Being relatively new to market economy, we in India have for long centered quality measurement around accreditations with a rather low bar. Does your electrical appliance meet the minimum safety standards? Do factories have basic minimum safety conditions for workers? Do our business schools meet the minimum standards of infrastructure, faculty, number of books in the library?

This hasn’t worked very well for us. Our best business schools have stagnated after climbing just a few notches above the bare minimum All India Council of Technical Education (AICTE) norms, while for the remaining majority meeting that bar has been an end in itself in the pursuit of quality. Our best business schools have failed to reach much success in achieving international accreditations such as AACSB or EQUIS, and it’s not like they haven’t tried.

Amidst this, two private credit rating agencies have announced that they will grade Indian management institutes. Of these two, Credit Analysis and Research (Care) is yet to launch their business school rating while global rating agency Standard & Poor-owned CRISIL has already published gradings of 30 business schools. B-schools such as Narsee Monjee Institute of Management Studies (NMIMS) and SP Jain Institute of Management and Research (both Mumbai-based) have received the highest grading (A***) in the CRISIL gradings while the Institute of Business Studies and Research (IBSAR) at Navi Mumbai is graded lowest (B).

B-schools that want to get graded will have to voluntarily approach CRISIL, who will then evaluate the b-school based on their industry interface, governance, student selection process, infrastructure, faculty, curriculum, research and student outcomes by visiting the school. Eventually, the b-school will get a national and a state-level grading on an eight-point scale the highest of which will be ‘A***’ and the lowest ‘B’. CRISIL will charge the b-school a fee for the grading.

Unlike accreditations which are given if a b-school satisfies a set of criteria, the CRISIL gradings will be given for relative excellence. In other words, accreditations tell you whether a b-school is ‘good enough’ whereas gradings seek to portray ‘how good’ the b-school is.

What we liked about the CRISIL b-school gradings

1. The grading compiles standard statistical information about graded b-schools — faculty strength and experience, class composition, ability of the school to fill its capacity, recognition, etc — all at one place. You can get this information anyway from the b-school’s website or brochure, but on CRISIL’s compendium it seems to have undergone some intelligent post-processing and is presented in a uniform structure so that you can compare between different schools.

2. The grading is valid for one year — it gives b-schools an incentive to improve and work towards a better grading next year. On the flipside, a lot of shady schools will secure a favourable-sounding grading and despite it having expired, continue to advertise it for years.

What we didn’t like about the CRISIL b-school gradings

1. The eight-point scale is misleading. The highest grading that a school can get is ‘A***’, followed by ‘A**’, ‘A*’, ‘A’, ‘B***’, ‘B**’, ‘B*’ and ‘B’ which is the lowest grade. Which means that a lot of really shady b-schools will be able to get away by claiming to be ‘B’ grade schools, which doesn’t sound too bad to someone who does not understand CRISIL’s scale. This practically renders the grading impotent and unusable as far as MBA aspirants are concerned, lakhs of whom will take ‘B’ to be an above-average grade and stand to make skewed decisions, not knowing that CRISIL does not grade b-schools ‘C’ or ‘D’.

It is difficult to imagine that the technical details of CRISIL’s grading system will become common public knowledge, given that every year, CRISIL has a few lakhs new MBA aspirants to educate its scale system to. The ratings scale therefore is too biased in favour of the b-schools that are paying for it, than towards its largest consumers.

2. The grading system is not transparent. Several b-school grades just don’t add up. Consider the following table,

On all statistical grounds, IBSAR appears to have better staffed and more experienced faculty, more diverse batch, better student-faculty ratio and better placements than either Indus Business School or Skyline Business School. Yet, it gets the lowest grade on CRISIL’s scale. Seems like being affiliated to a controversial university went against it (so much that it pushed the school right to the bottom). But isn’t that better any day than Skyline, which runs without any recognition?

According to CRISIL, “CRISIL’s Business School Gradings service does not seek to merely judge the ability of an institution to provide quality education, but to assess if students have indeed gained quality learning experiences from the management programme.” If that is the case, then the grading accorded to the less-than-one-year-old Indus Business School is indeed questionable.

It would do well for CRISIL to be more transparent about the findings that result in a grading and be open about what qualitative insights led a grading to so completely defy quantitative data. Without such transparency, more such gaping anomalies may turn the CRISIL gradings as untrustworthy in the public as are the several inexplicable magazine b-school rankings in the market.

3. Some components of the grading do not reflect the segmented nature of India’s b-schools. The vast majority of India’s management institutes do not qualify to be business schools in the same manner as the top b-schools are. They are more like finishing schools, doing the job that undergraduate colleges ought to have done — teaching communication skills, dressing in formals, English lessons, using Microsoft Word — and producing individuals who could loosely fit into junior-level sales roles. Can one really grade them using the same parameters as proper full-fledged business schools?

Take student diversity for example, which forms an important component of CRISIL’s grading. “CRISIL believes that for management programmes, student diversity is a critical enabler of peer learning and therefore, of an enhanced learning environment,” says CRISIL in its brochure.

The reasoning is theoretically sound, except that there are no benefits of diversity if the batch isn’t selected on merit. And in the vast majority of b-schools, while the student composition might look more diverse, it’s not out of choice that the school ends up with a diverse class. These schools have to struggle to admit just about anyone (haven’t we heard of ‘direct GD-PI calls?) by throwing merit to the wind. The so-called peer-learning in a batch with widely varying intellectual abilities is therefore questionable, diversity or not. Using premier b-school parameters to gauge finishing schools is a lot like judging a car using parameters used for airplanes and pretending that everything is alright.

Another example. At least one b-school in the CRISIL gradings runs another b-school on the side which offers a distance-learning MBA degree under the garb of a fulltime program. Both b-schools share some common faculty members. Shouldn’t the student-faculty ratio in such b-schools also account for the students from this side-business-school that the faculty has to also teach?

Even a b-school like SP Jain Institute of Management Research, Mumbai sends its faculty to its branches in Dubai and Singapore to teach entire courses. The student-faculty ratio in the grading does not account for this.

4. Placement data used in the gradings is questionable. The Indian Institute of Foreign Trade (IIFT), Delhi is graded A*** in the CRISIL gradings and is said to have had a median salary of Rs 11.5 lakhs in the 2008-10 placements, which were 100%. CRISIL does not reveal that the first figure (Rs 11.5 lakhs) also includes dollar converted salaries from international placements (IIFT releases combined domestic+international salary as a policy). Nor does it reveal that three students opted out of placements in 2010, a data point that it discloses for the Pune-based FLAME School of Business and FLAME School of Communication. Similarly, there have been opt-outs in other schools such as XIM Bhubhaneswar and SP Jain. Post-recession, only those b-schools with very small batch sizes have had 100% placements. These inconsistencies question the accuracy and consistency of the raw data used to calculate the CRISIL gradings.

I do not want to sound like I am nitpicking. But the obsession with MBA placements has been the biggest factor leading to the qualitative decay of India’s management education industry, the very reason we need gradings such as CRISIL’s. But if the grading is going to feed us the same hype and propagate the same myths that we need to look beyond, does the grading not lose all reason to exist?

B-school rankings calculated using objective data have succumbed to the same pitfall of inaccurate data and have lost relevance due to decreasing public trust.

For a market befuddled with the mushrooming of b-schools, a product such as the CRISIL b-school gradings has the potential to add a lot of value. But in our opinion, at this point of the time gradings at best serve to compile statistical information about b-schools while succumbing to some of the same pitfalls as b-school rankings. As far as the actual grading is concerned, CRISIL will have to devise a more user-friendly scale and a more no-nonsense data gathering capability in order to be known for a gradings that are taken seriously beyond the academic circle.