Private Sector & Professional Education
by Dr. J.K. Goyal
Director, JIMS
The higher education in general and professional education in particular is attracting a lot of attention of the policy makers and planners. The government has committed itself to enhance the excess of higher education, make it available to weaker sections of the society and improve its quality. The pioneering work of the National Knowledge Commission (NKC) with its emphasis of demand-supply gap (demand far outstripping the supply) caught the attention of not only the government but also the private sector. The government’s inability of meet the huge investment required for higher education was well-known even before the publication of the report of National Knowledge Commission; but the precise numbers in terms of the quantum of investment and the number of universities required to bridge the demand-supply gap cited by NKC; fueled the appetite of the private sector in a big way. During the post liberalization era, the private sector investment in higher education has been increasing substantially. It has further picked up during the past decade, outstripping the public sector investment. Bulk of this investment has gone to technical education specially in the areas of engineering and management as per the dictates of the market system. In the pre-liberalization era, the private sector’s presence in higher education was virtually negligible. Apart from this quantitative change, there has been a qualitative change in the role of private sector in higher education. Earlier the big business houses, corporate and industrialists set up educational institutions as a philanthropic activity. These were donations and not investments. They spent very little time in their day today administration and management. Now-a-days, a new class of educational entrepreneurs has developed for whom setting up, running and managing educational institution is a full-time activity. They do not have any other economic engagement. In spite of their declared status of “not-for-profit” organization due to statutory obligation, it is well known that like any business entity, their objective is nothing else but profit. One promoter once told me in a lighter vein that though his trust was a non-profit organization but they love surplus ’. Success stories of huge surplus being made by educational entrepreneurs started making rounds. The compound annual growth rate of most of these promoters was simply astronomical. The early starters were biggest beneficiaries as government subsidies in land allotments were available and state surveillance on educational standards was minimal.
However, admissions in present academic year (2010-11) have seen substantial drop. There are reports of some engineering colleges (particularly in South India) reporting admissions of 20 students or less against an intake capacity of 240. Management institutes are also having similar problem of very low enrolment. Brokers, disguised as consultants, are having a field day. Jittery promoters are offering handsome commissions to them for ‘catching’ students. The drastic fall in enrolments this year has unnerved many educational entrepreneurs and they are left wondering as to what went wrong. There appears to be a paradoxical situation. Going by the GER figures and the forecasts of the NKC, there should not be any problem in terms of admission seekers. The access of higher education is still limited. Then, where have all these students gone? How can enrolment fall so drastically in a single year? The NKC said that India would require 1500 universities in order to achieve a GER of 20%. We have not yet crossed 900 and there is an adverse demand-supply gap; this time, supply far outstripping demand. Are we in for the worst of times?
The answer is a ‘conditional No’. There is nothing wrong with the projections made by NKC, HRD Ministry, Planning Commission etc. There is a vast potential for enhancing the access of higher education in this country. India and China are being regarded as major sources of student supply in the top universities of the West. The eagerness of foreign universities to set up shop in India is a testimony to the ever increasing demand for higher education. In India, higher education particularly at the undergraduate level, is an item of mass consumption. Every parent, who has a title bit of resources, wants his children to do at least graduation. In a country where 70 million people are in the age group of 18-22, the demand for higher education will keep on increasing. And remember, the economy is growing at a rate of above 8% p.a. So, we can not be in for bad times; however; a stated earlier it is conditional no. Let us not forget the other two components of the three-pronged strategy advocated by the Eleventh Five-year plan i.e. besides access; there are equity and quality. The private sector may not be interested in ensuring equity as that would require setting up educational institutions in backward and rural areas which may not have the financial capacity to pay. But quality cannot be ignored. Instead of looking bewildered and dejected on account of sudden and sharp decline in student intake; private educational entrepreneurs should realize the lack of attention paid to quality of education. “The fault dear promoter lies in ourselves, not in our stars.”
The quality of higher education in India leaves a lot to be desired. In most of the world rankings of universities, no Indian university figures in the top 100. Even in the list of top 200 universities, the numbers are like a drop in the ocean. There are only a few islands of brilliance in the vast ocean of mediocrity. It is common knowledge that 90% of the graduates produced by Indian universities are unemployable. The self financing private sector education was available at a hefty price. Promoters fixed very high fee structure in order to make a fast buck. In the initial period, the euphoria for PGDM / MBA; Computer engineering; MCA etc. was so strong that the students and parents were willing to grab a seat wherever available. The easy availability of education loan added to the rush. The private sector on its part relied mainly on advertisement, tall promises and physical infrastructure. The reality soon dawned on the students and their parents when they found that after paying a two year fee of Rs. 7 to 8 lac, an MBA degree was not even worth a Rs. 15,000 per month job. The ‘return on investment’ was too low. Now-a-days, a stage has come when the students no longer suffer from asymmetric information. They have become smarter – thanks to various social networking sites and other informal channels. The educational entrepreneurs can no longer lure them with glossy advertisements and swanky receptionists. The physical infrastructure does not assure quality education and training. Promoters, unfortunately erected buildings; they did not care to build institutions. Under the circumstances, we hereby suggest a five-point agenda for a private promoter to set its house in order before it is too late.
1. Have Patience: be a Long Term Player:
Setting up an educational institution of repute takes time. It is a gradual and sometime very painful process. A promoter, who enters this industry with a view to get fast returns, is bound to fail. The minimum gestation period is five years after which you may get a 10-20% surplus. In the first three years, all expenses are virtually sunk costs. The year 4 & 5 may see recovery of variable costs. Empirical evidence suggests that in order to run an educational institution smoothly from 5th year onwards, a promoter should stick to the 40:40:20 rule. It means that out of the total revenue generated (read it as total fee collection, as there is virtually no other source of income for most of these players) a prudent promoter should spend 40% on faculty alone, another 40% on rest of the expenditure and 20% surplus, a part of which he can devote to existing institution and for cross subsidizing his next venture. Unfortunately most of the promoters do not stick to this rule and in a desire to expand fast, kill the goose that lays golden eggs.
2. State Recognition is not sufficient to ensure success:
Many promoters are under this false impression that an AICTE approval is a life time guarantee for student intake. They flaunt their approvals, affiliations and accreditations repeatedly. But the ground reality is that these recognitions may be a ‘necessary’ condition to attract students but they are certainly not the ‘sufficient’ conditions. As per one estimate, 73% of the management graduates, trained in AICTE approved institutions, have been found to be unemployable. On the other hand, there are a few (though still isolated) instances of educational institutional who have deliberately not sought any AICTE approval or university affiliation so that they do not have to subject themselves to the so called rigid regimentation of theses state authorities; and these institutions are making their presence felt. The most ironic instance is that of an institution against which the UGC has been forced to come out with multiple newspaper advertisements stating that this institution is in no way recognized by UGC or any other educational authority in India. One wonders how much impact these advertisements would make on the ‘clientage’ of that institute.
3. Devise Innovative Advertising Strategy:
Faced with falling student intake, a typical promoter immediately increases his advertisement expenditure. Most of the advertisements flaunt things like state-of-the-art infrastructure, experienced faculty and above all 100% placement! These advertisements have become so repetitive that they fall flat. The students no longer trust these. In fact, these tall promises, especially that of 100% placement proves to be a constant source of embarrassment to the promoters when the student takes admission and confronts them everyday. The increased expenditure on advertisement should not be at the cost of compromising on facilities and faculty. Contrary to the popular belief, we suggest a direct relationship between ad spend and student intake i.e. if student intake in high, one can afford to advertise more without compromising on quality. The advertisements should more be informative in nature rather than be totally persuasive.
4. Check your Intake – Act Accordingly:
The self financing private sector is market driven. Those who have the requisite financial muscle are welcome. This may not be true for a top few in this category; but for the rest of them, and there are a lot of them, if you have the fee to pay, you are in, irrespective of your caliber. In a typical B-grade business school, we find three categories of students in abundance.
The first category is that of female students, which we term as ‘waiting to get married’ type. These girls have no intention of taking up any professional career. Such parents (Who have sufficient resources) ‘park’ their daughters in these institutions till the time a suitable match is available. During this search period, they proudly proclaim that the girl is doing MBA. It adds value to their ‘salability’. The second category of students (exclusively male) is called ‘Aish Karenge Type’ (we shall enjoy). Theses students come mainly from business families. The small family size ensures that they are the sole inheritors of their parental business. These students too have no career goal except joining the family business. In fact the initiation starts during the course itself. These students invariably are short of attendance. They are seen more outside the institute rather than inside it. The parents do not mind giving them a ‘2 year sabbatical’ before joining the family business. Moreover, an MBA degree increases their dowry component and puts them a notch above their counterparts. The third category of students (both male as well as females) are called TINA students. (There is no alternative). These students had tried unsuccessfully in all competitive exams of leading B-schools, sometime more than once. Once they fail, they turn to these B-school with a sense of self pity and dejection.
The number of students with focus, determination and commitment is very low in these places. The promoter should take stock of this ground reality with respect to their student intake. The reading habits of these students are pathetic. Case study method is all Greek and Latin. These institutions should design their course curriculum accordingly. The economic compulsion forces you to admit these students. Teach them at a pace which they could go along. Do not try to force a leading B-school syllabus down their throats.
5. Attract and Retain Competent Faculty
If there is any single sure mantra for success of an educational institution, it is its capacity to attract and retain excellent teachers and researchers. The promoters routinely complain of shortage of competent faculty, particularly at the middle level and above. But facts speak otherwise. Most of the small time promoters assign very low priority to faculty. Had the private sector as a whole made concerted effort in this direction during the past two decades, it would have built a strong faculty base parallel to its state funded counterpart. Most of these institutions rely on fresh recruits (available at low salary) and retired personnel from traditional university system. The AICTE and the UGC have also contributed to this trend by increasing the retirement age to 70 years instead of 65. The private sector cannot poach talent from the public sector unless it makes its career advancement scheme much more lucrative than the once proposed by the UGC in its recent notification; dt. 30.06.2010. Nothing prohibits the private promoter to devise and advertise a long term performance based reward system.
Dr. J.K. Goyal
Director
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi
Ph.: 011-45184000, Fax: 011-45184032
(Views are personal)