Should we be opening more IIMs or should we increase the batch strengths of the existing IIMs? Or should we do both?
In the last 8 years, I have often pondered over this question. The first time I encountered this question was when in 2010, the director of the IIM I was studying at took the drastic step of almost doubling the batch size. My batch had 238 of us. Our junior batch had 450.
This morning, I read a report in the TOI that IIM A and IIM B are going to add capacity across their programmes including the flagship PGP programme. This should be music to the ears of aspirants preparing for CAT 2019. IIM Bangalore is reportedly going to add at least 150 seats to its flagship PGP programme.
Implications of a seat increase at IIM Ahmedabad and IIM Bangalore
- For MBA Aspirants : This means about 500-700 additional students could get an IIM Bangalore interview call after CAT 2019 next year. Although not clear from the TOI report how many additional seats the flagship PGP programme will get, I'd assume IIM Ahmedabad will also be adding seats in a similar range. If you needed any more incentive to take CAT 2019, it is here. This news will also be welcomed by all leading test prep companies.
- For IIM Students and Professors : The institutes need to ensure adequate infrastructure development for hosting the increased batch. There is the usual upgradation and increase in hostels, classrooms, Mess etc. If it means there are 2 new sections, either the existing faculty takes more lectures or there needs to be hiring of new faculty at the two business schools. This could be an opportunity for many young professors at the supposedly lower ranked IIMs. Does this mean there is dilution in the quality of teaching or the academic rigour? We will have to wait and see.
- Placements : There will be higher competition for placements at both schools. No one likes a bigger batch size after they have joined the school. Especially, in the early years of transition. This is something I have seen first hand at IIM Indore. Things become easier after the first few batches. It will be difficult to find enough jobs in the same salary bracket immediately. It doesn't matter which school it is. Of course, while it will be much easier for IIM A & B as compared to other schools like IIM Indore or even ISB, it will still require a significant effort from the placement teams. Companies like to diversify the intake of students from across top campuses in India and the ones who only go to very few campuses often have lower head count requirements of IIM graduates. In a way, both IIM A and B are betting on growth in certain sections of the Indian economy which will lead to an increase in demand for IIM grads.
- Other Business Schools : Schools that fight for the same jobs with IIM A and B should be a little concerned. Especially, those which are ranked slightly lower. The strength of the alumni base of IIM A and B may influence a lot of companies into not adding new campuses in their hiring roster or hiring lesser grads from other perceived 'lower rank' schools. You can only fight this if you have built a long term brand among recruiters and hence they wouldn't compromise on their hiring numbers at your campus. Campuses whose graduates haven't yet created a good reputation in the market yet will definitely be impacted. We are talking about jobs that pay a minimum of INR 15 Lacs per annum here.
- Revenue at IIMs : The added seats will also yield additional annual revenue to the schools. Just multiply additional seats with the program fee. Both the schools charge over INR 20 Lacs for the 2-year flagship PGP programme.
Coming back to the question I asked in the beginning. This is my assessment based on what I have seen over the last 10 years since I took CAT, studied in an IIM and having run InsideIIM.com :
Personally, I have always favoured adding more infrastructure to existing IIMs than opening new IIMs. This is because the foundations of the older IIMs are strong and the quality of graduates at least in the first few batches after expansion will be better guaranteed by an older IIM with a reputation and an existing infrastructure. There are a limited number of very good professors in the country. This problem cannot be solved overnight. However, the same professor can definitely teach a higher number of students. Also, my assumption is that economies of scale kick in with higher batch sizes and it is a more efficient option. Placements are definitely easier to manage. Would a person who is currently in a new or baby IIM be better off if he/she was in an older IIM with a bigger batch from the perspective of placements? My sense is the answer to these questions is yes.
However, the bigger argument in favour of opening of new IIMs is simply that our country requires lots and lots of high-quality managers. The existing IIMs will never be able to scale up beyond a point and if we want India to grow faster we need faster and quality development of human capital. Whether and when the newer IIMs can churn out graduates of similar or higher quality as the old IIMs is a question that no one yet has an answer to. Some would argue there is no objective way to assess that either. The current proxy used by everyone for this is placements. However, assuming a basic standard is accomplished then many more corporations in India will have high quality and trained students joining them early on. In an ideal world, this can give a very big boost to the quality of output that comes out of Indian corporations and their overall efficiency leading to a positive impact on the economy.
The other aspect which absolutely justifies the setting up of new IIMs is that it helps the city and state in which they are based. For the long-term development of the region, the institute will play a pivotal role. We have seen this play out multiple times - from the impact of IIM A on Vastrapur region of Ahmedabad to the setting up of IIM Shillong. Since, they are now considered 'Institutes of Eminence' and receive special support from the central government, it helps in research on problems in newer regions and on broader topics. There is sharing of ideas and emergence of skilled human capital in diverse regions of the country.
A lot of people could be cynical about this but my argument is that given the lack of quality human capital in India and its concentration in very few cities even if a handful of new IIMs achieve their objectives it will help India. The potential loss from the dilution of brand IIM is far lower than the potential gain if even a few IIMs shape up well. We just need to have more patience.
Further, it is also possible that many of the newer IIMs will build niches and be known for training graduates with a specific set of skills and will be the best at that. After all, India's economy needs managers for all kinds of domains, sectors and organisations. We need to move beyond Sales, FMCG, Banking, Finance, Consulting, E-Commerce, HR etc. Which school today provides the best talent for NGOs? Or for domains like Data science? Or even managers in the health industry. There is great scope for specialisation.
We have worked with companies across the spectrum helping them engage and hire campus students. Based on what we hear from them and based on our faith in the long-term success of India's economy, whether it is an increase in batch size or whether new IIMs are set up, we should welcome any investment in India's human capital.