For- and NonProfit and Other Issues in Innovation

Investors -- and regulators -- discuss the profit motive and emerging models in private higher education, growing worldwide.
May 16, 2008

"For-profit or not-for-profit: Does it matter?"

Or, is that even the right question to be asking, challenged Ron Perkinson, formerly senior vice president of the Whitney International University System.

Given amazing global demand for higher education, undercapacity in the public sector in many countries, and interest from private investors, what are the right questions to be asking relative to achieving quality and meeting demand?

To ponder those questions and others, about 125 people, including private investors, government regulators and private university leaders, gathered in Washington this week for a conference on innovation in private education, hosted by the International Finance Corporation, a division of the World Bank that focuses on private sector projects in developing nations. Douglas L. Becker, chairman and chief executive officer of Laureate Education, Inc., kicked the conference off Wednesday by projecting a bright future for private education internationally – but also growing scrutiny en route to the sector's ultimate acceptance.

In the United States, at least, to attach “for-profit” to “education” is still, for better or worse, to ask for extra scrutiny, and the conference devoted an entire session Thursday to debate how meaningful the "for-profit" label actually is. "Does it matter?"

“The answer, I think, is simple. Yes, it matters very much. I don’t think anything promotes fiscal or organizational discipline more … than being for-profit," said Jorge Klor de Alva, senior vice president for the University of Phoenix/Apollo Group, Inc., America’s for-profit education giant.

“When done well,” Klor de Alva continued, “it makes possible a level of investment on the academic side that’s not just difficult, it’s almost impossible on the nonprofit side.”

Daniel Levy, director of the Program for Research on Private Higher Education, at the State University of New York at Albany, said that -- unlike his former SUNY colleague, Klor de Alva -- he wasn’t a businessman and wouldn’t give so clear-cut an answer. So Levy's answer as to whether the distinction between for- and not-for-profit matters? "Yes, but...."

“At least a lot of people think that it matters,” Levy said, pointing out that the question closely parallels the older question of whether being private or public matters (and, particularly in the developing world, that answer is yes and those differences, he said, can be stark). Levy noted, however, that among the confounding variables, he believes a large proportion of institutions that are legally nonprofit are, functionally speaking, for-profit.

In another session Thursday, panelists discussed innovations in private higher education more generally -- given the sector's flexibility, creativity and "lack of conservatism," as Sir Graeme Davies, vice chancellor and president of the University of London, put it.

Richard Miller, president of Olin College of Engineering, described for instance the college’s founding by the F.W. Olin Foundation in 1997 to confront what the funders saw as systemic problems in engineering education. Founded on a set of precepts -- including that there would be no tenure, no academic departments (so as not to inhibit collaboration) and no tuition -- the institution now has 35 faculty, 300 students, and an average SAT score around 1,500, Miller said. Engineering curriculums in general, he said, tend to focus too heavily on cramming in content, under the belief there is too much to learn. “There is too much to learn period,” Miller said. “What’s more important is to learn how to learn.”

“We’re teaching them to be engineers, not about engineering.”

Dave Taylor, dean of Limkokwing University of Creative Technology, subsequently spoke on behalf of the founder of Limkokwing, which has expanded to seven countries and has plans to be in 20 more countries within five years. The Malaysia-based institution recently opened a branch in London -- the first foreign, non-U.S. institution to open a branch in the United Kingdom, as the Guardian reported in 2007.

"We want to create two-way traffic,” Taylor said. "We believe it's important to reverse the flow."

“Strictly Western-specific education is no longer sufficient, even if you live in the West.”


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