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Kaplan CEO's book takes on higher ed's incentive system

Ready for Change.edu?
January 11, 2012

Andrew S. Rosen takes the long view when talking about higher education. As CEO of Kaplan, Inc., he often defends the role of for-profit colleges in an evolving marketplace, peppering versions of his stump speech with tales about the creation of public universities and community colleges. His point is that some skepticism about for-profits is similar to the snobbery those older sectors faced from elite private higher education.

Rosen goes further in his debut book, Change.edu: Rebooting for the New Talent Economy, which attempts to paint a picture of higher education's future as well as its history. He also takes a turn as a journalist of sorts – an interesting twist for the former staff attorney for The Washington Post – writing about his campus visits to other institutions, a couple of which are Kaplan competitors.

The book is ambitious in its scope, particularly for an author with obvious vested interests. But most reviewers have given Rosen high marks. Kirkus Reviews writes: "Incredibly, his argument never comes off as self-serving; the author’s thorough exploration of 'Harvard Envy' and the rise of 'resort' campuses is both fascinating and enlightening."

Rosen recently answered questions over e-mail about his book, which was released by Kaplan Publishing.

Q: The book arrives amid a series of challenges for your industry. What did you hope to accomplish by writing it?

A: I’ve spent most of my life studying or working in education, with students of all ages and preparation levels: top students from America’s most elite institutions and working adults and low-income students who have few quality choices to change their lives. I’ve come to see how the American higher education system (as with K-12) is profoundly tilted in favor of those who already have advantages. Our society keeps investing more and more in the relatively small and unchanging number of students who have the privilege of attending our top universities, while poorer students and working adults can’t find a seat in their local community colleges for lack of funding. In my view, the well-intentioned, talented, committed people who work in our higher education system are presiding over a significant misallocation of resources that harms many students and ultimately our national economy.

I wrote "Change.edu" to try to explain the incentives that drive actors in each of the major sectors of our higher education system – four-year traditional universities, community colleges, and “private-sector” (for-profit) colleges. In each case, I believe those incentives are misaligned with our broad national educational goals, and that the misalignment has significant costs to our society and economy. It’s sapping the strength of higher education as an engine for the American economy, and it’s diminishing public support for the billions of dollars in taxpayer funds that flow to higher education each year. In the book, I propose changes that will realign incentives with what ought to be the goals of American higher education, and explain why the next 25 years can be the start of a new golden era for American higher education – if we’re willing to make real changes.

Q: Did you consider having it produced by an outside publisher?

A: I knew from the start that this book would have to stand on the power of its arguments. It’s not surprising that some might start off skeptical of the for-profit guy writing about the history and incentives of higher education. I’ve been glad to see that almost uniformly, reviews of the book have called it even-handed, honest and surprising – and have noted that I don’t give private-sector higher education a free pass.

Q: You were granted what appears to be a great deal of access at High Point University, Miami Dade College and Strayer University. For-profits in particular can be protective of trade secrets – how did you get Strayer and other institutions to open their doors to Kaplan’s CEO?

A: While obviously my position at Kaplan was clear, I approached and researched these institutions as an author. I selected these schools – among others – because each has a charismatic leader and an interesting and innovative approach to how it has navigated the incentive system that I argue characterizes its educational sector. That said, the contortions caused by those incentive systems can be seen in how each of these effective institutions defines success. High Point, for example, has seen a huge spike in its rankings over the last six years, in good measure by turning its campus into a resort for 18-24 year-olds through a major building campaign that has added fancier dorms, chic restaurants and elegant fountains. That’s led to a tripling in the size of the school’s freshman class, and an average freshman SAT score increase of 100 points – and serves as an example of how the prestige that university constituencies crave can be achieved through a focus on matters that have very little to do with education.

No institution turned me down when I asked to talk with them; those that are proud of what they are doing are eager to tell their story. Based on the reactions I’ve received to the book, readers admire the stories of these particular institutions – but tend to be outraged by how the system pushes the schools to do things that are clearly not consistent with a rational view of what the goals of our higher education system ought to be.

Q: On a related note, have for-profits contributed to negative news media coverage by sometimes not being open about what they do?

A: I do think the for-profits need to do a better job of educating the public about what they do, create a deeper understanding of the real challenges they face and be candid when they fall short. (I have a chapter that goes into detail on “the case against for-profit higher education.”)  But in all the debate, it shouldn’t be overlooked that for-profits are relatively new on the higher education scene, and are far from finished products. They are classic examples of what Clay Christensen calls “disruptive innovators.” Disruptors are never viewed kindly by incumbents and their allies – and that’s especially true in education, as I detail in the book. The land-grant universities were scorned when they were new in the post-Civil War era, as were community colleges when they were the latest players on the scene after World War II. Yet much of the innovation in higher education today – online learning, adaptive technologies, the “flipped classroom,” geographic and scheduling convenience, common curriculum, measurement of outcomes, use of data to drive course revision and plenty more – is being led by for-profits. Treating this sector as a static one is a fundamental mistake; it will look far different 10 years from now than it does today.

We’re already seeing increasing transparency among private-sector institutions. A number of for-profits have published detailed “academic annual report cards” that are emerging models for public disclosure – based on data, not the anecdotal stories that have frequently dominated the conversation about for-profits. I think that’s a trend that will grow, as all institutions respond to valid demands that they justify any use of taxpayer dollars. Particularly as the environment shifts to a more even-handed, less political and less anecdotal assessment of the relative performance of institutions, the many private-sector institutions that have good stories to tell will be eager to share them widely.  

Q: The chapter on community colleges is largely positive, although it describes the sector's relatively low graduation rates and substantial taxpayer subsidies. Some for-profit advocates, however, have been harshly critical of community colleges. Is that combative approach a mistake?

A: I strongly believe community colleges and for-profit institutions are natural allies, not adversaries. Both are trying to serve a nontraditional population that often struggles to succeed in school. I think it’s ironic that our society consistently celebrates the well-funded universities that have the most resources and teach the best-prepared students, yet often condescends to more practical, less-funded institutions that educate higher-risk students. Our society needs great community colleges like Miami Dade and strong, practical, private-sector institutions. In the debate over how to deliver excellence and choice to higher-risk students, these institutions are sometimes pitted against one another. The truth is their missions are complementary, not adversarial. They should be working together. Given how important it is to increase college attainment in this country, we’re going to need both sectors to thrive.

Q: You write that community colleges “offer an extremely wide (some might say absurdly wide) gamut of training and services,” which has led to sometimes substandard performance. But aren’t broad offerings their responsibility? To use your example, if a community college doesn’t offer both low-tuition courses in Thai cooking and auto mechanics, who else will?

A: With all due respect, this kind of question just illustrates the problem. As an example: the federal government provides air-traffic control, national park maintenance and regulation of medical devices, but we understand it would make no sense for one agency to do all three. Yet whenever we come up with a postsecondary priority that our four-year university system isn’t handling, we just toss it into the community colleges without regard to how it might muddle their mission and distract from their focus.

We expect community colleges to train workers for the local plant, offer associate’s degrees to students who want to transfer to four-year schools, provide lifelong education courses to retirees, and more. Then, when we try to measure their performance, we throw up our hands and say it’s too complicated. The lack of clear standards, meantime, makes it hard even for those in the community college community to know which schools are excelling and which need to up their game – and why. Our community colleges and their students deserve better. (I should note that I’m excited about the new Aspen Prize for community colleges, building on some of the Gates, Lumina, Achieving the Dream and other work within the community college sector. I think there’s a chance these efforts will help catalyze more of a consensus on what constitutes excellence for this sector.)

Many countries set up separate funding structures – and separate kinds of institutions – to handle the diverse, independent and sometimes conflicting missions we expect of our community colleges. Rather than making community colleges the catch-all, we should slim down their missions. There should be smaller, focused schools for students who want job-related skills development and separate institutions for those who seek an inexpensive associate’s degree before transferring to a four-year college. If a community thinks it’s important to fund continuing education courses, they can create institutions that do that as well. But let’s not put the burden of meeting all these goals in one institutional mélange and expect it to excel on all fronts.

And yes, I also think there is a role for private-sector (for-profit) institutions in some of these areas, as partners in the process of ensuring that students have excellence and choice.

Andy Rosen's Predictions

In his book, Rosen offers seven predictions about how higher education will be different 25 years from now. The following selected sections are taken from the book:

1. It will be more mobile. It’s a virtual certainty that many students -- even 18- to 24-year olds -- will be purchasing education separately from the socialization experience of today’s college.

2. It will be more disaggregated. Just as students will be able to acquire education without having to “buy” the campus experience, they will no longer be expected to acquire all of their education from the same provider.

3. It will be more personalized. Particularly as students access more and more of their educa­tion through mobile devices and other technology, it will become much easier to standardize the basic download of information, using the most compelling instructors in highly produced seg­ments with simulations, maps, illustrations, video, and avatars.

4. It will focus more on learning outcomes. Increasingly, institutions and courses will be evaluated not on reputation, tradition, or assumption, but on how effectively they help students achieve learning outcomes. Those that try to rely on the assumption that students are learning will steadily lose ground to those that can prove it.

5. It will be more accessible. The good news is that the changes in store over the next twenty-five years bode well for continued expansion of access. With the arrival of mobility and the forces enabling much less expensive delivery of quality education, such expanded access will be much easier to deliver.

6. It will be more global. With the rise of mobility, place will not matter nearly as much in the future. A student from Kuala Lumpur can take a mobile class as easily as a student from Kansas City, and at prices that will be affordable for many more students worldwide.

7. It will be cooler. We will be able to deliver education to students where they are; based on their specific needs, desires, and backgrounds; focused on delivering outcomes that are matched to student and employer goals; to a much broader audience of students, and at lower cost, than ever before; and integrating a global population of potential students.

Q: You acknowledge that for-profits can have an incentive to maximize short-term profits, and that can lead to bad behavior. If smart government regulation is part of the solution, as you argue, which policies in particular would you cite as effective and fair?

A: Companies, like universities, are designed to last forever. Accordingly, well-run for-profits are focused on the long-term performance of their institutions, and that means consistently investing in strong student outcomes.That’s what will keep students wanting to enroll over time, and that’s what makes investors happy. It’s also why many observers are looking to private-sector institutions as the best sources of innovation in technology, pedagogy, measurement and student service. It’s very much in the interest of these institutions to differentiate their schools through new approaches leading to better student results. And it’s in their interests to support policies that promote greater transparency and disclosure of academic outcomes, sorted by student demographics, across all types of institutions.

Having said that, the impact of an education takes place over years, even decades, while the delivery of (and payment for) the education occurs in a relatively short period. If the owners of an institution have a short-term horizon – that is, they don’t intend to be in the business for the long run – it is possible for them to under invest in quality, reap a short-term benefit and exit before the student outcomes play themselves out. In the book, I propose some solutions that could address this time-horizon problem, including keeping sellers of a higher education institution on the hook for student outcomes for years after their exit.

More broadly, though, I argue that the entire regulatory structure of American higher education is misaligned with what the goals of our system ought to be. Our current funding systems generally don’t distinguish between mediocrity and excellence, for instance. Institutions are as free to invest in climbing walls as they are in classrooms. We should rework that funding system to reward institutions that excel on four key values: learning outcomes, access, affordability and accountability. In many respects our current funding system, at both the federal and state levels, pushes institutions away from all four. If we were inventing a new system for investing in higher education, we’d never pick the patchwork approach we have today. We’d set a clear set of goals – based on outputs, not inputs – and fund accordingly. It’s time to move in that direction.

Q: The book argues that traditional colleges' broad and varied revenue streams – private fundraising, state appropriations, research, athletics, etc. – can dilute their focus on students, because college leaders serve too many masters. But don’t for-profits face a similarly diverted focus in seeking to increase earnings to benefit shareholders and company executives?

A: The issues are actually quite different. As I said earlier, investors should not divert focus in a well-run for-profit; everyone’s interests are served by student success, as long as the time-horizon issue is addressed. At many traditional universities, by contrast, there can be real conflict between the various constituencies, and students can get lost in the struggle. Such a small percentage of the revenue is actually coming from students at some universities that it’s easy for administrators to forget who they’re serving. There’s always another donor, legislator or grant-maker whose needs have to be addressed. Sometimes those needs align with those of students, and sometimes they don’t (as when the donor wants to fund, say, a new swimming pool or Center for the Study of Pastry when what students need is more math tutoring labs). It is part of why it’s hard to say that student learning is truly at the center of many institutions.

Q: What sort of responses have you heard about the book?

A: The response has been extremely positive, from academics, policymakers, think-tank leaders, economists, those who just care about educational issues and (I’m glad to say) reviewers. It was nice to see Change.edu listed on Bill Gates’s reading list and to get good feedback from people like Joel Klein and various national political figures. Certainly, I appreciate those on each side of various educational debates who said the book is essential reading for those who care about the future strength of American society. Everyone doesn’t agree with all of my assessments and prescriptions, of course, but most people seem to believe the book made them think. Interestingly, liberals tend to appreciate the core argument that our system is overspending on the “haves” while under investing in those with fewer advantages, while conservatives appreciate its advocacy of student choice and market-based solutions. It almost makes me think there could be bipartisan solutions on education issues.

Of course, in the world we live in, some people are likely to criticize Change.edu because it’s written by the CEO of a for-profit education company.  (I’m sure some of the comments posted to this interview will do the same!) I hope these people will do what universities encourage: take the time to read the book and assess its arguments, rather than just assuming they know what it must say. I’m particularly grateful when people tell me that the book not only differs from their expectations, but made them think about the issues differently as well.

 

 

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