Wednesday, May 30, 2007

Governance of IITs and IIMs

Yesterday's ET carries a debate on how the IITs and IIMs should be structured. The three participants are: V Ranganathan of IIMB, Mohandas Pai of Infosys and Pankaj Jalote of IIT Delhi. The context is the proposed IIM Bill. There have been reports saying that the idea is to bring IIMs under an Act similar to the IIT Act. That would make the IIMs directly accountable to parliament. Today, they are accountable to their respective Societies and their relationship with government is defined by a Memorandum of Understanding.

I must confess I had to pinch myself in disbelief when I read some of the analysis and the prescriptions. Ranganathan concedes that the IITs and IIMs lag in research. He concedes that the IIMs have leaned too heavily towards executive training (which helps faculty make easy money) at the expense of research. How do we address these?

The government can solve this problem by pouring money on the IIMs but keeping their hands off after that.
Indeed! The government should keep their hands off so that faculty can keep ignoring research and focus on making more money for themselves?

A plausible inference, going by Ranganathan's diagnosis, would be that the present governance structure is inadequate. Indeed, it is in many ways. The IIMs have large, unwieldy boards. Most members fail to show up for meetings. This is not a situation that is conducive to effective monitoring and it may account for the problems Ranganathan mentions.

On a broader note, we do know from the corporate governance literature that boards are effective where there is a dominant shareholder who takes active interest. They are ineffective where there is dispersed shareholding and there is no major shareholder who is willing to take the trouble of watching over management. The governance revolution worldwide is about dispersed shareholding giving way to dominant, institutional shareholders who exercise effective oversight.

In the IIMs, the dominant shareholder is the government. It follows that governance would be more effective if the government took more interest, not less. If the IIMs do not want this to happen, they must propose alternative governance mechanisms that could be as effective. Ranganathan is not inclined to do so. His solution is one that every body of professionals - managers, doctors, lawyers, judges- would love to have: leave it to us faculty, we know best. (In a system where board monitoring is weak, 'leave it to the board' means 'leave it to faculty' or, worse, 'leave it to the director').

Mohandas Pai gives us the usual rubbish about government dominance of education affecting quality. He thinks all problems will be solved if government should get off the backs of IITs and IIMs and education in general. Readers of this blog at least should not buy this. I have repeatedly posed this question: out of the hundreds of engineering, medical and management institutions in the private sector, how come none measures up to the IITs, AIIMS and IIMs? Who has stopped private institutions from beating the hell out of the top government ones? The constraint, I daresay, is motivation: where the motive is to maximise profit, you are not going to get great quality of education.

Pankaj Jalote also advocates a hands-off approach but one linked to a vision outlined by IITs and IIMs for their future- the kind of objectives they could achieve over different time-frames. Subject to this, the government should keep off.

That is nearly what we have now through the MoUs! The government has indeed kept off in most respects except one- salary levels. I have argued elsewhere in my blog that increases in salary, while necessary, will not by themselves propel the IITs and IIMs into a different league.

Nature abhors a governance vacuum. The unpalatable truth is that since there appears to be one at the IIMs, the government is moving to fill it.


Gabbar said...

There is a gap of administration at the IIMs, definitely they can be improved and brought at the world level. But will the government be able to do it? I don't think so. The government is biased and politics plays the major role there. The way private education institutes are focussed on money, government is focussed on vote banks. If they get their hands on IIMs then IIMs will also decline. But these are my views, what do u think the faculty can do?

T T Ram Mohan said...

Shubham, we need to be clear as to what is proposed here. The IIMs, according to news reports, are to be brought under the same framework as IITs. If the IITs have reached a certain level under government, why must we expect things to be worse for the IIMs?


Anonymous said...

I am afraid that your blog posting obfuscates the issue, uses inappropriate analogies and extrapolates without any basis:

a) "The IIMs have large unwieldy boards....most members fail to show up for meetings" - you neglect to mention the fact that among the members who most regularly fail to show up for board meetings are the representatives of the government of India! The reason why the others may not is that the Board's role in governance has been whittled away by the machinations of what you refer to as the "dominant shareholder"

b) The fact that the government grants supported the institutes is a historical fact, but was driven by public policy at the time - in of itself, it does not give the government any ownership rights for all time to come. The government also subsidizes minority education institutions (like St. Stephens) or for that matter, kidney transplants for ministers - the mere act of having done so does not confer any special ownership rights. The "government" is not the dominant shareholder in the IIMs any more than Queen Elizabeth is the dominant shareholder in Columbia Unviersity New York (the precursor to Columbia, King's College was set up under the tutelage of the king of England) or any more than the Anglican Church is the dominant shareholder of St Stephen's College in Delhi (it was founded by the Cambridge Mission in conjunction with the Church of England) - if you go back to why the IIMs were structured to be governed by independent societies and grant diplomas, not degree, it is very clear that the IIMs were not meant to have representatives of the government of India as anything more than one of the stakeholders.

c) Your extrapolation from corporate governance literature is far-fetched and misleading - the best institutes of higher education the world over (and certainly those dealing with management/business education) are not run by government-shareholders - Harvard, Wharton, Stanford, INSEAD, etc. are all run by independent boards/societies. Wharton is part of the Univ of Pennsylvania (a state university) but is independently governed. How about looking at the record of our government at our vaunted public sector undertakings where it is the "dominant shareholder" - I am sure you know that their performance on tangible growth metrics (e.g., revenue growth), or efficiency metrics (e.g., return on capital employed) is dismal

d) On why no private colleges measure up to the standards of the IITs or the IIMs, your explanation is a little simplistic. Clearly, organizations set up with only a profit motive are unlikely to achieve excellence - the run-of-the-mill private medical or tehnical colleges, mostly run by politicans, don't have 'excellence in education/research' as one of their objective functions - so, there is no point harping on the fact that they do not outrank the IITs or AIIMS. but the point that Ranganathan, Pai and Jalote are making is that there is an alternate governance model - one that is widely practiced and has been proven to be successful. Harvard or Yale do not have a "profit motive" but they are private in the sense that they are governed by independent boards. In India, it is a matter of time before ISB or Great Lakes gives IIMA a run for its money. Also, building a reputation in research/education is a long lead-time game (you need to attract great faculty and great students, both these processes tend to be governed by virtuous cycles) - no institute which is only 5-10 years old can be realistically expected to topple incumbents like the IITs or the IIMs. There are some rumblings about the Sterlite group or the Ambanis or Naresh Trehan Medicity establishing a big corpus for a private university in the American mould (e.g., Carngie Mellon Univ) or a teaching hospital (e.g., Johns Hopkins) - if this were to really happen i.e. a private university established with a corpus / trust funds, and not a for-profit entity disguised as a trust in order to launder money and evade taxes (which is what most of our "private colleges" are today), 15-20 years after that, you would be justified in pointing fingers if those universities did not measure up to the IITs or AIIMS.

e) Lastly, "the government" is not an abstract entity - it happens to be represented by incompetent people with vested interests that clearly diverge from the missions and objectives of these institutions - men like MM Joshi and Arjun Singh, and by bureaucrats who are beholden to them. The IIMs and the IITs are certainly better off without the influence of these worthies - there is no shortage of alumni, prominent public-spirited industrialists (NR Murthy, Ratan Tata) and educationists who have the expertise and experience to govern these institutes and help them further their original mission, and to excel in teaching, research and influencing public policy