India's new private universities: how much of a game changer?

The Economist has an upbeat story  about India's new crop of private universities. But its title - India's pricey universities want to take on the Ivy League- suggests it is getting carried away. The new private universities could, at bestm become India's Ivy League but that's hardly the same as taking on America's.

The new universities- Ashoka, Shiv Nadar, Krea, Jindal, Ahmedabad, to name a few- are funded by businessmen. The Economist writes:

The new crop of private universities set themselves apart in several ways. From the beginning they have sought to excel in research, not just in teaching. Many emphasise humanities and social sciences, says Eldho Mathews, an education researcher in Kerala—which in other Indian institutions are often considered secondary to science-based subjects and also to training for the professions.

Well, the new private universities have distinguished themselves from the general run of public universities. However, other than Ashoka, which has an outstanding undergraduate programme, none remotely approaches the Ivy League in quality. Perhaps they do not even match the rigour and class of the best IITs and IIMs. They have a long way to go.

The Economist sees the new universities as having to deal with sensitivity to research on controversial issues:

A big worry is the Indian government’s intolerance for research or opinion that it finds irksome. Self-censorship is rife in the social sciences in particular, says one academic. Publishing an inconvenient finding can easily “blow up in your face”. Sensitive topics include religious freedom and the state of India’s democracy.

It's not clear that is the biggest problem. One problem certainly is attracting quality faculty. Not many have established a tenure system, whereby security is tenure is assured after a probationary period of the first few years. Nor is the faculty pay particularly attractive except in a few places. The IITs and the IIMs offer not just pay but quality accommodation, job security and substantial funds for research and travel. The new private universities do not uniformly measure up on these counts. The new universities also tend to have a centralised model of leadership, more akin to that of ordinary Indian universities than the IIT and the IIMs.

That the new universities are backed by businessmen does not  a blank cheque. The institutions are expected to meet a substantial portion of their funding requirements through fees and executive training. After the initial bout of funding, the business backers are often reluctant to provide substantial support. The formula for IITs and IIMs has proved unbeatable: 100 acres or so of land, Rs 150 to 200 crore for initial capital expenditure and recurring revenue grants of upwards of Rs 100 crore - for at least ten years.

The new universities will be preferred to the typical Indian college. But Ivy League is miles away.

Academics and the allurement of stardom

Everybody was shocked to hear of the firing of Francesca Gino at Harvard Business School. It's not called firing, it's called "revocation of tenure". Tenure grants academics the right to stay on for as long as they wish- there's no retirement, officially, although most academics do hang up their hats at some point. 

This was the first instance of a tenured faculty being asked to leave at Harvard in about 80 years since the system of tenure was introduced to create conditions necessary for independent scholarship. Gino had to leave after HBS concluded that she had falsified data in several papers she had published. 

The Economist has a story about a graduate student who seems to have similarly succumbed to the allurement of attaining stardom through publishing. An unpublished paper written by a high-flying graduate student has been withdrawn by MIT and the student's personal website taken down.

Empirical papers are especially prone to falsification because the potential for falsification is much greater than in theoretical research. The pressures to publish even at the graduate level are considerable:

More than in other disciplines, success depends on a few high-stakes events. Job-market candidates are evaluated on a single paper, rather than a body of work. Because institutional pedigree and advisers carry lots of weight, young researchers may face pressure to overstate results.

Tenure makes academics very attractive- and at least at business schools, the pay is pretty good at least some disciplines: accounting, finance, marketing.  And tenure is contingent on publishing. The temptation to get in papers in through data manipulation is large.

Data manipulation is a different problem from plagiarism. There are reasonably effective tools to detect plagiarism today. But somebody playing around with a dataset has a greater chance of getting away with it. 

US universities face challenges but will not lose dominance

 

The battle lines are drawn. More than 200 American universities and colleges have united in opposing what they regard as overreach on the part of the Trump administration.  A statement signed by, among others, the presidents of Columbia, Princeton, Brown and Harvard, says:

As leaders of America’s colleges, universities, and scholarly societies, we speak with one voice against the unprecedented government overreach and political interference now endangering American higher education. We are open to constructive reform and do not oppose legitimate government oversight. However, we must oppose undue government intrusion in the lives of those who learn, live, and work on our campuses. We will always seek effective and fair financial practices, but we must reject the coercive use of public research funding.

The pushback comes as the Trump administration demands sweeping changes in the way American universities are run, in particular, their response to alleged antisemitism on campuses. The US government is mounting pressure on universities in three ways: withholding federal grants, looking into their tax-exempt status, monitoring international student enrolment (which is a source of funding as well as diversity of talent).

The large universities have huge pools of endowment. Harvard sits on over $50 bn in endowments. Does the US government withholding around $ 2bn matter? How material is government funding for American universities? The Economist has some useful data and points to make.

Federal research grants account for a double-digit share of the revenue of most prestigious private universities, so losing them permanently would be a body-blow for any of them. They make up 11%, 15% and 18% of the income of Harvard, Yale and Princeton universities respectively. Columbia, at 20%, is especially vulnerable.

The proportion may be higher for small universities, rendering them even more vulnerable to government pressures. Can the leading universities use their endowments to tide over the cutbacks? It's not easy:

Universities’ endowments are not as much help as their billion-dollar valuations would suggest. For a start, much of the money is reserved for a particular purpose, funding a specific professorship or research centre, say. Legal covenants often prevent it from being diverted for other purposes. In any case, the income from an endowment is typically used to fund a big share of a university’s operating costs. Eat into the principal and you eat into that revenue stream.

 What is more, eating into the principal is difficult. Many endowments, in search of higher income, have invested heavily in illiquid assets, such as private equity, property and venture capital. That is a reasonable strategy for institutions that plan to be around for centuries, but makes it far harder to sell assets to cover a sudden budgetary shortfall. 

There is also the threat to the tax-free status. The previous Trump administration had imposed a tax of 1.4 per cent on endowments larger than $500,000 per student-it affected only 52 institutions. Moves are afoot to lower the endowment threshold and increase the tax rate. Why not tax the richer universities and use the money to fund public education, many argue.

American universities are in no mood to bend before the US administration's demands, so they do face challenges in respect of their finances. The Economist warns in another report:

The MAGA plan to remake the Ivies could have terrible consequences for higher education, for innovation, for economic growth and even for what sort of country America is. And it is only just beginning. 

Well, the Economist exaggerates the threat. US universities will find ways to raise resources- through debt, more endowments, more projects, higher fees. Even if there is some hit to the income, the scale of research funding will dwarf what is available in the rest of the world. Government departments, such as the Pentagon, will continue to fund projects of importance to them, entirely out of self-interest- they need the cutting edge that American universities alone can provide. 

American leadership of higher education is so dominant that it's hard to see it reduce in the foreseeable future. The Trump administration's moves pose headaches but are unlikely to pose any major threat to American universities. 

 

Did you know? - Harvard gets $9 bn in federal grants !

Harvard is,perhaps, the richest university in the US with over $50 bn in endowment funds. It is a private university. And yet it gets $ 9bn in federal funds, according to this report in the FT! This  includes $256 mn in contracts and $8.7 bn in grants.

That is certainly news to me. I was aware of government funding for projects and funding through agencies such as the National Science Foundation. I was not aware of outright grants. I read also that Columbia gets $400 mn in grants and $5 bn in other forms. 

The Trump administration is asking universities to review their policies on anti-semitism, DEI (diversity8, equity and inclusion), etc. in order to qualify for funding. Columbia university announced its willingness to fall in line with the government's demands. It appears there was a severe backlash from faculty and students which resulted in the president of the University announcing her decision to step down.

My concern here is not with the problems American universities are having with the government. It is about the financing of higher education. The combination of endowments and government funding allows America's private universities to massively subsidise their courses. The fee charged does not cover costs. At the undergrad level, there are tuition and other waivers- Harvard has said that for 2025-26, undergrad education would be free for all students whose family income is below $100,000. 'Free' means the university would cover tuition, food, housing, health insurance, and travel costs. 

In India, courses at government universities are subsidised but not those at private universities. The IIMs have relatively small or no endowments and the leading IIMs do not get government funding, so they recover costs plus margins through enormous fees. The same goes for engineering and medical courses at non-government colleges.

The failure to subsidise higher education in India across a wide swathe of colleges has implications for inclusion, the financial well-being of students who pay for courses and the cost of services such as health for the average person. Much of Europe offers free or subsidised education for its citizens. So does Canada. Our model is seriously flawed and needs to be revisited. 

Silicon Valley CEO's high praise for IIT Madras

 Vivek Wadhwa, a successful Silicon Valley entrepreneur, has high praise for IIT Madras in this article:

When I visited IIT Madras earlier this year, I was blown away by the talent, world-class facilities, and their ability to connect with top scientists across India. I was so impressed that I decided to outsource the development of breakthrough technologies for my company, Vionix Biosciences, to them. Frankly, I told my friends and VCs in Silicon Valley where I live, that IIT Madras puts MIT, Duke, Stanford - and the Valley itself - to shame in terms of intellectual capacity, scale, ambition and  readiness to collaborate.

I've been more than amazed by the progress IIT Madras has already made in building technologies that could never be built in the West. The last company that tried to develop what we're doing was Theranos, which burned through $1.4 bn on medical diagnostics that are nowhere near the advanced solutions IIT has already created - at a tiny fraction of the cost.

Wadhwa goes on to make suggestions about the sort of research that Indian educational institutions must focus on:

India must avoid the pitfalls of the US research system, which, despite vast investments in basic research, is often disconnected from real-world applications. The US spends over $130 bn annually on academic research. Yet, much of it remains locked in the 'Valley of Death', where promising research never transitions into marketable solutions. As former dean of engineering at Duke University, Tom Katsouleas had told me, based on his work with the US National Academy of Engineering, 'Only about 1% of university patents are ever commercialised.'

I do not know how IIT Madras evaluates faculty. Do commercial applications carry as much weight in tenure and promotion decisions as publications in journals? If they do, then IIT Madras will find it difficult to improve its ranking in international ratings of institutions of higher education.

But then if research publications alone matter, institutions such as IIT Madras may lose out on applications. Wherein lies the balance between pure research and impact on practice? The answer has implications not just for IITs but also the IIMs and other places. 

Should the IIMs be trying to influence  practice through executive training, consulting and participation in policy-making by using the available research? Or should they try to catch up on research with the top institutions of the world, an objective that will remain elusive in the foreseeable future?

 

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. 

 

 

 

Crackdown on pro-Gaza student protestors in the US

Like many others, I have been watching the response of America's great universities to the pro-Gaza student protests with some consternation. I cannot imagine how disallowing peaceful student protests can be consistent with the spirit of academic freedom at all. Several universities have had students evicted by police from the camps that had set up on the campus. Students have been suspended, expelled, arrested. 

One of the things I find disconcerting is that America's star faculty have not been sufficiently forthcoming in defence of the students. There is the odd vote of no-confidence from a section of the faculty in some universities (eg. School of Arts and Sciences at Columbia university) but these are few and far between. There has not been the sort of unequivocal defence of students' right to peaceful protest that one would have expected of American faculty.

My latest article in BS is on this subject, US protests: why are faculty voices muted?

Here is the full text:

FINGER ON THE PULSE
T T RAM MOHAN

US protests: Why are faculty voices muted?

American university campuses erupted in protest last month over the conflict in Gaza. The pro-Palestine protests are still on and have since spread to Europe. These protests have raised fundamental questions about freedom of expression at universities. University administrators (often distinguished academics) have not been able to withstand pressure to silence the protestors. The voices of faculty, too, have been strangely muted. 

In dealing with such protests, universities obviously need to strike a balance between allowing freedom of expression and maintaining order on campus. The American Civil Liberties Union has spelt out ground rules that nobody can quarrel with. 

First, no viewpoint, however offensive, must be censored or disciplined.  Secondly, no student or group should be targeted or intimidated in any way in the name of free speech. Thirdly, universities can place restrictions on the time and place of protests so that the functioning of the university is not disrupted. Fourthly, the police must be called in only as a last resort. Lastly, campus leaders must not yield to political pressures.  

It should not have been difficult for the university authorities to have allowed the protests subject to these rules. Sadly, the situation has got out of hand at many American universities, such as Columbia in New York. Police (including anti-terrorist squads in combat gear) have been called in to clear out encampments of students even where they were not disruptive of normal activities.  The universities’ response to the protests may be disappointing, but nobody should be overly surprised. 

The United States is almost unique in the scale of philanthropic contributions to universities. Donor contributions are typically the single biggest source of finance for universities. Student fees don’t even cover operational costs, let alone capital expenditure.  The more funds a university or college can raise by way of donations, the more it can invest in infrastructure, research, and faculty and hence the greater its stature. Annoying donors is a terrible idea for any university.

In addition, universities get large funds for research projects from the government.   The US Defence Department, for instance, has historically been a major source of funds. Corporations, too, fund research projects. Universities, in turn, invest their endowment funds in corporations. 

Leading donors, major corporations and politicians have not cared to conceal their displeasure over the pro-Palestinian protests on campuses. Many tend to reflexively label the pro-Palestinian protests as anti-Semitism. America’s donors and politicians have been keen to oblige Prime Minister Benjamin Netanyahu of Israel, who has called on the universities to shut down the protests. 

So deep are the links between universities on one side and the government and the private sector on the other that the universities can’t afford to antagonise either. The students’ demand that the universities divest from corporates with links to Israel is thus a non-starter for most universities. A crackdown on the protestors was inevitable.

It’s not just university administrators who have been timid in responding to outside pressures. Faculty have not been sufficiently forthcoming in support of the students’ right to legitimate protest. At Columbia university, the 111-member university senate considered but did not pursue a vote to censure the university president for her decision to call in the police, among other things.  

At Harvard, about 300 faculty have signed a letter urging the president to negotiate with the student protesters. That is a relatively small number out of the 2400 faculty the university boasts of. Most of the signatories are from the humanities departments. Faculty at Harvard’s famous schools of law, business, medicine, and the departments of physics, chemistry and economics appear largely absent from the list. At a few universities, faculty have passed a vote of no-confidence in the leadership.  Such faculty actions have been pretty rare.

Where, one wonders, are America’s many Nobel Laureates and other thought leaders? Columbia University’s Joseph Stiglitz, himself a Jew, has decried the “interference in academic freedom”. He has said in an interview, “They (the students) had empathy for what was going on in the world. How could anybody not react after seeing the pictures, after seeing the numbers of people dying, being injured?” Professor Stiglitz is a distinguished exception to the silence of the leaders of America’s academic community.  How come?

Faculty in the US comprise two groups: clinical or adjunct faculty and tenured faculty. Clinical faculty do mostly teaching and are on contract. They would be reluctant to put their jobs on the line by taking a position on such issues. Tenured faculty enjoy complete job security and are not subject to any retirement age. With that sort of protection, people would expect tenured faculty to speak up on issues of academic freedom. 

Alas, that doesn’t happen. For one thing, governance in American academia has changed quite a bit over the decades. American universities are said to be “faculty governed”; that is, faculty are supposed to play an active role in the running of colleges and universities. Over the last two or three decades, however, American colleges have tended to become Dean-centric, which means more power has come to be concentrated in the office of the Dean. Finance, faculty appointment and confirmation, and faculty compensation (including annual increments) are all matters on which  Deans have come to have the larger say.  

The “incentives” that have caused academic administrators to fall in in line with donors and politicians also operate to keep faculty on a leash. Distinguished faculty hold Chairs that are endowed by wealthy donors, whether individuals or companies. Funding for research projects and, broadly, power and influence within the college or university are contingent on faculty keeping administrators and donors happy. 

So faculty may hold forth on human rights abuses and limits on freedom of speech in China, Russia, Myanmar and other places. They may sit on government and regulatory bodies and record stirring notes of dissent. They may write searing critiques of political parties succumbing to powerful lobbies. They may exhort graduating students to stand by the “values” of the university and to speak truth to power. 

Within their own colleges or universities and in their dealings with Deans and Presidents, however, faculty know how to lie low on issues that matter- and not just in the US. Your columnist, who has had a long stint in academia, is happy to share a little secret: The internal culture of academia is not all that different from that of the typical corporation (whose authoritarian culture academics are apt to decry). 

Academics, like sensible people everywhere, know which side their bread is buttered. They understand that the price of annoying administrative leaders and powerful external lobbies is steep. Freedom of expression, “governance” and “values”, then, are strictly for the birds. 

Ashoka University woes

 I return to my blog after a long lay-off caused by my having to relocate. It's taken me longer than I thought to settle. I hope to regular with my posts hereafter- fingers crossed!- TTR

Ashoka University was in the news recently- and, not for the first time, for quite the wrong reasons. Two co-founders and trustees of the University have been charged in a case filed by the CBI and have since stepped down from their posts at the University. Ashoka had made news only a few months ago when one of its faculty members, Pratap Bhanu Mehta, resigned. Mr Mehta, who has been critical of the government, had indicated that some of the top brass had conveyed to him their discomfort with his writings.

Ashoka University’s problems highlight a fundamental problem with setting up quality educational  institutions in the private sector. Such universities require support from those with deep pockets, which mostly means businessmen.

When businessmen are associated with a university, there are two issues. One, you never know when a business donor will get into trouble with the law. Two, it is not  easy for businessmen to allow the sort of freedom of expression that goes with the best of academia- there will always be pressure from those  in authority. For these reasons, quality academics will be reluctant to associate themselves with private institutions. There is no great University in the west that is associated with a corporate. The great Universities of the US are non-profit, private universities or government universities. 

The US has outstanding private universities that attract huge endowments. But these endowments typically come without strings attached from a large number of alumni, not from a few corporates. Donors do not, in general, ask to be associated with the university to which they contribute. Wealthy individuals, who have made their money from business contribute - and, often, after their association with a corporate has ended. Even if the corporate gets into  trouble later, it is not a problem for the University or School. The culture of large philanthropic contributions to academia  is almost unique to the US. It certainly does not obtain in India.

The IITs and IIMs have built their reputations overwhelmingly through government funding. While they have received large donations in recent years from alumni, they have, with rare exceptions, been wary of any association with Indian business. They have sometimes attracted funds from alumni who became successful entrepreneurs  in Silicon Valley and elsewhere but have been hesitant to tap Indian corporates for funds. Rightly so, judging by the troubles at Ashoka.

The university after the pandemic

 Is the residential university soon going to be a thing of the past? Will online learning displace it in  a big way? Will young people opt not to go the universities?

No, no, no, going by article in the FT on the future of the university. 

The pandemic has forced a lot of experimentation and improvisation. Blended learning- a combination of online and classroom learning- is pretty much the norm. Alternatives to the 2-3 hour exam are being explored. Online exams through special proctoring mechanisms have come into vogue.

At the end of the day, however, the university will not go away and the residential university will remain dominant. As everybody knows, there is more to the university than classroom learning- the social interactions on campus and group learning have their place. And online learning, many students seem think, is not the real thing.

The most striking fact in the article is that the flow of UK students this year is undiminished, with some universities, such as Cambridge, even seeing a small rise. (Although the experience in the US and Australia seems to be different). That's again because students do not see online as an alternative to the residential university.

What is more likely is that online education will supplement, not supplant, the residential university. It will be an useful aid to classroom learning. And universities will use their learning from the online model to offer it to those who can't make it to university. That will boost revenues at universities- and it will also result in greater inclusion.

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.

India's private universities fail to make a mark

Shiv Nadar, Aziz Premji, O P Jindal, Munjal, Bennett.... we have quite a few universities started by private industrialists. Yet, none has made a mark thus far as a quality institution, notes Anjuli Bhargava in BS.

That's true of professional colleges as well. There's no engineering institution that can match the IITs, hardly any that match the IIMs and the AIIMS or even other prominent government medical colleges.

Why so? One reason that Bhargava mentions is the lack of high quality admission standards. Indeed, many of these universities go all out to woo student candidates, something no self-respecting institution would do. Another is that they are far too focused on hardware and too little on software, namely, faculty and research. And a third is that promoters run them as they do their own businesses- by calling the shots and not giving enough leeway to professional educators.

I guess all of this is true. But another crucial factor is that most private universities have a profit motive in mind- they are looking for returns, preferably quick returns. Whereas the striking thing about private universities in the US and some other places is that these are non-profit in orientation and are sustained by large endowments.

No educational institution that aims to generate surpluses out of its operations- mostly running degree programmes and, in some cases, consultancy and executive training- can be expected to produce high quality in the long run. There's a view that, ever since the IIMs have been left to set their own fee, they too are focused on revenue generation. Their reputation was built in a period when they were sustained by government funding and did not have think about surpluses.

Worldwide, the combination of quality and access is possible only when there's a large element of subsidy built into higher education. In India, it's public universities that conform to this model. The worry about IIMs now must be whether they will end up in the same bracket as private universities.

Do we need universities?

I know that's hardly the right question for somebody sitting in an elite educational institution to ask. And it may sound dumb coming from anybody- who could argue against higher education? But the case needs to be made rigorously. Tim Harford, the undercover economist, takes a look at the pros and cons.

Pro: a recent study suggests that universities boost the growth of economies in the region:

Valero and Van Reenen find that universities do indeed seem to boost the income of their region. Double a region’s count of universities — say from five to 10 — and GDP per person can be expected to rise by 4 per cent. Double the university count again, from 10 to 20, and that’s another 4 per cent on GDP per person. Neighbouring regions also benefit. This is not a trivial effect.

Con: a degree from a reputed university is no more a signal of talent. You got into a good school, so you must be worth something. It's not that you have learnt something at the university that is useful at the workplace:

....undergraduate degrees have no value to society: they enable employers to pay higher wages to smarter workers, but lower wages to everyone else — and in order to enjoy these higher wages, smart people must waste time and money going to the trouble of acquiring a degree. Everyone might be better off if the whole business was abandoned.

In other words, as we at B-schools understand very well, universities, more often than not, are about placement, they are not about learning. But one mustn't carry this too far. What people learn at engineering and medical schools is, indeed, of value. To put it differently, you may start off as a trainee at a company without any B-school degree and rise to become CEO. But it's doubtful that somebody can simply land up at a hospital and be trained to become a doctor.
 

Sudha Murty, IIIT Dharwad and institutional autonomy

This is one item I have been following with disbelief- and, of course, I am assuming that ET has got the facts right.

The story, as you can see for yourself, is that IIIT Dharwad has plans for constructing buildings which were to be financed by MHRD (50%), the state government (35%) and Keonics, a state PSU (15%). After Sudha Murty was appointed Chairperson, she proposed that Keonics be replaced as a partner by Infosys Foundation. In return for the funds that Infosys Foundation would provide, the buildings at IIIT would be named after Infosys.

The MHRD referred the proposal to the law ministry. The law ministry objects on grounds of conflict of interest involving Ms Murty. I have a more fundamental objection: how can an institution funding 15% of a project want its name to be assigned to the project? At best, there could be a plaque in the buildings thanking Infosys Foundation for its contribution.

The story doesn't end there. Ms Murty apparently wants the mentoring institution, NIT Suratkal, to be replaced by IIIT Bangalore of which she happens to be a board member- another conflict of interest.

This little episode reinforces a point that I have long been making and that readers will be familiar with: it is most unwise to leave the governance of public educational institutions entirely to boards of governors in the name of autonomy. Those sitting on these boards have little stakes in these institutions and cannot be expected to take care of the long-term interests of the institutions. The government needs to keep a watchful eye through its own representatives and by requiring the institutions to obtain government approval in important matters.

This is the reason I favour the IIM Bill. TOI reports the Bill is being held up following objections raised by the PMO to certain provisions. The PMO does not want the HRD minister to head the IIM council and it also has reservations about the President being the Visitor to the IIMs. The PMO does not think that the IIT model is appropriate for the IIMs.

I'm afraid the PMO is mistaken on these counts. Matters cannot be left to the IIM boards- there has to be an independent authority to oversee the boards of the IIMs. This is because there would otherwise be no checks and balances otherwise on the functioning of the boards. Boards are ineffective even when they are subject to the discipline of the financial market. Where market discipline is absent, boards can become seriously dysfunctional and harmful.

This is not just my view. Matters haven't been put to vote at the leading IIMs but my sense is that a majority of faculty feel that way. We feel that faculty autonomy is better safeguarded by having the ministry watch over the boards than by leaving matters entirely to boards. Our greatest apprehension is that faculty autonomy will be undermined if matters are left to IIM boards as, in practice, this would result in unchecked powers for the directors of the IIMs. We see the government as the saviour and protector of faculty autonomy, not as a threat. As long as we are governed by the rules of service of the government of India, we believe we can express ourselves freely as academics.

It would be worthwhile for MHRD and the PMO to engage faculty at IIIT Dharwad and at the IIMs in these conversations. The PMO may be well-intentioned but it seems unware of the facts on the ground. It would benefit by eliciting faculty views on these matters.

Free tuitions at top US universities?

America's top universities, such as Harvard, are under pressure from activists to make tuition free to their students, the Economist reports. The argument is a straightforward one: their endowments are so large that they don't to charge their students any fee- Harvard sits on an endowment of $36 bn.

American universities are not willing to offer free tuition or even reduce their fee, which has soared by 220% since 1980.  Why would they raise the fee when they can afford not to charge students? Simple. Higher fees mean greater power to spend- on new buildings, research, higher salaries for faculty. And if students can raise loans to pay the fee, why not? "We can rip off students, so we will"- seems to be the motto. Many will see shades of this in the IIMs' own propensity to raise fee in recent years.

American colleges argue that they try to care of needy students by providing financial aid- at Harvard, 70% of students are covered by aid of some sort. However, students still have to raise large loans to fund their education. The evidence is that this does come in the way of inclusiveness- those outside a small elite are intimidated by the thought of taking large loans to fund their education.

Again, one sees echoes of all this in the IIM system. The argument is made that most students can afford to take loans given that placement salaries are high. There are two flaws in this argument. One is that several students will still be discouraged from coming to IIMs  given the uncertainty about paying off large loans. The second is that high fees in the IIM system cause other B-schools to raise their fees even though their placement salaries are not high enough to justify the fee. So great is the demand for igher education that students will take the risk of going to lower B-schools even though they are not sure the salaries they will get will make the fee worthwhile.

Why would Indian educational institutions want to go abroad?

Amity University plans to be in 50 countries in the next ten years, the Economist reports.  It has already set up shop in  America, Britain, China, the UAE, and Singapore.There are others such as BITS and Manipal University that have also spread their wings overseas.

Why would Indian institutions want to go abroad when there's a huge untapped market here? And surely, they can't expect to compete with foreign institutions for foreign students?

Well, here's the answer to the puzzle. These universities do not in general cater to the local market abroad. There are plenty of quality institutions overseas to take care of the local market. What the typical Indian institution does is cater to rich kids from India. These kids can't get into, say, Amity University in Delhi. But they can get into the same university in Dubai or Singapore. They are happy to cough up more than what they would pay in India and they either can't get into top schools abroad or don't want to pay the fees of foreign universities.

So, there's a perfect market segment arising from basically the Indian market. Why would Indian institutions not expand their institutions here and take in more students? Because that would dilute the quality of their products in India and affect placement and their brand image. Many do take in some via capitation fee or donations but, taken beyond a limit, this carries risks. Better to cater to Indian students who can't make it here by setting up operations abroad. Then you grow your revenues without compromising on quality in the domestic market.

I daresay this makes for a great case study in market segmentation and pricing.

Financing higher education: ideas from the US presidential poll

Tuition fees in the US have doubled in real terms in the past 20 years, partly because universities have felt no compulsion to curb costs. Student debt is soaring. How to make higher education more affordable? The US presidential poll is throwing up interesting ideas, the Economist reports.

Hilary Clinton's solution: Cap repayment of college loans at a maximum of 10% of income over 20 years. Any shortfall in loan repayment made on these terms would be made good by the government. The cost to government is estimated at $350 bn. As for curbing college costs, Clinton would link government subsidies to reduction in college costs.

Another candidate Marco Rubio wants online programmes to be actively promoted. This is easier said than done. The problem is not lack of information on these programmes, it is that online degrees do not have anywhere near the same acceptability in the market as resident programmes. Rubio has a bold proposal for financing of education: opt for equity financing provided by private investors instead of loans from banks. This would link repayments to earning capacity. To ensure that successful students do not overpay, one could limit the tenure over which repayment happens.

The problem with equity financing, as the Economist points out, is that if a candidate should opt for a low-income career after an expensive education, the private investor loses out. Moreover, those who think they will do well in college and thereafter would prefer to have debt finance to equity as repayments are limited.

One thing is clear: simply leaving it to the market to set fees and trying to fund higher education through loans is creating serious problems. In India, we are aping the American model, especially in respect of management education. We need to think again.

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.

Is higher education worth the expense?

The world over, more and more people want higher education. Is it worth it? The Economist attempts to answer this question.

It's certainly worth it for students-a bachelor's degree earns a return of 15% on the average in the US, despite escalating costs of higher education.  But does society benefit?  This is not as clear. Why? Because- incredible as it may sound- the best universities may not be adding value to their students. How do we know this? Through poor student scores on tests and the testimony of employers.

We have this state of affairs because leading universities focus on research and neglect teaching. Top professors don't want to 'waste' time on teaching when their professional rewards are linked to publishing papers. The work is delegated to adjunct faculty and research assistants who deliver indifferent material to overcrowded classrooms (since universities want to maximise fee earnings).

If so, why do employers hire the products of higher education? Well, not for what they learn but for their innate talent. Education is valued for its signalling value- if a student has made it to a good schools through a selective process, he or she must be good. Not because it makes the student more productive. In other words, the enormous amounts that students and universities spend on a degree is money down the drain.

Those of us who are at B-schools will not be shocked by these propositions. Employers have been hiring from, say, the IIMs not because they see the IIMs as adding much value but because the IIMs are highly selective. (I mention IIMs only by way of illustration- the same is true of the top B-schools elsewhere). Students coast through the two years, focusing more on placement and networking, perhaps because they believe that there's nothing much to be learnt anyway. Mind you, it's not that B-schools don't add any value- if so, employers should hire from the admissions lists, they should not wait for those who have been admitted to go through two years. But neither students nor employers think that the value addition is substantial.

What can we do about this? How do we ensure that higher education adds value. The Economist has useful suggestions:

More information would make the higher-education market work better. Common tests, which students would sit alongside their final exams, could provide a comparable measure of universities’ educational performance. Students would have a better idea of what was taught well where, and employers of how much job candidates had learned. Resources would flow towards universities that were providing value for money and away from those that were not. Institutions would have an incentive to improve teaching and use technology to cut costs. Online courses, which have so far failed to realise their promise of revolutionising higher education, would begin to make a bigger impact. The government would have a better idea of whether society should be investing more or less in higher education.

I would go further. Schools should track a sample of their products through their careers for, say, five years after graduation. They should seek to ascertain from employers whether they perceive value addition from these products, whether employers see students as having benefited from having gone through a graduate programme. This feedback can be used to modify school curricula. We also need to find ways to incentivise better teaching, say, by linking rewards to ratings of faculty by students.

Are online education's prospects brightening?

Yes, it appears from a recent article in the Economist.

We have to be clear what we mean here. Online education through mass open online courses (MOOC) has caught on - in the sense of helping people educate themselves. But the nub of the issue is whether such education translates into a job, whether an online degree is saleable. So far, this hasn't happened because universities and employers are unwilling to recognise an online degree as a substitute for an on-campus or full-time degree. But this may be changing in subtle ways. Universities can use online education to supplement on-campus courses, instead of viewing it as an alternative. Then, online begins to look really attractive. Here are some models:

• Mix of online and on-campus courses: Many universities are now willing to experiment with a mix of online and on-campus courses- a notable example being the Arizona State University at Phoenix. It's using online courses to help under-prepared students with remedials, for instance. It's also using data analytics to zoom in on students who need help. This way, online can help students finish their degrees on time and help them cut the costs of college education. It also means faculty resources can be freed from certain kinds of teaching work and more students can be enrolled. ASU is able to offer a degree as a result for $10,000 for in-state applicants.
• Offering a course both on-campus and online: Students have a choice of getting credits for some courses either online or by being on campus. A degree can be done full-time or part-time.
• Taking credits online from another university: Some of the lesser universities could allow their students to take credits by doing online courses from a credible place such as Harvard.

The trick, therefore, is not to position an online degree as a substitute for a full-time degree. Market acceptability for that may be long in coming. The more sensible thing is to have a mix of online and on-campus courses. This cuts costs for students while helping universities to maintain their revenues by reaching out to larger numbers.

Online's big advantage is lower cost. Campus education's big advantage is acceptability in the market. Marrying the two is the way to make education affordable and worthwhile for more and more people.

Grade inflation in Ivy League colleges

Grades and grade point averages at Ivy League colleges mean less than they did before, the Economist reports :

In 1950, Mr Rojstaczer estimates, Harvard’s average grade was a C-plus. An article from 2013 in the Harvard Crimson, a student newspaper, revealed that the median grade had soared to A-minus: the most commonly awarded grade is an A........Universities pump up grades because many students like it. Administrators claim that tough grading leads to rivalry and stress for students. But if that is true, why have grades at all? Brilliant students complain that, thanks to grade inflation, little distinguishes them from their so-so classmates. Employers agree. When so many students get As, it is hard to figure out who is clever and who is not.

An earlier piece in the journal takes a rigorous look at whether grade inflation is 'inflation' at all:

.... “inflation” in grades ought to mean that work of a given standard would be awarded an ever higher grade, year by year. The highest permissible grade would therefore have to keep rising: A this year, A-star the next, A-double-star and so forth thereafter, in a ceaseless procession of non-improvement. Because in reality the top grade is fixed, the process is not so much grade inflation as grade compression. This is worse: a distortion in relative prices is more confusing than a uniform upward drift. Grade compression squeezes information out of the system. At the limit, when all Harvard's students get As all the time, the university's grades will yield no information whatsoever. 

Faculty settle for higher grades for students because it makes their job easier, it flatters students and students may return the flattery by giving faculty good grades in their feedback. But grade inflation does interfere the 'signalling' that university education is supposed to be provide employers. One answer could be that employers will find their own ways to distinguish amongst students by using group discussions, case analyses, interviews - and recommendation letters from professors. But the last, as the Economist points out, could mean more work for profs. Better that they devote more energy to having a suitable distribution of grades.