Universities today, in India and elsewhere, are built on the industrial or “Fordist” organisation principles that Henry Ford employed to manufacture his Model T cars in the early 20th century.
Fordist organisations are geared to the production of standardised products. It may be relevant here to remember what Mr Ford had famously said: “Any customer can have a car painted any colour that he wants so long as it is black.” These organisations work on the principle of economies of scale: costs reduce as the volume of production and the volume of inputs used increase. Work is broken down into different elements conducted by different classes of workers. Management is hierarchical; decisions are made at the top and passed down a line of command.
Similarly, universities the world over conduct standardised entrance tests to take as input a standardised student, use standardised textbooks and standardised “board exams” or “university exams” to grade the student.
Post-Fordist organisations, on the other hand, have a set of “core” workers, who are highly educated and reasonably well paid. But non-core workers and functions are outsourced. The products of these organisations are adaptable to the needs of customer segments. Also, rapid feedback is used to modify products and accompanying services. Work is accomplished by de-centralised, empowered teams of workers. These organisations depend extensively on partnerships and alliances with other organisations with complementary competencies. Silicon Valley technology firms are archetypes of this form of organisation.
The Indian Institutes of Management (IIMs) in India are organised on post-Fordist principles. Faculty members are loosely grouped along expertise clusters such as Behavioural Sciences, Finance and Marketing. Management activity is conducted through “programmes”, some of which are organised around the main courses offered. For example, the Postgraduate Programme offers the flagship two-year, full-time residential course; and the Management Development Programme comprises short-term training programmes for working managers. Other activities are organised along classical line functions such as admission and placement. People heading these “programmes” are faculty members who carry on with their teaching and research activities even as they “chair” these programmes. They occupy these positions on a voluntary basis for a two-year spell, after which they go back to their teaching and research engagements. They don’t get paid extra for doing these “management” jobs.
Successful senior managers from industry and government serving on IIM Boards are driven to their wits’ end when they watch the IIMs function as described above. No sooner does a chairperson of an activity area acquire the expertise needed to manage it than he reaches the end of his two-year term. The next chairperson, often a faculty member with no prior managerial experience, has to start the learning cycle all over again. Some of these programmes are quite large-scale. For example, the person chairing Management Development Programmes has to help create, market and run several dozen courses that train 3,000-4,000 managers a year.
Observers often ask: by rotating management, are you not foregoing the performance enhancement that comes with the experience of managing the same function for a long period of time? What about the role of financial incentives? Why will people take on additional responsibilities if they are not paid more than what they usually get?
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Despite defying all such management theories, the IIMs continue to flourish. Applicants flock to enter them, students love the time they spend there, recruiters from the world’s top companies snap up a class of 400-odd graduates in no time. And to top it all, many of the IIMs deliver a 25 per cent profit-to-revenue ratio, a profitability level achieved by only a minority of companies listed on the Bombay Stock Exchange.
What explains this paradox?
The answer perhaps is that by trial and error, the IIMs have evolved an organisational system that may be the prototype of post-Fordist organisations. Such organisations may be the norm in the Information Society, into which the world is gradually sliding. In this new arrangement, work is not de-skilled by excessive division of labour; all workers are assumed to be multi-skilled. No permanent class of people is designated as “leaders” and others as “followers”. Like a cricket team, everyone gets to bat. It is important to be reasonably well-paid, but extra performance is not achieved by extra pay alone; rewards are more intrinsic: approbation from peers, satisfaction from contribution to institution building and so on.
The early IIMs were founded based, in part, on grants from the Ford Foundation. So, watching IIMs defy his management philosophy, would the great pioneer of modern management, Mr Ford, be turning in his grave?