Why can't universities be run like businesses? During the 25 years I spent as a professor of management, this question always intrigued me,
and is partly responsible for my having spent the last 10 years in the for-profit side of higher
education.
I found the answer. They can, but that does not mean they will be any more successful.
What does it mean to run something “like
a business”? It could
mean that university presidents should become robber barons; some in the
for-profit and not-for-profits have tried. It could mean that university
administrations should practice scientific management, engage in time and motion
studies, and reward the “good lads” who meet or exceed work standards. Some have tried.
In 2001, Robert Birnbaum wrote a
neat little book, Management Fads in
Higher Education, that began with that question, “Why can’t a college be
more like a business?” and ends with this profound statement (p. 241) :
“Academic management fads are potentially disruptive in the hands of insecure
or inexperienced managers who adopt them because they do not know what else to
do.”
Most current for-profit higher education institutions are indeed rife with management fads promulgated by many insecure and inexperienced administrators.
The provost in one of the
for-profit universities in which I worked became enamored with a baseball book about Billy Beane.
All the deans flew hundreds of miles, spending thousands of dollars in the
process, for a series of management training sessions related to this book (the premise of which was fundamentally opposite to the operating structure of the university),
which we were required to read, which had nothing to do with our jobs or the
business in which we operated, and which was never integrated into the
structure of our philosophical or existential lives.
At this the same time this
same provost had the deans and directors voting on an organizational structure. The votes
were counted, but the results were ignored, and the structure changed
drastically at least three times during my three years in the organization.
Each
change was explained as stemming from a need for more control of the academic
administrators.
The operative word that prompted
this adventure was “metrics.” The metrics that were deemed most appropriate for
academics at this university comprised an alphabet soup of labels; Q rates, R
rates, U rates were among the most popular of the soup. The president had an
interesting logic in explaining the mission of the academics: “We admit
students with an ethical responsibility; we take their money so we are
ethically obligated to graduate them.” This was generally followed by, “I don’t
want to hear any excuses from the academics.” The Q, R, and U metrics were used
to measure how well we were doing with this ethical obligation.
There were several flaws in the
soup, however. First, a mountain of research on student retention shows
that there is almost a one-to-one correlation between student admissions and
student retention; the logic is that if you admit the “right” students (i.e.,
those who fit the mission and culture of the institution), they will most
likely stay. So, if you want strong retention, get everyone, including
academics, involved in admissions. For me to say this in public at any of the
for-profits in which I worked invited blank stares at best (why would
I know anything about admissions), and derision at worst. I saw a lot of blank stares and experienced much derision.
Admissions is key to the success
of any academic organization; if you don’t attract students, you don’t succeed.
Admissions offices/processes/compensation are governed by law and watched
carefully, especially in for-profits, the result of several documented bad
practices over the years. This has resulted in creative approaches to get
around the law. One of the for-profits sponsored lavish cruises each year for
“invited” admissions representatives. Of course these invitations had nothing
to do with the performances of the invitees. And of course, the cruises
involved “training” exercises. The fact that folks who did well with admissions
got to go on cruises and hobnob with top company executives was a part of the
company’s belief in training and development.
No equivalent “training” was
offered to non-admissions professionals.
The second flaw is that
the most significant aspects of the alphabet soup do not relate to admissions.this
university. The universities in which I worked had “open enrollment”
policies, which boiled down to the fact that if you had the tuition money you got in. Names of potential
students were bought from groups called lead aggregators, and colleges paid per
name based on the quality of the leads—the cheaper the lead, the lower quality.
If one of the metrics employed by the college relates to the lowering of the
“cost of acquisition” of students, one does not need to have an M.B.A. to
understand the “best practices” of that open enrollment institution.
The third flaw is obvious. If the
quality check on admitted students is not operational, it is probable that
there will be students admitted who do not have the academic wherewithal to
succeed in the institution. This is the ethics flaw in the president’s message. If universities let people into the university who can not succeed, and then not provide them the tools for success, they will fail.
In my experience, it was then left to faculty members and academic advisers (in the for-profits
these were overworked young folks who were frequently caught in middle between
professors and students) to bear the brunt of the obligation for, and work in, retaining
these students, without having the proper tools to do so.
This is where the alphabet soup
metrics kicked in. “Drop rates”, “Unsatisfactory Grade”, “Retention” rates were
measured weekly and deans got reports. If there were too many students failing,
deans got subtle messages; I was never explicitly told make sure students passed,
but the implicit messages could not have been clearer, if disguised in ethics
rhetoric. If there were too many students dropping out, deans got clear messages, weekly.
I was on a phone call with deans
of on-ground colleges owned by this major corporation, hosted by the corporate
vice president for faculty, dealing with drop rates and retention. “Everyone
knows learning is a drag,” she said, “So get those students out of class
frequently and feed them ice cream and pizza. We should learn from my
experience at this large department store, where I went I last week to buy a
pair of shoes and came out with their having sold me $1000 worth of other
things. Feed them and get them enrolled in more courses.” This approach is
perfectly consistent with buying cheap leads and letting everyone in the door,
and reflects a remarkably condescending attitude about learning, higher
education, and human beings.
It was an attitude that pervaded the culture
of “the management” in this
institution.
Academic deans, faculty members
and advisers were held accountable for retention. They were not privy to lavish
cruises, however, training or no training. They were not privy to praise. They
were privy to metrics reports. I asked the president what the motivation was
for these folks, given this reality. I was told “You get to keep your job.”
Metrics seems to be a
Twenty-First Century business word, like “buckets” and “at the end of the day.”
I’ll use it in a sentence: “The metrics for your college indicate a downward
trend in student retention, which, at the end of the day, shows some significant
problems; we need to re-examine each of your buckets, using these metrics, to
determine the scope and significance of this significant problem.”
At one of the for-profits I
worked for, “drop rates” were viewed as significant metrics. No one knew why,
exactly, but we measured them weekly. At the end of the day, we knew no more
about the effectiveness and efficiency of the college. We did know that we were
delivering 30 percent margins. We did know that was not good enough. I knew it
was not good enough because top management had made promises to the parent
company, not based on any metric other then greed and hubris, that they could
not keep. The management theory then deployed was to intimidate and demand
performances, using undefined metrics, examining non-existing buckets, which
would, at the end of the day, result in their being able to keep their
promises, and therefore their bonuses.
Rakesh Khurana’s book, From Higher Aims to Hired Hands (2007)
makes elegant points about what he sees as the denigration of the academic
profession of management. His basic case is that business schools have shifted
their attention to the training of students to use “financial engineering
tools, like leverage and stock options, to align corporate actions with the goal
of maximizing shareholder value.” (p. 364). These business schools graduated
the management teams that ran the for-profits I worked for; one prided itself
on the number of MBAs from big-league schools comprising their corporate
leadership.
Jerome Groopman, in his book, How Doctors Think (2007), makes the
point that in recent years “medical students and residents are being taught to
follow preset algorithms and practice guidelines in the form of decision trees.
. . Similarly a movement is afoot
to base all treatment decisions on statistically proven data. This so-called
evidence-based medicine is rapidly become the canon in many hospitals.” (p. 5)
These two books document the
widespread acceptance of this newest fad, not only in higher education management,
but also in at least two professions.
The metrics fad in higher
education causes problems. Groopman talks about doctors taught the algorithms
approach, looking at the decision trees rather than listening to the patient.
There is nothing wrong with decision trees; they just don’t tell the whole
story, and one does not begin with the trees and fit patients into them, but
uses the trees as tools in diagnosis. The metaphor is most apt for higher
education.
The business that is higher
education is at its core a very easy one to understand. In order to “run the college like a business”, one
first needs to understand the nature of the business. The business of higher
education is straightforward on its face if a bit more complicated when one
digs. It is the business of higher education, says me: to provide students the
opportunity to grow and develop intellectually, professionally, and socially;
to challenge what is currently assumed to be known; to promote the development
of “new” knowledge; and to promote the intellectual and social growth and
development of societies.
In order to accomplish these goals,
the higher education institution needs to
maintain fiscal solvency, defined slightly differently in for-profit
than not-for-profit institutions. In not-for-profits, fiscal solvency means
generating the means to sustain itself, living within its budgets, and securing
funds to ensure its solvency over time. The danger is in not paying attention
to budgets but in assuming lofty ideals without attending to the checkbook and
savings account.
For-profit institutions have
these responsibilities, plus there is the additional demand to deliver a
reasonable (defined by the market) profit to its shareholders. The danger is in
assuming their only reason for existence is to provide ever increasing profits
to shareholders, thus confusing means and ends.
For both, students provide a
fundamental means for accomplishing the ends, and the mechanism for ensuring
fiscal solvency. Students are the core of the business, without which the
industry and businesses within it cease to exist.
Higher education is an industry. Universities should be run like businesses. This means they should have missions,
develop strategies to accomplish missions, and develop and grow resources
(people, financial, process) to implement the strategies. They should monitor (maybe even use appropriate
metrics) the accomplishment of strategies, and change to meet new challenges.
In this industry, however, we
should not begin with the supposition that “learning is a drag.”