MBA Graduates & Employability: The slip between the cup and the lip

1. Introduction

A brief history of the MBA

The Master of Business Administration degree, also called MBA, originated in the United States of America in the early 20th century. As the country became industrialized, businesses began to experience a need for professionals who could apply scientific approaches to management and this led to the evolution of an advanced degree in business.

The degree might be known as an MBA now, but that’s not how it spun into life. The first advanced degree in business ever conferred was called Master of Science in Commerce and it was offered at the first graduate business school in the United States called the Tuck School of Business at the Dartmouth College founded in 1900.

It wasn’t until 1908 that the first ever formal MBA program was introduced at the Harvard Graduate School of Business Management. The program was rolled out with 15 faculty members, 33 regular students, and 47 special students. It’s a measure of the success of the program that within 12 years, the number of MBA students at the Harvard business school went up to over 300. By 1930, 1070 students had enrolled for Harvard’s MBA program.

However, only American universities were offering MBAs at this time. It was a while before other countries warmed up to a formal education in business, which many believed was best learned on the job.

INSEAD or the InstitutEuropéend’Administration des Affaires or European Institute of Business Administration located in Paris became the first European business school to offer an MBA program in 1957. The first year saw only 50 students graduating from the program, a number that has now swelled to 900 per year.

The phenomenal rise in the popularity of INSEAD’s MBA program was mirrored in other parts of Europe and soon there were business schools scattered all across the continent offering MBA. Today, more than 300 MBA programs are offered at 35 countries across Europe. Europe is also home to some of the top B-schools in the world such as the London School of Business and IMD.

The Indian Institute of Social Welfare & Business Management established in Kolkata (erstwhile Calcutta) in 1953 was the first institute to offer an MBA degree in India. Even though Xavier’s Labour Relations Institute (XLRI) founded in Jamshedpur in 1949 is the oldest management institute in India, it did not offer an MBA program at the time.

IISWBM was a joint effort between the West Bengal government, University of Calcutta, and the robust business community of the state to promote management education in the country. The institute was, in fact, a mentor to the elite Indian Institute of Management (IIM) Kolkata established in 1961 in its early years. IIM-Ahmedabad was also established in the same year and together they were and are still regarded as the best B-schools in India.

Even though the old B-schools in the country are considered the best, some of the newer institutes are also making a mark in the field of business education. Primary among these new business schools are Indian School of Business (ISB) in Hyderabad, Symbiosis Institute of Business Management (SIBM) in Pune, and Management Development Institute (MDI) in Gurgaon to name a few.

B-schools rise in number

The All Indian Council for Technical Education (AICTE), the apex government body providing accreditation to MBA and Post Graduate Diploma in Business (PGDM) programs across India, has pegged the number of business schools offering MBA in India at 3644. Additionally, there are 308 institutions offering PGDM programs in India.

As India’s economy started to boom, many entrepreneurs established their own B-schools anticipating a surge in demand for professionally trained management graduates. According to AICTE, a whopping 927 B-schools were established in the country between 2007-12.

But over the last few years, many B-schools, especially the mid and bottom-tier ones, have been shutting shop. According to a report published in the leading national daily Times of India, 147 standalone B-schools and MBA programs offered by engineering institutions across the country closed down in the 2013-14 academic year.

The economic slowdown that India has been experiencing is one reason for many of these B-schools closing their gates permanently. Many found it unfeasible to continue operations in the face of dying demand. Others, without proper facilities, solid faculty, and outdated curricula, have also been rendered unviable.

Added to that is agrowing realization among recruiters of the mediocre quality of education imparted at some of these B-schools.

Instead of grabbing the lowest hanging fruit, recruiters are now concentrating on hiring management professionals exclusively from top-rung B-schools even if they cost more, leaving the mid and the bottom-tier ones struggling to fill up seats.

2. Falling employability of the MBA

Numbers don’t lie

One of the impacts of the falling demand for MBA programs at mid and bottom-tier B-schools is the lowering employability of students graduating from these courses. As these schools began to experience a fall in demand for seats, they slackened their admission criteria resulting in virtually any graduate getting into these institutions. This resulted in an overall fall in the standards of MBA graduates leading to their low employability.

In a hard hitting report published in the Economic Times, it was revealed that a mere 10 percent of B-school graduates are actually employable. According to the report, India produces about three lakh management graduates annually, but hardly 35,000 of them are employable.

Quoting the 2012 National Employability Report, talent assessment company Aspiring Minds released a press brief highlighting the dismally low employability of India MBA graduates. According to the press release, the employability of MBA graduates from the class of 2011 was below 10 percent for functional roles in the field of HR, marketing, and finance.

When it came to specialized roles like business consulting and analyst functions, which require exceptional English and cognitive skills, the employability of B-school graduates was even lower at 2.5 percent and 7.9 percent respectively.

The employability for customer service roles, in which the behavior and personality of graduates have a key role to play, hovered around 16 percent. Employability in the area of operations was a little more than 15 percent, while the same for the BPO/ITES sector was around 33 percent.

Reasons for low employability

According to an Associated Chambers of Commerce and Industry of India (ASSOCHAM) paper on “B-schools and Engineering colleges shut down- Big Business Struggles," B-schools barring the IIMs are fast losing their shine for corporate India Inc. The paper reveals that since 2009, campus recruitments at B-schools have gone down by 40 percent.

Some key reasons for this low employability of B-school graduates in the recent years include excess supply, lack of basic skills, lesser work experience of candidates, inexperienced faculty, and lack of practical & problem solving skills of graduates.

3. Improving the employability of MBAs

In its paper, ASSOCHAM has advised B-schools to improve their infrastructure, train their faculty, pay well in order to attract good teachers, work on forming industry linkages, and spend money on research and knowledge creation to improve the employability of their graduates and hence draw more students into their fold.

Here are some measures that can be taken by B-schools to improve the employability of their MBA students:

4. Conclusion

Despite struggling with falling demand and suspect quality of course content as well as faculty, MBA remains one of the most preferred post graduate courses in India, according to a survey conducted by university search engine India College Search. It is still believed to be the common man’s ticket to a high profile job and a better quality of life. The degree allows individuals to acquire a vast amount of knowledge and gain key skills in a relatively short period of time. Clearly, the mighty MBAstill holds a lot of promise and has the capability to live up to its lofty standards. All these programs require is a well thought-out and an intentionalstrategy to overcome the problems that haunt them today.