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Is MBA overrated.

Published on July 7, 2019 | Choosing a Career| Education News| Eye Opener
B-School Shutdown – Is MBA overrated?


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The accepted norms and paradigms of the Indian youth have recently been rocked on its very foundations. Young male adults no longer know what to do with all the spare time on their hands. The reason behind the manifestation of this precious commodity (time) into the hands of our youth is the MBA degree.  Previously it was an unspoken truth that every young Indian male would complete his MBA after his engineering and then carry on with life.

However recently the craze for management education that once gripped India’s burgeoning middle class when the economy was booming has died down. The mushrooming of various business schools that followed the economic boom has staggered to a standstill, revealing the rotting and unregulated systems of AICTE and pulling to light the repulsive truth about the quality of an MBA education in India. Hence the country’s business schools are running out of business and shutting down en masse. Oh, the irony!

Between 2012 and 2015 over 300 business schools closed down. 66 in 2015-16 and 76 in 2016-17. And this year owing to a dip in campus placements, 101 institutes seek for voluntary closure according to AICTE the apex body of technical and management institutes. Most of these requests would likely be accepted said AICTE. But what are the causes behind the downfall of business schools?

 B-school MBA Boom

“The economic liberalisation in 1991 unshackled the private sector, the demand for MBA shot up. Management became a sought after career for students and MBA the key to success in life. As tycoons hired 20-something MBAs at gargantuan salaries and installed them at the top of their companies. Even those who managed to get into B- or C-grade business schools could rest assured that they have made it in life. However after more than two decades, the degree is losing its prestige.” – Source.

Rapid GDP growth had helped double the number of B-schools to 4,500 between 1995 and 2005 as an off-shoot of the economy growing at an average of 8 percent and bringing with it huge job opportunities. The demand for skilled managers led to the growth of B-schools. Then came the slowdown in 2008. Jobs began drying up and admissions started tapering off, except in the elite schools. – Source

In 2016-17, more than half of MBA graduates could not get hired in campus placements. Just 47% of MBAs were placed, 4% less than the previous year. The drop in placements for postgraduate diploma holders was even bigger at 12%. These numbers do not include graduates from the elite Indian Institutes of Management (IIMs) which are not affiliated to AICTE.

Economists warn that the country needs to grow by 8% in order to generate enough jobs for the 13 million people entering the workforce each year [1]. The problems for the educated unemployed only seem to increase in the world.

AICTE has faced harsh criticism and has been blamed for the wild and unregulated increase in both management and engineering institutes that have flooded the market with graduates who were far from being job-ready.

“AICTE thoughtlessly approved a large number of requests for opening management institutions in the country between 2007 and 2012. This included permission to those who had no prior experience of running a college or an educational institute,’’ says Harivansh Chaturvedi, director, Birla Institute of Management and Technology. – Source

Problem with management education in India.

  1. The business of education:
    Most business schools outsize their focus on commercial success than quality education; jobs and salaries than shaping careers. In other words, business education is big business for schools and their professors. There are substantial questions about the relevance of both the careers and management skills of their graduates. While the system is far from ideal, no one wants to change it. The biggest problem in implementing change is the resistance from the faculty itself. They think showing a record of good placement with good packages is more than enough.
  2. The cost of education:
    Business schools are relatively expensive. For some reason, an MBA is not supposed to come at a reasonable cost. The cost of the top institutes (A+ rated onwards) for a two- year Post Graduate Program (PGP) course at Indian Institute of Management, Ahmedabad stands close to Rs 22 lakh, while IIM Bangalore and IIM Calcutta cost stand marginally less. Though compared to private institutions, this is relatively cheap. Course fees for ISB one-year PGP costs over 1.5X the fees of IIMA. Even before stepping into the portals of the business schools, the exorbitant fees become a matter of concern. 

    Apart from these top institutes, the BBB+ rated school fees go up to 10-12 lakhs. Despite such a high fee structure, they do not guarantee placements, and even if they do, the package is usually not so great.

  3. Low paying jobs:
    While the cost of a two year overrated MBA program is around Rs 3 to Rs 5 lakh. The average earning of an MBA graduate is a measly Rs 8,000 to Rs 10,000. With such low returns, an MBA degree ironically sounds like a bad investment. Hence many students are hesitant about the program. Which is reflected in the declining rate of growth of technical institutions in the country. (post-2012)“Barring a handful of top Business schools like the government-run IIMs and other few, most of the B schools in the country are producing sub-par graduates who are largely un-employable resulting in these pass-outs earning less than Rs 10,000 a month, if at all they find placements”, the ASSOCHAM study has pointed out.
  4. Less number of seats in Tier-1 B-schools:
    The top business schools in the country that provide quality education and placement opportunity, do not have enough seats for every meritorious student.CAT aspirants, who qualify with 80 percentile score or above, seek admission only in the top colleges which have very few seats to offer. Hence every year a large pool of candidates (40,000 or more) have nowhere to go if they are unable to secure admission in any of the top-ranking institutions. As they are unwilling to settle for Tier-2 or Tier-3 colleges.
  5. Subpar faculty in smaller business schools:
    While top B-schools have a shortage of seats; Tier-2 and Tier-3 management schools find no takers.
    As many do not follow globally benchmarked practices and neither focus or invest in skill development for its faculties. The need to update and re-train faculty in emerging global business perspectives is absent in them. Thus making the course content redundant. Also, very few professionals opt for a career in education. For various reasons a few of which we have covered in this post. Moreover, smaller institutes pay lower remunerations to its faculty. Thus, experienced teachers do not apply to such colleges.

  6. Lack of skill-based education:
    On the whole skill-based education in higher education fields is lacking in India and the field of management is no different. (Hence the Skill India Initiative) The focus of business schools needs to shift towards skill-based education that imparts a more hands-on training to students.
  7. Syllabus not updated regularly:
    There is a mismatch between the demand and supply as the labor market needs are not being met by the current skill level of graduates [2] [3]. This gap is due to the lack of regularity in updating the syllabus. While the industry and its needs are evolving, the syllabus isn’t.A study by the ASSOCHAM Education Committee (AEC) noted that only 7% of the pass-outs are actually employable in India excepting graduates from IIMs.

    But this issue of unemployable graduates also exists in the field of engineering. Of the 15 lakh engineering graduates India produces every year, 20-30% of them do not find jobs and many other get jobs well below their technical qualification.

    More on unemployable engineers here.

  8. Lack of regulation and infrastructure:
    India has had wild and unregulated increases in both management and engineering institutions in the past decade – it has 360,000 management seats and 1.5 million engineering places on offer. [4] 

    “Historically, AICTE has helped mushroom dubious institutions and hindered the growth of quality institutions by archaic rules and endless administrative procedures,” – C fore’s Chief Executive Premchand Palety.

  9. An MBA degree doesn’t help you succeed:
    The biggest misconception that people have in their minds is that an MBA degree is enough to make them succeed in life. In India, the concept of M.B.A is mushrooming with great altitude but we need to really think of it’s worth. 

    As a matter of logic, learning in business school should ideally help you to be better prepared in the domain of the Business world. But when the students actually enter into the competitive world, more and more students are finding the promise of business schools to be hollow.

Is this only a national phenomenon?
After the AICTE shutdown, 5 years integrated MBA courses in 2016 [5]. The consistent closing down of several business schools every year does not bode well for the field of management.

The decline of the two yearlong MBA degree is not only a national phenomenon. Around the world, owing to shifting demands in the business education market, schools have either dropped full-time courses or opened without MBA programmes. For example, the London School of Economics does not offer a full-time MBA programme as a flagship program anymore [6]. The alternative to a full-time MBA would be the MSc programmes offered by its department of management. Other colleges such as King’s College London, Wake Forest University in North Carolina and the University of Iowa’s Tippie College of Business as well do not offer MBA programmes. These developments hence lead us to ask the following question:

 Are business schools even required? While there is no concrete answer and every side has compelling arguments the question is of a speculative nature. Even so here are a few compelling arguments:

Seek to know what it’s currently like in the field of management? How are managers in industry coping and what do they suggest? We at Navigus can help you put your doubts to rest, through the Auriga mentorship program you can interact and speak to experts in every field who would be better facilitated at answering your queries. Visit Navigus to find out more.

Navigus – Why survive, when you can reign?

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