Has the IIM faculty been sidelined?

The government’s moves to bring accountability(responsibility,दायित्व) to the institutes of management through legislation have raised apprehensions(fear,भय) in the IIMs. These fears are chiefly about the loss of autonomy that emanates(give out,निकलना) from the proposed creation of a Coordination Forum with policy-making and oversight powers. IIMs want the appointment of the chairperson, members of the board, and of the director within the purview of the board and they want a full say in the selections. Thus far, the discourse does not make it clear what the role of the faculty and faculty-based governance systems will be.

In the original scheme of things, IIM Ahmedabad, in particular, instituted systems that were governed through a faculty council, faculty committees and activity chairpersons. This was based on Ravi J. Matthai’s conviction that academic activities can flourish only when faculty are given full freedom, space to grow and express themselves freely. The council and committees had the autonomy, inter alia, to set the fees, design the academic curriculum, and set up academic centres in specific domains. They also had a hand in faculty recruitment and other operational decisions. The faculty’s dedication, commitment and ownership at various levels played a key role in strengthening the processes and the IIM brand. Faculty involvement in key decision-making led to a strong sense of ownership and high commitment in implementing the decisions.

Powerful boards

However, over the years, particularly after 2000, the IIM boards assumed more power, and some of the policies and decisions that were discussed at faculty forums and committees and recommended to the board for final approval started getting finalised at the board or director level and came to the Faculty Council only for information sharing. Many of these decisions followed a top-down approach and had perverse consequences(result,परिणाम). Thus, in 2008, the board did not take inputs from the faculty even on the important matter of raising fees for the two-year Post Graduate Programme from Rs.4.5 lakh to Rs.11.5 lakh. Faculty members learnt about this decision later through the media. The present fee is about Rs.18.5 lakh.

Procurement and sourcing decisions were centralised and the role of faculty members in administration became marginalised. Many significant programmes were dropped without any significant discussions with professors. During this power shift, faculty members remained un-unionised and had little negotiating powers for collective bargaining.

Autonomous decision-making needs to be accountable. Earlier, faculty members, through their involvement and engagement in internal processes, ensured accountability at all levels. The systematic removal of faculty involvement in decision-making has created conditions that impact the effectiveness of the IIM boards. IIMs are not just business schools;  their mission includes establishing professional management practices. Because they understand academics better as well as the needs and aspirations of stakeholders, it may be argued that in the absence of an executive board, faculty members bring an integrated perspective to decision-making. The centralisation of decision-making at the board level creates a situation where there is no accountability in an autonomous environment. It carries the risk of catastrophe(disaster,प्रलय) in the long run.

Prof Ram Mohan in his article in The Hindu on the IIM Bill (“No reason for IIMs to be alarmed”, July 1) rightly argues that the IIMs lack the necessary conditions to ensure the effectiveness of the IIM boards. For boards to be effective there must be competition in the market, and a large or dominant stakeholder to monitor their performance. In the case of IIMs, both the internal markets (procurement, outsourcing, faculty recruitment systems, faculty incentive systems) and the external markets (students, parents, and financial institutions) must be transparent and efficient.

IIM boards, consisting primarily of independent members, can be considered non-executive boards. For effective decision-making, non-executive members need information. With no executive except the chief administrative officer participating on the board, its members are dependent exclusively on the director for all information. Directors may be selective in providing information. In the absence of adequate(enough,पर्याप्त) information, the quality of decisions deteriorates(make worse,बिगड़ना), as they are discussed in a hurry and non-executive members carry no deep insights into issues and facts.

We thus have a situation where the IIM boards enjoy more power and are less accountable. For example, the IIMs have failed to adhere(follow,समर्थन) to the tradition of one term for the chairman and members. The selection process of board members has become less transparent.

Course fees

The problem of leaving matters entirely to boards is best illustrated by focussing on just one important issue — the setting of fees. It has been argued that the government should have no say in fee setting and that the task should be left to the IIM boards. Given the vicissitudes(variation,हेरफेर) in government funding, IIM boards have exploited the tuition fee route, and have never articulated(express,उल्लेख) the rationale for fee escalations(increase,वृद्धि). The only argument set forth is that most students can afford to take loans and those who cannot will get varying degrees of financial aid. However, the IIMs have ignored the implications of the rising cost of management education. Faculty involvement would have ensured deeper analysis, due deliberations, and consensus(agreement,सहमति) building.

The ability to hike the tuition fee allowed IIMs to incur(become liable to,अपने ऊपर लेना) capital expenditure, outsource procurements, implement a faculty incentive system and take decisions with far-reaching financial and operational implications. The faculty today is rewarded with low teaching loads for mandatory classes and monetary incentives for publications. From a governance perspective, it is essential for an organisation to be financially dependent on an external source that can ask tough questions about activities and budget. The older IIMs, now financially self-sufficient, are not adequately examined on their strategies, direction and activities by any authentic stakeholder. The absence of a performance-based contract for the director ensures they remain ineffective, and both board members and the chairman cash in on the IIM brand rather than spend effective time strengthening the institutions.

IIM boards have not clarified the institutions’ strategy, direction or how resources will be raised and used in the future. One would like to alter the process that gives blanket autonomy to the IIM boards.

The government has the onerous(heavy,भारी) task of bringing back faculty governance and the involvement of executive board members. Key activity heads could be made permanent invitees to the board. The faculty council should first ratify all strategic decisions before they are put up to the board for discussion. This will enhance the sense of ownership leading to better execution. Faculty members understand the needs of the stakeholders better and can bring in an integrated perspective to decision-making in the absence of an executive board. The IIM Bill should focus on issues such as these.