EA RESEARCH button_bg INTERVIEW OF THE MONTH AJIT RANGNEKAR

Mrs. Vandana Luthra

I have gone on record to say that instead of giving USD 50 million to Harvard University,Mr. Ratan Tata should have given it to Bombay University. It s sad to see that Indian HNIs fund extremely wealthy institutes in the West, but are unwilling to invest in their own country to help it become better.

In an exclusive interview with Avisekh Agarwal and Dhruv Chadha, Ajit Rangnekar, Dean ISB talks about the evolution of the business education sector, changing perceptions, holistic growth at all levels and the role of FDI in education.

How has the Indian Education sector shaped up in the past 5 years?

In the last 5 years, the only big thing that has happened in education is in the field of Executive MBA, and the acceptance it has received from the students and the corporates. We started our part time Executive MBA program 2-3 years back; while the IIM’s started their full time programs around 5 years back. Both types of programs have seen a good uptake in the industry. On the regular MBA front, the AICTE approved a lot of MBA programs a few years back because of which the market got flooded with sub standard MBA colleges and quality went down significantly. In the aftermath of the recession, people have realized that MBA is now no longer a panacea for all problems and this resulted in the reduction in the number of applicants to MBA colleges.

People now have also realized that doing an MBA from a low grade Institution is not an answer.
The low number of applicants has resulted in another problem for the academic world; a number of 2nd grade MBA institutes are unable to fill their seats. So while the IIM’s have been forced to increase their seats, the 2nd tier institutes are still struggling to get good students.

Despite the number of applicants going down, there is still a huge demand-supply gap between the number of applicants for MBA and the number of seats available in quality MBA institutes. How do we deal with this?

India is a peculiar country, the moment anything becomes successful, there is a stampede towards it. I understand the demand and supply problem but does that mean that all those applicants deserve to be in high quality institutes? For a country of our size, we should have at least 200 good quality MBA schools which could be divided into world class, national quality and locally competent schools. For example, a place like Thiruvananthapuram does not need Harvard graduates, but locally competent people who can run SMEs. If we only have high class MBA’s, who would look after the smaller and local enterprises? What we need is a pyramid of talent. For example, none of the IIMs or ISB graduates would apply for a branch manager role at a small regional bank. Here we need good quality tier 2 MBA graduates. There is a huge market below the Tier 1 MBA graduates and people need to realize that. Sadly, the Tier 2 Schools are not doing a good job of training their students for this market.

Many Corporates today feel that not all MBAs today are employable. Where do you think we are going wrong?

We have been increasing our class size every year and with it the applicant numbers, the offers and the average packages have gone up too, it clearly proves that if the product is good, there is a market for it. The challenge is that there are very few high quality institutes, and beyond them, there is a big gap in quality. It’s not a problem of talented students, we have that in plenty. The problem is that we don’t train the students properly because we don’t have good faculty and we are nowhere even close to solving this problem because we pay our faculty so little. Business education needs to be free from such monetary constraints. It is satisfying to see that at least some of the good institutes are slowly increasing their fee and paying the faculty decent compensation packages. We have to make management teaching an attractive career.

What should the government or the educational institutes do to solve this problem of quality faculty?

The government already has a lot of problems of its own to worry about. Why can’t we train good professionals and turn them into good faculty? They may not do great research, but definitely can be great teachers. Nowadays professionals have at least 10 years of professional capabilities left in them even at the age of 60. Why can’t we train these people to become faculty? The point is that someone, especially the Tier 1 MBA schools should offer this kind of a curriculum and the 2nd tier schools should be ready to pay for these professionals. The reluctance of 2nd tier schools to invest in good faculty is a challenge, but there can be mechanisms to deal with the fears of these institutes. Also, the leadership of these institutes is constrained by their mindsets. The point is that if they are really motivated, they can make big changes happen.

Do you feel that even students nowadays have unrealistic expectations from their employers and that is also hurting the overall dynamics of this industry?

MBA’s throughout the world are trained to be self confident and think like world leaders and yet people want them to join a company at a pittance. A company hires MBA’s because they are better than the rest; they are highly intelligent and ambitious. You cannot expect them to be ambitious about the company’s sales and not be ambitious about their own compensations. If people want a high quality talent in a shortage economy, the talent would want some nurturing. The industry also needs to understand how to handle quality talent. For instance organizations like Cognizant give a very different exposure and learning to students. A lot of our students get placed at Cognizant every year and only few of them quit.

There has been a general shift in people’s perspective to rate an institute based only on its placement record. Who is to be blamed for this?

All of us are to be blamed for this. The institutions themselves create noise about their placements, which only gets magnified by the media. The media has had a single parameter to rank institutes and that has been placements, but it is actually we, who fed it to the media to exploit it. Another challenge is that it’s difficult to measure the long term impact an MBA has on a student. People need an immediate measure and unfortunately there is no way to measure education, so the only proxy is compensation. To some extent, it is an evil we cannot do away with because there is no other easy way to say that we are doing well. It is also noticeable that the IITs have never been affected by this problem. There the measure is that how many students went abroad for higher education, how many went for MBA education, but in business education, salary has become the accepted measure. Fortunately, some of us have realized that salary is not the sole criterion to measure success, but it will take time to shift people’s perspective

Can the fact that higher education is obscenely expensive be another reason for people’s obsession for compensation figures?

There are two points here. A student is right when he asks that if he is spending 15 lakhs on education, what is he getting out of it and the only easy measure again is salary. So it is our responsibility to help him understand and evaluate his career benefits.
Secondly, I feel that that management education in our country is not expensive compared to the ones abroad. When you consider the return on the investment, it is actually amazingly cheap and today there are bank loans available for everyone. Effectively, it is just a working capital problem for a period of 1-2 years and that capital is now easily available. At ISB, we have never been forced to reject a candidate because he was unable to pay his fee

A lot of people these days are shunning plum offers to take up entrepreneurship, some even in social sectors. What do you think about this change?

These are more exceptions than majority. Even in ISB, out of around 3500 ISB alumni, only around 7% have started something of their own. That figure is significantly lower elsewhere. The numbers are, however, improving. One reason is that the entire entrepreneurship ecosystem is now much better than what it was some years back. Now we have angel investors, PE funding etc available and therefore there is a launch pad that is available, which is a huge plus. Another factor is that unlike the old days when people built companies and stayed with them, now a lot of exit routes are available. Someone can buy you out or you could go public and the money that you get is very attractive. Essentially, people move out of their comfort zones only under two circumstances, either when they are scared or when there is a huge opportunity and today both situations exist. Post the recession, the risk of losing a job is high anyways, so people want to try something of their own.

Another point is that if someone is successful as an entrepreneur, he can make a lot of money, even in the social sectors. In the mid-90s, the technology driven services companies came to the front with very little capital requirements and very high intellectual capital requirements. The success of companies like Infosys meant that an average middle class individual could now aspire to become a big industrialist. Now in the dot com era, the possibility to start something new with just a few computers made it all the more attractive for people to experiment as it had the potential of extremely high returns with minimal investment.

I happened to bump into a new student the other day who worked at Facebook. I asked him if he wanted to rejoin Facebook after his MBA but he mentioned that he wanted to start something of his own. He probably hoped that Facebook would buy his venture out for a billion dollars some day.

Today’s generation is a lot more resilient. Losing a job is not the worst thing that could happen to you because it happens all the time and is no longer an indication of failure. Indians, in general, have learnt to accept setbacks, which makes them more open to entrepreneurship.

Many B-Schools today are going for International collaborations and tie-ups. Do you think it helps raise standards or is it just a fad to gain credibility?

Like everything else in this country, foreign education is also considered good. We have been the premier example of using foreign associations to create our credibility and to create new standards and to some extent that is the standard everyone looks up to now. All the IIMs were set up 50 years back in collaborations with top global institutes. We have just reinvented the wheel and proved it all over again, although there was some scepticism when we started, but we succeeded. There will always be some who would do a genuine collaboration and there would be some who would only use it for window dressing and since the level of disclosures and transparency in our system is so less, people can get away by making any kinds of claims. It’s just that stakeholders need to understand carefully and be more aware.

What do you feel about FDI in education?

It’s a very interesting issue. If you look at the top 100 institutions across the world, not one of them is a For- Profit institution. Having said that, if we are continuously going to require philanthropic capital, the size of such capital requirement for a country like ours would be huge and practically not possible to generate on a regular basis. So if private capital has to come in education, it would be for the For-Profit institutions which would be more of skill development schools because they would then run courses where they can charge fee commensurate with their costs.

So courses like liberal arts and humanities would be left out and it would end up being a skills programme rather than an education programme and we already have surplus of engineering colleges doing just that. But it is always better to have something rather than not having anything at all so we have no option but to allow FDI as long as clean foreign money comes in. Also, today a number of institutes have already created structures to enable them to make profit, so we should probably accept FDI and hopefully tax it.

A lot of corporate capital in education goes to the Universities abroad rather than being distributed here. What do you feel is the reason behind this?

I have gone on record to say that instead of giving USD 50 million to Harvard University, Mr. Ratan Tata should have given it to Bombay University. He lives in Bombay, his company’s headquarters are in Bombay and if we don’t invest in improving our institutions, who else will? ISB is a proof that we can have a world class institution if we want. 20-30 people came together with relatively small amounts of money and we were able to set up this institute. Adanis, Jindals and Shiv Nadar today are building good quality institutes. Mr. Tata could have set up a whole new university in Bombay with all that money and it is indeed sad to see that Indian HNIs fund extremely wealthy institutes in the US, but are unwilling to invest in their own country to help it become better

Mr. Sachin  BansalAjit Rangnekar is the current Dean of the Indian School of Business, Hyderabad and has recently been appointed as a director of GMAC (Graduate Management Admissions Council), making him the only Indian in the GMAC team. Prior to being appointed the Dean, he was the Deputy Dean of the School from March 2003 to January 2009. Prior to ISB, he was the country head, first for Price Waterhouse Consulting and then for PwC Consulting, in Hong Kong and the Philippines and was head of the telecom and entertainment industry consulting practice for PwC in East Asia (China to Indonesia). Mr. Rangnekar completed his undergraduate degree from the Indian Institute of Technology, Bombay, and his post-graduation in management from the Indian Institute of Management, Ahmedabad
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