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Can they keep the economy out of it?
The alarming trend of increased unemployment among mbas in the us has raised apprehensions in the minds of students. while Indian B-schools are performing better on the back of a robust domestic economy, they must not be complacent
Issue Date - 08/12/2011
They call it the crisis of higher education in the US. The unemployment scenario in the country post-recession is devastating and some have even begun to question the ‘assumption’ that higher education means job security itself. The first aspect of it is the rising cost of education. The percentage of undergraduate students applying for loans for four year courses in public institutions increased from 32% in 1993 to over 50% in 2008, while the percentage for private for profit instititutions grew from 53% to 92% in the same period (US Department of Education). As is obvious, the next question that parents and students are asking is regarding the job security. Well, in a recessionary phase, the answers may tend to be a tad disturbing. In the beginning of 2009, for instance, the total share of unemployed graduates crossed 4% of the total for the first time in recorded history.

What is the situation for an MBA degree? Well, the prospects of MBA courses and the ability of students to maximise their career perspects does have a strong correlation with the economic situation, even for the prestigious institutes. Harvard Business School was able to manage placements for 89% of the students of the 2007-09 batch who sought placement. While in 2008, 45% students in Harvard went for financial services, the number went drastically down to 31% and 34% in the next two years. Wharton Business School could manage to achieve job offers for only 530 students out of 660 students who were seeking placements; a figure of roughly 80.3%. Even out of this figure, only 56.5% students managed on campus offers. The rest managed offers through job fourms, personal networks, alumni contacts, et al. If you look at the year 2008, out of 708 students seeking employment, 657 students received an offer, a figure of 92.7%. Yale saw 8% of its MBA students without jobs after three months of graduation in 2009 as compared to 6% in 2007 (Source: BusinessWeek). The figure was 8% for Olin Business School from Washington University (4% in 2007), 10% for Stanford University Graduate School of Business (3% in 2007), 12.8% for MIT Sloan School of Management (2% in 2007), 13% for University of Maryland Smith School of Business (2% in 2007) and 13.5% for University of Chicago Booth School of Business (2.4% in 2007). The list is well, quite long. Prof. Abbas Ali of the S.P. Jain Institute of Management Research, Mumbai, also relates it to the approach to placements in the West, as he says, “In the West there is a career advisory cell and most of the placement efforts are done by the students.In India there is a full fledged placement cell. In the west there is no reason for companies to aspire to come on day zero but in India this is a major contention between companies and institutes.” Another noticeable fact is that 2009, the year immediately following the recession, the number of students enrolling in top B-schools started going down. While Harvard saw 908 students in its 2008 class, the number went down to 889 in the following year. Similiar was the case with Chicago Booth School which had 559 students in the class of 2009 as compared to 595 in 2008. Average ranked B-schools in Europe found it very hard to even run a batch.

In the Indian scenario, top B-schools hardly faced a problem in terms of getting 100% placement for their students, though it is perennially debatable whether this is due to genuine abilities of their students or due to the scarcity hypothesis (incredibly low batch sizes) that works so well for them. Despite a recessionary situation, IIM Ahmedabad managed to achieve an average package of Rs.12.17 lakh for domestic offers and $83000 excluding bonus for international offers in 2009. Also, slowdown impacts them, though one has to read between the lines to really read between the lines. But this was sharply down from an average domestic package of Rs.17.85 lakh in 2008 and an average international package of $1,19,000 in the same year. While the institute still claimed that it managed a coup in 2009 despite a recessionary phase, the fact is that global banks (and companies) participated far less. The highest number of offers came from Union Bank of India (18). Even premium institutes allowed companies that had earlier not been invited to visit the campus to keep their records intact. The biggest testimony of this is the fact that there was a total of 13 companies in 2009, which recruited from the campuses of IIMs after a gap of more than 3 years. In the current phase of economic uncertainty, even IIM (C) saw Day zero offers drop to 90 this year as compared to 115 last year.

The problem comes for students from low ranked institutes, which had to radically innovate their way out of poor placement records. A south Delhi based placement agency confirms that a few B-schools approached it for placements in 2009. These B-schools were interested in the number of students they can get placed and packages were not a concern, though he declined to name specific B schools. Also, a few students from lower grade B schools confirmed that they were not allowed to sit for the placements as they had received pre-placement offers. “ They asked me to accept whatever offer I got for my pre-placement offer and not to be concerned about the job profile or the package as placements were hard to come by”, accepts Shekhar Pradhan (name changed), a 2008 graduate of a low ranked business school, who received a pre-placement offer from the employer where he did his summer training. Students receiving any offer were stopped from taking further part in the placement process. This shows that a slowdown has an immediate impact on the weakest in the B-school eco-system. In the current environment, Indian companies (which accounted for 260 placement offers or 90.9% of placement offers even at IIM-A), do not yet face the constraints of being in a slow growth economy to the extent companies in the west do, and still look forward to pick up top talent. “Our hiring did get affected during the slowdown, but we didn’t compromise with the package as you cannot get right talent in that case. We did, however, place fewer people,” says Himani Modi, Executive Director of Modi Group. Considering the manner in which the Indian economy is poised for the long term, there is still a lot of worth to the MBA degree in a country where a crying shortage of qualified managerial talent is talked about across industries in various reports. For students in Indian B-schools, the crisis is not as severe as in the US. But B-schools must not consider this as an excuse to be complacent on quality across parameters, as this is the one aspect that remains immune, whatever the economic cycle.


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