Schumpeter in his recent article in entitled “The latest bubble?” in the Economist, argues that American higher education bubble is already beginning to burst. Specifically, for business schools he concludes “Middle-ranking schools are seeing a significant drop in demand, which they have masked by taking weaker candidates, but which will eventually force them to start cutting back.” He also cites Peter Thiel, co-founder of PayPal who “believes that higher education fills all the criteria for a bubble: tuition costs are too high, debt loads are too onerous, and there is mounting evidence that the rewards are over-rated.”
With more than 3,000 B-schools, India has three-times the number of B-schools as compared to the US. This difference becomes stark considering that the size of the Indian economy is one-tenth of the US economy. The end result is poor quality of education, oversupply of MBA graduates which in turn increases unemployability and underemployability among graduates.
- The Process in MBA colleges ?
- First and foremost is to create awareness about theory and practices of management. Then the students are made to choose their disciplines be it marketing, HR, Finance, systems etc., this awareness is adequate to build the basic competency - elementary management skills.
Competency has three components -
- Fundamentals the theoretical know how about Management Frame-work,
- Experience which reinforces the theory by providing an opportunity to experiment with the theory and finally and most critical, situation specific adaption of performance style, which is the end result of the first two components.
A recent article notes that according to All India Council for Technical Education (AICTE), last year nearly 60,000, or 30 per cent of the approved 200,000 management seats, remained vacant. Also, the number of applications coming in for the Common Admission Test (CAT) for MBA entrance have decreased from 260,000 to 200,000 in the last three years.
This clearly indicates that Indian B-schools are in a bubble. Except top-100 institutions, most will suffer from bursting of this bubble which is characterized by irrational exuberance, oversupply and poor quality.
Interestingly, China is witnessing a boom in B-schools. The reason being that they caught on to the management education quite late and at the same time the size and growth of the economy is able to absorb MBA graduates. For example, there are nearly 230 B-schools offering MBA in China in 2010 while there are more than 3,000 B-schools in India.
Bubbles have a long history of existence around the world and they inevitably bust with severe damage to individuals, society and economy (remember dot-com bubble? housing bubble?). It’s time we collectively make our best effort to reduce the damage from the Indian B-schools bubble. Institutions have to start questioning if they are contributing to expanding the B-school bubble or containing it?