GMAC CEO Sangeet Chowfla on How the GMAT Plans to Expand in India

PaGaLGuY speaks to Sangeet Chowfla, the Indian-born CEO of the Graduate Management Admissions Council (GMAC), the US-based organisation that owns and runs the Graduate Management Admissions Test (GMAT) across the world. Mr Chowfla is a 1979 alumnus of the Faculty of Management Studies, Delhi University and has previously spent his career predominantly in key positions at technology companies such as Hewlett Packard and Comviva.

What are GMAC’s plans for India?

From previously being a largely US company, today 62% of our tests are delivered outside of the US and 25% scores are sent to non-US business schools. We are now beginning to grow the set of non-US schools that accept GMAT scores. In India, 128 programs now accept the GMAT and 20% of our scores originating from india get sent to Indian b-schools. The next phase of opportunities for us are in connecting local candidates to local schools. We are trying to understand where we can add value in the whole candidate evaluation and assessment landscape in India.

Does that mean the GMAC is looking at creating a special test for India?

That’s too strong a statement to make now. We are seeing where we can add value to domestic exams, whether it is by assisting, cooperating with or providing technology to them. We don’t have an answer right now. The answer may well be that the space is saturated and we have no role to play.

India has two problems with MBA exams. First, and this is unique among markets, that it is highly fragmented. You can take any letter of the English alphabet and add an ‘AT’ at the end of it to get an exam of some sort. This is unfriendly to students. Everywhere else in the world, you take something like a GMAT and based on your scores, select a set of schools that fits your capability. Here in India, you make a school decision even before even knowing your capability for studying at that school. If I want to go to school A, then I take exam B and find that my performance is either over or under the consideration set for that particular score. Either way, it’s a bad process.

Second, you need to take multiple exams which is also not very friendly. So is there a need to start consolidating management admissions testing over a period of time? As the market matures, it would be a healthy thing to happen. All tests in India are tests of elimination. They are designed to create a merit list and a cutoff point. We have always believed in a test of prediction. GMAT, since the beginning has been built around the idea of testing a candidate’s ability to succeed at the business school environment. I think this is important as India gets more business schools, because schools can decide that this is the candidate set that they require to succeed in their environment. You don’t necessarily want a 99th percentile person in every program because the cohort doesn’t support that. You need a cohort of like people and a mechanism to get them together. These are areas where the Indian market is going to have to grapple with as it develops. We think we have some solutions that might be helpful, but let’s see.

Are there any areas outside of testing where you see yourself playing a role in India?

Within testing, there are different forms of testing. For example, we also have a soft-skills self-assessment tool called Reflect which is gaining traction. We are also working with some specialised recruitment related areas. For example, our Integrated Reasoning section is being looked at by more and more global consulting companies as a way of assessing a high level aptitude for consulting. We are an organisation of b-schools. Our mission is to connect talent with opportunity. We are investing a lot in training and certifying admissions professionals in creating a professional admissions process at b-schools. These will be people who understand how to build a class cohort, the role of standardised testing and how various admission instruments come together, so that the profession becomes more standardised by itself. This is great for candidates too.

Today, there are too many myths flying around about what works during admissions. Candidates go through multiple hoops and the more standardised the admissions is, the more everyone will benefit. In India, such professionalisation will help the new business schools that are being freshly set up. In the emerging world, there is a lot of such greenfield activity to do with new b-schools.

What is your opinion of the CAT in its five years as a computer-based test? Is it a test that GMAC sees itself running for the IIMs?

The CAT has been around for a long period of time. In our view it’s a test of elimination driven by the sheer volume of people who apply to the IIMs and it serves that particular need. But it’s not necessarily a test of prediction. The CAT in its current form is not an area that we can bid for because of its eliminating nature. We are also concerned that the over-quantification of testing instruments, not just in CAT but in other similar tests, is leading to diversity problems in management education. Schools tend to end up with predominantly engineering candidates and we don’t think that’s healthy from a management education point of view, because that is not how management education was meant to be when it started out as a liberal arts degree.

How do Indian b-schools respond to your worldview of management admissions testing?

There is a general agreement that a highly quantified testing instrument is not good for business schools. There are however certain constraints, one of which is the sheer volume of candidates who apply to the IIMs. There is also a strong push, especially at government b-schools, to have a very repeatable process where you can put points and percentages to everything so that you can defend it in case of a Right to Information query. While I understand why that is important, I see that it reduces the role of judgment and increases the role of numbers.

While it’s important to bring transparency to the system, it’s equally important that trained admissions professionals create a class or cohort that is well-diversified, where students can learn from each other. A research by a Haas School of Business professor at the University of Berkeley on the performance of teams showed that rather than putting very smart people together, it was more effective to put very diverse people together to create a high-performance team. The sum of the intelligence of the the team is less important than the diversity of the team. So it’s important to have diversity at b-school but it’s hard to have diversity in an admissions system where you’re supposed to act on the basis of numbers. A lot of people are worrying about trying to find a balance, but things won’t change overnight.

What candidate-facing product possibilities does GMAC see specifically for India?

For admissions, we would like to talk to good b-schools to see if they can agree on a standardised assessment rather than have the fragmented process that exists. Whether that creates a product that we provide, or it is developed by someone else and assisted by us, or whether it uses our technology, are all possibilities if this conversation can progress well.

Secondly, school choice is a difficult thing. Particularly in India, we suffer from the brand-name fixation. A huge number of Indian candidates apply to the same five or ten American b-schools. Since these schools have limited seats, most of them end up disappointed. But there is actually a wide variety of exceptionally good b-schools available that can use the existing talent of the candidates and prepare them for the future. These schools may not have the instant brand recognition of a Stanford, Harvard or Wharton. We would like to build some kind of a matching system, like a, that can match candidates with more school options based on their capability and desirability.

Why is the GMAT in India sold in US Dollars, considering that India is a large market and yet a price-sensitive country, and also that the test has become very expensive in recent times due to the falling rupee?

As long as the GMAT is largely a test to apply to foreign b-schools, the cost of the test is actually relatively small compared to the total expense required in getting the MBA degree. From our research, we don’t find that the price is a limiter from people taking the GMAT. We do realise that the GMAT at its current price point is not used to apply to domestic b-schools in large numbers. But at this point of time it isn’t in a position to be that either.

Why can’t GMAC fix a constant Rupee price for tests delivered in India, in a way that doesn’t hurt the test’s viability?

At this point the way our costs are structured, we spend the most on development and validation of intellectual property, which is the test questions. We have looked at local currency pricing across the world but it leaves us at the mercy of having our costs in one currency and revenues in another currency, and that doesn’t work well together. It exposes us to currency fluctuations which as a relatively small organisation, we don’t have the capability to hedge at this point of time. It’s a little bit like asking London Business School why they can’t charge Indian students in Rupees. They’ll say it’s not possible because their costs are in the Pound Sterling.

How do you see the GMAT growing in India, both by test numbers and delivery cities? What infrastructural obstacles would you face?

It’s hard to give a number. Once we figure out how we are going to be relevant to the domestic market, we could put a number to it. Right now, it’s very early. But yes, we do want to grow in India and for that we will have to expand our footprint. This will inevitably lead to more test centres and all the valid factors that you mentioned will continue to be in our consideration. As we grow, we will just have to deal with one or the other.

What else do you see GMAC doing apart from testing?

We are actually beginning to think of ourselves not as a testing company. Testing is a means to an end, but not the end. We go back to our mission, which is to connect talent and aspiration to opportunity. The important word for us is ‘connect’, and the GMAT does that by predicting a candidate’s capability and using that as an instrument to identify the right schools for him. Part of that connectivity could be matching systems that help candidates idenfity schools based on their performance and aspirational parameters. Connecting could also mean helping b-schools market themselves to reach out to candidates, professionalising their admissions process so they would find the right candidates.

We also do significant amount of research work, including seven global surveys to understand the management education market. All of this has to happen in a global environment. Across the 18,000 b-schools across the world, there are two million admissions happening globally each year. We see ourselves developing those linkages.

With the emergence of Massively Open Online Courses (MOOCs) and the ongoing innovation in technology-assisted learning, do you see the university system to be under threat? What relevance would GMAC have in a possible post-university world?

I was in California during the dotcom booms and busts in the late nineties and early 2000s. Remember the time when everybody was going to do e-commerce and all shopping was going to happen online? We in the technology world used to, in a semi-derogatory way, refer to the rest of the retail world as ‘bricks-and-mortar’. In the end, the answer turned out to be what we now call ‘clicks-and-mortar’. Except for Amazon, the most successful e-commerce sites in the US are actually the largest retailers. The same happened with music and movies. There is some learning from this for the higher education space.

So much of education is about the experience, and not just factual learning. My own view is that eventually the education world will find its own version of the ‘clicks-and-mortar’ model where certain things, which are more fact-based, will be taught online. So I won’t have to attend a classroom to learn that two plus two equals four, I can figure that out online. But I would still need to go to classroom to learn case studies, soft skills and strategy. I suspect that some amount of education will go online, and some will stay on campus, perhaps in a different type of campus than what we know today. Some b-schools will embrace this change and move forward, and some won’t and have problems.

As far as the role of GMAC is concerned, we still see the need to connect students to the university. You can go to Coursera and EdX, but you still end up learning from a university, so I don’t think that changes. In the online world, there needs to be some assurance of learning. I can go to a MOOC and learn a course, but to continue my education on a physical campus, that campus needs to know that you came in with a certain amount of learning from the online course. So there is that credentialing and assurance of learning that would still be required, whether the testing is done online or in a physical environment. We do see ourselves playing a role there.

One of the biggest impacts of the Internet on the music industry was the unbundling of songs from albums. Do you see the university system getting disrupted due to a similar unbundling of courses from degrees?

A university creates, delivers and credentials knowledge through research, teaching and the degree respectively. Unbundling in education has the problem of how you can certify education. One could do an online course each from Wharton, Stanford, Harvard and Chicago but then who gives him the degree?

As long as a degree is important as a credential that I can take along with me in life, I will need one. Even if I did an online course with university X for some credit hours that I want to use to avail an exemption in university Y, that university Y will also need some amount of assurance of learning from the course done at X. That problem still hasn’t been solved as yet.

And then again, today’s MOOCs are not about degree education, but about learning a subject to solve some problem one encounters day-to-day in their jobs or businesses. Someone who works in engineering faces a situation where he has to deal with finance, so he takes an accounting course just so he could deal with that situation. Also interestingly, there are more retired people on today’s MOOCs than younger people. These senior citizens have probably never had a chance to learn something that excited them, like maybe Astronomy. It’s great that people can learn this way. But at this point, the MOOC isn’t a university as long as it doesn’t have credentialing power.