Saturday, October 25, 2008

Bhargava committee on IIMs

The report of the Bhargava committee on IIMs is yet to be released. We have to be content with snippets appearing in the press. The latest bit will not please the IIM fraternity at all:

The IIM Review Committee has suggested that the pan-IIM board’s secretariat should be within the HRD Ministry. It has slammed IIMs for not “reacting to the market need quickly enough”, said that IIM Board directors and chairmen have failed to be effective CEOs, pointed at a ‘lack of mutual confidence and trust between the IIM and the Government’, and recommended that a common interview be held for all IIMs.

Regarding faculty, the committee has called for fixing of “higher level base salaries”, though it has put a cap on the consultancy and executive training programmes. The committee has recommended that time spent on these by the faculty should be limited to 90 days in a year with not more than 40 days during the nine month period when the institute is running post-graduate programmes.
The recommendation on consulting caps it not clear. Does the committee mean a total of 90 days in a year for all faculty or 90 days per faculty? If the latter, that would actually be a relaxation of existing norms which limit faculty to 53 days' consulting.

The committee faults IIM boards for not doing their jobs. These boards, be it noted, include representatives of the central government (and, in some cases, the state government). The committee has judged that one reason for the ineffectiveness of these boards is they are too large- with 25 members or so- and poor attendance on the part of board members. It recommends that the size of the board be pruned to 11 and also that minimum attendance requirements be laid down. That would mean that government nominees on the boards should also take their jobs more seriously.


Ganesh N.Prabhu said...

Some implications of the IIM Review Committee Recommendations .

It is worth looking at some the implications of these recommendations to the future of all the IIMs. Points 6.13 to 6.18 effectively means that even when an assistant professor gets a higher base salary, likely to be less than 6 lakhs per year given the 6th pay commission still he/she will still not be obliged to teach even the present requirement of three PGP courses in a year that exists in the IIMs. Obviously electives offered in PGP will dip as all faculty who still stay on in the IIMs will at most be required to do the core courses for the 750 students - that too will have to forced on them as there is no minimum teaching requirement as per the review committee recommendation! Faculty will also find no reason to teach in executive programs on campus as they cannot earn at all from them and therefore the IIM income from executive programs will take a drastic dip! Many faculty offer executive programs as it improves their visibility which helps in getting consulting offers. However this will also be hit as faculty will only be allowed to earn additional income of just 15% above their base salary from consulting (15% of 6 lakhs = Rs 90000). No faculty will see any point in taking up any major consulting project as this limit will be crossed in no time. The contract appointments suggested in 6.16 will result in higher payouts to lower quality faculty who will also not be contributing to the IIM programs or generating income from consulting given the income limiter. With hardly any earnings from consulting share of faculty consulting fees and hardly any earning from executive programs given that no one will see any point in doing the company based general management programs (faculty may still do short executive programs of their specific interest but these programs are usually loss
making) and using the formula given by the IIM Review committee in point 5.32, I expect the PGP fees to go up by several times to well beyond the US business school fee levels. There is no way any student will be able to or willing to join IIMs at that fee level - the means scholarship will therefore have to go to almost every student who joins - raising the fee further. Programs like the PGPX will also die out quickly if their fee is raised to very high levels. Then point 3.27 is a classic - while the IIMs are now struggling to get PhD students to join them given the low faculty income in the IIMs, the new condition of a bond of five years will effectively close the PhD program as no one will now join the program and take such a high risk. This means lesser faculty available for all IIMs in the future. How this will help in improving the research output in the IIMs is indeed a wonder! These IIM Review Committee recommendations in combination will surely make all the IIMs go bankrupt as well as lose a lot of good faculty who are currently generating substantial income for the IIMs through their research, teaching and consulting! Given that the IIM Review Committee has no academic at all I am not surprised!
IIM Review Committee Recommendations

5.23 Each IIM should aim to ensure that incomes on revenue account exceed the revenue expenditure by 10% at the end of 5 years of operations of an IIM. The surplus should be with accounts prepared according to Indian GAAP and from 2011 the International Financial Reporting Standards (IFRS). The following illustrates what we are recommending as the methodology for determining the fee structure:

1. Total gross revenue expenditure for the year (according to GAAP/IFRS) Rs GE.

2. Total gross income for the same year, excluding income from the PGP fee, but including interest on the Endowment Fund Rs. GI

3. GE minus GI equals gross deficit Rs.(GD)

4. Income required from the PGP would be Rs.GD plus 10%of Rs.GE equals Rs GF

5. PGP fee would then be Rs.GF divided by the number of PGP students.

This formula could be applied at any time, once the end target of a surplus/deficit for the revenue budget has been decided. All the existing IIMs excluding Shillong should thus be generating a small surplus.


6.13 Ideally the remuneration of all IIM staff should be determined by the Board, taking into consideration market conditions so as to attract and retain high quality talent, ability to pay, and the need to provide motivation for performance. The Board should also periodically review the compensation packages taking changes in the environment into
account. At the same time, all the IIMs should have some degree of uniformity in remuneration packages, adjustments being made for local conditions. However, for
various reasons this is not practicable in the IIMs and the basic salary structure would have to be that notified by the Government on the basis of the Pay Commission report.

6.14 We recommend that the Boards should draw up a compensation scheme that has the following features and is consistent with the orders that Government may issue on this subject.

6.15 If the Government orders permit, a higher level of base salaries be fixed for faculty in the functional areas of management such as Marketing, Finance, Strategy, etc. This could be in terms of a special pay for defined disciplines. However, the system of 'overtime' should be discontinued. The total remuneration, including the special pay, should remain 15% lower than that of faculty appointed on a contract basis, to cater to the risk attached to contract appointments.

6.16 A system of appointing faculty on a contract basis be introduced, where market oriented salaries could be paid The contracts could be for 5 years or more, with provisions for increases in remuneration based on performance and termination of services for non performance. Taking into account the attractiveness of an academic
environment, the contract amount could be around 70% of the market wages for persons with similar qualification, experience and capabilities. Earnings for such faculty from executive training programmes or consultancy assignments should be limited to
around 15% of the contract amount.

6.17 Faculty in the basic disciplines may be paid according to the Government scheme. Incentives could be considered for performance related to research
publications. Income from Executive training programmes and consultancy should be limited to 15% of salary.

6.18 We recommend that all full-time faculties give priority to teaching the 2 year PGP and doing research. The system of prescribing any number of teaching hours should not exist. If in any IIM some faculty members are underutilized, they could be asked to teach in another IIM.


3.27 We also suggest that IIMs consider sponsoring and supporting a reasonable number of students for a doctoral programme. They should be required to execute a bond that they would teach in an IIM for at least 5 years after completion of the PhD. Such a programme would have to be funded by the IIMs but seems essential to
overcome the problem of inadequate numbers of PhDs being produced.


T T Ram Mohan said...


Thanks very much for your comments and also for the recommendations appended. If you have a copy of the report, could I request you to email it to me?


Anonymous said...

I am dazed at how ISB has shaken up the Indian management education sector.

Sid said...

This is in response to both Prof. TT Ram Mohan and Prof. Prabhu's concerns.
Sir, we would be at fault if we try to seek any academic rationale or even common sense in the Bharagava Committees formation, leave apart their recommendations. This is just a wicked exercise to control the IIMs for mean political considerations. Prof. Rama Bijapurkar had also published a series of 2 articles in Indian Express sometime ago. I was astounded then and again now to see the levels of absurdity and shamelessness that this committee has reached.
However,I am more astounded at the reaction of the media as well as IIMs themselves. After all, they were the ones to holler out most loudly against MM Joshi's fee reduction plans, which were rather naive compared to designs of Arjun Singh. And yet, there is very mild and discrete voices against such brazen attempts of 'sarakari-karan' of IIMs.

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