For-profit Higher Education: A Challenging Balancing Act

 

In this posting we reflect on a few aspects observed after several decades working in for-profit universities in the US and abroad. Business and academia have different DNAs, and its dynamics inside universities is not exempt from tension.

First, for-profit colleges are driven primarily by monetary gain. Such aim is often exacerbated by external pressures and leads to business practices that can be detrimental to the welfare of an institution and its constituents. Examples of these are the use of aggressive sales tactics coupled with under-delivery of promised services, and understaffing/underinvestment in student support and service areas. Ideally, the business prowess brought into a university by for-profit operators should better serve its mission. However, we’ve seen managers driven only by the bottom line making unwise business decisions that end up having a negative impact on academic quality and institutional reputation.

Second, grounded in dissimilar value sets, the institutional priorities for academics and business managers are often at odds and lead to difficult dilemmas. For example: Hire more faculty with PhDs or more part-time lecturers with only master degrees? Invest in expanding teaching and research resources or spend more in marketing? Hire more academic mentors or more administrative staff? Invest in seeking a voluntary external accreditation? The impetus of managers is geared to invest where ROI is the highest. However, there are positive externalities to investments made by a university that aren’t captured in a ROI analysis, but are essential to its nature and social mission, and can’t be overlooked without incurring substantial regulatory and reputational risks.

Third, businesses and educational institutions are generally structured differently. The organizational structure of higher education institutions tends to be flat and responds to a collective sense of shared purpose and accountability. Meanwhile, businesses are organized through vertical structures, with clear chains of command. The superimposition of businesslike hierarchical structures on top of the traditional university structures can affect the functioning of an institution. The resulting picture is one in which academicians are asked to report to managers and often have to deal with burdensome procedures that stifle creativity and innovation.

Fourth, some business managers assume that people’s motives are mostly economic and that individuals only respond to financial incentives. While it’s true that everyone aspires to fair compensation, the drivers inside academia are of a different nature. Teaching and research are deeply vocational activities, and entail an intrinsically generous attitude toward sharing and giving to others. The main reward for educators and academicians comes not from money but from recognition and from seeing students thrive and research endeavors succeed. Managers who can’t understand this, are left wondering why they can’t ever harness faculty’s creative energy.

Bottom line: Universities generally benefit from the adoption of business practices. However, these must remain instrumental to a higher purpose and not the opposite. Higher education--and broadly speaking, academia--can’t just be instrumental to a profit seeking motive.

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