It is tragic that education today churns out graduates unmindful of the requirements of the industry that will employ them. In boom times, most organisations grab whatever employee they can and then invest heavily in training, for want of an alternative. We have heard of the training campuses of large companies. I was involved in training for new recruits at Lehman Brothers when they set up their back office in Mumbai.
Also, an investment banker was in discussion with me once to set up a mini-university within his company. The objective: crash the time it takes a new recruit to be productive, from nine months to 45 days.
No depth
The problem with our management education is fundamental. Most MBA courses, for example, are marketed on the basis of a stated number of credit courses. Some are compulsory while others are elective. Each credit course on paper is well laid out with quizzes, presentations, assignments, reading and end-term examination. The process of evaluation is expected to assign marks for class participation as well.
So, topics like elements of finance and derivatives may each have one course. Naturally, a more complex subject like derivatives takes a beating, having to be covered in a short time-span. Before a faculty can warm up to the subject and establish rapport with the students, the course is over and finished. There is neither an effort nor a desire to grill the students in the fundamentals and ingrain some depth of knowledge such that when he enters employment, he is ready to contribute.
In my interactions with students undergoing super-specialisation in different aspects of finance such as wealth management or investment banking, it was appalling to see them struggling with basics. What is their specialisation and what is super about them is anybody’s guess. In most of these institutes, we still have the concept of a teacher coming and lecturing, students taking down copious notes and later regurgitating the same in an end-term exam, passing with marks upwards of 90% but with little assimilation of knowledge. The institutes have learnt to avoid investments in libraries and the tech-savvy students, heavily reliant on Googling, have adjusted very well, rarely making visits there. They all want handouts, for reading multiple books is an activity for which they have no time.
Education is viewed as a very profitable business, where your cash flow is upfront before the product is delivered, and admission is driven not by quality of education but by placement and remuneration record. Higher the placement record, better the average pay offered, greater the intake of students. The institutions are structured to cater to this formula. They use marketing skills and personal relationships with HR managers and somehow push placement for the students. Many even dump a certain syllabus on the students, make them learn a few jargons and unleash them in the market to wreak havoc. Most students in finance would have no clue on any practical aspect of what they learn.
They don’t get to see a Reuters or Bloomberg screen, rarely visit active markets during the course — all this despite the internet and other trappings of modernity being available. In fact, most teachers themselves must be surviving without actually visiting the live markets.
No exposure
What is taught is determined by the academicians who rule these institutions and not on the basis of what the recruiter would like to have. While some do invite practising professionals to come as visiting faculty, that exposure is minimal. Rare are those institutions who invite practitioners on a professional basis to conduct a full-credit course with complete practical orientation.
The general approach ingrained in the average MBA course seems to be that the students need to have a broad overview of the various subjects and not necessarily in-depth knowledge in any sub-topic. This has reduced it to a farce, with the students throwing sophisticated phrases with little understanding of concepts. You scratch them at the surface and they start to falter. I have seen this at different levels in different situations.
Students in finance complete the course without a clue on how products are structured or traded, why the arbitrage taught in a classroom rarely works in practice, how bid-offer spreads and liquidity can kill all that theory mugged up in a classroom. The pity is that most don’t care, so long as there is a job at the end of the course.
Low-paid teachers
Emmanuele Darman describes this in his book My Life as a Quant: “During my last few years at Goldman Sachs, I interviewed undergraduates applying for jobs in investment banking, and I was often surprised at how little of their coursework some of them recalled, how little a sense they had of the essence of their field. I met juniors majoring in statistics who couldn’t define standard deviation and students who had taken several courses in electromagnetic theory but couldn’t remember Maxwell’s equation. What I had learned, I had learned well. Theirs’ sometimes seemed a wasted education.”
Rarely is teaching a choice of pursuing a passion. While there are some faculty members who have opted for it despite the low remuneration, in most cases, it is by default. I have never been able to reconcile the expectations from low-paid faculty members who turn out students offered starting salaries higher than their remuneration. Rarely do you find practising managers giving up their lucrative careers to teach.
Industry’s role
Institutions trying to attract visiting faculty from practising managers also face many problems. They owe their loyalty to the organisation they work for, cancel lectures at the last minute, and rarely coordinate the topics or deliver to the agreed syllabus. To make matters worse, these visiting managers rarely read and hence fail to stitch the theory to the practice.
While the brochures speak elegantly about the faculty, pedagogy with lectures, case studies, class discussion, etc, it is seen that faculty often don’t change the case studies for more than 4-5 years. Even today, most institutions would harp on the Barings case study, while there are multiple cases of later years available to emphasise on the learning. Latest market practices are often not taught. For instance, a class on fixed income markets would rarely refer to the FIMMDA or its handbook of market practices, CCIL and the clearing and settlement practices, RBI’s electronic anonymous screen-based trading system and how to interpret the market from the prices quoted there, etc. It is possible that in most cases the faculty themselves are not aware of these.
It is necessary to deal with this on a holistic basis. Initiative must come from industry to set up state-of-the-art management training institutes. Each one can be set up by a cluster of contributing or participating companies. Each of these institutes must have a cluster of real businesses, producing products and services used by the participating companies setting up the institution. Students studying for an MBA would spend 3-4 years with a well-structured mixture of theory and practice. The companies must be run by the students themselves with assistance from faculty who must be practising managers.
Graduates must be assured of jobs from the participating companies with an option to choose jobs outside the participating companies. By the time they graduate, they would have managed different aspects of a running company and be ready to put their theory to practice, having dabbled in it.
This is possible only if organisations such as FICCI, CII and Assocham take the lead and set up great centres of learning across the country. The faculty should be paid on the same scales as senior management staff in industry. Naturally, the cost of such education would be high and must be borne by the students, through scholarships if necessary. Needless to say, for their work in running the company, they will be paid a remuneration which can partially defray the cost of their education.
If we fail to address the need to revamp our education system and think innovatively, managing double-digit growth rates may be an uphill task.
