The
high GDP growth rates of India relative to the rest of the world should
normally lead to higher demand for higher education. During the late
2000s, there was a lot of talk of how low GER's may impede growth; however
today we are in a situation where there is huge under-utilised capacity in the
higher education sector despite decent macro-economic growth.
The
premium and top decile institutes continue to get large number of
admission applications. Students in these institutes generally get jobs
commensurate to the cost of education and these institutes manage to command a
premium compared. That is par. Top 10% institutes all over the world find
it easy to get students.
The
problem is that, while in other countries only the bottom quartile has student
intake problems; in India, for more than 90% of the higher education institutes
there is a shortage of applications and seats go vacant. This despite the
fact that India's Gross Enrolment Ratio in the ages 17-27 compares
unfavourably not just with global benchmarks but also with many emerging
economies. High growth, low GER and low student interest in professional higher
education institutes is a precarious situation to be in.
The
massive underemployment of graduates and the concomitant reduced student
intakes in the laggard professional institutes is because lack of employability
(rather than lack of employment opportunities) and hence poor returns on
investments on higher education for students (as a result of higher cost of
education relative to expected remuneration levels for students passing
out).
Macro-economic
indicators suggest that there is an intrinsic opportunity to revive the sector.
Indian Higher Education institutes need to introspect and re-invent
themselves to correct this anomaly. There are a few dimensions the
institutes will have to review before they start improving their academic and
financial outcomes.
Firstly,
institutes must realise that students are not taking admission because they
lack confidence in the institutes ability to provide industry relevant
education to churn the students enough to make them employable.
Academic rigour and industry connect, which is missing in most
institutes, is the only sustainable way of getting out of the poor student
intake-poor placement-poor student intake vicious cycle and to create a
sustained pull factor for student enrolment. There is massive short supply of
quality institutes; and institutes should focus on improving their quality
quotient as an end in itself. Putting admissions above academics is putting the
cart before the horse, and that will never be sustainable.
Secondly,
education groups need to understand that the education sector has matured to
some extent. The returns and pay-back period will necessarily be similar to
other industries. Gone are the days when institutes had a minimal pay-back
period and 100% plus return on promoter investments. The biggest cause of poor quality
is short investment horizon of institutes. Depending upon the type of course
and geographical location, mid-rung institutes need to plan a 2-4 year time
frame for operational cash break-even and a 5-10 year pay-back period for
capital investments. The irony is that, while promoters had planned
for short investment horizon reduce their perceived risks, in
effect their long term risk substantially increased as most mid-rung
organisations generate negative returns, if the cost of capital is factored.
Thirdly,
institutes need to make sure that the courses are rightly priced. Globally the
accepted norms is that the expected first year salary offered should be 80% to
120% of the total cost of education. However, a large number of Indian higher
education institutes compare unfavourably to this metric. For example, there
are many private universities where students pay more than Rs. 15 lakh to
complete a two-year management degree, but the students may struggle to get a
job with a salary of Rs. 5 lakh per annum. The numbers for engineering colleges
are equally bad.
Fourthly,
the institutes must improve business models - i.e. innovate to improve revenue
streams and focus on process efficiencies to reduce costs. Unfortunately,
most of the promoters do not have significant domain knowledge. That, coupled
with limited risk-taking abilities are preventing them from noticing the nooks
and niches to innovate and mould business models to create new revenue streams.
Consulting, research, vocational education, outreach are some of the many
options that are under leveraged. Similarly, most institutes do not
have adequate focus on process efficiencies and cost structures. Benchmarking,
re-engineering and technology offer many options. However institute management
is still based on intuition and institutes do not proactively use
management science to look for differentiation or efficiency enhancement.
Fifth,
and I have purposefully kept it at the end, is the poor regulatory framework.
The sector demonstrated exponential growth in late 1990s and early 2000s
because of regulatory de-bottlenecking; but insipid governance and misdirected
regulation spoiled the party thereafter. I have put it at the end, because I
feel large proportion of institutes can improve their lot despite the
regulatory weaknesses.
There
is an opportunity in the segment which can be leveraged if institutes look
to reinvent themselves by focusing on creating long term value for the
students. To do this the key is focussing on quality, increasing the investment
horizon, reviewing curriculum - teaching what the industry is prepared to pay
for, reviewing the fee structures, innovating to embrace new revenue streams
and reducing costs through process re-engineering and/or technology.
Those are the better prospects and hopefully by the time would even proved to be much better to be followed. gmat waiver request sample letter
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