takes time for infrastructure to translate itself into the perception of quality.

THE BRAND IMAGE. Obviously, the competitive position of a B-school hinges on the quality of its teaching and the impression of recruiters. So, it would be logical to assume correlations between the number of companies recruiting from a B-school and the number of students seeking admission to that school, and its overall rank. However, the fact that the Faculty of Management Studies (Rank: 6) received 740 applications for every seat on offer, and the Bharathidasan Institute of Management (14th) received 134 applications for 1 seat indicates that the link is not as linear as one would expect. Obviously, B-class schools receive the same number of applications as A-class schools, suggesting that applicants hedge their bets.

THE FACULTY PROFILE. No amount of infrastructure can make up for the absence of good instructors. Of course, arriving at a measure of teacher competence is not simple. Sure, qualifications count; for instance, the top-rated schools have a higher proportion of Ph.Ds in their faculty. Given the low student-to-instructor ratio at these institutes, that is a creditable achievement. But unlike American B-school dons, who take on corporate consulting assignments regularly, few professors in the Indian B-schools do so. And those who do, operate neither on the cutting-edge nor drill deep. For instance, most of the consulting assignments taken on by the IIM-A in 1996-97 were either training programmes or low-intensity workshops. The lack of exposure to real-life working environments, especially in the fast-changing post-liberalisation scenario, is a problem.

THE CURRICULUM. How do B-schools compete on course-content? The professors, the alumni, and the alumni-turned-recruiters -- the last two would actually know best just how useful their degrees have been since entering the portals of business -- should be able to answer that. There is an almost-total correlation between the curriculum scores ascribed by these stakeholders to their respective schools, and the overall ranks. Very few B-schools, however, actively work on their curriculum. Viewed against the background of the sweeping macro-economic and micro-managerial change that India is going through, such inertia is worrying.

Worse, the teaching methodology -- which is based on case studies -- has remained unchanged for almost three decades at most institutes, falling out of step with global trends. The Harvard Business School, which pioneered this methodology, has recently re-oriented its approach to emphasise skill-building and field-based learning. And the Massachusetts Institute of Technology's Sloan School of Management has a $3.50-million full-fledged trading room, identical to any trading room on Wall Street, providing lab-view insights into the real world of securities. By comparison, the curricula at Indian B-schools are antiquated. Fortunately, the necessity to change has not gone unnoticed. The poor curriculum scores given to their schools by the faculty of the Mumbai-based Narsee Monjee Institute of Management Studies, the alumni of the IIM-B, and the students of XLRI, for instance, are indicative of their growing awareness.

THE NETWORKING. All things being equal, people like to buy from, work for, or interact with people from the same B-school as themselves. Given the kind of managerial positions occupied by the average B-school graduate, networking can translate into a personal competitive advantage. The alumni of almost all the best schools rate their alma maters highly on networking. Indeed, the admission procedures in the best B-schools ensure that those students who make the grade are of a similar psychographic profile. Coupled with the fact that students from the best schools are placed in better companies, this explains why the mid-ranked schools do not share the same ratings. While the IIM-C comes out on top in networking, the IIM-A is a little down the list, at No. 4 -- a surprisingly high rank for a school the that is yet to publish its alumni directory.

THE ADMINISTRATION. The typical B-school curriculum comprises courses on strategic planning, systems analysis and design, and operations. It would be reasonable to expect these schools, then, to practise what they preach. Very few, however, focus their energies on operational details. Case in point: the quality of international communication, even in the best B-schools, is poor. Placement cells operate without demand forecasts nor do they help students plan their careers. And apart from XLRI, which conducted a customer survey in 1997 (see Wanted: The Multi-Skilled MBA, BT, December 7, 1997), none of the B-schools even troubles itself with finding out the needs of business. So, yesterday's institutes could find it difficult to produce tomorrow's managers today. Indeed, any institute that manages to assess customer needs accurately can transcend the traditional definition of the B-school and offer specialised programmes. An atypical -- in numerical terms -- instance: the Mumbai-based National Institute of Training & Engineering's Industrial Management programme, which trains students in the hot operational tool, Enterprise Resource Planning.

Are the best B-schools as good as they are perceived to be? And are the worst really that bad? An analysis of normalised -- reduced to the same scale -- data (based on the quality of students, curriculum, faculty, infrastructure, and the admissions and placement process) and perceptual (covering the perceptions of recruiters, students, faculty, and alumni) scores suggests that this is not the case. For the Top 15 schools, the perceptual scores more or less match the factual scores. For the rest, however, the perceptual scores are way below the factual scores. Perhaps these schools aren't as bad as they are perceived to be, indicating that they need to focus on improving the impressions of students, alumni, faculty, and recruiters about them.

Eventually, the schools that manage to stay at the top will be those who consistently deliver superior value to the customer -- as is the case with any competitive industry. The B-school, like any other service-provider, will need to scan the environment for signs of change that would require a new response from companies, demanding fresh managerial skills. The more efficiently a school makes this transition, the smaller the lag between the juncture at which a company feels the need for a young manager of a particular profile and the point of time at which the school can provide such a person. In the years to come, BT's biannual survey of the Best B-schools will always identify which of the country's management institutes have grown this competence. Or, learnt to be the best learning organisations.

THE MBA GAP

Indian B-schools aren't producing enough managers. The evidence? According to the Centre for Monitoring Indian Economy, there are 1,125 companies in India whose turnover exceeds Rs 100 crore, comprising 74 banking corporations, 30 financial services companies, 886 manufacturing companies, and 135 service-providers. And their collective appetite for new managerial resources is greater than the supply.

Of the 74 banks, 80 per cent -- the nationalised banks -- can be assumed to be uninterested in hiring MBAs. Let us guess that the average requirement of the remaining 15 is likely to be between 5 and 10 managers a year. Assuming a mean of 7.50, the banking sector's annual requirement of entry-level managers can be placed at 113. Given the state of the financial services sector, only about 50 per cent of the firms are likely to need entry-level managers in the medium term. And the annual requirement of each of these 15 companies can be pegged at between 3 and 5. Taking a mean of 4, the sector's annual requirement is 60 MBAs.

Companies involved in manufacturing and marketing consumer products traditionally constitute about a fifth of the total number of players in the manufacturing sector. All 177 such companies need entry-level managers, and their requirement is likely to vary between 5 and 10. Taking a mean of 7.50, their requirement of MBAs totals 1,328 per annum.

Of the remaining 709 companies involved in manufacturing industrial products, about half could be assumed to be in the market for MBAs. Their requirement can be estimated at 3 MBAs per company, translating into an annual requirement of 1,064. Assuming that about 75 per cent of the companies classified as service companies are actually holding and investment companies, the remaining 34 service companies are likely to require 5 MBAs every year. Or 170 annually.

Thus, the total number of entry-level managers needed by corporate India every year stands at 2,735. Apart from the IIM-L, which turns out 120 grads, all the other IIMs have a class strength of 200 while the other institutes have an average class strength of 60 each. But, the 21 B-schools which scored more than 40 per cent in the BT study produce about 1,740 managers every year.

The gap, amounting to about 36 per cent of the total requirement, proves why the corporate competition for MBAs will only get swifter, higher, and stronger.