US campus protests: a post-script

In my last post, I wrote about the muted faculty response to the pro-Gaza student protests in the US. Based on my experience at IIMA, I find this not at all surprising. Over the long years I spent there, I found that, on a number of matters of internal governance, faculty response was inadequate. I could cite numerous instances. Let me mention one.

In 2008, IIMA announced a hike in the two year PGP fee from Rs 4.4 lakh to 11.5 lakh, an increase of 155% at one go. The faculty came to know of the biggest fee hike in IIMA’s history via email on convocation day after the board had approved it. Many faculty were busy with the convocation formalities and had not checked their email, so they got to know about it from the newspapers the next day!

There was a bit of a storm in the papers. The former minister for HRD, Dr Murli Manohar Joshi, denounced the fee hike saying, ''It is a decision of the elite, by the elite and for the elite.”

A few days later, a faculty meeting was held. A senior faculty member rose to say that the convention had been for fee matters to be brought to the faculty for discussion. He wondered why this had not happened. He was right. The procedure was for the director to set up a committee to look into the costing of the PGP programme and recommend a fee. The proposed fee would be brought to the faculty council and, after approval, would be duly endorsed by the board of governors.  

The then director bristled at the suggestion that the faculty body needed to be consulted in the matter. “Faculty autonomy has always been a myth”, he said blandly, adding, “Financial decisions are always taken by the board.” Going by precedents, this was factually incorrect. But even if it was true, were the board and the director not obliged to provide a rationale for a near tripling of the fee at one go? There has to be a better argument for raising fees than “we can get away with it, so we shall”. So far as we could make out, the increase in fee bore no relationship whatsoever to any escalation in costs.

Institutional autonomy does not mean that the director and the board can do whatever they like. The IIMs are public institutions and are expected to conduct themselves with a measure of transparency and a sense of accountability to the people at large. It was incumbent on the board and the direct to explain why exactly they had gone in for a stupendous increase in fee. They failed to do so. 

In the case of the fee hike, both the faculty body and the board failed to ensure conformity with these basic principles. The board of governors was a mute witness to the director's frontal assault on faculty governance. From that point on, governance at IIMA went inexorably downhill, with the consequences that have inevitably followed, including the passage of IIM Act (Amendment) Bill in parliament last year.  IIMA enjoys considerably autonomy now but it is subject to monitoring- by the government, not the board of governors. Given the conspicuous failures of the board over the years, that is most appropriate. 

 

 

 

HBS announces tuition waiver for low income students

Harvard Business School has announced waiver of tuition ($76,000 for each of the two years) to the lowest income students for about 10 per cent of its annual intake or 200 students. Students will still have to incur living costs of approximately $35,000 per year. 

HBS is known to offer limited scholarships based on merit. Th expansion of scholarships to those who satisfy certain socio-economic criteria is a huge leap forward. It will make it easier for talented students who lack the means to access one of the most reputed business schools in the world.

The move should make IIMA and some other leading schools in India sit up and think. IIMA used to offer scholarships to the needy but these have been more or less phased out over the years. IIMA argues that the placement salaries on offer at the school are good enough to help students pay back students loans for the two-year programme. So those who gain admission should simply take loans to pay for the programme.

This argument is flawed. Several of the most disadvantaged students would be deterred by the uncertainty factor: what if they ended up with a  below-average placement salary so that it took them very long to repay a student loan? A typical student from a poor family would have to take care of the burden of several family loans. The prospect of having to take another loan could prove a deterrent to his or her accepting admission or even applying. 

For years, the leading IIMs would declare in their Admissions ad that no student would be denied admission for want of funds, meaning the IIM would take care of funding. They need to go back to that noble affirmation. 

IIMA logo controversy-I : symptom of a deeper malaise

IIMA announced a change in its over sixty-year logo recently. The director had told the faculty that the board had approved two logos, one that retained the original Sanskrit quote and another that did not retain it (and was intended for an international audience).

Faculty protested against the changes that had been made without consulting them. Here is one of the many media stories on the subject. The Institute then came out with an announcement. Here is a part of it:

The proposed logo continues the legacy of the original logo, retains the status line in Sanskrit (VidyaViniyogadVikasa) as in the original, the colour rendition has been improved, the fonts modernized, the 'jaali' inspired brand mark has been made more amenable to communication in digital media, and the brand name made more distinct. The proposed logo is to be released in June of this year after the annual vacation.

But the controversy has not died down. Current and retired faculty and alumni have mounted a campaign against any change in the logo. Some point out that leading universities in the world have retained their logos for centuries.

Like many of my colleagues, I find the new logos distasteful. But that's not the point. The point is that faculty are miffed over the fact that they were not consulted.

Those who know about IIMA would know that it what conceived as a 'faculty-governed' institution, that is, key decisions would be taken by the faculty. Legally, all powers vest with the board. The board delegates powers to the director. Successive directors have chosen to be guided by the faculty, in effect, sharing powers with faculty. This beautiful construct was the work of Vikram Sarabhai, the scientist, and Ravi Matthai, the first full-time director of IIMA. 

The idea that something as important as a change in the Institute logo can happen without any faculty input is revolting to anybody associated with IIMA.

The erosion in faculty governance is not sudden, it has happened over time and over the tenures of several directors. To me, a turning point was the fee increase of over 150 per cent in 2008. Faculty were told about the increase via email on Convocation day after the increase had been approved by the board. Some of us who had not checked our email got to know from the newspapers the next morning! No explanation was given for the stupendous increase in fee.

There is an interesting post-script to that episode. After the fee was announced to the public, it came up for 'approval' at a subsequent faculty meeting. Somebody asked what was there to approved since the board had already taken a decision on the matter and announced it to the world. One of the lackeys of the director chimed in to say that the approval sought was not for the fee itself but the components thereof- how much for the academic programme, how much for the hostel, mess, etc! So much for faculty governance.

Over time, the lack of consultation has extended to various matters. Centres have sprung up without faculty approval or discussion. Important appointments have happened in arbitrary ways. IIMA has, for years, followed the 'Nominations' process for appointments to administrative positions, such as Dean. The director would invite nominations from faculty. The idea was that the leadership would emerge from within instead of being imposed from above.

I have no idea how well it worked in the initial years. What I do know that, in recent years, it has been  nothing but a fraud perpetrated on faculty by successive directors. Faculty put in their nominations and the director sticks to his pre-meditated choices. In some cases, we came to know that the director had sounded out individuals for positions even before nominations were sought.

On one occasion, the director appointed a contemporary of his from IIMA at Visting Faculty for one year. A year later, the concerned area found the individual unsuitable for a permanent position. The Director then gave him a five year appointment as VF and proceeded to elevate him to the post of Dean (alumni), a  post just one rung below the Director. Evidently, none of the permanent and senior faculty qualified for the position.

There are three Deans at IIMA. Prior to the IIM Act, one of the Deans was eligible to officiate as Director when the incumbent stepped down and until a new director was appointed. So we could, in principle, have had someone who did not qualify or a permanent position presiding over the faculty of the Institute in his capacity as Officiating or Acting Director!

There is also a complete absence of norms for other appointments such as membership of the Faculty Development and Evaluation Committee and faculty membership of the Board of Governors. Earlier, many of these positions went by seniority- you had to be a full professor and one of the senior-most faculty would be chosen. All that has fallen by the wayside. Directors have made these appointments according to their whims and fancies.

The current turmoil at IIMA thus has deep roots. The logo issue is a symptom of a deeper malaise, the steady erosion of faculty governance and the shift in decision-making from the faculty to the board (in effect, the director). 

The sad part is that things have become worse after the IIM Act that has conferred greater autonomy on the IIMs. I will post separately on that subject. 

The MBA is alive and well, post covid

The world has not fallen apart after Covid-19. Greed is not dead and capitalism is not buried. And the MBA, contrary to forecasts, is alive and well, says an article in the Economist. Although the article is about US B-schools, much of it would apply elsewhere.

During the pandemic, B-schools saw online programmes posing a major threat. They saw applications falling as students felt that an MBA minus the social interaction may not be worthwhile. And foreign applicants to US schools fell following travel restrictions and reports of American universities getting foreign students to leave the campus, which also meant having to leave the country. European,  Chinese and Hong Kong schools benefited as a result.

But the American MBA is now back. The trend towards falling applications has been reversed this year. There is a rise in interest among the usual recruiters. How come? The article explains how US B-schools adapted and learnt:

MBA applications typically rise in recessions, when a weaker job market means lower forgone salaries. But business schools deserve credit for adapting their business models—as their professors preach others to do. Many delayed the start of semesters, offered generous scholarships, waived exam requirements and liberalised policies on deferrals. Harvard Business School allowed students it admitted to postpone studies for one or two years. GMAC reckons that deferrals globally have shot up from about 3% to 7%.

Schools also boosted online and flexible degrees, which are surging, and integrated digital teaching into core MBA courses.

The biggest learning, perhaps, is that online is not the threat it seemed to be. By intelligently combining classroom learning with digital teaching, B-schools can enhance their appeal. Their experience is akin to that of mainstream banks that at one point seemed threatened by online alternatives. By embracing online technology and combining it with brick and mortar branches, the leading commercial banks have strengthened and broadened their appeal. Ditto for B-schools. 

On a slightly different note, an article in the FT suggests that while B-schools may be booming, their appeal to women may be waning. It appears that women are more concerned about the rising cost of MBA education than men are. The move to online also seems to have cheesed off women but, as suggested above, that should not be a factor hereafter.

'Consensus' is not a good guide to decision-making.

I never forget that I am lodged in  a B-school, so I like to put on my management hat every now and then. (Which is why I wrote a book on the corporate world in 2015, Rethinc: What's broke at today's corporations and how to fix it).

In that spirit, I find myself agreeing with the departing head of Swiss bank UBS, Sergio Ermotti. Ermotti has revived UBS after the setback it faced in rogue trader scandal in 2011. In an interview, he details how he brought about the turnaround. One of the things he mentions is how there was a terrific clamour among analysts, shareholders and journalists that he shut down the investment banking arm and the US wealth management arm. His instinct told him otherwise and he was proved right:

My best decision was not to follow consensus . . . I’m sure I wouldn’t be the CEO today if I had done it,” he says. “With hindsight it’s always easy [to second-guess], but as a leader, your first instinct is usually the right one . . . So if I have to learn anything, it’s to rely on those instincts even more.

This reminds me of  an anecdote that Peter Drucker narrates about Alfred Sloan, the legendary Chairman of General Motors. At one meeting, Sloan asked his colleages whether they should go ahead with a particular decision. Everybody around the table nodded assent. Sloan rose to his feet,"Gentlemen, if there is this kind of agreement with the decision, there must be something wrong with it. I suggest we adjourn and meet again". 

In other words, consensus can be lethal to decision-making. It shows there hasn't been application of mind or expression of opinion. There has to be a modicum of dissent, a weighing of pros and cons for a decision to be sound. Wherever you find a high degree of consensus, be a little wary of it.

Harvard Business School sources of funds

Schumpeter, writing in the Economist, gives an interesting breakdown of the sources of funds for HBS: tuition fee (17%), executive education (23%), publishing (29%) and endowments (31%). The IIMs and other business schools should compare their own funding pattern with that of HBS and see how they stack up. The crucial thing to note is that tuition accounts for only a sixth of revenues.

The break-up for IIMA in 2013-14 (the last year for which the annual report is available) is: tuition fee (43%), consulting (22%), interest income (21%) and others (14%). It should be clear that tuition bears a much bigger chunk of the burden of generating funds at IIMA than at HBS.

Growing irrelevance of B-schools

Everybody knows what B-schools are for. They are a screening mechanism for companies that want to hire bright people. Whether the courses they teach add value to businesses is unclear. Whether their faculty and research have anything to contribute is even less clear.

This is not a situation peculiar to any country. It's a problem that B-schools everywhere have to face up to, as is evident from an article on UK B-schools. If B-schools are not seen to be contributing much to businesses either through their students or their research, it is only natural that industry should stop perceiving much value in them. In the UK, where it's fifty years since the London  and Manchester business schools started taking in students, this seems to be happening:

Perhaps even more worrying for business schools, there is no sign that business sees them as part of the solution any more. When the UK and global banking system went into a tailspin, few called to deans and professors for help. Did anyone expect the UK government’s plan for productivity to give a leading role to business schools?....Support for business school research by UK business shrunk by over 50 per cent in real terms between 1999/2000 and 2009/2010.

Why is this happening? Because B-school research is tailored to the requirements of their hot universities rather than to industry. Academic research has become an end in itself, with little thought given to whether such research is of any use to industry:

Reports on graduate aspirations might indicate that they want learning that is applied and connected to the ‘real’ world, but the evidence suggests that business academics are engaging less and becoming more inward-looking. This reflects the “capture” of business schools priorities by their host universities. Where they can, universities are increasing their control over their favourite cash cows. Faculty naturally respond by seeking academic legitimacy rather than economic contribution. The chair of the Chartered Association of Business Schools Angus Laing might see its members as central to solving the economic challenges faced by the UK but this can pall into insignificance against a good research assessment. 

For B-schools, the implications are frightening: if the corporate world should find an alternative screening mechanism that is as effective- say, hiring bright graduates through a competitive process- where would B-schools end up? In India, it's even more frightening that there is no indication that these issues are even being raised for discussion. 

IIM Bill: what's the fuss about?

The ministry of HRD is embroiled in yet another controversy involving the IIMs. Such confrontations have been going on since 2004 when Murli Manohar Joshi, then HRD minister in the NDA government, wanted the IIMs to reduce their fee for PGP to Rs 30,000.

Every time, there is a run-in with the government, the IIMs contend that their autonomy is under threat. Legions of alumni are mobilised. An adulating middle class and a media that believes that government can do no good rush to the support of IIMs. Politicians and bureaucrats beat a hasty retreat. We have seen this played over and over again.

Thus, in 2007, the government advertised the post of director of IIMA. Faculty and alumni went to town saying this was a threat to autonomy! One would have thought that they would have insisted on the widest advertising and search for the post.

In 2005, IIMB wanted to set up a campus in Singapore. The then minister, Arjun Singh, stalled this, saying they needed to create more seats in India in the first place, not an unreasonable point. IIMB claimed its autonomy was under threat. There was a huge ruckus. In 2010, Kapil Sibal called their bluff. He said they could go ahead. Nothing has been heard of the proposal since.

On another occasion, the government advised the IIMs to reduce their board size from an unwieldy 25 to around 15- a perfectly sensible suggestion. Again, the war cry of 'autonomy in danger' was raised before the IIMs came around to accepting the proposal.

I happen to have studied the history of IIMA and written about it (Brick by Red Brick). In the course of my research, I was struck by the fact that no chairman or director of IIMA had ever complained about lack of autonomy for nearly four decades until the early 2000s. That was a period in which IIMA and other IIMs were heavily dependent on government for funds- and yet there was no talk of government interference. If anything, those at the helm of IIMA had showered praise on the government for its support and restraint.

Things began to change in the early 2000s once the leading IIMs ceased to depend on government of funds- thanks, initially, to burgeoning consulting income and, later, to steep increases in the fee charged for various programmes. Some directors reckoned that since they were not taking money from government, it suited them not to be subject to government oversight. (Going by this logic, ONGC and SBI should also be resistant to government oversight- not only are they not taking money from government, they hand in generous dividends!).

That's how the clamour for autonomy started. Some of the IIMs articulated their position on autonomy through Position Papers. What do they mean by autonomy? The leading IIMs, notably IIMA and IIMB, would like to become board-driven institutions, with the government only setting very broad objectives. All major appointments- the chairperson, board members and the director- would be done by the boards. The board would decide the fee. The board should also be free to delink compensation from government so that the IIMs could become globally competitive (a privilege not granted to ONGC or SBI, which are commercial entities).

It astonishes me that those who make these proposals should show lack of understanding of the legal position. There was report on the IIMs prepared by V K Shunglu, former CAG, in 2004. He said that the concept of autonomy espoused by IIMA was simply not supported by the Articles of Association of the Institute. Shunglu cited a Supreme Court judgement that upheld the government's right to regulate admissions, fees and service conditions of employees even in private aided institutions.

If the IIMs come to be covered by an Act of parliament, it will be even harder,legally speaking, for government to adopt the hands-off approach that the IIMs want. After all, the government is accountable to parliament. It is just not possible for the government to leave all matters, including matters of governance, to the IIM boards. The self-perpetuating board- with the chairperson and members being appointed by the board, as also the president of the university- is a feature that obtains in private universities abroad, not in public universities. What the leading IIMs propose thus amounts, in effect, to an attempt at privatisation of the IIMs.

Legalities apart, there's the question of who will enforce accountability in the IIMs if the government were to withdraw. The IIM boards consist of people with little stake in the institutes. So when people say that matters should be left to IIM boards, they mean, in effect, that matters should be left to directors. Government withdrawal would thus result in a dangerous governance vacuum at the IIMs.

One last point. If I can write freely today not only about IIM matters but also on matters of public policy, it's because I'm protected by the service rules of the government of India . Government is thus the saviour and protector of my autonomy. I must confess that the prospect of being at the mercy of an all-powerful board - and, by implication, an all-powerful director - fills me with more than a little trepidation. 

More on the IIM Bill in my article in the Hindu, No reason for IIMs to be alarmed.

Helsinki Diary- I

As I await the Air Finland flight to Helsinki at the boarding gate in Delhi, I am in for a big surprise. The flight is full - and most of the passengers are Indian, mostly middle-class people on a group tour. 

The flight departs half an hour late (and lands half an hour late), so India's airlines take heart. The economy section is cramped and uncomfortable and it's warm inside as the plane readies to depart. The airline doesn't provide a bottle of mineral water. You are supposed to trudge up to the flight crew's section and help yourself to a cup of water. Since this means having to disturb the person next to you, it's not pleasant at all. Lunch is frugal and nothing to write home about. There are announcements in Hindi and English, the airline mindful of the large complement of Indians on the flight.

                                                              *****
Helsinki airport is quite small and the immigration counter courteous and quick to clear. I am out in about half an hour or so. It's cold and drizzling outside,14 degrees- and this is supposed to be summer in the Arctic region. I'm glad I have my jacket on and have brought along a sweater. I get into a large-sized cab. It turns out to be a BMW (and yet the fare is no different from that for other cabs). The driver is from Somalia. He landed decades ago and hasn't thought it necessary to ever go back. "It's rather tough out there", he says. It's hard to disagree.

The sights alone the drive from the airport to downtown Helsinki, where my hotel is located, remind me of London, with lots of brickwork-like buildings along the route and plenty of greenery. It's a Sunday, so traffic is scanty. We do the 20 km distance in about 20 minutes. The cab fare is around 50 Euro. As I arrive at the hotel, a seafront and several large liners loom into view. Helsinki has five ports and this one comes right into the city. There are plenty of cruises from here to Stockholm, St Petersburg and elsewhere.

Scandic Grand Marina is a four-star hotel. It wouldn't compare with Taj Vivanta although the tariff is comparable to that at Taj Colaba. There is a flight of steps to climb from the road into the hotel. No attendant comes rushing nor is there a doorman. I have to lug my bag up the stairs up myself. There is a smallish lobby leading to the only restaurant. Just two people at the counter to do the check-in and check-out. You understand what it is to be in a high-wage country (Finland has a per capita income of around $30,000).

I had asked for a sea-facing room. What I get is a room facing the conference centre. Standing at the window and viewing the outside from a sharp angle, I get a glimpse of the sea. The room itself is quite utilitarian. Surprisingly, there's no indoor heating. I'm told a room heater can be available on request. I had seen the menu card put up at reception and my heart sank. There is a very limited number of items on offer (quite unlike the multi-page menu you get at an upmarket hotel in India) and, except for one item of salad, no vegetarian food.

                                               *****************

The next morning, I head for Aalto business school where the conference is to kick off. I'm there for the European Workshop on Efficiency and Productivity Analysis. Helsinki has free wi-fi in most places in the city. I look up Google Maps and know which tram to take and where.

I step out of the hotel and make way to the tram stop. The narrow road from the hotel gives way to a broader one about 100 metres away. I walk pass Market Square where fresh vegetable, fruit and other foods are on offer. This is a typical downtown location of an European city. Broad avenues with parks and other greenery at regular intervals at the centre. Cafes and other restaurants on either side, along with upmarket shops selling clothes, jewellery, hand bags and what have you.

I have to stop and ask for directions every now and then. I am to find over the next few days that people are uniformly courteous helpful. This is probably the friendliest country I've ever been to.
Finland has a population of just five million. It was ruled for nearly 150 years by Sweden and then by Russia, becoming free, I am told, in 1917. It is part of the Nordic states and its economy conforms to the Nordic model- high taxes (43% at its highest in Finland) and free provision of education at all levels and high-quality medical care. It also has an excellent public transport system, comprising buses, trams and a metro, and cycling paths all over the city.

                                                    ****************
I board the tram. Most drivers, I notice over the stay, are female. There's no conductor, you pay the driver as you enter. (Doubt that this would work in India). I know from Google Maps that the ride is about 20 minutes long. I keep glancing at my watch. It turns out that there is a lady next to me who is also headed for the conference. Twenty minutes later, we ask somebody if we are close to Aalto. We learn we are and hop off. It's a good ten minutes from the tram stop to the business school.

There's not much of a formal inauguration. The first day is spent on workshops for students. I head for the finance department. Some of the offices are open. I knock on a door titled, 'Director of finance'- I guess it must be the head of the department. A professor with his back turned to me and bent over a PC wheels around on his chair and looks up. I ask,"Do you have few minutes"? He breaks into a grin. "Of course".

I walk in and take a chair. I introduce myself. I tell him I want to know something about the school. He chats with me for a while and then puts me on to a colleague. Aalto is Finland's leading business school. Both students and faculty are overwhelmingly from Finland but that's changing of late.There is a huge effort to recruit faculty from outside by offering competitive pay. A business school degree is not part of the mainstream university courses, so Aalto charges a fee for its undergrad and MBA programmes. I am surprised to learn that placement- which is really the whole point about a business school- is not very active at Aalto. Not many companies come to the campus  to recruit. Students have to apply on their own. If this happened in India, b-schools would lose their clientele.

I ask about Finland's high school education model of which I have heard so much. Kids go to school only when they are seven.There are no exams until the final stage. The teacher to student ratio is amongst the best. School teachers are well paid, well-educated and highly respected in society. The prof remarks, "This system is good for bringing everybody up to a certain level but it's not good enough to achieve excellence". I guess that could pass for a comment on socialism in general. What he omits to mention is that it may be difficult to achieve excellence until society as a whole first reaches a certain level. Ask the Russians and the Chinese.

Aalto b-school is part of Aalto university. The university itself is split across three campuses, one of which is close to my hotel. The b-school has another building, called the main building, which houses mostly the administrative staff. I am put in touch with the international exchange coordinator. I'm pleasantly surprised to learn that IIMA has an exchange arrangement with the b-school and a couple of students on either side have been going over for the past several years.

Not far from the B-school is one of the best-known sights of Helsinki, the Rock Church, a whole church burrowed into a natural rock formation. I enter the cavernous structure and am amazed to see a beautifully lit church inside swarming with tourists. There's a lady playing the piano. I sit on the one of the benches and take in the mellifluous notes.
 

B-schools: the dethroning of the financial sector

Financial firms, such as banks and investment banks, are out; consulting dominates and high-tech firms are in. This trend, which started post the financial crisis of 2007, now stands confirmed, going by two reports, one in the Economist and another in the FT. 

Mr Lewis charted the ascent into investment banking of the most talented graduates in the 1980s, a situation that still held true as the financial crisis struck in 2007. Then, 44% of Harvard’s MBAs landed a job in finance; 12% became investment bankers. Yet in the class of 2013 only 27% chose finance and a meagre 5% became members of Mr Lewis’s master race.
The trend is the same at other elite business schools. In 2007, 46% of London Business School’s MBA graduates got a job in financial services; in 2013 just 28% did, with investment banking taking a lower share even of that diminished figure. At the University of Chicago’s Booth School of Business, the percentage of students going for jobs in investment banking has fallen from 30% in 2007 to 16% this year.

What are the reasons for these trends? One, of course, is that pay in banking is no longer as attractive as before. Earlier, you put in long hours in the hope that you could quickly cash out and enjoy life. Now, this seems less possible. But there are other reasons.

Investment banks expect long-term loyalty. Consultants are happy to see people leave after five years or so- and give them business from the other side of the table. Moreover, consulting opens up a variety of opportunities whereas in banking, you are stuck in one sector.

Thirdly, there is an odour of disrepute about banks now. What young graduates hear about these places and the adverse publicity they attract because of their tangles with regulators does little for their reputation.

Fourthly, consulting firms and tech firms are seen as good training grounds for those wanting to become entrepreneurs. The tech firms' casual culture is appealing. And they too promise big bucks:

Tech firms and consultants both appeal to the growing number of students who want to gain the right experience to start their own business. A survey by the Graduate Management Admission Council, an association of business schools, found that although only 4% of MBAs have entrepreneurial experience when they enter their course, 26% say they want to start companies after they graduate.

How are banks responding? In several ways. By targeting undergrads instead of grads, by using social media and competition games to attract candidates, encouraging a better work-life balance, etc. Some are even heroically attempting an image make over:

Some are running campaigns urging graduates not to believe media stories portraying them as greedy or evil. Others are trying to lure recruits by persuading them they will help make the world a better place. Goldman Sachs’s job portal advertises opportunities to work on community projects alongside positions for analysts: “That’s why you come and work at Goldman Sachs, because you can make a difference in the world,” trills its recruitment video.
A few banks are trying to change their culture, taking a tougher line on sexual harassment of female staff and advocating a healthier work-life balance, perhaps even allowing the odd work-free Saturday. For the business schools’ brightest and best, though, all this may not be enough.

How do B-schools respond to the MOOC challenge?

B-schools have yet to figure  out how to address the MOOC challenge. It is easy to shrug it off, saying that online is no substitute for class-room interaction. That may be well the case but we need to ask: what price level are we talking about? B-schools are investing hugely in expensive infrastructure and charging higher and higher fees. It's not clear that the pay-offs to a B-school degree are rising commensurately. Perhaps, for the top schools, yest. Not for the rest. That's why GMAT- and CAT- applications are falling.

How do b-schools respond? Schumpeter harks back to the Porter model: you compete on cost or quality. For the top schools, the answer may be the latter- offer such a high quality program that it pays off. For the rest, however, costs cannot be ignored. Schumpeter points out how some B-schools are responding;

Though the average fee for an American MBA course has risen by a third over the past four years some schools, such as Cornell and Rochester, are offering shorter courses and others, including Maryland and UCLA, are forgoing the annual fee increase. Ashridge, near London, focuses on short courses for executives. But too many continue to stick their heads in the sand. Meanwhile, they face competition from companies with a monetary incentive to control costs and expand enrolment. The Career Education Corporation, an American firm, is assembling a portfolio of business-oriented institutions. Laureate Education has over 800,000 business students in 30 countries. Private schools such as these are directly challenging the faculty-dominated not-for-profit model, employing staff to teach rather than research and making it easier to combine study with work. And some consultancies and investment banks are running in-house mini-MBAs.

As Schumpeter points out, pruning costs and offer a low-cost model is not easy for B-school administrators because they are run by academics, for academics. Most of the costs are on account of salaries and salaries are inflated to attract research talent. Who will bell the cat is a big issue for B-schools.