B-schools need to shape mindsets, not just placement agencies

The global economic crisis has thrown up many challenges for our higher educational institutions, especially business schools. This meltdown is not only about greed or irresponsible judgement in using other people’s money by those at the helm in some institutions; it is also a manifestation of a deeper crisis in capitalism. B-schools can play a role in addressing this crisis. Besides shaping the mindset of the students, they also need to set a new direction to the research their faculty is involved in.

The subprime mortgage crisis in the US could not have caused such havoc worldwide had the regulators and the rating agencies done a better job. Valid aspersions are being raised on the integrity of these rating agencies that converted the bad debts of some financial institutions into investment-grade products and trapped other financial institutions. Some even attribute it to an unholy nexus between rating agencies, regulators and financial institutions. The disturbing aspect of it is that most of these organizations are run by products of some top B-schools.

Unfortunately, the role models for most B-school students are those graduates who earn the biggest pay packets; and their dream destinations have been companies that pay the most—even those that borrow heavily to do so or whose directors don’t mind getting fat bonuses even as their firms bleed. Wall Street icon Lehman Brothers Holdings Inc., which was highly leveraged and collapsed in mid-September, was also one of the highest paymasters.

Even media overplayed the placement performance of B-schools by publishing misleading data. This overemphasis on placements in the last few years has had a great impact on shaping the mindset of students. Many faculty members at some top Indian B-schools have told me how they see the quality of students deteriorating every year. From the day they enter campus, their focus is more on getting high-salary jobs than on improving their capabilities. Students are increasingly viewing B-schools as placement agencies rather than learning centres. This creates an environment where making money gets primacy over hard work, ethics and social responsibilities.

After the Enron Inc. crisis, it became the fashion to include ethics as a subject in B-schools though I have my doubts on whether ethics can be taught at all—particularly at this stage of education. In my view, the best way of inculcating ethics in students is to promote an ethical culture in the institutions. Faculty and management should be role models for ethical behaviour.

This is where many of our B-schools falter. Misleading advertisements, backdoor admissions, hiring incompetent faculty, siphoning money from the system and tolerance for unethical practices among faculty and students by management have a corrupting influence on students.

This, in turn, is often reflected in their alacrity in taking short cuts to complete their projects or in making money. Reversing this trend would be a big challenge for our educational institutions.

The present economic crisis is not only about the failure of some financial institutions, it is also symptomatic of the breakdown of the capitalist system. Like the command economy of the erstwhile Communist countries, it too has failed to keep up with the needs of our growing population and its growing aspirations. It invested much more in fuelling consumption than on investing in creation and application of knowledge in critical areas such as food, fuel and the environment.

Most of the research in the financial sector, too, has facilitated consumption on borrowed money. For example, securitization, the process by which loans of one institution are sold to other institutions as pools of debt, has in a way resulted in irresponsible lending that has significantly contributed to the present crisis. Even the poor are treated more as a market for different products, including debt, rather than as potential wealth creators. This is precisely where research in our educational institutions should now focus—to increase the productivity of the poor, especially those in rural areas. Before treating them as a market, their productivity should be increased by leveraging innovations in technology.

For this, our educational institutions should first believe that they can play a leadership role in transforming society. As of now, most of them are content with being just teaching outlets and placement agencies.

Premchand Palety is director of Centre for Forecasting and Research (C fore) in New Delhi, from where he keeps a close eye on India’s business schools. Comments are welcome at businesscase@livemint.com

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