It wouldn’t be wrong or unfair even to the extent of generalizing that the purpose of professional education is reduced to merely getting a job. While for a very small percentage of students, the purpose might continue to be learning so that one can add increasing higher value in the future.
Degree merely for a job while holds true everywhere, no stream of education is as corrupted by this notion as the field of management education. While students still manage to give interview worthy answers to the question “Why do you want to do an MBA?”, the truth remains evident that it is only to get a job. Parents also consider the fees paid as an attractive investment when the resulting pay package is big. As a result, the last 15-20 years has seen an unprecedented surge in the opening of new management institutes. However, lately the demand for MBA education seems to be fading and there could be various reasons for this namely - supply outstripping demand, steep increase in fees making for poor return on investment etc. But the primary reason is that educational institutions have failed to provide good quality management professionals to the industry. Hence, except for students from the select top few institutes industry seems to be skeptical and reluctant to pay a high salary to MBAs.
Good teachers* will agree unanimously that across all institutes, irrespective of their business magazine rankings, top 15-20% of students have the potential to deliver as much value as any other student from a premier institute.
The central premise of this essay is to invest our energies in these 15-20% students in a manner that nurtures competition and creates a win-win for all stakeholders namely parents, students, employers, institute & faculty members
* Good teacher = someone who consistently adds significant & increasing value to students
In a 4-semester course (typically full-time MBA programs are of 2-year duration), identify and separate the top 15% candidates after evaluating their performance in the first 6 months. Performance parameters need not necessarily be purely academic. They could be ranged broadly for e.g.
- Ability to add value in team projects
- Participation in extra-curricular activities
- Willingness to put in long hours at work
These 15% students should be given 100% scholarship in their 2nd year of studies while in-return they should commit to pay the institute 50% of their first year’s salary.
Under this arrangement, the institute makes money when it is able to place its students in a job which can pay a minimum of 2 times the annual fees. Anything more than this is a net profit to the institute. The parent is able to save a full year’s tuition fee which in a private institute could mean ~4-5 lakh rupees. But more importantly, chances of her child getting an attractive job offer are much brighter (which was anyways the primary driver)
Like in large corporates, high performing executives are fast tracked for greater responsibilities so is the case here too. On the institute front, it would mean investments in resources that will enable these identified students to stretch their limits and unleash their true potential.
If an institute wants to test this idea, then its faculty members should also be willing to let go off a fixed salary. Instead, the institute should share its earnings with the faculty members. Let us look at an example:
Say, a private business school has 5 full-time faculty members earning (collectively) ~Rs 5 lakhs per month OR Rs 60 lakhs per year. Under this plan, all faculty members choose to draw a 40% discounted salary i.e. Rs 3 lakhs per month on the condition that the institute will share 50% of its earnings (from the 1st year salaries as explained above) with them.
15 students (size of the fast-tracked batch) bring the institute Rs 60 Lakhs per year in the form of tuition fees. If these students are able to get a job of Rs 12 lakhs / annum then the institute stands to earn the following:
- 15 * (50% * 12 lakhs) = 90 lakhs
- Institute’s share = 50% * 90 lakhs = 45 lakhs
- Institute’s net savings because of discounted salaries = Rs 24 lakhs
- Net earnings = 45 + 24 = Rs 69 lakhs (compared to Rs 60 lakhs otherwise)
- Faculty share = 50% * 90 lakhs = 45 lakhs (Same as institute)
- Each faculty member earns = 45 / 5 = 9 lakhs
- Total earning of a faculty member = 7.2 + 9 = Rs 16.2 lakhs (Rs 4.2 lakhs more than otherwise)
Thus, each faculty member makes 25% more than a fixed salary arrangement. As the student earnings go up both the institute and the faculty stand to earn in an equal proportion. However it is not right to look at the benefit purely from an economic perspective:
- A good teacher thrives in a class where students challenge him/her. Compare teaching in a class of 60 students where only 20% are involved / engaged with a class where there is 100% involvement. The second option is always fascinating.
- Most students will work exceedingly hard in their first semester to become a part of this Elite squad
- The institute will send a right signal to the industry regarding its intent to provide high caliber students
- Overall performance levels are likely to go up multiple notches.
- In the coming years, we are bound to experience multiple “innovation leapfrogs” that will add significant value to the society. Managers par excellence will be the factor that will distinguish ordinary from great companies. Educational institutions have a great responsibility in providing such candidates.
Remaining 80% students in the class will continue getting faculty inputs & access to other learning resources like it happens today. They will however, lose out on the additional credits / special courses / mentoring etc…that the elite squad will get access to.
Companies who today hire only from select MBA institutes can get what they want from lower ranked institutes which are willing to go that extra mile, and that too at significant cost reduction. Companies could participate in this effort by partnering / adopting 1 or more of such institutes. Adoption should give the company first right of refusal at a pre-defined minimum salary levels. (Adoption will also translate into responsibilities for the company)
But this solution is certainly not as easy as I make it look. Any faculty who agrees to a significant variable component in his salary has to be exceedingly competent. A bane of our education sector is the dearth of exceptional teachers. In a difficult corporate world, academia has come to become a refuge for many sub-standard executives. Any institute which chooses to test out such an idea needs first to have a team of extra-ordinary teachers on board.
While, I have chosen MBA as an example, the logic can be extended to other areas like engineering, medicine, law, architecture. I believe that our society will benefit significantly when many exceptional professional will take charge.
If this essay intrigues your interest, we will be happy to discuss it in greater detail!
Pranil Naik is an Entrepreneur, Professor and a Business Consultant with over 15 years experience across various domains. He is a Professor at Xavier Institute of Management & Research, Mumbai and Founder of LeapForWord which is a non-profit organization dedicated to the cause of enhancing English language skills of children and youth from under-served communities. He is an alumnus of SIMSREE, Mumbai.