BS READS: Job security vs skill upgrade - the future of one-year MBA course

As the IIMs discuss the status of degrees, the programmes themselves face many questions about placements and applications in the wake of the Covid-19 pandemic

All aspects of India’s higher education system seem to have been affected, for the better or worse, by the Covid-19 pandemic — whether the shift to online, which has changed the nature of classrooms and exams, or the lack of technology and infrastructure. Within this landscape of change, we have the elite one-year management programmes offered by 50 or more business schools in the country, in addition to the traditional two-year masters of business administration (MBA) courses offered by some 3,500 institutes.
 
One-year MBA programmes at the Indian Institutes of Management (IIMs) have come under the lens of the Ministry of Human Resource Development (MHRD), which has questioned the validity of these courses handing out degrees in variance with the University Grants Commission (UGC) norms. Even as the IIMs come together to hold a dialogue with the Union government to reach a mutually acceptable solution, the IIMs’ one-year MBA programmes, along with those of institutions like the Indian School of Business (ISB), are addressing other concerns arising from the pandemic.
 
These concerns have to do with the MBA experience, which has changed in 2020 and is traditionally less about lectures and geared more towards peer-to-peer learning and networking. They are also hoping for an economic revival, and have students — each of them with industry experience — secure well-paying jobs. These concerns feed directly into applications for next year, with institutions in the process of assessing whether they will see a surge in applications or there will be a decrease from the normal.
 
IIMs’ one-year programme under MHRD lens
 
While the top IIMs have been running one-year MBA programme for over a decade, it was in 2019 that they started awarding degrees, too. This was done after the approval of the board of governors, in view of the autonomy granted to them under the IIM Act, 2017. Earlier this month, the MHRD conveyed to the IIMS that awarding MBA degrees for one-year programme violated UGC norms, and directed them to act according to the UGC Act, 1956, which allows Masters degrees only for two-year courses.
 
According to a July 5 Business Standard report, the IIMs are planning to meet MHRD officials with mutually agreeable options. They are considering going back to offering one-year post-graduate programmes as diplomas instead of MBA degrees, or adding the additional component of a year's research. The outcome will depend on the dialogue the IIMs have with the ministry. While the IIMs battle an existential question of ‘degree vs diploma’ status for their one-year MBA courses, the programmes themselves, as well as others offering one-year MBA programmes like ISB, are facing other questions.

 
Attendance this year
 
The cost of a top one-year MBA course can range between Rs 27 lakh and Rs 37 lakh, depending on the institution. Despite classes being conducted online, there have been no changes in tuition fees, and institutes have allowed students to defer. At ISB, in a class of 900, approximately 700 seats are filled. Students who have deferred have created messaging groups with up to 250 members in order to stay updated. The IIMs, with smaller class sizes of less than 100, have also seen deferrals with waitlisted candidates filling seats.
 
Education of this nature is considered an investment, as students earn back the tuition fee within a few years. While it is not difficult to have a loan sanctioned for a top B-School education, many who have deferred are not keen. “The risk of a loan is high. I don’t want to re-enter the job market with an MBA and a lower pay scale,” says Arun (name changed), who has deferred admission and returned to his previous job.
 
The pace of the programme is accelerated. Students enrol for peer-to-peer learning, professional networks and refreshing fundamentals while focusing on a re-entry into the job market. A typical year includes immersion visits to top partner B-schools abroad, group work, extra-curricular and social events. With the new cohort entering its first months on a digital platform, B-schools are attempting a range of initiatives to ensure that student experience is not diluted, and worth the seven-figure fee being charged.

 
Kavitha Kumar, head of communications, IIM Bangalore, says: “We have MOOCs (massive open online courses), digitised books, and staff trained in online teaching. We have conducted online faculty development programmes and use online education for our executive programme.” The pandemic has made little difference to teaching as the digital-learning vertical at the institute has always been in place. Others are investing in new methods and pedagogy to retain the experience — introducing interactive expert lectures, group presentations, office hours, and socialising sessions — all online.
 
The main concern — placements
 
The average annual compensation package upon placement in the past was anywhere between Rs 20 lakh and Rs 30 lakh. A senior employee at a B-school says: “People take a break and pay a high fee with the expectation of returns. Most placements are usually commensurate with experience. Students are in senior leadership roles within a few years.”
 
In the recent Quacquarelli Symonds global top-50 Executive MBA rankings, IIM Bangalore’s executive postgraduate programme (EPGP) was placed at the 36th spot. On the career outcomes metric, which demonstrates the extent to which graduates of a programme enjoy promotions and salary increases, the institution scored 86.8/100. ISB was ranked 81st, and IIM Kozhikode broke into the 101-plus category.
 
Vishwanath Pingali, chairperson of MBA-PGPX at IIM Ahmedabad, says: “We see some challenges ahead. There are too many candidates with very high qualifications. They have experience as well as expertise. But I do see jobs reviving and markets opening up after December.” Employers, according to him, will look for talent and recalibrate their requirements when the market is ready to expand. “That is when students, armed with an MBA degree and past work experience will be at an advantage.”
 
In 2019, ISB saw 79 per cent of its students making an industry shift and 77 per cent a function shift.
 
The same year, IIM-A saw the highest annual domestic salary for PGPX (postgraduate programme for executives) rising to Rs 60 lakh from Rs 54.6 lakh in 2018. At institutions offering both one-year and two-year MBA courses, the one-year course often sees a higher pay package. In 2015, there was a gap of Rs 72 lakh in highest international salaries received by PGPX and PGP students at IIM Ahmedabad, and a gap of Rs 8.3 lakh in their average domestic salaries.
 
ISB Hyderabad is working with recruiters and getting students familiar with jobs that might start emerging in the future, and the required skill sets for them. Asked about economic revival and the impact on placements, Milind Sohoni, deputy dean of the Hyderabad campus and academic affairs at ISB, says he sees some sectors reviving and others being hit hard. “It all depends on how long it will take to recover and return to their original state. You will see a differential effect across sectors.”
 
According to him, sectors like manufacturing which require people to be physically present, will take longer to revive, while IT, which is purely service-oriented, could have people working from home. Other sectors would depend on consumption, as both demand and supply have been impacted, especially transportation, hospitality, and the mobility industry.
 
“Consumption and wealth creation needs to return. To my mind, the economy is depressed and employment may not be as it was. A few sectors that will hire, especially the services sector and the ones that take time to come back, will see a recovery. We are hoping for a recovery faster than being expected, and that would depend on how the government creates opportunities for industries to grow,” Sohoni adds.
 
In a class of 75, IIM Bangalore's EPGP 2019-2010 cohorts saw 67 offers made, of which 26 were successful. Kumar of IIM-B agrees that companies across campuses have stalled hiring but says this has not caused significant immediate worry. “There is a relationship with repeat recruiters that we have cultivated over the years. There is an understanding on both sides ensuring that students are not at a disadvantage,” she says.
 
However, with the economy facing a downturn, hiring freeze across sectors, and pay cuts for senior management, placements will be affected, especially for the senior positions that students usually gain after a one-year MBA.
 
One-year MBA vs other MBA programmes
 
The standard Executive MBA (EMBA) is part-time and modular and is offered to senior executives who continue to work alongside. It was in 2001 that ISB offered a new MBA model and launched its one-year full-time residential programme and called it Post Graduate Programme (PGP). This programme was geared towards professionals and required applicants to have a minimum of 2-5 years of work experience.
 

Following its success in 2006, IIM Ahmedabad launched its Post Graduate Programme in Management for Executives (PGPX), as did IIM Calcutta and IIM Bangalore, among others. In 2017, the IIM Act gave autonomy to the IIMs, after which the institutes started to confer MBA degrees to students of the one-year programme, instead of diplomas. The MHRD and law ministry in 2018 and 2019 raised objections, stating the degrees were in violation of UGC regulations, which allowed Masters degrees only for two-year courses. But IIMs went ahead with offering the degree.
 
The All India Council for Technical Education (AICTE) allowed other B-schools offering Post Graduate Diplomas in Management (PGDMs) to offer fully-residential Executive PGDM. Institutions like Management Development Institute (MDI) and Xavier School of Management Jamshedpur (XLRI) also started similar programmes.
 
While there are pedagogical similarities, the one-year and two-year MBAs are different. The latter accept students with less than three years of work experience, and after graduation students get placed at the entry level with recruiters. In the 2017-2019 MBA class at IIM Ahmedabad, 39 per cent of the students were freshers, and only five per cent had over three years of work experience.
 
One-year MBA requires students to have a minimum work experience and demonstrated leadership potential. It is designed for students in middle management looking to re-enter industry while changing their function, transitioning to a senior role, or changing domains. The minimum age of students at IIM-B in 2018 was 27 years, and the average work experience was 7.1 years. While ISB accepts students from a younger age group, the 2019 class profile saw students with 2-20 years of work experience, 4.3 years being average.
 
Impact on applications for next year
 
After the 2008 recession, there was a surge in B-school applications in the US, with many professionals losing their jobs. Those who enrolled spent the most impacted months of the recession gaining new skills and networks, and returned to the workforce once recovery was visible, with a new degree in hand. In India, too, the one-year MBA at ISB saw a 20-25 per cent surge in applications in 2009, along with IIM Ahmedabad’s executive management courses seeing a surge of 15-20 per cent.
 
The impact of the pandemic on applications for next year is an important topic for institutions. According to the Financial Times, top 13 of 20 global schools in its ranking witnessed a surge in applications for this year. Barcelona-based INSEAD, known for its one-year MBA, which attracts experienced professionals, saw a 57 per cent surge over the previous year. There might be different reasons for this, but it is in line with the trend that a career break for new skill sets and professional networks is the norm when recession looms.
 
There is a consensus that the online B-school experience will train students to adapt for the future of work, especially if ‘work from home’ becomes the norm. According to Sohoni of ISB, “while there is great value in face-to-face training, students are beginning to realise that a shift to online or hybrid education is here to stay. This is also going to equip students to become independent learners and adapt professionally”.
 
A professor at an Indian B-school who does not wish to be named explains: “We don’t really know. On the one hand, the students might want to make themselves more appealing to employers with an MBA, or realise that there is no increment coming and decide on a one-year MBA. On the other, they could hold on to their jobs and not take a break that might impact their income.”
 
The process for applications to one-year programmes in India will begin later in the year and the institutions that Business Standard reached out to are anticipating a surge in applications. “We are expecting a surge. And if our hypothesis is correct, it will only show once the application cycles begin. It is difficult to predict the psyche of a potential student,” says Sohoni.