Changing Higher Education

An update on StraighterLine - a "disruptor in the making"?

A few years ago, I identified a few organizations that I thought were doing things in higher education that were examples of approaches that potentially could be disruptive to the field (Potential disruptions in the higher education space). Among these is StraighterLine, which offers primarily introductory level college courses much more inexpensively and flexibly than traditional colleges and universities.  Entry level courses are relatively similar in many if not most colleges, and at the same time are the most profitable for the colleges because they are most often taught in large classes. If students in large numbers were to opt for the StraighterLIne combination of online convenience and low cost, it would prove quite disruptive to the budgets of many traditional institutions. 

Reputation and brand in the changing world of higher education

The world of higher education has obviously entered into a period of many changes. Major universities have jumped into the MOOC game, classrooms have been flipped, competency based learning is going mainstream, government at all levels is demanding measurable outcomes, traditional tuition increases that outpace inflation are coming under attack, non-traditional students have become the new tradition, and the continuing tight financial environment for higher education is forcing many institutions to reexamine their organization and mission. Under such conditions, it is interesting to consider the bases for reputation and brand in higher education, and ask how the changes we are seeing might impact the brand and reputation of different types of institutions. What follows are my first tentative steps to address this issue.

Accreditation: ally or obstacle as higher education wrestles with change?

Goldie Blumenstyk recently published a very nice description of the accreditation issues that led to the shut down of the  generally acclaimed for-profit/nonprofit partnership of Altius Education and Tiffin College.  As Blumenstyk points out, there are critics who feel that this demonstrates that the accreditation system is broken, and others who say that it has done what it was designed to do. It may be that both positions are correct, as I shall discuss in this post.

In the spirit of full disclosure, I have connections to both parties. I was on the advisory board of Altius until it closed down recently, and Sylvia Manning, President of the HLC (which challenged the partnership), was my Executive Vice Provost at USC for several years and remains a good friend. I have no interest in getting into a discussion of the merits of the decision of HLC, but rather would like to put it into a larger context of the strengths and limitations of the accreditation system. 

American Public Education and Fidelis link up

American Public Education, parent of the American Public University System, announced today that it was making a $4M investment in Fidelis Education as part of a new round of funding for Fidelis.  In the spirit of full disclosure, I have been on the advisory board for Fidelis for almost 2 years.  

Gunnar Counselman started Fidelis in 2011 to address the mismatch between the educational services offered in the typical college or university and the needs of service members leaving the military and seeking tertiary education leading to a civilian career. Over time, he recognized that what was needed was a "wrap around service" that helped to coordinate all of the elements of the university in a way that responded to the needs of the student, and he knew that he had to build a scalable approach. His resulting web based tools turned out to be so useful that his university partners asked that he make them available to their general student bodies.  

This new funding round enables Fidelis to focus on technology developments that will make these tools more useful to a broader audience. It will be interesting to see how it developes.

How a course-rich world might impact higher education: II. Creating new institutions

In part I of this series, How a course-rich world might impact higher education: I. Technology vs pedagogy, I looked at some of the characteristics of the readily-available new college level courses (NCLCs) that have created a course-rich world. In this post, I discuss using this new course-rich resource to create new institutions using higher education business models that are radically different from the faculty-centric model that is traditional in higher education.

In these new models few, if any, traditional, permanent faculty are needed to produce the educational product, which is provided primarily by the NCLCs. Social media increasingly is used to both improve learning and create peer relationships. Examples of such models can be found among the many organizations trying to provide essentially free degrees (e.g. University of the People),  parts of typical degrees such as the first two years (e.g. StraighterLine), and lower-cost degrees (e.g. WGU).

A step forward in California, an ambiguous step at HLC

California's Democratic State Senate President Pro Tem Darrell Steinberg has just introduced a very important bill called An online student access platform (with details in amendments):

Creates a faculty-led, quality-first framework allowing online course providers to have strategically selected courses approved and placed in a state-level clearinghouse through which students may access the courses and receive credit at the UC, CSU, and California Community Colleges

This bill seeks to remedy the very significant lack of capacity in California public higher education that is reflected in the enormous number of applicants unable ot gain entrance into the systems, large wait-lists for seats in important classes, and the delayed times-to-graduation.

Should professors be replaced by a computer screen?

Cathy Davidson,  the John Hope Franklin Humanities Institute Professor of Interdisciplinary Studies and Ruth F. Devarney Professor of English at Duke University, has just published a post on the HASTAC site that I recommend to all. Its conclusion is clearly conveyed in its attention-grabbing title: If We Profs Don't Reform Higher Ed, We'll Be Re-Formed (and we won't like it). Her message is further underlined by inclusion of the slide (above) which closes many of her presentations.

Davidson discusses four reasons why there is currently a great deal of discussion about replacing professors with computer screens:

(1) Too many students worldwide want to go to college to be able to accommodate them all.

(2)  College in the U.S. costs too much

(3) Online education promises to be lucrative to for-profits

(4)  Our current educational system (kindergarten through professional school) is outmoded. 

 Davidson makes excellent cases for each of these points in her post. She closes by briefly describing some of the efforts she has encountered in her travels that are beginning to address some of these issues. Rather than weakening her excellent arguments by attempting to summarize them, I will simply recommend that you read the original.

I would add another reason to this excellent list that is a slight modification of the 3rd point above:

(5) Online education promises to be lucrative to nonprofits

Just as Davidson says that (3) really bothers her, I will say that (5) really bothers me. Many of the traditional nonprofit universities and colleges are jumping into the online business because they see it as a new source of much needed revenue. As a former administrator, I understand the need for new revenues as much as anyone, so I am a fan of increasing revenues. My concern is that in most cases the online initiatives are not being done in a way that incorporates the online education into the educational mission of the institution - it is a financial, not educational advance. As a result, little emphasis is being placed on educational effectiveness in many of the new online programs. I have great fear that when the educational outcomes of many of these new programs are evaluated, they will be shown to be relatively ineffective. This result will lead many to conclude that online education is intrinsically inferior, when all it will really show is that inferior pedagogy leads to inferior learning. Nonetheless, such a negative, albeit flawed, analysis could be a big setback in the much needed expansion of effective online learning in higher education.   

 

edX: a step forward- or backward?

edX, the new distance learning collaboration recently announced by MIT and Harvard, has gotten a lot of attention, and rightly so:

Harvard University and the Massachusetts Institute of Technology (MIT) today announced edX, a transformational new partnership in online education. Through edX, the two institutions will collaborate to enhance campus-based teaching and learning and build a global community of online learners.

Coming on the heals of the appearance of Coursera, Udacity, and the edX precursor, MITx, this has led numerous commentators to suggest that we have entered a veritable age of aquarius for massively open online courses (MOOCs). All of these efforts involve, to one degree or another, universities of the very top rank and each will offer online versions of university level courses using the most advanced technologies. Further, all will be open to anyone who wants to sign up, and the courses will either be free or involve a very nominal cost for e.g. testing. Importantly, however, none of these efforts will lead to course credit, degree or certificate from the universities involved. Instead, successful students can hope for a signed letter of completion from their well-known instructor or a certificate from the organization

Preliminary results are very exciting, indeed. Sebastian Thrun, founder of Udacity, did an online course at Stanford that drew over 160,000 student, and Udacity has over 200,000 students signed up for its first six courses. MITx's first course enrolled about 120,000 students.

A valuable new offering at StraighterLine

A key issue for one of our potential disruptors, StraighterLine, has been creating credibility among four-year institutions so that its students can transfer their credits easily when they are ready to enter a bachelor's program.  Although their courses have been blessed by The American Council on Education's College Credit Recommendation Service, with current, input-focused approaches to accreditation, StraighterLine is unlikely to be able to achieve the stamp of approval of accreditation for its courses. Recently, in a very interesting move, StraighterLine has begun an effort to shift the focus away from input-focused accreditation towards student outcomes.

Multiple views of globalization of higher education and of place

I had the pleasure of attending the Laureate International Universities' annual Leadership Summit last June.  As readers of this blog know, Laureate is a for-profit corporation that runs a world wide network of higher education institutions, both brick-and-mortar and online. Laureate is one of my potential disruptors. Not surprisingly, while listening to some of the talks at the Summit, I found myself musing about some of the very different ways that various players in higher education are conceptualizing globalization, and how this was related to the place-based identity of most higher education institutions.

I have written about what I called the place-based identity of higher education institutions, and how it impacts globalization efforts. Most higher education institutions were created in response to local needs, typically with funding either from individuals of the area or local (or state) government.  They initially served primarily students from their surrounding regions. Thus, they responded to the special contexts of their regions - they were place-based both physically through their campus and also programmatically through their focus on response to local conditions and needs . As time went on, the contexts of regions changed and became more complicated, and successful institutions responded to those changes, keeping in step with those changing regional contexts. In addition, some institutions began to view themselves as national, not regional, institutions and so the context to which they were responding became much larger and national in scope. However, the simpler, geographic component - the campus- of place-based identity generally did not change in any significant way. Most institutions continued to maintain one main campus right where it started. If there were offshoots, they were generally small and designed to better serve their region. This maintaining of the original campus as the "main campus" further connects today's institutions to their origins even as they change to respond to new contexts.  

An educational system built for another time, another student demographic

Complete College America has just released a very interesting and important report entitled Time is the Enemy: the surprising truth about why today's college students aren't graduating- and what needs to change. The report moves beyond typical IPEDS information that focuses on full time students who enter as freshmen, thus ignoring part time and transfer students. Thirty three states provided information on their public systems that went into this report. A couple of caveats: The data do not track educational pathways of individual students (as is now available in a few instances), but rather use gross data such as entries, graduations, drop-outs, transfers from one part of a state's public system into another part of the same system. Thus, for example, transfers to private (either non- or for-profit) institutions and public systems in another states are not included. In addition, the labels "full" and "part-time" student are defined by the status of the student in the first term of enrollment, which may or may not be descriptive of the way many of today's students follow their education.These and other similar caveats aside, this report provides an excellent first look at a much larger and broader set of students than are described by IPEDS.

The report contains two striking demographic facts that underline problems in the way that we typically view higher education:

• 40% of public college students are able to attend only part time
• only 25% of college students are "traditional" in the sense that they are attending full time, attending a residential college, and have parents that are are paying most of their bills 

Brief update on StraighterLine, one of my potential disruptors

In a recent post, I described several organizations that seemed to me to be potential disruptors on the higher education space.  StraighterLine, which focuses on offering introductory college coursework on line, is one of these.

StraighterLine has now issued its first "report card", a survey of their students. The survey looked at such things as student satisfaction, convenience, perception of course rigor, and whether the student was able to obtain credit from a college of their choice for the StraighterLine course. In brief, the students seemed highly pleased with the courses on all parameters. Importantly, over 90% of those who sought college credit for the course were able to obtain it.  

The response rate to the survey was modest, and it would have been nice to see some validity discussion in the survey. Nevertheless, the report card indicates that StraighterLine is finding strong student approval of its method of offering an inexpensive way to get college introductory courses online, and that those courses are being recognized and accepted by traditional institutions.  Sounds like a good step along the path of disruption! 

Moody's looks at student-debt problems

Moody's Analytics has published a very nice analysis of the student loan situation by Cristian Deritis :

In this study, we examine the rapid growth of the student loan industry over the past few years, the weakening performance of loan portfolios, and what these trends suggest for future performance and lending volumes.

I will not go through the interesting analysis here, but simply show two very powerful graphs from the paper, and jump to the conclusions. The first of these graphs shows the rapidly growing student loans balances, which continue to grow although total loan balances have been shrinking:

The second graph, similar to many I have shown before, demonstrates a major driver behind this growth in loans - higher education tuition increases compared to increases in other sectors:

Always impressive how increases in higher ed costs outpace the rest of the pack!

Potential disruptors in the higher education space

As regular readers of this blog know, I have been using Clayton Christensen's concept of disruptive innovation to frame issues in higher education since 2006 (Disruptive technologies: when great universities fail?).  Christensen's work describes corporations (and industries) that are considered to be enormously well run and successful, but are essentially destroyed in a relatively short time by some new competitor that brings a new innovative approach to meeting the needs of the customers. The disruptor's new product is less expensive than the traditional product, and has some attributes that are quite different. Initially, the disruptor's product does not meet the customer's needs so well as the established product. Over time, however, the disruptor's product improves, and customers come to find its additional attributes to be very useful.  Christensen also differentiates between this disruptive innovation and a sustaining innovation. The latter is used to improve established products. Christensen shows that continual application of sustaining innovation often leads to an established product that is "better" than the customer needs -- or wants to pay for. Thus the very quality of the established product may well be one of its weaknesses. Eventually a tipping point arrives, and customers rapidly migrate to the new product that is both less expensive and has additional useful attributes.

Christensen describes characteristics of traditional companies that have fallen prey to a disruptive innovation. I always felt that higher education fits to a T his picture of an industry that has a high probability of suffering a major disruption.  Fortunately, you no longer have to view the issues through the lens of my interpretation of Christensen, because Christensen and co-workers have recently turned their attention higher education. A number of their works have now appeared or will soon appear. I previously did a post on his recent Disrupting College; Christensen and Eyering have a book appearing in August on the Innovative University:Changing the DNA of Higher Education from the Inside Out; and Michael B. Horn, a regular Christensen collaborator, has recently published an excellent paper Beyond Good and Evil:Understanding the Role of For-Profits in Education through the Theories of Disruptive Innovation.  All highly recommended.

With all of this, I thought it useful to introduce a blogroll on some companies, institutions, think tanks, etc. that seem to me to be doing interesting things that might well turn out to be disruptive for various aspects higher education, and/or sustaining for others. The blogroll will not seek to be all-inclusive. Rather, it will be indicative of areas in which I find that very interesting things are happening. I will  add more sites to the roll from time to time as I see things that attract my interest.

What does society have to pay for a student to get a bachelor's degree?

Jorge Klor de Alva and Mark Schneider have just published a paper -Who Wins? Who Pays?: The Economic Returns and Costs of a Bachelor's Degree- that will certainly cause considerable controversy and discussion. While there are many aspects of the specifics of the study that undoubtedly will be challenged and refined in the future, in a very real sense the great significance of the paper is that it introduces a perspective to the ongoing discussions of higher education that is new and critically important. 

National and state governments obviously are struggling  to come to grips with the new era of constrained budgets.  As they have tried to simply continue the old paradigms of higher education and its support into this era of constraint, results have generally been quite negative.  Resulting higher education cuts have led to significant decreases in the numbers of students who can be accepted and educated in most state systems. Often the cuts have been deepest at institutions that serve primarily lower income students.  On the private side, the recession has pummeled many endowments, and the sector depends on annual tuition increases that average inflation + 3.5%, a model that faces increasing resistance. Federal student aid support to all sectors is facing increasing scrutiny, with some of Obama's goals for increases being scrapped before the budget wars really start.

One of the major problems that all of the individuals, agencies and legislatures face as they seek to find new and sustainable directions for higher education that serves its various constituencies is simply lack of data, which then leads to a lack of understanding of the implications of aspects of current funding paradigms.  

Is online education disruptive or not?

Burck Smith, the founder of StraighterLine, has written a very nice piece about Clayton Christensen, et al.'s Disrupting College (see Christensen on disruptive innovation in higher education) for the John William Pope Center for Higher Education Policy. In this article, Smith argues that, in fact, online education is acting as a sustaining, rather than disruptive, innovation at this time:

Yet the effects of disruption—vastly lower prices for consumers, new course providers, struggling old providers, and disaggregation of products—are not evident in higher education. Prices continue to rise and, with the possible exception of for-profit colleges, nobody new has appeared on the education landscape to deliver college courses. In practice, it seems as though online learning is simply a “feature enhancement” (like adding rubber tires to wooden wheels) that allows colleges to make their offerings attractive to more people.

Christensen on disruptive innovation in higher education

Regular readers of this blog know how often I call upon Clayton Christensen's ideas regarding disruptive innovation as described in The Innovators Dilemma. Christensen has now turned his focus to higher education in a superb, must read white paper called Disrupting College:How Disruptive Innovation Can Deliver Qualityand Affordability to Postsecondary Education , published by the Center for American Progress and the Innosight Institute. The report is coauthored with Michael B. Horn, Louis Soares, and Louis Caldera. This white paper does a great job of succinctly describing the challenges and issues facing American higher education today, outlining the concepts of disruptive innovation, and then applying those concepts to higher education.  

But what about the students?

Community colleges cancel deal with online Kaplan University

This headline begins a recent article in the Los Angeles Times.  As described in the article:

The plan was intended in part to offer students at the state's 112 community colleges a way to take courses that might have been canceled or overcrowded because of state budget cuts.

It is not surprising that this plan gets scuttled in the current charged political debate over for-profit higher education.  Nevertheless, the cancellation brings up a few important issues that should be noted.

According to the article, one of the main reasons given for the cancellation is:

because the University of California and Cal State University systems had not agreed to accept Kaplan courses for transfer credits.  Without the transfer agreements, the plan could have harmed students and the community colleges, the officials said.

It would be interesting to know why the UC and Cal State systems would not agree to accept Kaplan courses for transfer credits.  It cannot be because they found that learning outcomes for Kaplan courses were worse than learning outcomes for the community college courses - there are no data available to make such comparisons.  Could it be that the Kaplan courses were excluded simply because Kaplan is a for-profit institution?

There were also concerns raised by some faculty leaders regarding the price of the Kaplan courses: $646 for a three-credit class, compared with $78 at a community college. According to the New York Times, the Kaplan price represents a 42% discount. This cost theme was reflected in a quote in the Chronicle of Higher Ed attributed to Deborah Frankle Cochrane, program director at the Institute for College Access and Success:

It certainly is odd that a system that is so proud of its affordability and low fees would encourage students to pay $216 a credit

It would, of course, be nice if Kaplan could have charged the same as a community college.  The reality is, of course, that the taxpayer is subsidizing the community college class enormously, but not the Kaplan class. And the reason that the agreement was drafted is that the California taxpayer cannot afford to continue to subsidize educational costs at previous levels.

So at the end of the day, UC and Cal State have stood firm for "academic quality", others are happy that this high-priced option has disappeared. But the question remains – what of the students who are being turned away from the community college system because of falling state budgets? This agreement may or may not have been the best, or even a good, solution to the problem.  But what is a better solution? What are the options for the students when the state cannot make additional investments in education? Protecting the status quo is not really a very positive response in these times, and the state budget  is not going to get better for a long, long time.

Has for-profit higher education missed its big opening into the mainstream?

The news has been filled recently with two “orthogonal” continuing stories about higher education.  The first story involves a seemingly never-ending list of egregious activities that touches almost all of the well known (and less well known) names of for-profit higher education, and the congressional indignation that has followed. It seems increasingly likely that the congress will enact laws that will restrict significantly the conditions under which the for-profit higher ed world can access government student financial aid.  Should this happen, it could greatly constrain the growth of the for-profit sector, and, in fact, put the survival of some of its players at risk. The second story involves the increasingly aggressive growth of on-line degree programs of traditional, bricks and mortar non-profit universities and colleges. This aggressive growth has been driven by an increasing understanding that current funding models of the non-profit sector are broken, and it is imperative to find new revenue streams. Perhaps the most visible, and potentially game changing, of these on-line efforts was recently announced by the University of California system.  One can imagine a situation in which the very highly respected UC system offers a broad spectrum of effective, high quality on-line degrees at prices competitive with those of the better for-profit institutions.  Brand sells, and UC has a much better brand than any of the for-profits are likely to have in the foreseeable future. Under these circumstances, what space would be left for the for-profits laboring under a host of congressionally mandated constraints?

The realization that US post-secondary education attainment is dropping below that of many of our global competitors, and the increasing constraints on capacity defined by shortfalls in the current funding models of higher ed have pointed to need for significantly increased post-secondary capacity (The coming shortfall in workers with postsecondary credentials).  A year ago, many would have suggested that only the for-profits could provide that needed capacity, providing a perfect opportunity for the for-profits to move into the mainstream of higher education. Have the for-profits missed this golden opportunity because of a perfect storm driven by greed of some members of their community on the one hand, and the changing economic conditions for nonprofit higher education on the other?

There obviously is not a clear answer to this question at this point. However, it is interesting to consider some important points regarding both the for-profit and non-profit sides of the question.

                                   ********************

The negatives of the for-profit side are on much display at present. There seems to have been a widespread lack of understanding in the sector that higher education plays a central role in the American dream that puts in on a different level from, say, auto repair or mortgage lending.  Because of this special role, unethical (not to mention illegal) behavior in the provision of higher education will likely be met with societal responses that are considerably harsher than would be stimulated by similar failures in other sectors.  Perhaps because of this lack of understanding, the sector did not sufficiently police itself against providers who focused on the quick buck, and many of the more responsible players did not set up sufficient internal controls to catch bad behavior on the part of employees.  Business models that focused almost exclusively on gaming the federal student aid budget through recruitment of large numbers of aid-eligible students with little or no potential to graduate put the sector in a very risky position, indeed.  Thus, we see recruiting scandals, loan repayment scandals,etc.  As a consequence, it would not be at all surprising to see a number of laws and rules coming out that greatly restrict conditions under which students in the for-profit sector have access to federal loans, and much tighter rules on student recruiting.

However, there also is much to be positive about on the for-profit side. Much of the real innovation in higher education over the past decade has come from this sector. Most have focused on matching educational opportunities to the realities of the life conditions of adult students, e.g. courses that start on an almost continuous basis rather than two or three times a year, learning centers located in high traffic areas for better access, broad on-line offerings, standardization of course content between campuses to enable continuity when students move, and an emphasis on career preparation. They are flexible, able to expand or contract following demand, and rapidly create new courses of study in response to local employment opportunities and in consultation with local business leaders. Some have evolved systems of advising and tracking of students that provide considerably more contact and support than has been traditional in higher education.

The sector has controlled costs while the rest of higher education has given at best lip service to the issue. Cost control has been at administrative, facilities, and instructional levels. In the last of these, new instructional approaches have been developed. Many of these institutions build new courses by involving subject matter specialists, learning specialists, and media experts in a real partnership of equals to create an approach that encourages learning – a costly approach compared to that followed in the non-profit world where the faculty member is expected to play all three roles while being trained only in the subject matter role. This approach, however, enables a variety of options in presentation that can greatly decrease overall costs. 

The for-profit-sector has not made the mistake of equating program quality either with the level of prior educational attainment of entering students, or the fraction of applicants who are rejected.  This, coupled with the innovations such as those mentioned above, has led to this increasingly becoming the sector of choice for working adults returning to education, and of underrepresented minorities.  Increases in both of these areas obviously fit perfectly with national priorities.

Even among the real and obvious negatives mentioned above, some balance is called for. In 2007, there was a major scandal in the non-profit sector relating to students being directed by their financial aid offices towards loan companies that had financial relationships with the directors of those offices.  Financial aid directors at a number of prestigious universities were dismissed as a consequence.  Thus, greed is not an attribute limited to the for-profit sector, but rather something that must be controlled everywhere. 

A very large fraction of students at the for-profits do have Pell grants – but this also indicates that the sector is providing opportunity to students who are less well off financially.  Many of the less well-known members of the non-profit sector also have high participation in the Pell program.  Both reflect the well known statistic that parental income correlates well with admission into higher ranked institutions.  Indeed, in the loan data that has been disclosed, one sees that a number of less prestigious non-profit institutions have repayment numbers similar to those of the for-profits, as well as similar graduation rates.(see, e.g. MagicDiligence’s analysis of two athletic conferences)  It has also been noted that the historically black colleges have a mean repayment rate that puts them well below the mean for for-profits; another set of institutions with repayment rates below that of the for-profits consists of medical schools such as Harvard, Tulane, and Chicago! 

If one looks at the loan data more globally, what one sees is a problem for all of higher education.  Debbie Frankle Cochrane, a program director at the Institute for College Access and Success calculated from this data that students from non-profit public institutions are repaying loans at 54%, non-profit privates at 56%, and for-profits at 36%.  Thus, in the best case, close to half of the graduates with loans are not paying them off according to the criteria used by the government! This raises real questions about the cost of higher education and the actual financial return on the education obtained-across all sectors, both for- and non-profit.  When and if the government moves forward with criteria regarding “gainful employment”, in all honesty, it is an issue for both for- and non-profit sectors.

                                ********************

Clayton Christensen’s classic management work The Innovators Dilemma describes what happens to industry leaders when an upstart brings a disruptive innovation into an industry. I have commented before that online learning may well  be a disruptive innovation, and the business model of the for-profit education companies  (especially when connected with online learning ) similarly may be a disruptive innovation.  Christensen’s work shows that it is almost impossible for industry leaders to successfully adopt a disruptive innovation. Primary reasons for this failure  include 1) a corporate mind set that refuses to acknowledge that the new approach brings a quality proposition that the customers will find more valuable than the traditional approach;  2) an infrastructure built to support the more expensive traditional approach prevents the new approach from being used in a cost- effective, competitive way; and 3) the new approach provides  direct competition to the old product, and thus poaches customers away from the old product.   The few companies that have been successful in incorporating a disruptive innovation have done so by setting up independent divisions far from corporate headquarters, carrying little of the traditional corporate overhead costs, and with carte blanche to destroy the viability of the traditional product line – Schumpeter’s Creative Destruction within the corporation itself.

The question of whether or not the traditional non-profit world of higher education ultimately can compete with the new world being defined by the for-profits is a serious one. All of the red flags raised by Christensen are present: 1)The faculty – who make up the academic management of traditional higher ed – are broadly and actively hostile to the for-profits and their approach.  They generally are convinced that the education being offered is second class and the approach is simply wrong. Crafting courses in response to input from businesses is often viewed a violation of academic freedom. As a consequence they resist attempts by their institutions to consider the innovations emerging from the for-profit sector.  2)Where such innovations as online learning are implemented, they are simply grafted onto existing structures and approaches.  This leads to the oft heard- and completely incorrect- statement that creating and teaching an online class is more expensive than a traditional classroom one.   It only seems more expensive because we accept as our baseline the very expensive infrastructure underlying the traditional classroom course, e.g. physical classrooms built at high cost to signal the serious academic standing of the institution; expensive facilities poorly utilized because of a rigid academic calendar; and costly research faculty who teach only a few courses per year to a relatively small number of students.  If we accept this baseline as necessary, then the marginal cost of producing another traditional course is certainly less than the marginal cost of producing an effective online class.  However, to bring the disruption into the university, we must recognize that none of these costs and restrictions need apply to the new product if we start with a fresh approach.  3)There is an oft-articulated fear that “online education will draw students away from our traditional courses”.  One response has been to price online courses higher than the traditional ones, which is hardly the way to create the market share necessary to compete with the innovators.

Another big issue for traditional higher education as it considers this new world will be “brand”, or perhaps “mission”. Mission originally involved teaching students from a certain geographic area.  The geographic region of draw has broadened greatly for most institutions, but mission still relates primarily to students willing to come to the central campus.  Numerically, the overwhelming focus of current mission in this sector is undergraduates, with most outside of the community college area focusing on “traditional” 18-24 year-old full-time undergraduates. Brand has been significantly based on exclusiveness, or the number of applicants that can be rejected as not being up to academic snuff.  Although professional training is now an accepted (by most, but not all faculty) part of college and university life, the major universities have a relatively limited list of professions that they consider worthy of serious study. The for-profits reject geographic mission boundaries, see little value in exclusiveness, focus on  non-traditional students of all ages, and consider job-related training at all levels to be meritorious.  Thus as traditional higher education institutions move into the for-profit space in search of increased revenues, they will have to seriously consider how they will change some of the traditional components of their brand and mission.  Such considerations are likely to be quite contentious (see Christensen’s first point above), and no major traditional institution has yet seriously undertaken this critical step.

                            ********************

There is little doubt that the regulation that likely will be forthcoming from congress and the executive branch will hit many in the for-profit world quite hard.  In the end, the survivors are likely to  become more formidable competitors because they will much more alert to the business necessity of more closely adhering to the ethical and social norms that society expects to see in higher education.  Phoenix, Walden, Kaplan, Capella and others are already developing offerings at both undergraduate and graduate levels that look very similar to what one might see in a major university.  Unnoticed by many in the non-profit sector, they  are all moving along the path of improving quality that is hallmark of destructive innovators.  Their growth prospects and brands will obviously be harmed by the current mess, but their intention clearly is to fill the space that UC and other traditional universities are thinking of moving into in order to stabilize their revenue models.  Many of the traditional universities clearly have much stronger brands at this point, but are they willing to make the changes necessary to achieve the kinds of market penetration necessary to balance their budgets? Only time will tell, but I would guess that most of the first tier non-profits will have a very difficult time in moving significantly into this space.  The exceptions are likely to be those, such as NYU, that already have highly robust continuing education degree programs and thus have already begun to cope with some of the issues described above. I would expect that several of the second tier non-profit colleges will be more successful in moving into this space – they have more to gain by change, and they have significant  positive brand recognition that will  help differentiate them from their for-profit competitors.

Interesting times!

The coming shortfall in workers with postsecondary credentials

The Georgetown University Center on Education and the workforce has just published a fascinating report entitled Help Wanted: Projections of Jobs and Education Requirements through 2018:

The Georgetown University Center on Education and the Workforce shows that by 2018, we will need 22 million new college degrees—but will fall short of that number by at least 3 million postsecondary degrees, Associate’s or better. In addition, we will need at least 4.7 million new workers with postsecondary certificates…..

The shortfall—which amounts to a deficit of 300,000 college graduates every year between 2008 and 2018—results from burgeoning demand by employers for workers with high levels of education and training. Our calculations show that America’s colleges and universities would need to increase the number of degrees they confer by 10 percent annually, a tall order.

Their analysis suggests that most workers with a high school diploma or less are working in 3 occupational clusters that either pay low wages or are in decline.  Job growth is to be found in those areas that require non-repetitive tasks, jobs that typically require some level of postsecondary education.

As noted above, the shortfall in postsecondary degree and certificate recipients will be very difficult to fill in. Given the constraints (both fiscal and mission) on the non-profit world of higher education, it is unlikely to be the major source of the needed additional graduates. 

For-profit higher education institutions, because of their flexibility, costs, and access to capital, are likely to move most aggressively to provide the needed educational opportunities.  Indeed, according to the Chronicle of Higher Education, a recent Eduventures report predicts that :

For-profit universities will have 42 percent of the adult-undergraduate market by 2019, nearly doubling their current share…

By that time, for-profits will lead both public and private universities in the number of adults enrolled. They will have approximately 60,000 more adult students than will publics, and 800,000 more than privates.

I have not seen the report, but these predictions certainly must be based on analyses such as can be found in the Georgetown report.   I made similar points with respect to the situation in California in an earlier post.

As the powers-that-be in Washington move to control some very real abuses by some members of the for-profit higher education world, let us hope that they note the critical role that that world will play in meeting the educational needs of the next decades.  New rules should certainly address egregious behavior, but without destroying the badly needed innovation and drive that the sector brings to higher education.

Wal-Mart brings higher ed to its employees

                                                        
 
Wal-Mart recently announced that it would be offering many of its employees an opportunity to work on a college degree through an agreement with American Public Education, Inc (APE).  APE offers online degree programs through the two components of its American Public University System (APUS), American Military University (AMU) and American Public University (APU).  APUS is accredited by the Higher Learning Commission of the North Central Association. AMU focuses on providing education for active military personnel; APU focuses on the non-military working adult. Eligible Wal-Mart employees will get a 15% discount on tuition at American Public University, and Wal-Mart is setting up a $50M tuition aid fund as well.  According to a June 3 article in the New York Times (NYT1), Wal-Mart executives said that the “point of the program was to help employees get more education and to build a better work force.”

Wal-Mart is known as provides an enormous range of competitive quality “everyday” products at very low prices.  The business model that enables it to sell its merchandise at such low prices is both much admired and much maligned, and need not be discussed in detail here.  However, one component of that model is to drive very hard bargains with its suppliers, requiring both low prices and appropriate, competitive quality.  Thus one would not imagine that Wal-Mart would pick an educational provider without due diligence and an understanding of what it wanted to buy. Indeed, according to a June 9 article in the New York Times (NYT2), before picking APU:

Wal-Mart surveyed 81 institutions, including for-profits, nonprofits, online universities, brick-and-mortar colleges, and “even some of the open-source, open-platform online offerings that are out there,” said Alicia Ledlie Brew, senior director of Wal-Mart’s lifelong learning program.

The criteria Wal-Mart used in making its decision paralleled those used in its usual relationships with suppliers, according to NYT2:

It had several criteria: a program with clear, low pricing (American Public charges $250 a credit hour, a price that has not changed in 10 years, Mr. Boston (President and CEO of APE) told the UBS audience); one that was accredited; a college that offered a variety of degrees and course subjects; and one that was used to dealing with adult students.

Because Wal-Mart is so large (1.4M employees in the US), and because it has transformed retailing in the US and many other parts of the world, it is important to consider about some of the implications of this arrangement.  

                                      *     *    *    *   *

Wal-Mart executives said it decided to work with an online university instead of a brick-and-mortar school after surveying more than 32,000 of its employees and learning that most of them wanted the scheduling flexibility afforded by online classes. (NYT1)

This result, of course, is not very surprising. Indeed, flexible scheduling is one of the main requirements most working adults have when they consider returning to higher education. It is also not surprising that Wal-Mart decided to go with a for-profit university since few non-profit universities both have extensive on-line degree programs comparable to those found in the for-profit sector, and are flexible in their dealings with large potential client corporations. 

In pitching their programs to Wal-Mart, APE’s President and CEO Dr Wallace Boston and his team:

stressed the organization’s history of offering classes to the nation’s more than one million military personnel. These students are often older than conventional undergraduates, hold jobs and work shifts at various times of day in different time zones. (NYT2)

One must assume, therefore, that the normally demanding executives of Wal-Mart looked at the programs and outcomes of AMU and found them to be of a standard they found appropriate.   In the process, they must have considered Daniel Golden’s article For-profit Colleges Target the Military with its many mentions of AMU, as well as the many negative articles that followed as Golden and others pummeled the for-profit world for what they viewed as its excesses and shortcomings.  The resulting contract seems to indicate that Wal-Mart must have concluded that Golden and his followers had not made their case, at least as it applied to AMU.

                                      *   *    *   *    *

The partnership with American Public University, a for-profit school with about 70,000 online students, will allow some Wal-Mart and Sam’s Club employees to earn credits in areas like retail management and logistics for performing their regular jobs…. For instance, a department-level manager, who receives training from Wal-Mart in areas like pricing, inventory management and ethics, would be eligible for 24 on-the-job credits, at no charge, toward a 61-credit associates’ degree. A cashier would be eligible for six credits toward a 61-credit associate’s degree or a 120-credit bachelor’s degree. (NYT1)

All studies of the adult education world clearly demonstrate the importance to prospective students of gaining a credential (degree), as opposed to simply taking a set of courses, no matter how pertinent they may be.  This agreement enables employees at Wal-Mart to get credit towards a degree for the training they already are receiving from their employer, thus facilitating their quest for the desired credential.   It might well increase the value of their Wal-Mart training in their minds at the same time. Thus this component of the arrangement was probably quite central for both Wal-Mart and its employees.

More than half of all higher education institutions give some kind of credit for learning outside the classroom, so this arrangement is not unusual per se. In addition, such credit for prior learning has recently been shown in a study funded by the Lumina foundation to correlate strongly with success in persistence to the degree: students receiving such credit had graduation rates more than 2 times higher than those of students who had not received such credit, and the difference held regardless of institutional size, level (2 or 4 year), and institutional control (for-profit, non-profit public or private).  

A key to the ultimate (rather than short term) success of this program is whether the prior credit given is based on a rigorous, credible process.  Many Wal-Mart employees will eventually seek to transfer some of the academic credit awarded by APU to other institutions, and if it is not accepted, the negative impact on employee moral could be significant.     

*   *   *   *   *

Wal-Mart clearly recognizes that size alone makes this a very visible corporate educational program, one which may ultimately be as influential in the adult education field as Wal-Mart itself has been in the retail field.  In a letter to Secretary of Education Arne Duncan, Wal-Mart showed that it has ambitions of playing a leadership role in pushing the adult education field to levels of increased effectiveness:

“While there is broad agreement about the need for more Americans to attain college degrees, we recognize that there is a healthy discussion under way about the best way to get there,” wrote Leslie Dach, Wal-Mart’s executive vice president for corporate affairs and government relations. “One of our aims with this program is to try some innovative approaches that seem promising, grounded in what is already known in the field.”

He added: “We hope in this way to expand the education and employer communities’ knowledge of what works most effectively, so that policy makers, other companies and other stakeholders can continuously improve such offerings.”(NYT1)

Dach also said in his letter that Wal-Mart “will work with third party experts to evaluate the impact and effectiveness of this program.”  One imagines that APU will welcome these evaluations, and use them to modify and improve their own approach as time goes on.   At present, APU is a relatively small player in the field of for-profit higher education.  However, if it effectively and rapidly transforms the results of these evaluations into improved educational approaches, the visibility this program could move it into a leadership role in adult education.

*  *  *  *   *

Some commentators have decried the fact the Wal-Mart chose to go with a for-profit university rather than a non-profit college or university.  They charge that the degrees obtained will have little or no validity in the rest of the world, and that the employees will, in effect, be cheated.  I think that charge deserves some additional consideration.

First, as I have pointed out in earlier posts, we actually have no data to demonstrate that the education that for-profits provide is less effective than that at non-profits.  For simplicity, I am willing to stipulate that the education provided at the top 200 of the approximately 4000 accredited non-profit colleges is superior to that provided at any of the non-profits, although there is no data to support that stipulation.  However, I believe that a large fraction of the for-profits provide an education that is equal or superior to that provided by a similarly large fraction of the remaining 3800 accredited non-profit colleges.  Many of the for-profits simply spend more developing courses, bringing in advanced pedagogy, and evaluating student outcomes than do most of the non-profits. So, there is no a priori reason to believe that the Wal-Mart students will be cheated in the quality of their instruction.   

Secondly, while there is no doubt that at this time degrees from most for-profit institutions generally are viewed less favorably than degrees from most non-profit institutions, there are reasons to believe that view may be changing.  In reality, many corporations are working with major for-profit higher education providers to offer advanced opportunities to their employees, including degree programs.  For example, both Kaplan University and the University of Phoenix have programs focusing on this market.   This has numerous consequences.  Perhaps most importantly, the sheer number of students in this group assures that graduates of for-profit universities increasingly will be moving into responsible managerial positions in corporations all across America.   As more of these graduates move into positions of responsibility, they will increase the respectability and brand value of the degrees.  As some of the successful graduates move to other companies, they will take a respect for the brand with them to the new company.  Equally significant, in companies that have such education programs, HR offices clearly will treat candidates with degrees from for-profit universities more positively.

 The Wal-Mart  program, because of its potentially very large number of students and the visibility of the employer, looks suspiciously like a significant step forward in the evolution of for-profit higher education as a disruptive innovation ( as described by Christensen.)

 

 

 

Big news on the Laureate front

Laureate International Universities just announced it has a new Honorary Chancellor – none other than William J Clinton, 42^nd President of the United States!  According to the press release:

 As Honorary Chancellor, President Clinton will advise this group of universities in areas such as social responsibility, youth leadership and increasing access to higher education.  He will also encourage civic engagement and youth leadership on important social issues during his appearances at university campuses and in print and online messages to the nearly 600,000 students in the Laureate network.

“Last year I had the opportunity to visit Laureate’s universities in Spain, Brazil and Peru to speak to students, faculty, and the communities that they serve,” said President Clinton. “These private universities exemplify the same principles of innovation and social responsibility in education that we worked to advance during my Presidency and now through my Foundation, and I am pleased to support their mission to expand access to higher education, particularly in the developing world.”

A little over a year ago, I wrote a post (Laureate keeps building a global brand) about Laureate’s building of a high-quality global brand.  In addition to focusing on ever-increasing educational quality in their system, they have long recognized the importance of working with groups such as the World Bank to increase access to education, and in participating at international higher education meetings.  The appointment of President Clinton as Honorary Chancellor will help greatly to increase their visibility and brand globally.

                                                            ***********

 On another front, Laureate announced last week another acquisition in the US – the WASC accredited National Hispanic University in San Jose, CA. According to the press release:

With its focus on educating the growing and underserved Hispanic population in the United States, NHU complements Laureate International Universities' mission of providing broad access to higher education.

According to the Mercury News:

A new, nonprofit foundation made up of the current trustees will own the property and continue to run the college's charter high school on campus. Laureate will operate the university and pay unspecified rent to the foundation. In addition, the foundation will have three seats on a new NHU board set up by Laureate.

The Mercury News also reports that Laureate hopes to add up to 8000 online students within 5 years, and possibly open other campuses of NHU around the country.  Again, according to the Mercury News, Paula Singer, the President and CEO of the Laureate Higher Education Group:

said NHU offered Laureate an opportunity to tap into a large pool of Hispanic youths who can't afford traditional, campus-based education or don't have time because they work.

It will be interesting to see how Laureate succeeds in expanding educational opportunities to this group without running into the high student debt problems that many other for-profit, online programs have encountered. 

Making a profit on the core educational function

 Following my posting the article Unexamined premises in reporting on the for-profit higher education front, I received an email from an old mentor of mine, John Lombardi.  Like any good mentor, he praised my efforts in that post before gently pointing out that I have missed a key nuance or two in the discussions of the for-profit vs the non-profit sector.  His insights were very interesting, and serve as a springboard for this discussion.  However, he bears no responsibility for distortions of his viewpoints that I might purposely or accidently set out below.

I have often commented that we in the non-profit world of higher education lose money on education.  John pointed out that that is not literally true.  We lose money on the bundled degree product that we sell, which includes education, socialization, athletics, housing, student services, support for professors to create and disseminate knowledge, student recruitment, etc. But if we do the bookkeeping in a different way, we see a different picture. 

Consider first an abstraction that I will call the core costs of instruction.  John argues that these core costs are very similar institution to institution, for-profit and non-profit. That is, the core of education is essentially a commodity. These core costs are always less than the revenue that comes in to pay for the educational product, creating a profit to the institutions. What varies, institution to institution and for-profit to non-profit, is how this profit is used.

Typically, in the non-profit sector, the instructional profit is used to subsidize the various components of the bundled degree.  Some of the subsidized components are themselves part of the instructional “center”. For example, some of the profit is likely to be used to broaden educational offerings beyond the core of profit making offerings, e.g. to support low enrollment majors, and increased breadth of electives.  However, much of the profit goes to non-instructional areas such as student services, student recruitment, athletics, buildings and support for professorial knowledge creation and dissemination by faculty.  Putting all of this together, we over-subsidize. That is, we spend more than the profit made on the core instruction, thus losing money on our now- bundled degree. This deficit must be made up from additional resources (e.g. philanthropy).

Dana College goes for-profit using a somewhat different approach

Last week, Dana College, a non-profit college of the Evangelical Lutheran Church in America, announced that it was being taken over by the for-profit Dana Education Corporation (DEC).  Dana College had experienced financial problems over the past few years, and had seen declining enrollments.

Most of the press (e.g. the AOL report) has treated this as just another in a series of stories of small non-profit institutions that found that the only road to fiscal salvation lay in purchase by a well financed for-profit.  According to this story, the for profit then uses the institution's accreditation to inflate enrollment, thus simultaneously cheating both taxpayers and students (see Unexamined premises in reporting on the for-profit education front).   However, based on the press release, this ownership transition does not seem to be well described by that generic story.

According to that release, DEC intends to maintain Dana College’s traditional mission, and will focus on liberal arts education in a bricks-and-mortar setting.  Dana College’s old Board of Trustees:

 will continue under the name Dana Education Foundation. The foundation will continue to preserve the heritage of Dana College through support of the Danish American Archives, campus ministry, Alumni Affairs & Alumni Council along with support for community events.

DEC is led by two veterans of the for-profit world:  Niraj Kaji, formerly Vice President of Walden, and C. Ronald Kimberling, formerly President of the Chicago campus of Argosy. Kimberling  also served earlier in senior positions in the Department of Education.   Kaji will become President of Dana College after the transition, and Kimberling will become Provost and Chief Academic Officer.   Other investors were not identified.  However, according to the press release, the new board of trustees will have an interesting composition:

 Upon the effective date of the new partnership, members of Dana’s board of trustees will include leaders from higher education, government, and the private sector including a former state governor, past president of a Lutheran university, administrators from Ivy League universities and local community leaders.

According to the press release, DEC currently has no plans to start an on- line extension, but rather initially will focus on rebuilding the on-campus student population to previous levels, and in building study abroad programs.  

In an interesting break with other similar transitions, faculty tenure will not be abolished. Inside Higher Education describes Kimberling’s views on the tenure issue thusly:

Kimberling said that the decision to keep tenure reflected his belief that "faculty are the lifeblood of institutions" and that to be effective in "blending cultures," a for-profit institution should show respect for "the values of traditional institutions." He said he viewed tenure as "a master's badge" and that there was "nothing incompatible" about tenure in a for-profit environment.

DEC’s decision to focus on rebuilding the campus programs is similar to the strategy typically followed by Laureate Education (parent company to Kaji’s old company, Walden) in its acquisitions.  The board of trustees looks like it will be similar in composition to the boards that Laureate has instituted for its U.S. acquisitions (see, e.g. the recent announcement from the College of Santa Fe).  

The interesting innovation in the Dana case seem to be the maintenance of tenure.  In some ways, it seems that DEC is betting that professional management will enable Dana College to thrive and grow without shedding core attributes such as mission and tenure.  It will be interesting to see how this works out, and how DEC's strategy clarifies and evolves over time. 

 

Unexamined premises in reporting on the for-profit higher education front

Your Taxes Support For-Profits as They Buy Colleges

So goes the headline of an article in BusinessWeek by Bloomberg columnist Daniel Golden.  I have seen a dozen articles recently with the same message in large and small publications (including seemingly unlikely places such as Going Concern: Accounting news for accountants and CFO’s). Many of these seem to be minor rewrites of the above article and a subsequent article by the same author. 

The issue that attracts so much interest and passion is pretty well encapsulated in a paragraph in Golden’s article:

The nation’s for-profit higher education companies have tripled enrollment to 1.4 million students and revenue to $26 billion in the past decade, in part through the recruitment of low-income students and active-duty military. Now they’re taking a new tack in their quest to expand. By exploiting loopholes in government regulation and an accreditation system that wasn’t designed to evaluate for-profit takeovers, they’re acquiring struggling nonprofit and religious colleges -- and their coveted accreditation. Typically, the goal is to transform the schools into online behemoths at taxpayer expense.

 Aha- many for-profits are “buying accreditation”, and that must be bad!...Or must it be bad?  What are the assumptions that  seem to underly the paragraph above?

****

First is an assumption that some of our laws and institutions are not up to dealing with the rapid changes taking place in this area.  It is quite possibly correct to have this view of our laws and institutions, but one could say that of many areas of modern life.  I assume “loopholes in government regulation” of this paragraph refers to the two-year rule that requires for-profit institution to be in existence for that period before being eligible to qualify for federal assistance.  The rule obviously did not envisage this situation in which the for-profit in not starting a new institution, but taking over the management of an existing one.   The Department of Education undoubtedly will consider whether it thinks a rule change is needed, given these new circumstances – whether a “loophole” exists.  Golden has made his opinion clear, but the pertinent government officials have not.  As for accreditation, it likely struggles with evaluating many of the activities of the for-profits.  However, as Kevin Carey recently has eloquently described, accreditation struggles with evaluating many of the activities of traditional non-profit institutions. It is not just the for-profits that are sometimes getting a “free pass”. In my mind, a more correct conclusion is that all of higher education is becoming so complex that the traditional approach to accreditation needs to be reexamined and reinvented.

****

The second assumption is that the for-profits will be getting student aid from the federal government is somehow a raid on taxpayers’ monies.  However, they are getting this aid by teaching students, which is the reason that Congress had in mind in setting up the programs.  It is the same reason that non-profits get the aid. Associated with this “raid” assumption is the fact that the for-profits seem to be able to grow the programs they take over rapidly. From another perspective, that growth can be taken to show that there are many prospective students whose educational needs are not being met by traditional educational institutions.  That would probably make Congress happy.   A complaint sometimes lodged against this growth is that it is a result of advertising power, and that the money being spent on advertising could better be spent on education.  True enough.  However, the for-profits have some leeway in their spending since they are run much more efficiently than most non-profits, and do not have so much per student sunk into very expensive “social” infrastructure such as residence halls, athletics, etc.  So the non-profits are also spending a lot of money per student on non-educational expenses – including, by the way, recruiting.

****

A third assumption is that “online” is somehow really lower quality.  In terms of learning, Department of Education studies (see Is online learning ready to become a disruptive technology, July 29, 2009) have shown that online is not inferior to classroom, and may be better.  Obviously, online does not bring the social learning benefits of the real campus experience.  However, for most of the students who are signing up for these programs, traditional four year residential programs may not be possible or even desired. Thus, these programs are not likely to be of lower quality as perceived by the students.

****

The really big underlying assumption in all of these articles, however, is the conviction that for-profit higher education is inherently inferior to non-profit higher education because the former is interested in profit, the latter in education.  This assumption might be correct, but the reality is there is little if any actual data to show that it is, at least in the core area of student learning.  We lack data on learning outcomes from different institutions, so it is not possible to say that Harvard University does a better job of education than the University of Phoenix.  It is obviously true that incoming Harvard students are generally much better academically prepared than incoming Phoenix students, but we don’t know which institution provides the greater growth in knowledge, critical thinking, etc.  As Derek Bok himself has pointed out, even our great non-profit institutions do not lead to nearly so much growth in these areas as we all imagine.  Some of the for-profits actually spend large sums of money creating new courses, using not only subject matter specialists, but also education and media specialists, in an effort to remedy some of the learning problems Bok identifies. Few non-profits do as much. And in any case, the real comparison of educational quality should not be between the 100 top non-profit colleges and universities and the for-profit world, but between the for-profit world and the roughly 4,800 accredited non-profit institutions that are not in the top 100.  That is where the prospective students are really making their choices. In making policy, we must not ignore the enormous range of quality that exists in those 4,800 non-profit institutions that have obtained accreditation, as well as in the for-profit sector itself.

On the other hand, it is true that  several of the for-profits have gotten into very visible difficulties over time by pushing the rules too far in the search for profits.  One of the major problems has been the linking of admissions salaries to students recruited and funded by government scholarships.  However, it is to be noted that in the most recent GAO report on this problem, there were roughly as many non-profits cited as for-profits. Everyone needs to make their enrollment targets, no matter what their profit status. For some of the less financially robust non-profits, making those targets is a matter of institutional life or death. Thus, this problem is more general than the profit status of institutions.  There are also concerns regarding whether some for-profits are admitting unprepared students in an effort to increase enrollments.  Very low graduation rates are one indicator of a problem in this area, and several of the for-profits do have lower graduation rates that might be desired.  This is a complex issue, however, and there are questions as to whether appropriate comparison groups of institutions have been assembled to evaluate whether the profit motive is influential in graduation rates. In any case, Carey’s article states that the Department of Education reports that over 250 accredited non-profit institutions in the “lower echelons of higher education” have graduation rates of less than 30%, putting them right into the midst of some of the for-profits that are cited as reason for concern.   Similar concern often is voiced in discussions of default rates, which are higher at many for-profits than at non-profits.  Again, Carey tells us that the Department of Education has identified over 200 non-profit, accredited institutions that have default rates similar to those of the worst for-profit offenders. It is logical to assume that the financial health of the non-profit may influence the preparation level of admitted students in a way similar to what may be occurring in some for-profits.

*****

One important thing  must be remembered when we think of traditional non-profit higher education – the top 100 institutions cannot be used as a surrogate for the whole.  Within the roughly 5000 regionally accredited non-profit institutions lies enormous variability in all dimensions: academic rigor, fiscal stability, mission, honesty, concern for students, etc. Many of those institutions bear only very faint resemblance to the top 100 institutions.  Within the for-profit sector there is also considerable variability within these same dimensions, but with very little overlap in most dimensions with the top 100 non-profits. There is, however, significant overlap with large portions of the remainder of the non-profits.  The for-profits obviously are the “new kids on the block”, and sometimes behave in ways that hurt their own long term interests and, in fact,the interests of all of higher education.  However, in general, that negative behavior is not so much different from that which can be found in the non-profit world as well.

 I think we make a mistake when we look at higher education through the lens of for-profit or non-profit.  What are important are not the drivers, but the outcomes.  The drivers, in any case, are quite complex for both sectors, and more overlapping than we often acknowledge.  The focus should be on producing desired learning outcomes, and assuring fair and honest treatment of students.  Casting a bright light on bad institutional behavior is appropriate, desirable, and necessary – but we should look at the entire field of education, not just one component.  There are enough problem cases in both sectors to go around, and new approaches to accreditation are likely to be necessary in order to improve the entire, rapidly changing,  field of higher education.

An update/correction on the College of Santa Fe

I have written several times about the transition of the College of Santa Fe, most recently in Joint Ventures at the for-profit/non-profit interface.  Doug Becker, Chairman and CEO of Laureate Education, Inc, kindly wrote me to clarify the exact situation regarding the relationship between the College, the city of Santa Fe, the state of New Mexico, and Laureate.  It seems that the city of Santa Fe, with financial support from the state of New Mexico, now owns the campus on which the College sits, and leases that land to Laureate. Laureate itself owns the College of Santa Fe. 

 Several readers had requested an update on the current situation of the College. Thanks to Doug, we now have clarity on the complex ownership situation.

Joint ventures at the for-profit/non-profit interface

In these troubled financial times, should a non-profit higher education institution consider teaming up with a for-profit partner to create new sources of revenue?  Inside Higher Education reported on an interesting presentation by Michael B Goldstein at the recent meeting of the National Association of Independent Colleges and Universities that suggested this might provide an important lifeline for institutions under financial pressure.

Goldstein noted that several smaller non-profit colleges with severe financial problems have had to sell themselves to for-profit entities.  Although the institutions survived, they did so by relinquishing control to others. Examples of such institutions are Grand Canyon University, originally a Southern Baptist college, which was sold to Significant Education LLC (also behind the similar purchase of  Chancellor University, new home of the Jack Welch Management Institute) to become the first for-profit Christian college; Post University, which was bought by Generation Partners; and Ashford University, originally sponsored by the Sisters of St. Francis, now owned by Bridgeport Education.  A somewhat related fate befell the College of Santa Fe, which is now owned by the city of Santa Fe, but leased by Laureate Education (Update on the College of Santa Fe- Laureate deal, July 30, 2009).  Indications are that the for-profit sector continues to be quite interested in acquiring fully accredited non-profit institutions, and, unfortunately, there are an increasing number of accredited  institutions whose financial situations make them prime targets for acquisition.  

Goldstein suggests that there is a “middle track” possible to exploit the higher education interests of investors: forming joint ventures with a for-profit venture.  Such a joint venture can enable the college to tap into the capital markets to build some new revenue producing academic programs without ceding control over the academic core of the programs.  He suggests that the appropriate model for such a venture is to create a new, independent entity such as an online program or new institution.  Within this entity, core academic functions would be handled by the college, while the new entity would handle non-academic services, such as student support, marketing and finance.  The new entity itself should be controlled through majority ownership by the college so as to assure that all aspects are handled in ways that are appropriate to the brand of the college.  An underlying goal of the approach, according to Goldstein is” This enables you to pick the best capabilities of the various partners, so you don’t have to build it or do it all yourself.”

Two models of this approach discussed were the recent (and much discussed) partnership between the National Labor College and the Princeton Review's Penn Foster Education Group, and the partnership between Tiffin University and Altius Education to form Ivy Bridge College. Ivy Bridge College enables students to earn associate’s degrees online.  It is accredited by commission of the North Central Association of Colleges and Schools, and has transfer agreements with almost two dozen four year colleges.

A slightly different approach, but ultimately in the spirit of Goldstein’s quote above, has been used by Laureate Education in some of its dealings with non-profit higher education institutions(Interesting activity at the for-profit/non-profit interface: Laureate, Jan 14, 2008). In 2006, Laureate and some Turkish partners agreed to take over technology, student and human resource services, and financial management for Istanbul Bilgi University.  The “win” from Bilgi’s perspective was that it joined Laureate’s global network of universities, thus opening up study abroad and exchange opportunities for its students.  In addition, resources came to Bilgi to allow it to expand in Turkey and possibly beyond.   Also in 2006, Laureate partnered with Liverpool University and Xi’an Jiatong Univesity to set up the Xi’an Jiatong-Liverpool University in Suzhou, China.  Academic programs are under the control of the two university partners, and finance and management is provided by Laureate.

Kaplan also has a number of arrangements with non-profit higher education institutions that are not dissimilar in goal and philosophy to the approach suggested by Goldstein (Interesting activity at the for- profit/non- profit interface: Kaplan, Jan 7, 2008). In particular, in Asia, Kaplan has partnered with a number of primarily English institutions to enable them to offer degrees in Asia without the expense of setting up stand-alone programs with all of the costs of student recruitment, management at a distance, etc.  Again, Kaplan is providing what it can do best (capital, management, infrastructure), while the universities provides what they can do best (academic content), and everyone is benefiting.

There is actually a fair amount of evidence that, under the right conditions, with the right partners, Goldstein’s advice is on target.  Getting partners who have strengths that compliment yours is the key component of a win-win situation. 

Another advance in learning outcomes - in the for-profit sector

 Well, it had to happen!  The Yahoo! Finance page from January 11 carried an article that begins:

The Council for Higher Education Accreditation, a national advocate and institutional voice for self-regulation of academic quality through accreditation, has awarded the 2010 CHEA Award for Outstanding Institutional Practice in Student Learning Outcomes to Capella University (MN), one of four institutions that will receive the award in 2010. Capella University is the first online university to receive the award….

“Capella University is a leader in accountability in higher education. Their work in student learning outcomes exemplifies the progress that institutions are making through the implementation of comprehensive, relevant and effective initiatives,” said CHEA President Judith Eaton. “We are pleased to recognize this institution with the CHEA Award.”

Capella University is not only the first online university to receive the award, it is, I believe, the first for-profit.  Capella University is owned by the publicly traded Capella Education Company.  The Capella Learning and Careers website, which describes their learning outcomes, is quite impressive and well worth a look. Capella is regionally accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools.

I have noted before the emphasis many for-profit higher ed providers are placing on developing learning outcomes. It is a natural, credibility-building stage in their trajectory as disruptive innovators in higher education (see, e.g post of Aug.5, 2008). CHEA is the accreditor of the accrediting groups, and thus a major force in maintaining quality in American higher education.  Recognition by CHEA as a leader in accountability is therefore a significant step in this process.  It is worth noting that Capella University is both for-profit, and on-line, thus representing two main forces of disruptive innovation in higher education. 

By the way, Dr Michael Offerman, vice chairman of external university initiatives at Capella, has a very nice blog that presents an often different and useful perspective on issues in higher education. 

 

For-profit higher education moves to fill gaps left by state budget shortfalls

 
 UB Daily for December 23, 2009 pointed me in the direction of a very interesting article in the Times-Herald, which covers the Sonoma and Napa regions in northern California. The article is entitled “Private Universities Covering the Gaps in Higher Education.” The gaps of the title are those resulting from the crippling state budgetary cuts to public higher education in California, and the “private universities” that are rushing in to alleviate the problems are all in the for-profit sector. Although several for-profits are mentioned, The University of Phoenix is the focus of this article. 

According to the Times-Herald, a northern California official of The University of Phoenix reports that they are seeing increased enrollments due to two cut-related effects: inability of students to get needed courses in community colleges, and inability of students to transfer between different state institutions. The Times-Herald reports that In order to meet these needs:

University of Phoenix officials are working on a strategic plan with nearby Solano Community College to assure its students have good access to the school, said Jo Hoffmeier, University of Phoenix vice president of community relations and product safety....The local University of Phoenix campus is also working to improve its alliances with California State University campuses nand University of California at Berkeley to assure access to as many students as possible, Hoffmeier said.

Thus, the University of Phoenix is working proactively with the public sector to maximize opportunities for students under changing conditions in higher education.   I believe that this type of public-private cooperation is going to be increasingly important in meeting the learning needs of future students. Strong support for this belief can be found in a recent USC doctoral dissertation by Lauren Cooper.   

Cooper’s  USC dissertation is entitled Market-state-based planning for nation-state style prosperity: Reinventing the higher education “promise” to create a “win/win/win” for California.  In it, she argues that higher education capacity discussions need to shift from a demand-driven model to a workforce-driven model.   Using primarily projections made by the Public Policy Institute of California for the number of college degree-holding workers required to satisfy industry needs in California in 2025, Cooper shows that there is likely to be a massive shortfall of such workers by 2025 if long-standing growth rates in the UC and CSU systems are maintained.  (In fact, the current budgetary mess in the state has led to shrinkage of both systems, so Cooper’s analyses can be considered “best case”.) Cooper’s projections show that to fill in the CSU portion of the 2025 shortfall, the system will need to open 12 new campuses prior to 2025 - an unimaginable outcome given the finances and political situation in the state.   Cooper concludes, therefore, that the public sector alone cannot meet future workforce needs:

As components of the higher education system, the UC, the CSU, community colleges, and private and for-profit universities will each need to play a significant role in the future success of the state....Reorienting the state’s current trajectory will require nontraditional thinking and innovative solutions to change the current course.

As Cooper notes, in much of the world, for-profit higher education is stepping in to meet capacity problems that cannot be met within government's budgets.   It is neither surprising - nor unreasonable - that we increasingly see a similar movement in the United States as the state is progressively less able to meet educational needs.  

In the situation described by the Times-Herald, it seems that the negative effects of state budget cuts have lead to the positive result that the for-profit University of Phoenix is working collaboratively with various components of the California public higher education system to help meet student needs.  The differing viewpoints held by the partners in these collaborations suggest that the interactions have the potential to be positive for all sides, especially if they lead to discussions of some of the critical questions for higher education.  Among these questions might be: what should be the goals of higher education in this changing world?; how can the cost of providing higher education be contained?; and, what are the most effective approaches to student learning?  

However, in order for these various players to produce a real “system” of higher education that meets the needs of the students and the workforce needs of the state, as suggested by Cooper, a number of things must happen.   Most important, and perhaps most difficult: transferability of course credits must be assured amongst the various institutions.  This is not unlike the problem being faced in Europe with the Bologna process.  Successful broad transferability requires a focus on learning outcome measures, rather than on inputs or student hours in the classroom.  As Europe is showing, it is possible for a very diverse set of institutions to agree on desired learning outcomes for various educational steps.  The focus now is on the difficult task of creating outcomes measures that are recognized by all parties.   The Bologna process, although primarily involving public institutions, does include a number of for-profit institutions.  Thus,  there is no reason that a similar process involving Cooper’s players could not succeed here in California (or other states).  This would enable the coupling the strengths and resources of the different sectors in order to meet the challenges of providing high quality education in times of constrained resources.  

Update on the College of Santa Fe -Laureate deal

I recently described some of the financial difficulties of the College of Santa Fe, and attempts by the city and the state of New Mexico to save the College (New on the for-profit higher education front, May 14, 2009).  I reported that Laureate Education was part of the efforts, and that the College of Santa Fe was likely to soon join the Laureate family of institutions of higher education. 

The Santa Fe New Mexican reported today that the pieces have fallen into place.  Laureate will lease the institution, with a purchase option. Laureate has agreed to commit $20M to offset losses, and to offer discounts to local and in-state students. Governor Bill Richardson has committed $11M of state money to help make the deal possible. The College of Santa Fe name will be kept, "while also giving Laureate the flexibility to add other words." The global Laureate University Network continues to grow!