Or Not To B...

• Around 4.25 lakh seats available; over 40 per cent have no takers
• Economic slowdown sees limited job offers, particularly in small cities
• Absence of industry link-ups hurting many B-schools
• Trend of big companies recruiting plain graduates, the allure of MBAs dims
• Student pressure to lower fees hurting quality of MBAs

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“MBA-running college for sale with total land area of 10 acres.” The advertisement is typically small, and discreetly tucked away in cyberspace: like this one in April 2011. But the message is clear. Despite the rules not permitting it, there are a significant number of MBA colleges on the block. This trend has intensified over the last couple of years. Scores of management institutions, particularly in Tier-ii and Tier-iii cities, have become casualties to a drop in demand for MBA and PGDM (post-graduate diploma in management) courses.

It’s not easy to get numbers. And estimates vary about colleges which have discontinued MBA or PGDM courses, seen a change in management or are running courses at 40 per cent or less than their sanctioned seats, or have even undergone a complete metamorphosis into an office complex or mall. Officially, Dr S.S. Mantha, chairman of the All India Council for Technical Education (AICTE), the central body that annually accords approval to a large number of colleges offering management courses, maintains, “We have not closed down any institution.”

He, however, does concede that there could have been a few cases where the management structure of a trust running a college may have undergone change, but says this applies more to engineering colleges. Contrary to the general optimism that education and health are recession-proof, the financial turbulence of 2008 has shown that the former is perhaps not so immune. Many of the institutions have 40-60 per cent empty seats. The numbers are huge, considering that there are 4.25 lakh seats on offer in roughly 4,000 institutions serving up MBA courses and another 300-odd offering PGDM courses.

A major reason is the drop in placements of management graduates, particularly from institutions not ranked among the top 100. Zero to very poor placements is demoralising, not just for the students but also for the college authorities. “In the last two to three years, we have been experiencing a dip in student admission for management courses and have shifted focus back to traditional courses, particularly BEd. We have withdrawn our MBA course and are focusing on other courses like BBA, BCA and BEd,” states Dr Arun Kumar of Meerut College of Advance Technology.

The problem is more acute in colleges which had got permission to have a large number of seats but are now finding it hard to enrol students to fill even one-third of them. The drop in demand is also seeing a situation where students are seeking a lower fee structure. In a buyers’ market, institutions have to comply with demand, however painful, in order to survive. “With lower fees, you cannot have a good faculty. It then becomes a case of khaana purti (tokenism),” warns Dr Shifali Gautam, former president of the Association of Indian Management Schools (AIMA).

There’s another factor—a recent trend of a large number of top companies shifting from recruitment of post-graduates to graduate students (particularly from the commerce and economics streams) has dimmed the allure of management courses for students from small towns. In some cases, the salaries being offered to graduate students are equivalent to what management graduates are getting. “There is a lot of recruitment happening at the graduate level by big companies. After three-four months training for bare needs, they are deployed for work. Once that happens, most students are averse to quitting and joining an MBA,” says Hari Krishna Maram, Bangalore-based regional head of AIMA.

The outcome is evident. At the upper end, Maram puts the number of business schools that have shut shop over the past two years at over 300 and estimates that an equal number have undergone management change. More conservatively, Amit Bansal, CEO of PurpleLeap, which works with 100-plus colleges to produce better-quality talent, estimates that less than 10 per cent of the estimated 4,500 institutions in the country offering MBA or PGDM have either changed hands or are in a state of flux.

No silver lining Queue at a Hyderabad job fair

“But currently colleges up for sale are over 20 per cent,” adds Bansal, a management graduate from XLRI, Jamshedpur. The modus of sale is generally through the buyer investing in the institute and taking a controlling stake. In many cases, the sale happens through a services arm that “outsources” the management. Gradually the change in the board of trustees becomes effective. Such complex management changes have taken place in many universities, according to industry watchers.

The situation is more serious in Andhra Pradesh, which has over 950 colleges offering MBA courses and 34 offering PGDM. Three years back, AICTE allowed the engineering colleges to add management departments and guaranteed that the government would pay 50-70 per cent of the fees, which at around Rs 30,000 per annum, was more affordable compared to the several lakhs being charged by most management institutions. Yet today, 40 per cent of B-schools in the state are facing problems—only 8-10 of PGDM colleges are active. Having got permission for a large number of seats (a painful bureaucratic process), the colleges are now loath to surrender them.

Reports from Uttar Pradesh, Rajasthan, Haryana and Gujarat, among others, suggest that the problem is not restricted to any one region or state. “From the last two years, instead of colleges doing counselling, it is the students who are asking questions based on which they are making the selection,” admits Prof Mohammad Masood Ahmed, principal of the Deccan School of Management.

Amit Agnihotri, chairman of MBAuniverse.com, sees the churn as a positive trend, particularly with firms coming forward to set up institutions to meet industry demand for quality rather than quantity. Experts, however, point out that in the last decade, not just the private sector but even the government monitoring bodies have been guilty of creating capacity but failing to deliver on quality. AICTE chief Mantha objects to this criticism, “If somebody says the graduates are not employable, it has to be backed by data. The question is whether we really have the desired 1.5 lakh jobs?” Surely, if even that is in doubt, we’re in trouble.