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How the IIMs became India Inc’s talent shop

Jul 23, 2022

The institutes were set up to groom PSU managers, but their bright graduates had other plans right from the start, and that turned out to be a good thing

The Indian Institutes of Management, along with their siblings, the IITs, are widely regarded as a string of jewels in India’s crown. They’ve helped establish a reputation for Indian managerial prowess globally, with several of their alumni occupying top slots in the world’s leading organisations. And they’ve played a key role in creating a culture of managerial excellence within much of corporate India

Sixty years after their establishment, it’s possible to see the legacy of IIMs as being stronger than that of the other ‘Temples of Modern India’. It’s interesting to note the original purpose of the IIMs was, in fact, to supply high priests to these very temples. However, from an early day, IIM graduates succumbed to the superior attractions of MNCs; it seems only 5-odd students from the 120-strong 1971-73 batch of IIMA opted for a PSU job. Nehru expressed much frustration at this tendency. In a convocation address to an early batch of IIT Kharagpur, he fumed: “We take all the trouble to put up this expensive institute and train people here, and then, if we do not utilise the services of those people, then there is something wrong… Such state of affairs can only be described as fantastically stupid.” One can presume he’d have had similar feelings towards IIMs.

However, the IIMs’ departure from their intended purpose may have been a good thing, not just for them but for the nation. It gave Indian managers a global stage to show their talents, in the process raising not just the stature of the IIMs worldwide, but also the managerial standards of Indian businesses domestically, with a slew of Indian companies adopting managerial practices on a par with the world’s best.

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As the IIM brand has become more coveted, and the competition to get in progressively more intense, it has expanded dramatically. The older IIMs have almost trebled the capacity of their core two-year courses, apart from adding several shorter specialised courses. And over the past two decades the government has gone in for new launches, raising the number of IIMs from just 4 in the first 25 years of their existence, to a total of 20 in the next 25. In the process, the capacity of the IIMs has increased more than ten-fold, from around 400 annually for the core two-year programme, to over 4,000 today. Unfortunately, despite this massive increase in intake, the competition forentry remains nearly as intense as it was 50 years ago, with over two lakh applications – a multiple of 50 times the capacity.

This extreme level of selectivity in admission leads some people, like Jairam Ramesh in an interview some time ago, to argue that the IIMs owe their stature more to the quality of their student intake than to their inherent quality of teaching or research. I tried to probe perceptions on this subject in conversations with 10-odd alumni from various batches and found that opinions varied. The fact is that with greater autonomy, the IIMs have been able to raise faculty compensation substantially to attract better talent. However, even now, an associate professor’s salary at IIMA or IIMC starts at Rs 17 lakh per annum despite the requirement of at least 6 years of teaching experience after a PhD – a figure that’s on a par at best with what the average passing-out student gets. Even with supplementary income from consultancy, their remuneration doesn’t appear to be comparable with that of their industry peers. This does suggest the likelihood of the best minds eschewing a teaching job for a corporate career.

Managers more than entrepreneurs: 

In terms of the overall contribution of IIM graduates, there’s no denying their role in raising managerial standards across Indian industry, and of making the quality of Indian management acumen shine on the world stage. However, their track record in terms of entrepreneurship is less impressive. A recent ET article quoting research by EMA Partners, a consultancy, says the IITs have together produced 78 of the 153 founders of India’s 63 unicorns; the IIMs have contributed only 21, most of whom are from an IIT anyway. This seems a bit odd, because it’s the IIMs’ business to prepare businessmen, far more than the IITs’.

The vastly better record of IIM graduates as managers than as start-up entrepreneurs deserves some thought. One contributing factor could be the IIMs’ admission process which progressively places a premium on qualities like diligence and discipline, far more than on lateral thinking, creativity and comfort with ambiguity. In other words, traits that are far more suited for working within large, structured corporations than starting new enterprises in today’s ever-changing VUCA (volatility, uncertainty, complexity, and ambiguity) world.

Forty-five years ago, when I sat for the IIM entrance test, there was no way to prepare for it beyond studying a few GMAT test papers, since testprep had not yet become an organised industry. This allowed many maverick but bright people to squeeze through, perhaps resulting in a more eclectic and creatively- charged environment on campus. But today even the brightest student has no hope of getting through, unless they put in months of serious CAT preparation. Besides, school and college grades matter far more today, and we know how correlated these grades are with a propensity for hard work. The result is a set of students that are of course bright enough to make the cut, but also pre-selected for qualities that possibly make them better suited for structured management than free-wheeling enterprise.

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The IIMs should consider odifying the admission process a bit, to allow for a more diverse intake of students (today over 90% are engineers) and varied skills and temperaments. Not only could this make for a more eclectic student culture – a better environment for personal growth – it could better sow the seeds for future entrepreneurs. Or managers of the future, for that matter, given the way even established companies must increasingly adapt to the vagaries and vicissitudes of the VUCA world.

Teach biz where business is 

Another aspect that probably needs examination is the steady proliferation of IIMs across the country, as if to allow each state its own crown jewel. While this sounds like an egalitarian thing to do, its wisdom needs to be challenged. Unlike most other forms of education – including technology – which can be managed within a self contained ecosystem, management education needs a serious amount of integration with the industry outside. In the form of visiting faculty that brings live industry experiences to bear on the classroom, through regular interactions with local businesses via short-term projects, and so on.

The local business environment of the city in which a B-school is located clearly has a significant impact on the school. The fact that IIM Bangalore has overtaken IIM Calcutta over the decades in most B-school rankings may well have something to do with the fact that, as a corporate centre, Bengaluru has prospered in this period, while Kolkata has stagnated. Similarly, some alumni of the newer IIMs like Raipur and Rohtak that I spoke to said the absence of strong local businesses to connect with was a clear disadvantage. Even more troubling to the students was the difficulty of attracting visiting faculty or recruiters to their relatively remote locations, as compared with the older IIMs located in cities that were more likely to be on these visitors’ regular travel map.

It’s worth asking why the additional IIM capacity could not have been created through, say, another large campus of IIMC or IIMB within these cities, or by opting for large business centres like Mumbai and Hyderabad, or for that matter Jaipur or Nagpur, rather than remote locations like Bodh Gaya and Sambalpur. It’s not as if a far-flung new IIM helps the cause of its state’s students in any real way. A student from Odisha would surely prefer to go to the best IIM they can crack rather than Sambalpur.

It must, however, be said in conclusion that some possible course-correction apart, the IIMs appear well placed to continue to steer Indian industry in its journey towards global superpowerdom. In the words of IIMA’s motto, Vidya Viniyogada Vikasa, may they continue to spread “development through the application of knowledge”.

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