Anand Halve

The problem of scaling human excellence

The Economic Times on 17-08-2012 had a front page article: 'New IIMs clash with the old; young institutes claim established B-schools are not sharing resources'

Deans of two new IIMs were quoted: "IIM is an umbrella brand and students should not be seeing any difference in quality..."" says MJ Xavier, director of IIM-Ranchi. "We are younger siblings, but intellectually the same," says Prafulla Agnihotri director of IIM-Trichy. I am not sure everyone would agree that IIM grads from all 'branches' are interchangeable. However, to my mind, the bigger issue is the assumption that scalability in human-fields is do-able in a hurry. Propagated by VCs and private equity promoters is the God participle of 'scaling ideas'.

Their dharma / business model requires that all things be scalable. Even the Union HRD Minister Kapil Sibal took the scale mantra to heart, and in August 2009 the Union Cabinet, approved his proposal for setting up seven new IIMs taking their total to 13, with the objective of, "...generating a highly competent and trained manpower, the institutes are also expected to act as a major catalyst for developing a knowledge society that would inevitably impact on the economic growth of the country."

If it were only so simple! Recall that INSEAD, one of the world's most respected management schools has only two full campuses. And how many 'branches' does Harvard have? MIT? Stanford? Even in manufacturing, scaling up is non-trivial, but is relatively more do-able. Hero Motors can add a production line and make more motorcycles. An FMCG company can outsource more shampoo production. More bottlers can produce more bottles of coloured, sugared water. Indeed there are definite advantages conferred by scale. The direct cost per unit comes down, overheads are spread over a larger base, returns on advertising can be higher, and it becomes cost-effective to provide more after-sales service points. Even in service businesses, there are examples of remarkable scale. Starbucks had 19,763 outlets around the world as of June 2012.

McDonald's has over 33,500 outlets worldwide serving 68 million people across 119 countries every day! I am not for a moment underplaying the challenge of maintaining service quality over such extensive networks, yet superlative SOPs and attention to standards can ensure consistency.

But it is not so easy when it comes to education. Or healthcare. Or advertising. Or music. Or art. The simple truth is that you cannot scale things by executive or investor fiat when human talent is involved. In any activity which is fundamentally built to human scale, scaling by size can only lead to a drop in quality. You can always build another hospital building. But how do you produce good heart surgeons in a hurry? Regarding the IIMs, "There is a shortage of over 200 teachers who are currently outsourced" according to IIM-Ranchi Director Xavier. What do you think this does to the quality of teaching?

IIMs were added by the HRD Ministry. Scores of engineering colleges have been set up by others and 750,000 engineers graduated last year. What is the result? An assessment in 2011 by Aspiring Minds Computer Aptitude Test (ACMAT) of 55,000 engineering graduates found that more than 25% of them did not know enough English understand the engineering college curriculum. One-third were unable to answer entry-level math questions. And 52% would not be fluent in most words used regularly at the workplace.

In our own backyard, we have heard advertising agency people speak of the talent shortage for years. And yet, most agencies are now part of holding companies that are publicly traded. Where the pressure to relentlessly increase billings is probably the same as for sellers of shampoo sachets. What do you think this does to quality? Many years ago, Jay Chiat, co-founder of Chiat/Day asked Lee Clow, his creative director, "Lee, how big do you think we can get before we get bad?"

Human excellence is not a two-minute noodle; its a pear tree. A seed planted today will only bear fruit many years later. Jay Chiat's question is just as valid today.

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