Business issues

'Design Thinking' and Higher Education

As an advocate for the position that higher education benefits from studying the lessons of business and selectively implementing those ideas that help corporate and non-profit entities to prosper, I was pleased to come across Inside Higher Ed’s report on the publication of the multi-part work The Business of Higher Education (Praeger), edited by John C. Knapp and David J. Siegel. The author observed, correctly, that “many college and faculty leaders bristle at the suggestion that the institutions -- and their students -- would be better off if only institutions operated more like their counterparts in the private sector.”

That’s why I propose a model that may meet with the approval of those who think higher education is just fine ignoring business models: design thinking. For starters, it’s an idea with origins as remote from business as design itself. While their work is hardly nonprofit, designers are rarely found destroying the competition, maximizing profit margins and exploiting their employees. Few of the designers I know personally would fit the negative perception of corporate America held by many academicians. Design thinking is about helping people and organizations to solve their problems for long-term satisfaction, not achieving efficiency for short-run gains.

While it is true that more businesses are adopting design thinking as a model for achieving better results, enhanced innovation and improved service to customers, as evidenced by several new books about innovation design and design thinking targeted for the business market, the ideas behind design thinking emerged from the methods that are common to nearly all design fields, be it industrial, graphic, instructional or any other design profession. These basic operating principles constitute a process that might be expressed most simply as the way that designers approach problems and achieve solutions. Designers think of themselves as problem finders more so than problem solvers because their solutions start with a deep understanding of the problem requiring a solution.

What can design thinking offer to higher education? In a word, change. Not just change for the sake of creating change or trying the latest fad, but thoughtful change for the higher education institution that wants to position itself to better withstand the challenges presented by both old and new competitors. Change not just for technology’s sake, but change based on better understanding students and putting into a place a mechanism for institution-wide innovation. (I’ll provide some examples later.)

The seminal work on design thinking, The Art of Innovation (Currency/Doubleday, 2001) came from a business outsider, Tom Kelley, then general manager of IDEO, one of the world’s leading design firms. Those interested in learning more about design thinking are well advised to start with Kelley’s book, as it introduces the “IDEO Method,” a five-step approach to understanding how designers think. In a nutshell, the process requires its practitioners to internalize the following:

  • Understand: be an empathic thinker and put yourself in the shoes of your student or whomever it is that you provide a service to.
  • Observe: watch people in real-life situations to better understand how they really use a service or product and those things that both please and frustrate them.
  • Visualize: brainstorm with colleagues to identify new ideas and concepts that will give those you serve or teach a better (learning) experience.
  • Prototype: take time to explore multiple iterations of an idea before exposing those you serve or teach to a potential solution or enhancement.
  • Implementation and Evaluation: be thoughtful about when and how to implement a new idea and invest time to evaluate its impact, and then re-design as needed

For those who need a faster introduction to design thinking, take 22 minutes to watch "The Deep Dive," an episode of “Nightline” that profiled how the staff at IDEO tackle a new problem and develop a solution. As one learns from this video, the designers at IDEO are experts in using the design thinking process to identify and approach problems and then develop elegant solutions to them. That’s how IDEO has designed everything from the mouse you use nearly every day to NASA equipment to toothpaste dispensers and microwave ovens.

As the design thinking method gained popularity, IDEO added organizational consulting to its product design business, and now works with health care and K-12 education systems on restructuring and re-engineering workflows to eliminate dysfunctional practices and improve user experiences. One recent book about design thinking, Change by Design, by Tim Brown, CEO of IDEO, reads more like Zen philosophy than it does a how-to for businesspeople out to rule the world.

But even those who count themselves among higher education’s anti-business faction may benefit from another new book on design thinking authored by -- shudder -- a business school dean. The Design of Business, by Roger Martin, dean of the Rotman Business School at the University of Toronto, is a good example of a business book that even the most business-phobic humanist could enjoy reading. To be certain, there are a number of case studies profiling businesses that achieved success with design thinking, but there is still much food for thought for those who think their school or department could do better.

For example, Martin elegantly explains how businesses emerge and evolve, through a multi-stage process he describes as the “knowledge funnel.” It begins with a mystery in which the fledgling innovator seeks to build a better mousetrap, such as how to organize all the world’s information. The business creates a heuristic or an intuitive sense of how to solve the mystery that allows it to offer an initial product or service. As it moves out of the exploration stage, it develops an algorithm to operate the business so that the core solutions are efficiently exploited.

To illustrate this end stage of the knowledge funnel he points to companies like McDonald’s. What started as mostly a guess that Americans would eat fast food became a highly mechanized process that is easily replicated with great efficiency. McDonald’s has no interest in stimulating employee creativity or innovation; just keep the burgers and fries coming. But blindly adhering to algorithms can cost dearly when a competitor, like Subway, brings new thinking and imagination to the same mystery.

The problem, according to Martin, is that some organizations are operated primarily by intuition while others are rigidly controlled by algorithms. His core message is that organizations guided by design thinking achieve a balance between the two so that both intuition and algorithms merge to keep the organization searching for and solving new mysteries while avoiding the extreme exploitation that leads to obsolescence. When they “satisfice” for exploiting old ideas, businesses are ultimately confronted by upstart competitors exploring new mysteries. Thus emerge disruptive innovations offering products or services that better meet people’s needs.

It’s a cycle that endlessly repeats itself, and higher education is equally susceptible. Consider higher education’s long reign using the same delivery and organizational structures after hundreds of years. It now is pressured by new competitors, many of them for-profit businesses offering low-cost, convenient options that leverage advanced educational technologies. The new mystery is how to deliver higher education in ways that are both affordable and sustainable, and that meet the needs of a new generation of both traditional and nontraditional learners.

Are there ways in which design thinking could help America retain its place as the crown jewel of the world’s higher education system? Admittedly, higher education is a unique industry owing to the vast independence of its primary employees, the faculty. Each faculty member is in his or her own way an independent agent trusted with the responsibility to deliver learning to the students and pursue a highly individualized research agenda. Learning is not a McDonald’s hamburger that can be manufactured on demand guided by a scientific algorithm designed to assure a predetermined outcome. What faculty do in classrooms is largely guided by intuition; there is no algorithm for great teaching.

Despite the differences that distinguish colleges and universities from the corporations that Martin profiles in his book, design thinking is a potential solution by which higher education institutions could create the balance between intuitive and algorithmic methods. But to make that happen both faculty and administrators need to take a closer look at what design thinking can do for organizations.

Martin’s book offers a case study that provides a good example: the turnaround at Procter & Gamble. In 2000, when A.G. Lafley was appointed CEO, P&G had lost market leadership to newer competitors across a wide range of its consumer products. Like higher education in 2010, P&G’s expenses were soaring while Walmart and others introduced cheaper, lower quality private-label products that attracted consumers away from P&G’s more expensive branded goods. Lafley needed to boost innovation at P&G while simultaneously becoming more efficient; a blending of the intuitive and algorithmic sides of the organization.

In 2001 he appointed Claudia Kotchka to turn P&G into a design thinking organization. He invited outside designers to assist with the development of new products, a strategy not previously invoked at P&G, and by 2006 about 35 percent of P&G’s new products had origins outside the company. Perhaps the most critical change was obtaining a deeper understanding of the company’s consumers. Hair care product team members began to visit salons and homes to see how the products were actually used, and listened to the suggestions and complaints of consumers. Within three years of Lafley’s arrival P&G was achieving growth and recapturing market share in nearly every brand category.

The parallels between P&G at its weakest and the plight of many contemporary colleges and universities seem strong enough to suggest that design thinking is an idea worth considering. What might it look like to do so?

To follow the Procter & Gamble example, in higher education students endlessly evaluate courses, but what’s lacking is a committed effort to observe students as they learn and to then listen to their concerns. In a design thinking culture, faculty and administrators would empathically put themselves in the place of the students at their own institution and elsewhere to fully understand how to improve what happens in and beyond the classroom.

Consider the perplexing conundrum presented by scholarly publishing. Faculty members produce research that, in order to achieve tenure, they give away to journal publishers. Publishers, particularly in science, technology and medicine, edit and package faculty’s intellectual property and sell it back to higher education institutions at high prices that require constant increases to library budgets. Despite years of discussion about the scholarly communications crisis, we still have only partial and little used potential solutions.

The scholarly communications crisis presents what Martin would describe as a “wicked problem”, one that requires more than analytical or intuitive thinking. In his book The Opposable Mind, Martin states that when neither option A nor B works, design thinkers must create option C that blends A and B, offering a new and completely untested solution. Proposals to solve the scholarly communications crisis tend to fall into two camps: different pricing models and open access. The former attempts an analytical solution by transferring the existing system to a new price model so money changes hands differently. The latter attempts an intuitive solution by encouraging scholars to distribute their manuscripts through free (to the reader) distribution systems. Could design thinkers develop a C solution?

The design thinker would start by unraveling the real problem that fuels the crisis, which might well be the nature of the research and tenure system itself. Identifying the problem is paramount. The design thinker (or design team) would talk to all the parties involved and learn as much as possible about the scholarly communication process from the experts, both authors and publishers.

Next, the design team would bring back for analysis all the pieces of information, and process it in a brainstorming (“deep dive”) session. Out of the brainstorming would emerge prototypes for a new or modified system of scholarly communications. The design team would implement the prototypes deemed to have the most promise. The prototype that most closely approaches a “C” solution would emerge for implementation. That C solution might be some combination of a change in the tenure process and what counts as scholarship, a de-emphasis on publication in high-impact journals, an editing and publication process in which some publishers could participate, and options for self-publishing and archiving that are simpler, with clear benefits to faculty. In other words, some combination of existing practices and untested ideas that offers a completely new solution.

Design thinking is no panacea for all that ails higher education. Resolving challenges such as low retention and graduations rates, escalating textbook costs, an overdependence on adjunct faculty, lean budgets, for-profit competitors and myriad other problems will take more than a business as usual approach. However, higher education is not a business, and faculty and students will always respond caustically if they believe corporate solutions are being foisted on them by an unsympathetic administration.

This is where design thinking can make a difference. It’s more than a short-term strategy for boosting profits. It’s a roadmap for future-proofing one of society’s most valued resources. And since it involves no acquisition of or investment in sophisticated new technology, only a desire to try a new way of identifying and tackling institutional challenges, it’s right for the times. Those who want to engage with these ideas can begin with the Deep Dive video mentioned above or choose from a host of blogs written by experts in design thinking and user experience.

In 1972 Cohen, March and Olsen introduced the Garbage Can Theory of decision making as an effort to create a predictive model for how decisions are made in higher education organizations. The model describes colleges and universities as “organized anarchies” that make their decision by heaping multiple solutions into garbage cans. The detached solutions in the garbage present no utility until a problem presents itself to which one of the solutions could be attached. For too long the organized anarchy label has proven itself relatively accurate in describing what derails progress in higher education.

Design thinking, based on the premise of correctly identifying the problem before developing solutions, is as far removed from the garbage can theory as a decision making model can be. What is relatively the same since Cohen, March and Olsen devised their model is that higher education still confronts what Martin calls the “wicked problem,” a challenge that is not merely complex but is characterized by ambiguity, shifting qualities and no clear solution. Design thinking may be just what higher education needs to clean up its garbage can.

Author/s: 
Steven Bell
Author's email: 
doug.lederman@insidehighered.com

Steven Bell is associate university librarian at Temple University and co-author of the book Academic Librarianship by Design. He blogs at Designing Better Libraries and From the Bell Tower.

Adapt or Decline

In a faraway colony, one in a thousand people -- mostly young, rich, white men -- are sent to live in isolated, rural Christian communes. Some are pious, learned, ambitious; others are unruly younger sons with no other prospects. The students spend hours every day in chapel; every few years, the entire community is seized by a several-days-long religious revival.

They also get into lots of trouble. In their meager barracks they drink, gamble, and duel. They brawl, sometimes exchanging bullets, with local residents, and bother local women. Occasionally they rebel and are expelled en masse or force administrators to resign. Overseen by low-paid clergymen too deaf or infirm to control a congregation, hazed by older students, whipped for infractions of the rules, they’re treated like young boys when their contemporaries might be married with children. And, oh yes, they spend a few hours a day in rote memorization of fewer than a dozen subjects.

This was the typical 18th century American college, loosely modeled on England’s Oxford and Cambridge, which date to the 13th century. Nine colleges were founded in the colonies before the Revolution, and they’re all still in business: Harvard, William and Mary, Yale, Princeton, Columbia, Penn, Brown, Rutgers, and Dartmouth.

For universities, history is authority. It’s no accident that America’s most prestigious institution, Harvard, is also its oldest, or that some of the oldest organizations of any kind, worldwide, are universities.

Surveying the history of American colleges and universities with a jaundiced eye convinces me that many aspects of the current so-called crisis in higher education are actually just characteristics of the institution. It has always been socially exclusionary. It has always been of highly variable quality educationally. It has always had a tendency to expand. In fact, it is precisely because we are always asking more and more of education at all levels that its failures appear so tremendous.

Still, the United States does seem to have reached an impasse today, given escalating demand for higher education, spiraling costs, and limited resources. Unlike the 1860s and unlike the 1960s, there is little national will to grow our way out of this problem by founding more colleges or spending much more money on the ones we do have. Is this merely one more symptom of national decline? Have we hit some kind of natural limit for an educated population? Or is there a mismatch between the structures of the past and the needs of the present?

America can’t remain a global economic powerhouse while it slides to the middle of the heap in education. Nor can we grapple with the challenges we face as a global community without meeting the world’s burgeoning demand for education. Nor can college leaders get away with claiming that their hands are tied and only more taxpayer and tuition dollars can solve their problems.

There are two basic options the way I see it: fundamentally change the way higher education is delivered, or resign ourselves to never having enough of it.

The good news is that all over the world people are thinking big about how to change higher education. Brick, stone, and marble institutions with centuries of prestige behind them are increasingly being joined by upstarts, both nonprofit and for-profit, and even more loosely organized communities of educational practitioners and apprentices.

The open courseware movement started at the Massachusetts Institute of Technology in 2001, when the school decided to put its coursework online for free. Today, you can go online to MIT OpenCourseware and find the full syllabuses, lecture notes, class exercises, tests, and some video and audio for 1,900 courses, nearly every one MIT offers, from physics to art history. As of March 2010, 65 million people from virtually every country on Earth have raided this trove.

Open educational content is just the beginning. Want a personalized, adaptive computer tutor to teach you math or French? A class on your iPhone that’s structured like an immersive role-playing game? An accredited bachelor’s degree, in six months, for a few thousand dollars? A free, peer-to-peer Wikiuniversity? These all exist today, the beginnings of a complete educational remix. Do-It-Yourself University means the expansion of education beyond classroom walls: free, open-source, networked, experiential, and self-directed learning.

This opening world presents huge questions about the true nature of a college education: questions that are legitimate even when they are raised with self-interest by traditional educators.

The university is over a thousand years old, older than modernity itself. On American soil it has grown like Katamari Damacy, the Japanese video game in which a magical “clumping spirit” snowballs around the world collecting everything in its path until it attains the size of a star. The latter-day “multiversity,” as it was dubbed by the University of California president Clark Kerr in 1963, clumps teaching with research, vocational and technical education with liberal arts, sports, clubs, and parties with intellectual life, accreditation and evaluation with mentoring and friendship. For students “college” means very different things at different times: the place to grow up, be out on your own, make friends, take leadership roles, prepare for and find a good job, and even learn.

Technology upsets the traditional hierarchies and categories of education. It can put the learner at the center of the educational process. Increasingly this means students will decide what they want to learn, when, where, and with whom, and they will learn by doing. Functions that have long hung together, like research and teaching, learning and assessment, or content, skills, accreditation, and socialization, can be delivered separately.

There’s no good way to measure the benefits of the old-fashioned face-to-face educational model; there’s worry that something important will be discarded in the race ahead. More fundamentally, no one knows if it’s possible to extend the benefits of higher education to the majority of a population without diluting its essence. But those are questions that educators ought to be testing and investigating rigorously. College leaders who want to be on the right side of history won’t hold stubbornly to the four-year, classroom-hour-based “butts-in-seats, nose-to-nose, face to face” model as the only way to provide the benefits of a liberal arts education. They will innovate to meet students wherever they are, and they will reinvent assessment to provide much better transparency about what students are learning.

Here are four trends guiding this transformation, as they might look from the point of view of college leaders:

1. The 80/20 Rule. Is your institution part of the leading-edge 20 percent? How will you attract and serve the “nontraditional” student who is the new norm? Most of the growth in higher education over the next century will come from the 85 percent of students who are “nontraditional” in some way -- older, working adults, or ethnic minorities. They will increasingly attend the 80 percent of institutions that are nonselective. This includes most mainstream public universities and particularly community colleges and for-profit colleges, which saw the sharpest growth in the 2000s.

For-profit colleges are the only U.S. institutions that have both the resources and the mission to seriously expand their numbers in the foreseeable future. Community colleges already enroll half of all undergraduates. Both disproportionately enroll the demographic groups that dominate the next generation of Americans: Hispanics, all other minority groups, and first-generation college students. Some of the boldest thinking is happening in institutions that are far from the ideal of either the multiversity or the colonial “little college.” Yet, they typically lack the opportunity for undergraduates to participate in original research, not to mention many of the intangibles of college life like dorms and extracurriculars. Concerns about quality and affordability in the new mainstream of higher education have to be addressed head-on. The answer is not for established institutions to exclude the upstarts from the conversation.

2. The Great Unbundling. Which services and departments are core to your mission? Where can you partner, outsource, or pool resources across the state, the nation, or the world for greater efficiency? Universities have historically combined many social, educational, and other benefits in one-stop shopping. Increasingly, some of these resources (e.g., faculty time) are strained, while others (like written course content) are approaching a marginal cost of zero.

As it has with industries from music to news, the logic of digital technology will compel institutions to specialize and collaborate, find economies of scale and avoid duplications.

Books can be freed from the printed page, courses freed from geographical classrooms and individual faculty, and students freed from bureaucratic obstacles to transferring course credit between institutions, or designing their own courses of study.

Could any of your departments flourish on its own? Stripped-down institutions that focus on instruction or assessment only, or on a particular discipline or area, will find more and more audience. The most cutting-edge sciences and the most traditional liberal arts can both flourish in a specialized, concentrated, and technologically enhanced setting. I have seen professors elevate the craft of teaching rhetoric, composition, and critical thinking to new heights using social media and applying cutting-edge research about learning.

3. Techno-hybridization. Are distance learning decisions confined to the IT office? Are you creating online courses through a cheap, hands-off process, or are you experimenting across disciplines with the best ways to integrate online and offline experiences? How can you identify and support your internal innovators among faculty? Department of Education research shows that a blend of technology-assisted and traditional class instruction works better than either one alone. This blending can occur with institutions enrolling students on campus or off, in classrooms or online -- studies have shown that students do a better job collaborating online if they meet in person even once.

4. Personal Learning Networks and Paths. How well does your college serve the transfer, dropout, and nontraditional student? How easy do you make it for students to design their own experiences? People who graduate from high school at 18 and go straight through four years of college are already a tiny minority of all young Americans, around one in ten. Pulling America out of its educational slump requires designing programs flexible and supportive enough to reach the 44 percent of students who currently drop out of college and the 30 to 35 percent who drop out of high school. These programs have to provide socialization, personal development, and critical thinking skills, not just job training.

Self-directed learning will be increasingly important. Already, the majority of students attend more than one institution during their college careers, and more than half seek to enhance their experience with an internship. In the future, with the increasing availability of online courses and other resources, individuals will increasingly forge a personal learning path, combining classroom and online learning, work and other experiences.

The open-education pioneer Alec Couros at the University of Saskatchewan talks about assembling personal learning networks that include mentors, colleagues, media sources, books, and collections of links. The existing system will be challenged to come up with new forms of accreditation, transfer credits, and certification so that the value of this work can be recognized by potential employers and others.

***

Education is an essentially conservative enterprise. If we didn’t believe that one generation had something important to transmit to the next, we wouldn’t need education. So changing education makes lots of people nervous, especially school leaders whose salary comes from the old model.

Still, in an ideal world, we can agree that opportunities to stretch your abilities, test your personal mettle, follow your natural curiosity, and jam intellectually with friends, colleagues, and mentors -- all the good stuff that is supposed to happen in college -- would be more open to more people at all ages and transition points in life. Traditional colleges will continue to find plenty of eager applicants who want the experiences only they can provide.

The 80 percent of American college students who currently attend nonselective institutions will have many more options, and so will the majority of young people, those who drop out or who never apply. Alternatives to the four-year bachelor’s degree will get more visible and acceptable, which might help bridge one of the biggest social divides in American life. Tuition costs would reach sane levels due to increased use of technology, true competition, and better-allocated federal and state incentives. This would lower one of the most important barriers to educational access.

By modifying the economics of the nation’s second largest industry, we’d save money, and tap the resources and energy of a whole new generation to tackle challenges like building a greener society, expanding the middle class, creating better jobs, and providing people with health care. Whether these incipient changes will lead to that kind of positive transformation, however, still hangs in the balance.

It depends largely on whether the guardians of existing institutions embrace transformation, or let history pass them by.

Author/s: 
Anya Kamenetz
Author's email: 
newsroom@insidehighered.com

Anya Kamenetz's new book is DIY U: Edupunks, Edupreneurs and the Coming Transformation of Higher Education (Chelsea Green), from which this essay is adapted She blogs here.

Unnatural Acts

Financial crises cause public colleges to do funny things. Driven by enrollment limits, Bristol Community College in Massachusetts and Penn Foster University have come to an agreement allowing community college students to pay more to take Bristol classes delivered by Penn Foster. This deal comes upon the heels of the California Community College system announcing a deal that lets its students matriculate to Kaplan University, instead of the capacity-constrained California State University System, at a tuition level significantly steeper than Cal State’s though less expensive than Kaplan’s. Also in California, the College of the Sequoias, like many other colleges, is dipping into its rainy day fund and increasing class sizes while keeping tuition the same for now and likely higher in the future. At Bristol and through Kaplan, students pay more for the same. At College of the Sequoias, they pay the same for less.

Let me state my biases up front. I love unnatural acts -- particularly in higher education. My company, StraighterLine, which offers general education courses for which colleges can award transfer credit, has also been accused of performing unnatural acts with colleges. Kudos to Bristol Community College and the California Community College System for being willing to consider innovative options for their students. That said, these deals and actions worry me. Not because they are asking students to pay more – students always have the option to pay more – but because they do not give the students options to pay less.

Pay less? In these budget times? Any student who passed Econ 101 can tell you that, in a perfect market, price restrictions cause capacity constraints. State-mandated tuition levels and political resistance to tuition increases certainly qualify as price restrictions for public colleges. Therefore, the way to increase capacity is to allow higher prices for those willing to pay for it through a provider that’s not subject to state oversight. While these deals will undoubtedly allow greater enrollments and expand access to higher education, they do nothing to address the core failures of higher education economics. Indeed, higher education, abetted by an outdated accrediting and financial aid model, dramatically overprices many courses.

As printed in these virtual pages, it costs the University of Alabama $82 per student to deliver an intermediate math class and Frostburg State University in Maryland $25 per student to deliver an Introductory Psychology class. These two schools charge $2,680 and $2,100 for an out-of-state student for a three-credit class (out-of-state tuition better measures the nonsubsidized price per course). Further, these are face-to-face classes. Online classes can cost even less to deliver. These institutions, along with dozens of others with similar cost per student numbers, submitted this information to the National Center for Academic Transformation (NCAT) as part of the application process for grants to redesign their high enrollment general education courses. The profit margins on these general education courses for these nonprofit schools exceed 2000 percent. The same Econ 101 student would rightly note that, in a perfect market, this course-level profit margin would not be sustainable for long as new entrants would quickly enter the market to reduce the profit margin.

But it has been sustained. Why aren’t these extremely low prices for commonly taught courses passed onto students? First and foremost, most students rely on tuition subsidies available from the federal government through Pell Grants and loan subsidies. These benefits can only be accessed if the student enrolls in an institution – not just a course – that is accredited. Once enrolled, this financial aid cannot be applied to lower-priced courses at other institutions. Therefore, a market for lower-priced courses can only be supported by out-of-pocket expenditures or by a student completely transferring from one college to another. Further, lurking underneath a college’s tuition schedule is a nest of cross-subsidies. The profit margins on general education courses support low-enrollment courses, low-enrollment majors, administrators, sports teams, facilities and other nonacademic elements.

Indeed, though the price of college has risen, the amount dedicated to academics has declined. While many students enjoy the benefits of these subsidies, many others – such as commuter students, extension students or distance education students – do not. Lastly, the accreditation process itself takes five or more years, can only be undertaken by an institution (rather than a provider of courses), and requires a significant amount of overhead to be incurred – all of which pushes the overall price higher.

Agreements and actions like those of Bristol and the California community colleges, the nationwide growth in public college tuition, increases in Pell Grants, and further subsidized loans funneled through an institution-focused – as opposed to course-focused -- financial aid system point to continued rampant price escalation. So, it’s not an accident that Penn Foster, which is not regionally accredited, is working with Bristol, which is. Such an agreement gives students attending Bristol-branded/Penn Foster-provided programs access to a much larger pool of grants, subsidies and loans that can be spent on tuition. This deal expands slots for students, grows revenue for Penn Foster and grows revenue for Bristol. More importantly, it creates a precedent for variable tuition for the same credential from within the same institution. If public colleges are going to allow variable tuition for comparable credentials – and I think they should – they should allow it for those willing to pay more and pay less.

StraighterLine, the company that I run, offers a handful of general education courses for a subscription of about $100 per month without any taxpayer subsidies. As a provider of courses rather than a provider of degrees, we cannot be, nor do we want to be, accredited. Instead, our students receive credit for our courses at many hundreds of colleges via the American Council on Education Credit Recommendation Service or through direct arrangements with regionally accredited partner colleges. This can save students as much as 90 percent of the cost of their freshman year. On the one hand, since we’re not accredited, our prices only reflect the cost of individual course delivery, rather than subsidizing other elements of a traditional college. On the other, only students with the resources to pay out of pocket can take advantage of these prices. Call it an Accreditation Surcharge on taxpayers and poorer students.

Though our courses have received a variety of third-party endorsements – such as approval by the American Council of Education, approval by the Distance Education and Training Council (DETC), the appointment of an august advisory board, and review by partner colleges – awarding credit for these courses at these price points makes public colleges very nervous. When pushed by financial crisis, colleges search for deals that will help the college. They are not searching for deals that will help the student or the taxpayer.

Economist Paul Romer wryly noted that “a crisis is a terrible thing to waste.” Indeed, the higher education financial crisis presents an opportunity to examine basic pricing and financing assumptions in higher education. Agreements like the ones made by Bristol and in California should be welcomed as a way to expand capacity in high-demand fields. However, such agreements can only be embraced if similar agreements are made or policies enacted that allow students to more easily receive credit for taking much more affordable courses at other institutions and in other formats. If public colleges plan to allow students to pay variable tuition for more expensive courses, they should also allow variable pricing for less expensive courses. With many education providers – for-profit, nonprofit, accredited and unaccredited – available to provide additional educational capacity, colleges and their legislative overseers need to look at partnerships that will help students reduce tuition in addition to those that increase it. Given that this is in the student’s interest, not the institution’s, this might be the most unnatural act of all.

Author/s: 
Burck Smith
Author's email: 
info@insidehighered.com

Burck Smith is the founder and CEO of StraighterLine and the founder and former CEO of SMARTHINKING.

Learning From the Masters (Tournament)

My son and I recently went to the 2010 Masters, saw Tiger Woods come back to golf, and witnessed one of the greatest tournaments in decades. But what was most impressive to me about the Masters was not the amazing golf, or even the course itself (my son referred to it as an “outdoor museum”).

No, the most impressive thing was the actual running of the tournament and its concept of customer service. All college presidents would be well advised to attend the next Masters and study its management system. For what became crystal-clear to me as a nonprofit higher education consultant was the tournament’s very precise conception of who its customers were, compared to the very imprecise understanding by colleges and universities of who their customers are.

Here is the problem: Colleges and universities have a difficult time deciding whom they are serving. For a major golf tournament the choice is narrower: the corporate sponsors or the media or the patrons who come through the turn styles. Augusta National Golf Club, which runs the Masters very much like a nonprofit enterprise that is content to break even, views the fans who come to the course as their obvious customers.

All concessions are inexpensive (sandwiches: $1.50!); even the cost of golfware in the pro shop is reasonable. Bathrooms are strategically located, as are food stands, and every line of customers is designed to move quickly so fans can get back to the action on the course. Even the spectator locations are populated by movable chairs that the patrons over the years have bought ($29 this year) and placed where they want. Chairs are left there with one’s own marker on them, and no one sits in them but the owner, even at the most popular locations. When the day ends, you leave the course feeling cared for: You are a paying customer in the best sense.

Colleges and universities have more chaotic management systems because they are unclear about their preferred customers. Who is analogous to the fans at the Masters?

Here are the many choices for colleges, depending in part on the type of institution: enrolled students, their parents, state taxpayers, the local community, alumni donors, government granting agencies, even their Boards of Trustees -- increasingly dominated by corporate leaders. All are “paying” in one way or another.

Yet the principal customer on any college campus must be the student, and one statistic makes this fact obvious: the abysmal retention rate of students between their freshman and sophomore years. A third of all full-time college freshmen do not return for their second year. Very few have flunked out; some transfer for a major offered elsewhere or have to yield to family financial pressures. But my own experience has persuaded me that the freshmen who leave do so primarily because they were not treated as the school’s principal customers.

To take one example, colleges often treat distant parents who pay the bills as the principal customers when it comes to increasingly obscure fees -- but it is the students who must understand and rationalize those fees to their parents back home. We may think a $100 fee here or there is nothing to a middle-class parent (not true, of course), but it certainly is important to the student who wasn’t aware of it ahead of time, and does not appreciate having the issue minimized by a staff member to his or her face. If a student comes to an office on campus visibly upset about something, it should not matter how minor we think the issue is: it must be treated, for the student’s sake, as if it is major. It only takes a couple of calls home, after some insulting experiences on campus, to galvanize a family into leaving their school of choice.

In higher education, we do not know how to deal with 18-year-olds. Are they adults, despite being so needy and anxious, or are they just kids, despite being glad to be on their own for the first time? Even though sustained tuition income depends on their satisfaction on campus, we often treat them as spoiled and completely replaceable, like an object that is cheaper to throw away than to repair.

That might have seemed true when the baby boomers were sending increasing numbers of children to campuses. But in 2008 those numbers leveled off, and by 2012 they will be declining. By then, we had better figure out how to hold onto the students who, as customers, have chosen us, instead of treating them as lucky to have been chosen by us.

That has been our attitude -- that they were lucky to have been chosen by us. Perhaps that attitude is excusable at elite colleges that know their vaunted reputations will hold students on campus, even through their anxieties, for the prestige of the degree they receive. Those colleges -- only a few score nationwide regularly return 95 percent of their freshmen into the sophomore year.

But the numbers plunge from there for thousands of other colleges and universities that, until recently, have assumed there was no problem replacing the students who leave by the second year.

We must start treating freshmen as the adults they are -- but adults who are understandably apprehensive about, and sometimes irresponsible with, the freedom that college life gives them. Too often we view them as knowing how they ought to behave, even though we are less than clear about the regulations we do have and more than willing to reprimand them, condescendingly, for not knowing those regulations.

We think they do not want any rules when in fact they want our support and respect -- not permissiveness -- to mentor them on their way to the maturity they do desire It is going to be increasingly difficult to replace these young adults if we are disrespectful of them. It would be much wiser to help them manage the institution in which they have put their faith as a first step into maturity

Precisely because they are only going to be with us for a while -- as at the Masters -- we need to redouble our efforts at customer service from day one -- to take every student anxiety and complaint seriously, even if it turns out to be nothing more than normal freshman fear. Since it is reasonable for freshmen to be anxious, we must treat them as reasonable people, without being condescending or peremptory in our own attitudes.

We need to treat them as the Masters Tournament treats every one of its patrons: welcome, well-managed, and constantly appreciated.

Author/s: 
David Stinebeck
Author's email: 
doug.lederman@insidehighered.com

David Stinebeck, a former college president, is President and CEO of Concordant Consulting, LLC, a firm that specializes in managing personnel issues.

Not Dodging Health Care Law

Six months after passage of the Affordable Care Act (ACA), health care reform has finally moved off the front pages of America’s newspapers and is no longer the lead story on the nightly news. But below the surface, the controversy and political fights over the issue continue to roil.

Evidence of that came when higher education was recently drawn into the fight. On August 12, the American Council on Education and several other higher education associations wrote to the Department of Health and Human Services and the White House Office of Health Reform to ask for guidance regarding key ACA provisions to ensure colleges and universities could continue to offer students affordable, high-quality health care plans.

The response by the news media, spurred by interest groups following the issue, was almost immediate, and in the last few months organizations ranging from The Wall Street Journal to the College Parents of America have mischaracterized our effort as an attempt to carve out an “exemption” or “waiver” from ACA requirements. Some groups have suggested that we actually oppose efforts to enhance the quality of student health plans, while others say we’re only in it for the money.

They couldn’t be more wrong. Read the letter for yourself.

First, colleges are not seeking either an exemption or a waiver from the law. Historically, student health plans have operated under federal law as so-called “limited duration plans” because they provide coverage for a specific time period and are neither employer-based group plans nor plans offered on the individual market. These programs are tailored to meet the primary care needs of students as well as additional services such as mental health coverage.

Each is priced according to the eligible campus population and provide coverage to all eligible students and their dependents, do not vary premiums based on an individual student’s health status, and typically do not impose pre-existing condition exclusions. They are particularly important for international and graduate students. In short, these plans provide coverage that is responsive to the unique needs of the student population.

While the law specifically states that institutions may continue to offer student health plans, ACA is silent on how the law’s new requirements affect these unique plans. Federal agencies will need to write numerous regulations to implement ACA. Our letter seeks to include among them regulations that clarify how student health plans can continue operating as “limited duration plans” under a structure that incorporates reforms in the ACA -- and not, as some claim, to elude those reforms.

Specifically, we have asked HHS to provide rules of the road on two key topics:

  • What insurance reforms in ACA apply to student health plans? ACA includes many insurance reforms, such as prohibiting preexisting condition exclusions or other discrimination based on health status, but it is not clear which apply to student health plans.
  • Assuming student health plans incorporate required insurance reforms and provide at least a minimum ACA-defined level of coverage, will that satisfy the individual mandate to purchase health insurance under ACA?

We seek answers to these questions now because although many of the reforms in ACA don’t take effect until 2014, a number of institutions will soon be negotiating with insurers for new long-term contracts that will define the benefit coverage of their student health plans through 2014.

Are we opposing efforts to enhance the quality of student health plans? Absolutely not. In fact, we are following the lead of the American College Health Association, which has a longstanding set of standards to guide colleges and universities in structuring high quality coverage for student health plans. We also believe ACA will inevitably lead to improvements in the quality of student health plans, which is important because while the majority of institutions offer health plans of high quality — some continue to lag behind and must be improved. The key for us is ensuring that the changes brought about by ACA will result in plans that are both high-quality and affordable.

It is also wrong to characterize our efforts as an attempt to shield a major higher education profit center. The money made off these plans by colleges are modest, and revenue — if any — is returned to campus health centers or used to help maintain stability in the premiums paid by students.

In short, student plans respond to the unique health insurance needs of undergraduate and graduate students. They provide coverage over a limited time period for students under the age of 26 whose parents are uninsured and nontraditional students who are too old to access their parents’ plans. In some instances, student plans offer better coverage than students can get under parental plans, especially if they’re going to college hundreds or thousands of miles away from their parents’ networks or parental coverage does not adequately cover out-of-network care, making it prohibitively expensive.

Colleges and universities recognize the importance of ACA’s reforms and want high-quality health insurance options for their students. We are confident we can work with the administration on a constructive solution to ensure students have access to affordable, high-quality health coverage that is consistent with the reforms in ACA.

Author/s: 
Terry W. Hartle and Steven M. Bloom
Author's email: 
info@insidehighered.com

Terry W. Hartle is the senior vice president and Steven M. Bloom is the assistant director of federal relations for the American Council on Education.

Commercialization Is Not the Problem

Encouraged by critics like Derek Bok, Gaye Tuchman, and Jennifer Washburn (who characterizes market forces and commercial values as “a foul wind [that] has blown over the campuses” of our nation’s universities) the commercialization hypothesis has been accepted, often without critical thought, by many members of the academy. They are not big fans of the business community to begin with, and it is convenient to assume our problems come from “outside agitators” like intrusive business people.

We in higher education do have major problems with cost and quality, and they need fixing. But commercial forces are not the problem – our own internal practices are. A major factor in the persistence of our cost and quality problems is too much emphasis on public relations and too little emphasis on introspection.

Having served for over three decades in higher education and almost a decade in publicly held corporations, I have always found the assertions about the dangers of commercialization curious at best, since the way colleges and universities are run bears no relationship to the way corporations are managed.

Serious reflection reveals inconsistencies within the commercialization hypothesis. The corporate model leads to remarkable increases in product quality and lower costs; the record is clear in this respect. So how could such a model have exactly the opposite result (higher cost/lower quality) when applied to higher education?

The exceptional increases in total real expenditures per full-time student and the net cost of attendance are well documented. The only dissenting data with respect to the cost problem comes from the College Board, which claims that the net price (tuition and fees minus all grants, veterans’ benefits, and tax benefits) has declined over the past 15 years. The College Board data come from preliminary annual surveys. In contrast, the actual data reported by all institutions to the federal government institutional and longitudinal surveys reveal a persistent upward trend in real net price.

With respect to quality, I am aware of no scholar who makes the case that the quality of undergraduate education has increased over the past three decades. Furthermore, graduation rates, grade inflation, declining student study time, and lower prose, document, and quantitative literacy among college graduates all suggest at the very least that quality has not improved despite lower teaching loads and smaller class sizes for tenure-track faculty.

Our problems with cost and quality have an internal origin. The chain of causation runs from these problems to outside interference, not from outside interference to cost/quality problems. On the other hand, there has been an ongoing clash of values in higher education for the past three decades. The conflict is between traditional academic values and the values inherent in public relations. The combination of reputation competition and public relations governance makes introspection an improbable task. Building image conflicts directly with candid discussions about campus problems. If faculty members, administrators, and governing boards vigorously pursue cost and quality issues, they appear to admit the institution has problems. Without serious introspection, even the best institutions cannot get better. The first step in recovery is to admit you have a problem.

Reputations rule in higher education competition, and reputations are a factor only in markets where providers sell “experience goods.” An experience good is any good/service where the consumer does not know quality prior to purchase; he has to “experience” the good before he can judge quality. Quality uncertainty leads consumers to use the provider’s reputation for previous quality produced as an indicator of current quality. In extreme cases, the consumer assumes the higher the cost, the higher the quality. The reader may recognize this as the “Chivas Regal effect” among selective colleges and universities. Notice the perverse incentive this creates. If the institution spends more per student, the public assumes quality is increasing; if the institution cuts cost per student, the public assumes quality is declining. Hence, prudent cost control (which might make it possible to lower prices) lowers academic reputation!

Our dismal cost record since 1980 was made worse by the intrusion of public relations values, and those values are now comfortably at home in the academy. The reason the public relations people came to dominate campus administration is that reputations rule and reputations are built (at least temporarily) by public relations. This also explains why governing boards prefer presidents with fund-raising skills over presidents with either managerial skills or higher education experience.

Rather than a commercialization model to explain higher education’s woes, a better analogy is a political campaign, where the focus is to raise all the money you can and spend all the money you raise to create an image that may or may not accurately reflect reality. The conflict of values is between public relations expediency and the academy’s traditional regard for quiet substance. As faculty, we acquiesced in this takeover because it was in our financial interest to comply; more fund-raising meant more money for salaries and perks.

A recent study, written by Jay Greene and others at the Goldwater Institute, documents the growth of “administrative bloat” in higher education. Greene et al find, “Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent.” A study of the Maine university system shows similar results. Further, NCES data reveals full time faculty members represented 64% of total full time professional employees in 1976; by 2007 the proportion had declined to 46%.

Overhead cost (the cost of administering colleges and universities) should benefit from economies of scale and from the significant technological progress that occurred over the last three decades; as “output” increases, the overhead cost per student should decline. Unfortunately, overhead costs per student grew significantly and steadily during this period. By my calculations, as much as two-thirds of the increase in total cost per student came from increased overhead costs.

The Goldwater report raises serious questions about why governing boards allowed such exorbitant increases in overhead costs. After all, most governing boards include prominent business people who pay very close attention to overhead costs in their own businesses. Why would they not ask the basic questions? Is it possible the governing boards did not know what was happening to overhead staffing?

As the size of the administrative staff grew relative to faculty members and as the administration replaced tenure track faculty with contract faculty, the tenure-track faculty’s governance role declined. Curiously, the dominant public narrative concerning what ails higher education is that tenured and pampered faculty members obstruct all the good work proposed by administrators and governing boards; the reality is that most of the cost increases come from rising overhead costs, and tenure-track faculty play an increasingly smaller role in determining how the campus employs its resources.

An individual faculty member’s ability to influence governance is dependent on his or her academic reputation and alternative employment opportunities. Established scholars have alternatives; they can vote with their feet. Established teachers have little opportunity to vote with their feet.

Other things equal, one would expect that faculty governance would be stronger at research universities than at teaching colleges, and Greene’s findings seem to back this up. They show that in 23 of the 198 Research I universities studied, instructional employment grew faster than administrative employment. It is revealing that many of these institutions were elite research universities such as Harvard, California Institute of Technology, Rice, Emory, Cornell, Chicago, Princeton, University of Michigan, and University of Virginia, where faculty governance is stronger than it is in the rest of the academy. Hence, it is likely that growing administrative bloat is driven, in part, by weak faculty governance; precisely the opposite of public perceptions about higher education.

There are two ironies here. First, contrary to public perception, higher education’s chronic cost problems have at least as much to do with administrative decisions as they do with faculty members behaving badly. Second, if the corporate model had been applied to higher education, administrative bloat would not have happened. If governing boards closely followed overhead staffing patterns with respect to numbers and salaries, the explosion in overhead costs could not happen. The mystery is why governing boards did not monitor overhead cost.

The solution to these problems is to align the higher education incentive system with the public interest. The first priority is to move reputation competition away from public relations and toward “value added” competition, by providing more information about teaching value added. Teaching value added refers to the additional new knowledge retained by the representative student in Professor X’s classes or among College Y’s graduates. It also includes the ability to integrate and apply that new knowledge (critical thinking). The second priority is to offer faculty members incentive compensation contracts that lead to greater productivity and lower cost.

The third priority is to reinstate the faculty’s role in shared governance. Governance is shared in higher education because each group (faculty members, administrators, and boards) is supposed to monitor the behavior of the others; since administrative bloat accounts for two-thirds of the cost increases and, at best, the quality of undergraduate education has not improved over that same period, academic governance has not succeeded. Administrators prevent communication between board members and faculty members, and board members believe communication with faculty is a violation of the “chain of command,” a notion at odds with how higher education governance is supposed to work.

In the end, these are our problems and it is our responsibility to solve them. Denying problems exist betrays our students in at least two ways. First, beyond just teaching value added, we claim critical thinking skills, social responsibility, justice, citizenship, etc. are important parts of what we teach students. How can students take us seriously if we are unwilling to critically evaluate our own behavior and our institutions? Second, by our inaction, we deny students access to college. Uncontrolled rising real costs make it impossible for society to ever fully fund college access.

Author/s: 
Robert Martin
Author's email: 
newsroom@insidehighered.com

Robert Martin is emeritus Boles Professor of Economics at Centre College and author of The College Cost Disease: Higher Cost and Lower Quality, forthcoming from Edward Elgar, Ltd.

Aiming Too High

Smart Title: 

Growth plans -- and adjunct jobs -- at Roosevelt U. are jeopardized by failure to realize "overly optimistic" enrollment projections.

Examining Vendor-College Ties

Smart Title: 

Business officers' group plans review of corporate involvement in its own meeting and "best practices" governing relationships between colleges and companies.

Cuomo Targets Fire Back

Smart Title: 

As business officers assess impact of the loan scandal, Clemson and Drexel officials question attorney general's tactics and conclusions.

Some Old Fusion for NYU?

Smart Title: 

New York University and Polytechnic University, in Brooklyn, are restarting talks over a possible merger -- and a potential reunion.

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