We need better Indian Institutes of Management first, then more

There are reports that the fate of the six new Indian Institutes of Management that finance minister Arun Jaitley promised in last year's interim budget hangs in the balance. The human resource development ministry is yet to notify their setting up for the coming academic year, even as CAT results are out and the admission process is set to begin at the older IIMs.

The setting up of new IIMs at Rohtak, Raipur, Ranchi, Udaipur, Kashipur and Trichy in 2010 was debatable in itself. Due to non-availability of suitable land - the IIMs have set criteria for size of land parcels etc - these institutes continue to run from temporary premises. This has affected their ability to attract teachers. IIM Raipur, for instance, has only 25 permanent faculty and runs from a government engineering college.

Now there is talk of gifting an IIM each to Vishakhapatnam, Nagpur and Odisha. The burgeoning numbers of the IIMs is a sensitive issue in a country where the quality of education must play a subordinate role to the sheer demand. The IIMs set up in 2010 continue to seek help from the older institutes in areas such as admission counselling and faculty inputs. Even as that system is yet to become robust, the government is planning to launch new ones. How this will affect mentoring, the sole preserve of the Big Four at Ahmedabad, Bangalore, Calcutta and Lucknow, is open to question.

All of which is merely repetition of what we have come to expect from the ministry-IIM tussle. Since 2009, when CAT went online and new IIMs were set up, little in the IIM universe has run smoothly. This rush to set up new institutes, without having an enabling environment in place, does not speak highly of these tony institutes' ability to teach management.

A more germane question centres on the quality of the curriculum, and whether it is suited to the real world. IIM Ahmedabad director Ashish Nanda has spoken of the need to refurbish the institute's research facilities. Classes in most IIMs continue to use case studies developed by Harvard Business School. Little by way of the Indian scenario is discussed threadbare.

Let me give an example. The one finance subject I took a smidgen of interest in during my first year at B-school was corporate finance. This was because its dourness quotient was low, thanks to topics like the Discounted Cash Flow (DCF) model, cost of debt/equity and cost of capital. The other finance subjects focused too much on complex derivatives and investment models that held little appeal for the big-picture guy in me. On the contrary, if the beguilingly simple DCF model was finance, I thought to myself gleefully, anyone could do finance.

But I was shortly to be disabused of rosy notions. The kind taught in B-schools is not real finance. The DCF model, which tells you if a particular project is sustainable based on the net present value of future cash flows that it will generate, makes assumptions that are frighteningly simplistic. No one in their right mind will tell you that cash flows, the bedrock of the DCF model, are assured, as the model fatuously assumes.

Besides, the model assumes a perpetuity growth rate after a fixed period to arrive at a net present value for the project. To be sure, this rate is conservatively assumed but it is still a befuddling assumption given how fast industries change. I am not even talking about the extinction of the likes of Kodak and Walkman. Even stable, bread-and-butter sectors such as consumer goods can be buffeted by innovations and changes in consumer preferences. Assuming a perpetuity growth rate is not only foolish, it is fraught with disaster.

The chasm between B-school curriculum and the reality of the business world is not restricted to finance. Marketing syllabi have long held on to models that defy usability in the new context. The focus of retail management continues to be brick-and-mortar when the future clearly points to online. Customer Relationship Management, so essential in this day of big data, is given only the cursory importance in marketing classes. And the less said about social media marketing, the better.

What then are the advantages, if any, of an IIM education? Why is there such a hankering for an MBA? For one, it provides a reliable signalling mechanism. If you attend one of India's top business schools, you can't but be smart. At least smart enough to work a normal, not-rocket-science corporate job. That is enough for companies to make a beeline for you and your kind. The IIMs' input? Well, they do make you learn the difference between a balance sheet and P&L statement. That can't be bad.

Cynics would wag that, if nothing else, business school teaches one to make effective powerpoint presentations. There were those among my batchmates who went from drab text-heavy slides to smart art and gifs in the course of the two years. When I spotted them in the library or in the mess, they seemed to spend an inordinately large time bettering the look, not the content, of their presentations. When most of this lot ended up in consulting, it was easy to wager on the skills that had landed them the coveted spots. 

I have no idea when the latest bunch of IIMs will see the light of day. But unless they and their older cohorts work towards boosting their research and curriculum profiles instead of their numbers, they would only end up regurgitating management clones in the thousands.