The For-Profitization of Higher Education

31 Oct 2013 By Rusty Hartley, Principal Analyst The Almighty Dollar Is anyone else concerned about the extent to which higher education is turning into a business? Higher education continues to experience pressure to become more efficient, more effective, more affordable, and more accountable. This pressure is coming from pretty much anyone who has any stake in higher education – which means, pretty much, “everyone”. College rankings like the US News are only one example in their quest to rank schools based on metrics. President Obama has promised to link federal financial aid programs to a rating system that incorporates affordability, student completion, and employment metrics. Ratings agencies and accreditors may eventually follow suit with greater metrics analyses of their own. MOOCS and adaptive learning companies promise to use new technology and big data to enable scalability so that we can educate more students at little incremental cost. Even nonprofit schools are gaining back market share lost to for-profits by offering online programs though the strength and brand names of their traditionally on-campus programs. Finally, some schools are taking the concept of hiring distinguished faculty members to drive enrollments one step further by hiring ex-corporate CEOs or politicians as senior level administrators to help turn things around. I’m sure I’ve missed a few but let’s put a jolt of reality into this discussion. Higher education is a long way from becoming a business. First of all, most schools are nonprofit, and education is still widely considered a nonprofit industry, at least by the public at large. While this exempts most from paying taxes, it nonetheless does not exempt them from operating in an economically prudent manner. Secondly, nonprofit schools are not traded on public stock exchanges and are not expected to post “hockey stick” revenue growth or “Jack Welch style” cost cutting measures to please investors. Regardless, public and political concern over the state of our educational system is exerting pressure on traditional non profit schools to act more like for-profit businesses. Changes affected by the growth of online education and for-profit schools have only exacerbated this. While higher education is far from being “for-profitized” – it is clearly moving in this direction, and it should ultimately benefit from doing so. A Quaint Analogy I was recently in the Midwest on a “business trip” speaking with a group of liberal arts faculty members about how to increase enrollments by revising their academic program offerings. We also discussed heady topics like disruptive innovation, big data, and educational technology. I was even told about the importance of positioning academic programs like Pele would position himself on the soccer pitch – “i.e., go to where you think the ball will be, not where it is now.” While an appropriate analogy to consider in launching new academic programs (or for that matter making any personal or professional investment decision), this is the kind of discussion we have every day at Eduventures. But this was new territory for these faculty members. It became rapidly apparent that they had no idea what the effect of business and technology will have on their futures. And why should they? They are brilliant mathematicians, scientists, and historians. The point is that greater change is coming to higher education, albeit slowly. A Big Gulf This change is being impeded by the big gulf that exists between non profit schools and for-profit businesses. Neither side really understands the other. Schools sometimes disparage business’ for-profit motives while vendors often do not understand what it means to operate in an academic environment. Eduventures often acts as the “middleman” – not only do we help schools assess academic program demand, raise money, and drive enrollments, we also help vendors navigate the often confusing channels of higher education. The role of objective third party vendors like Eduventures is becoming increasingly important as schools evolve to become more competitive and responsive to market pressures (please excuse this shameless act of self promotion…). Grasp Change Quickly, but Act with Perspicacity Despite having different economic incentives, schools and vendors can only benefit from working together. While vendors, especially those new to higher education, need to recognize the challenges of doing business in academic environments, schools also should understand that it is within vendors’ best interests to help their customers reach their goals. Postsecondary institutions should prepare for a more competitive environment in the coming years by considering the following. New federal guidelines linking financial aid to metrics are slated to become operational by 2018. Schools need to embrace for the inevitability that congressional consensus is likely – they should start following these conversations now with the goal of putting systems in place that prove the efficacy of student learning outcomes in an affordable and efficient manner. MOOCS and adaptive learning technologies are here to stay. Regardless of the changes their business models will undergo – they WILL have an effect on traditional academic models. Schools should become aware of these technologies now and learn about their potential roles within their institutions. Nonprofit schools must continue responding to the competitive challenges thrust upon them by their for-profit cousins – otherwise, there WILL be a detrimental effect on the ones that do not understand the benefits associated with online education and educational technology. As schools make strategic and organizational decisions that help them become more competitive, they should look to their mission statements for guidance. Justification will come from statements like “help advance society”, “provide knowledge and learning at the highest level”, and “provide global access to higher education”. Operating in a less insular and more competitive environment, using technology to create efficiencies and improve student learning outcomes, and proving this through metrics will help schools adapt better to the future of higher education. The concept of “for-profitiziation of higher education” is debatable – but using the tools we have available to us to provide a better education to more students, and advancing society in the process, is just good business sense and should be considered part of higher education’s natural evolution.