The ROI of an MBA

In the last couple of weeks I've met with students at ISB, Great Lakes, ICFAI Business School Hyderabad and IIM Indore. And the one concern which unites students across one year and two year programs is the burden of the EMI.

The average ISB student will be paying an EMI of 25k over 7 years, an IIM student 25k over 5 years (going for the exchange program could jack that up by another 4-5k per month). So the concern students have is: "What will be my ROI?"

The way in which a bschooler calculates ROI is very direct: compare what I spent on the course, with the placement salary at the time of exit. In case you have significant work experience, also factor in one year of 'lost income'.

OK. By this method of calculation, the ROI - for a majority of students - will be negative.

The published figure for average domestic salary at ISB last year is Rs 16.47 lakhs p.a. (CTC).

The fees for this batch were approximately Rs 19 lakhs, while the average incoming salary was Rs 8 lakhs p.a.

Do the math and you can see that there is much heartburn. Especially for the 50% of the batch which must - necessarily - bag a job lower than the 'average'.

The same holds true for an ICFAI Business School graduates, where fees + living expenses for the course would works out to Rs 9-10 lakhs.

The average placement salary would be in the range of Rs 5-6 lakhs. A large % of candidates are freshers or with 1-2 years of work ex so we can discount the income loss component.

Now let us examine the case at IIM Indore. The average salary for the class of 2010 was Rs 10.29 lakhs.

The cost of the 2 year course for this batch was approximately Rs 8 lakhs.

Of course, 50% of the batch would have bagged jobs in the Rs 6-10 lakhs range but prima facie IIM seems to provide maximum chances of a high ROI.

However. As they say with mutual fund investments, past performance may not be indicative of future returns. So students who are considering the MBA today - be warned.

The class of 2010 at IIM Indore consisted of 175 students. That number went up to 235for the batch of 2011. The class of 2012 is a record 450 students.

No doubt this will affect the average salary figure. (In fact the larger the batch, the more focus the institute puts on 'quantity' over quality).

Moreover from this year, the cost of attending IIM Indore has also gone up to Rs 10 lakhs. Making the 'equation' far less favourable.

I can bore you with several more examples but you get the drift.

The origin of this entire mess go back to 2008, when the market was booming. It appeared that the MBA was a Golden Degree which, like the yellow metal, could only go up, up and up.

Record placement salaries, record number of jobs - and a relatively low fee structure - made the MBA a most exciting qualification. The better the bschool brand, the more excitement, of course.

At this stage two things happened:

1) In April 2008, IIM Ahmedabad more than doubled its fees (from Rs 4.3 lakhs to Rs 11.5 lakhs). Other IIMs followed.

2) At the same time, year on year, IIMs began admitting more students (seats increased btw 40-100%)

Let me be honest, when IIMA first hiked its fee, I thought it was a good thing. The course was highly subsidised, there seemed to be no reason for taxpayers to underwrite the careers of bright students bagging excellent jobs.

What's more, IIMs promised that no one would be denied a seat due to lack of funds. Education loans were made available to all and also merit scholarships, based on family income.

But. The consequences of these actions were not limited to IIM students.

In the world of finance the Reserve Bank of India signals changes in rates. Similarly, IIMs hiking their fees sent a clear signal to the entire bschool industry. Practically every bschool in India increased its fees by 50-100%.

In a strange and convoluted way, the low fees charged by IIMs kept fees of all bschools low. Because no one - apart from ISB, with its own unique brand - dared to charge more than the market leader.

To compound the problem, the market crashed. Jobs disappeared. The class of 2009 saw the worst of it - higher fees and lower placement salaries. The number of students appearing for CAT in 2009 also declined - for the first time in years.

So, what does this all boil down to? MBA karna chahiye - ya nahin??

Well, I think the 'Gold Rush' era is over. If you are looking for quick and safe returns, you will be disappointed.

I do think an MBA will add a lot of value to your career over the long term. By long term I mean a 10-15 year horizon. But you will begin to see the difference in as little as 3-5 years.

Certain avenues in the corporate world do open up for you, if you have the right 'branding'.

And if you are not from the best known schools you still have the chance to work your way up the ladder through performance and personality.

40 years of working life lie ahead of most of us, a one or two year program is an investment whose returns cannot and should not be calculated merely at the end of the course.

And yes, demand and supply is the inexorable law of Nature. Bschools may well have to go back to smaller batches and lower fees - to make themselves more attractive.

The other - and tougher way - is to provide such value addition that recruiters are happy to shell out more to snap up students. A scenario so implausible... the more practical method would be to hire Leonardo di Caprio.

And let the 'Inception' team loose at one of those CXO Summits where delegates struggle to stay awake :)

The New World Order

Once upon a time I tried to make sense of my virtual life. I thought 'Linkedin' would take care of my professional networking. And 'Facebook' would be for family and friends.

And yeah, 'Orkut' was for fans and readers of my blog/ books/ JAM etc. Coz orkut was THE youth site.

But times change, and with that, so must I. Orkut is dying, LinkedIn has added Facebook features. The fact is, today, FB is king.

One of the reasons I wanted to keep Facebook 'personal' was that, well, I wanted to have some privacy. But the fact is, FB isn't private. So many of the 'friends' I have added are vague and distant acquaintances, people with whom I shared oxygen with in a 7th standard classroom. No shared memories, closeness or experiences as such.

Kai to pehchaan mein bhi nahin aatey (minus braces, spectacles and chotis - all for the better :)

If these distant acquaintances can be my friends, so can the folks who come up to me at a bookstore and say they loved reading 'Stay Hungry Stay Foolish'.

Of course, I can start a separate 'fanpage'. But managing multiple websites, blogs, accounts, identities - is all very taxing. I know some people employ 'managers' for all this but the reason people want to be your 'friend' is to have a sense of personal contact.

So even if I log in only from time to time, whenever I do reply or respond or update my status... You know it's 'me' speaking.

I welcome my '781' new friends, in a new world order where we can have a social group of more than 150. Yes, we may not have a deep relationship but the possibility of us getting to know each other better now exists.

And I look forward to it.

Last but not the least, I must mention the character who introduced himself 'Great Indian Gigolo' and explained in his message that he 'cannot CUM online very often'.

No, I am not adding him but hey, it's a free world. Everyone is discovering the power of 'social media marketing'. Bet we'll see him quoted by some journalist out there... very soon!

More 'Connect the Dots' events

UPDATED - Venue in Hyd & Chennai + Panelists in Chennai

Listing all events scheduled around the book in next 2 weeks.

All are welcome :)

MUMBAI
Date: Friday July 16, 2010
Venue: Oxford Bookstore, Churchgate
Time: 630 pm

Panel: Ranjiv Ramchandani (Tantra tshirts) and Sunita Ramnathkar (Fem) - both featured in Connect the Dots will be there to interact with the audience.

HYDERABAD
Date: Friday July 23, 2010
Venue: Landmark bookstore, Banjara Hills road # 12
Time: 630 pm

Panel discussion on entrepreneurship with:
Deepesh Agarwal, founder, GoCars (An ISB graduate who is currently operating his mobile technology start up from the Incubation Lab on the ISB campus).

Mansur Ahamed, founder, Tigertail Gaming Studios (An IIM Ahmedabad graduate who turned down offers from investment banks to start up his own venture).

Sundar Subramanian, co-founder Dimdim Technologies (An MS in Computer Science from Drexel University, passionate about working on cutting edge technology).

CHENNAI
Date: Saturday July 24, 2010
Venue: Landmark bookstore, Citi Centre, Mylapore
Time: 630 pm

Panel:
Mr M Mahadevan of Oriental Cuisine, from Connect the Dots

Mr K Raghavendra Rao of Orchid Pharma, from Stay Hungry Stay Foolish

Sudarshan Anandkumar, co-founder of TING, a recent start-up.

Apart from the above I would be visiting a couple of colleges in each city. And if any of you would like to do a meetup over dinner after these events let me know!

Connecting the Dots in Pune

An event around 'Connect the Dots' in Pune - many of you have asked when? Well. here it is at last and here are the details

Date: Friday 9th of July
Time: 630 pm
Venue: Landmark bookstore, SGS mall

You are all cordially invited!

Hanmant Gaikwad (Jugaad section of CTD, founder of Bhatrat Vikas Group) will be present. I have also invited two local entrepreneurs – Saurabh Garg (co-founder, Four Fountains spa chain) and Ajay Aggarwal (IT entrepreneur and mentor to start-ups).

So we’ll have a small panel discussion & audience interaction – so do come, join in if you can!

The Naked Truth

So, there is currently a controversy around whether a well-loved professor of NID asked students to undress, as part of an experiment. The chap stoutly denies the allegation and students have come out in his support.

Course participant Pratik Shah told DNA: "The concept of his course is that we all are bound by many things like the norms of society, fear of different things and so on. If we want to be creative in the work that we do, we need to free ourselves from this binding which will enable us to think out of the box."

So, there was a session where each student was asked to walk alone in the night in 'pitch dark' of a jungle without a torch. And yes, there were 'talks' of nudity to take students beyond their comfort zone.

"There was also a session on 'who would strip' just to challenge the need for conformance to societal norms, but when somebody dared to do so, the professor stopped them."

I personally believe this version of events. I also believe we in India are especially touchy when it comes to nudity. Which is funny, considering our national dress (the sari) reveals more than the standard attire of most other cultures.

I think it starts early, this idea that nudity is somehow dirty and/or undesirable. Toddlers are taught that to be nanga is 'shame shame'. I mean sure, we have to teach them to keep their pants on but why choose an adjective like that?

Then there was the issue of privacy; the concept hardly existed in our society. Both for cultural and logistical reasons.

Mujhe yaad aata hai wo scene. In the aangan of our old house in Ratlam my uncles bathing in their blue and green striped kacchhas. My aunts - when we sometimes bathed together for logistical reasons (a large family with single gusalkhana) - always kept their underclothes on.

I think it was quite common to do so, even when bathing alone.

My first shock as far as nudity goes is when I was at high school in the US. In the locker rooms after PE class, girls did not squeeze their wet bodies into clothes inside the bathrooms. Afraid that someone might see them exposed - the way we would be.

They had body confidence which desis of my generation simply never had.

My next adventure with nudity occurred - ironically - during a course we took at IIMA called ERI (Exploring Roles and Identity). But there was no instructor involved.

In the dead of the night, on the beach of Teethal (near Valsad) where we spent four days, a friend suggested we go skinnydipping.

And that's what we did. Removing clothes was the easy part; walking into the darkness towards the water was what scared me. Even though it's a flat beach - in low tide the sea recedes a km away. The waves are small and gentle. So you know you can't get swept away...

It felt good.

Five years later I was in Kyoto, staying at an international youth hostel. The place was great, but there was one problem. They had Japanese style bathrooms, meaning no private bathing area.

You enter a large room with showers on the side. In the centre of the room is a largish tub. After showering you can go soak in the tub - with other people.

So there are separate baths for men and women but still, the first day I decided I couldn't. I simply did not have a bath. But on day two I said - what the hell. This too is an experience. I showered and then sat in the hot tub - nude - with two Korean girls (also nude).

We briefly glanced at each other and noted the difference in body structure (they were very slim and small built). And that was it - no awkwardness at all. They didn't speak English and I didn't speak Korean, so we all enjoyed the warmth of the water (It was December and bloody cold!).

I slept really well that night :)

I think I crossed the final frontier when I gave birth to Nivedita. A different doctor came in every 15 minutes to check how many cms I was dilated under a flimsy sheet. And my mother, mother-in-law and husband hung around watching like it was no big deal.

Later I realised, it was a liberating moment.

Or maybe I was just in too much pain to feel shy or violated!

That day I fell in love with this amazing piece of biological machinery that is my body. And in the years since, I have made a conscious effort to love myself.

All of myself, including my physical being.

Well no more 'adventures' since then. But if I happen to be on the French Riviera and find a nudist colony on the beach, I won't hesitate to take my clothes off.

I don't have a perfect body. Maybe I will, someday. But it's really not about that.

If someone asks you to strip in a classroom - sure, that's unacceptable. But try it in the privacy of your own home, with curtains drawn. I bet most of us will quickly cover ourselves up because... it just feels 'unnatural'.

Which is ironic, isn't it?

And in a metaphorical sense, can you see all the layers of beliefs, of rules and judgements with which you cover up your True Self? Imagine looseing your tie, opening the buttons... shedding even a belief or two.

You will feel light and easy and all-new.