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ISB's moment of reckoning

This internationally ranked Hyderabad school has all the makings of a blue-chip institution. Why didn’t respondents of our survey think so?

E. Kumar Sharma        Print Edition: October 18, 2009

The Indian School of Business has stellar credentials. It was started by a group of business luminaries, including Rajat Gupta, the former McKinsey chief. It has every imaginable corporate heavy-hitter on its executive board—including Lakshmi Mittal, Anil Ambani, Deepak Parekh and Rahul Bajaj.

It has top-flight institutions as partners, including Northwestern’s Kellogg School of Management, University of Pennsylvania’s Wharton School of Business and the London Business School. It has a stunning campus, superb facilities and is located in one of the Tech-capitals of Asia, namely Hyderabad. In fact, it is just a stone’s throw away from some of the top recruiters in the world and India—namely, Microsoft, Wipro and Infosys. Its international faculty, as well as student body, and its reputation for teaching excellence have even resulted in the Financial Times rating it the 15th best B-school this year.

So why on earth is it ranked a lowly 13th on our list, even behind tier-II establishments such as Amity and Loyola?

First, it is worth mentioning that the school has been excluded from our list since its inception simply because its one-year programme and steep tuition traditionally deterred most Indians from considering it as a top choice. However, things change.

With other top-tier institutes, too, making a preference for students with work experience, most MBA aspirants now do consider ISB as an option—no matter its course design or fee. So, leaving ISB out of the ranking was not appropriate. Great Lakes Institute, another reputed B-school offering a one-year programme, was also included in the survey but didn’t make it to the top 30 list.

That being said, ISB’s rank of 13 on our list seems odd for a school with so much muscle behind it. Moreover, not only was ISB behind the top three IIMs in all the categories that B-schools are evaluated on, such as placements, infrastructure and teaching methodology but it didn’t even factor amongst our primary stakeholders—Human Resource heads or aspiring MBAs—top 10 choices (see tables). While the hurdles that ISB is encountering may stem more from a problem of perception than anything else, there are other issues that dog the school in India.

First, ISB has a big price tag—it costs around Rs 20 lakh to study at ISB versus say Rs 12.5 lakh for a twoyear IIM-A MBA. The problem of a high tab attached to an ISB MBA is primarily because of high costs related to running the institution. A board member who does not wish to be identified says that ironically what are in fact major strengths of the school are also causing problems for it. “While it offers wonderful infrastructure (its facilities in various buildings distributed across a sprawling 260-acre campus), this comes at a cost. For instance, the school has to deal with huge utility bills,’’ says the board member. That apart, flying in top tier foreign faculty is also an expensive proposition.

ISB has another problem. Its student body, while reasonably diversified, is mainly from the finance, IT and consulting arenas and are looking for jobs in similar areas upon graduation. Take the current batch composition: 34 per cent are from IT services and IT products, 13 per cent from finance background and 12 per cent from consulting. Now, with the IT sector still hurting, finance and consulting hiring but choosy, the immediate need for ISB is to look to other industries and this would largely mean the manufacturing sector.

“Our challenge is to convince other industries (non-IT and nonconsulting) that they should be looking for high-quality talent,” says ISB Dean Ajit Rangnekar. “One of the problems that I have seen in manufacturing, industrial products and such sectors is that the industry has got a mindset that we cannot afford a high-quality person,’’ he adds.

A senior representative of a leading pharmaceutical company based out of Mumbai (and one that has never visited ISB or for that matter any of the tier-I B-schools) told BT: “It is not as if we do not like these MBAs but for us to go and compete with a Unilever or McKinsey would be impossible because the kind of compensation we would have to offer would disturb the complete structure within the company.’’ So, where does he go for talent? “We have never visited these campuses because we recruit from local B-schools, which have the compensation range that we can afford,” says the pharma executive.

Problem is, it’s not just some major manufacturing companies who are flocking to less vaunted Bschools. Larger IT companies like Infosys have also been recruiting from there. “ISB is certainly a tier-1 Bschool and we hire from there but I must tell you that you have equally smart people across many other schools,” says T.V. Mohandas Pai, Director, CFO & Head of Finance and Administration, Infosys. “The top 10 to 20 per cent of most of the tier-II B-schools are also very good and we hire from there, too.” This means an ever-shrinking pie of companies who are seeking better value propositions from their hires.

Of course, all these issues would not have come to the fore if it wasn’t for the slowdown, which severely impacted schools like ISB who relied on the investment banking sector to absorb many of its students. The meltdown taught the administration some lessons: “We realised that our old 80:20 model of recruitment— 20 per cent of companies recruiting 80 per cent of students— was not working any more as companies were not hiring in big numbers,” says Rangnekar.

Plus, “in a slowdown companies tend not to need experienced people unless they bring in a specific skill or knowledge,’’ says Puneet Jetli, Senior Vice-President & Head—People Function of Bangalore-based Mindtree Consulting. Last year, he says, his own company decided not to hire from B-schools at all and chose to pick up candidates currently working in the field. More importantly, the mindset amongst ISB-ers has also begun to change. “We seem to have a more open mind today. I see that not everyone in my batch wants to go to McKinsey,’’ says Yannick Even, an ISB student from France.

The other issue with placements that ISB has grappled with is the massive size of their incoming class— 572 this year versus 310 at IIM-A two-year MBA—gargantuan, when you consider the 128 students that ISB started off with. In a slowdown, this can easily turn out to be the school’s Achilles’ heel as finding quality companies to offer jobs to their students is not an easy proposition. Nevertheless, ISB says that they’ve been able to weather the storm.

“Despite a slowdown last year, we placed 430 students without hurting quality and for an average salary of Rs 15 lakh (our 2007 level),’’ says Rangnekar. The year 2008 was an aberration, he adds, as the industry overreacted on the positive side and apparently went into an overdrive. The average salary at ISB in 2008 touched Rs 19 lakh. Moreover, this year, companies seem to be already testing the recruitment waters. “Already, 52 international companies have expressed interest in participating in the placement season later this year versus less than half this number expressing interest same time last year,” says V.K Menon, Senior Director, Career, Admissions and Financial Aid at the ISB.

It’s not as if ISB is unaware of its problems. The school has embarked on a large cost-cutting exercise and in the next two to three years plans on becoming carbon-footprint neutral with energy-efficient and water-efficient systems in the works. More importantly, the school seems to be fully aware of its need to change its recruitment strategy. ISB, last year, initiated what it calls its ‘out-reach’ programme. “Since last year, we took to working on ways to broad-base the (recruiter) base,’’ says Menon.

Apparently, the results were immediate and significant. “The number of companies hiring increased in the last one year, from 230 recruiters in 2008 to 326 recruiters in 2009,” adds Menon. This year, the programme has further accelerated its efforts. Instead of three to four people earlier, there are now 10 to 12 on the field, scanning potential recruiters and explaining how the one-year academic buffing and polishing at the school is resulting in differentiated products that make a compelling value proposition for companies.

Also, for ISB to truly leverage its niche as an international star— thereby competing with INSEAD and IMD or other top-tier schools—it has its work cut out for itself. Dipak C. Jain, Dean, Kellogg School of Management and one who was actively involved in the founding of ISB, says that the focus should be on building its full-time faculty (today the school has resident faculty of 35 and visiting faculty of 85). It also needs to shift from mere knowledge-dissemination to knowledge-creation through research and case studies and also attract more international students. “Only when more international students get to experience India will it eventually lead to expanding the set of recruiters,’’ he says.

However, for ISB to become truly relevant in India, it also needs to figure out better ways to attract topnotch local students as well as local companies who can further enrich its diverse faculty and student body. May be the true place of ISB on BT’s ranking will emerge next year or the year after—when it would have recovered from the woes of the downturn that has coloured the impression of the two most important respondent categories in our survey—aspiring students and recruiters. Even at its premium pricing, the institute will then be considered value for money for both stakeholders.

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