Faculty at the Indian Institutes of Management (IIMs) has essentially been motivated towards building their reputation rather than by their salary. A new school that provides a higher base salary than the IIMs may attract faculty, but the best faculty in India would prefer to stay on or move to the older three IIMs, as they realize the higher value and reputation effect that the IIMs help them build. As IIM faculty gain reputation, their income levels also rise as they earn from international teaching assignments, consulting assignments and research funding that helps them improve their research productivity. IIMs provide research assistance and cover travel for attending international conferences. The IIMs also provide internal incentives for faculty to earn over their basic salary by publishing in major journals, by taking additional courses (over their minimum requirement), by designing, teaching and coordinating executive programs, and by guiding projects in these programs. Such incentives may accrue more to faculty members who have built a reputation.
Apart from teaching which helps IIM faculty build their reputation among students and executives, faculty build their reputation through a variety of other ways such as: (a) research that is published in international journals of repute or in widely circulated books, (b) being the editor or being on the editorial board of reputed international journals, (c) chairing international conferences or invitations to speak at plenary sessions or to be on the advisory board of such conferences, (d) being on the advisory committees of major national and international policy initiatives, (e) invitations to teach at international business schools or present their research in such schools, (f) being on the board of directors of reputed companies and other institutions of repute, (g) doing high profile consulting projects for major firms, (h) winning honorary doctorates or prestigious fellowships and receiving chair professorships or awards for research or teaching excellence, (i) receiving research grants and working on internal, national and international program committees and leading new program initiatives and (j) offering specialized executive programs in areas of expertise. Faculty at the IIMs are also drawn to their academic career by their positive classroom experience - at the IIMs they get the best of students and company executives and they challenge the faculty to teach better and enhance their course content. The IIMs provide executive education to middle to senior level executives from the top Indian and multinational companies. These executive programs, many of which have a project component, expose faculty to issues currently facing these companies - thus adding to their awareness and expertise. Similarly exposure to issues through student projects, campus events, presentations by companies in seminars held on campus and international visitors from all walks of life help faculty initiate new research projects. The large number of highly accomplished colleagues on campus provides opportunities for IIM faculty to initiate joint teaching and research programs. Such an ecosystem enables all IIM faculty to build their expertise in new areas and that translates into new courses and new content for the courses that they teach. It is difficult for new institutions to rapidly build such an effective ecosystem.
It is worth looking at some the implications of the IIM Review Committee recommendations to such an ecosystem in the IIMs. The committee recommends that the faculty salary be limited to the pay commission which is likely to translate to just about Rs 6 lakhs per annum. Further it states that all internal incentive pay for the faculty to earn over their basic salary by taking additional courses (over their minimum requirement), designing, teaching and coordinating executive programs and by guiding projects in these programs be stopped and earnings from consulting be limited to 15 pc of base salary. This will potentially reduce the number of general management executive programs done by IIMs as the faculty will see no point in offering and coordinating executive programs other than perhaps a short program in their specific area of interest. Potentially, the electives offered in the flagship PGP will also dip as faculty will at most do a core course and one elective in their area of interest as the review committee has suggested the removal of minimum teaching requirements (at present three courses a year). Many faculty offer executive programs as it improves their visibility, which helps in getting consulting offers. However this will also be hit as faculty will only be allowed to earn additional income of just 15 pc above their base salary from consulting. No faculty will see any point in taking up any major consulting project as this limit will be crossed in no time. Overall, this will reduce the synergies between executive teaching, postgraduate teaching, research, guiding industry projects and consulting. It reduces the potential for reputed IIM faculty to earn more based on the reputation they have built and new faculty to develop effectively in their academic careers. This may also force many reputed faculty to leave the IIMs. Faculty are a core resource in an IIM and it is their activity choices that have resulted in the IIMs building their reputation over time - a fact that seems to have been been ignored by the IIM Review Committee.
To make things worse, the IIM review committee has suggested that a five year bond be placed on doctoral students at IIMs to serve at the IIMs. While the IIMs are now struggling to get doctoral students to join them given the low entry level faculty incomes in the IIMs, the new condition of a bond of five years will effectively shrink the doctoral program as no one will now join and take such a high risk. Those who do join the doctoral program under a bond will presumably get a faculty position irrespective of their work! This means lesser faculty and even lesser good faculty available for all IIMs in the future.
With lower earnings from consulting share of faculty consulting fees and lower earnings from executive programs, IIMs will lose the two major sources of revenue that support the revenue shortfall in the post-graduate and doctoral programs. IIMs will then be forced to increase the PGP fees to well beyond the US business school fee levels. Few Indian students will be able to join the IIMs at that fee level - therefore the means based scholarships will have to go to almost every student who joins. Executive programs will also die out if their fee is raised to very high levels. It may also make the IIMs more dependent on government funding as expenses rise over time and revenues fall due to lower activity.
Prof Ganesh N Prabhu is Professor of Corporate Strategy and Policy at IIM Bangalore and has previously chaired the Post Graduate Program and Placements at the school. The views presented here are personal.