A New Leaf at Phoenix?

August 24, 2010

WASHINGTON -- When it comes to marketing and recruiting, the University of Phoenix is turning over a new leaf, or so its executives said at a briefing here Monday.

“We’re doing what we think is right,” said Gregory W. Cappelli, the co-chief executive officer of Apollo Group, which owns Phoenix and other for-profit colleges and schools. The company, he said, is shifting “from a recruiting mentality and culture into one of a long-term relationship” between potential students and recruiters, who’ve been renamed "counselors.”

The briefing was framed as a discussion about Apollo’s position paper, “Higher Education at a Crossroads,” which touts the for-profit sector as playing an essential role in President Obama’s access and completion goals. But the scrutiny facing the sector, and Apollo’s attempts to push back, dominated the hour or so that Capelli, his co-CEO Chas Edelstein and Joseph L. D’Amico, president and chief operating officer -- along with a cache of public relations people -- spent with a few reporters.

In the debate over the role of for-profit higher education, where the good apples/bad apples dichotomy has come to dominate discussion (though some Congressional Democrats have said they see something resembling a rotten orchard), Apollo is actively working to brand itself as an organization chastened and determined to do better, especially after being identified in the Government Accountability Office's "secret shopper" investigation of recruiting practices.

Announcing steps aimed to frame Phoenix as the “gold standard” in for-profit higher education, as Cappelli put it, the company is pledging to clean up its act ahead of what will almost certainly be tighter regulations on recruitment and student outcomes coming from the U.S. Department of Education this fall and the continued drumbeat coming from Capitol Hill.

In September, Phoenix will stop compensating recruiters based on the number of students they enroll and whether those numbers are on an upward trajectory, criteria that accounted for 32 percent of their evaluations. Instead, performance will be judged entirely on factors such as teamwork and attitude when interacting with students.

“The purpose of marketing is to inform,” Cappelli said. Edelstein chimed in: “We feel there is an imperative … [in] reaching as many as we can who can benefit” from higher education.

Phoenix monitors about 30,000 calls between recruiters and students each day to keep tabs on whether employees are misrepresenting or misleading students. ABC News performed its own secret shopper investigation at a Phoenix campus and was given incorrect information about whether the student would be able to get a teaching certification in certain states with a Phoenix degree. The officials said the student would not have been able to enroll because the company has enacted computer safeguards forbidding anyone but specially trained education recruiters to enroll students in teaching programs, though they acknowledged that the system failed to protect a wronged student interviewed by ABC.

And Cappelli said that recruiters aren't overly aggressive. “We don’t call people 50 or 100 times,” he said. (The undercover students commissioned by the GAO would probably disagree.)

More broadly, Apollo’s new recruitment strategy is more holistic, reputational and in-house, the officials said. “We’re fundamentally changing our approach to prospective students,” said Ryan Rauzon, an Apollo spokesman. In recent years, the company has halved the percentage of its budget going to third-party companies -- which in large part means lead generators and other entities that collect information from interested students.

Rauzon said he couldn’t specify what that meant in terms of dollars because of fear that it might hurt the company’s competitiveness, but overall costs relating to selling and promotion totaled $960.4 million in fiscal year 2009 and $805.4 million in 2008, according to Apollo’s Securities and Exchange Commission filings.

Rauzon also acknowledged that part of that reduction came as a result of Apollo’s October 2007 acquisition of Aptimus, Inc., an Internet marketing company that included lead generation among its products. “Tactics that some of the third parties have used have been distressing to us, where they mislead students,” he said. “Having people within our company manage our marketing controls our brand and helps safeguard what our students are hearing.”

Phoenix also is set to roll out a free, three-week new student orientation this fall, aimed at helping students with little to no prior postsecondary education figure out whether they’ll be able to handle the work before taking on student loans. So far, Edelstein said, 30,000 students have piloted the program and about 20 percent have decided against enrolling for a variety of reasons. He didn’t say how that compares with the typical attrition rate during the first three weeks of a Phoenix semester.

Though the executives wouldn’t say quite say that they were trying to frame the company as the good in a sea of bad, that was very much the subtext of what Edelstein and other Apollo executives told a small group of reporters. Going forward, Apollo seemed to be pledging, we’re going to do our best to be honest with you, our students, Congress, everyone. “Transparency is very important,” Edelstein said. “We’re trying to lead the industry.”

None of Apollo’s moves are unique in themselves. Westwood College pledged to end incentive compensation of recruiters this month. Kaplan Higher Education ended its use of ability-to-benefit tests -- often considered a low standard and used only by a few of the publicly traded for-profit companies for admissions decisions -- as a means to admit students who arrived without a high school diploma or GED. Corinthian Colleges announced the same move on Friday, effectively eliminating the source of about 15 percent of its enrollments.

To critics of the sector, moves like these come across as smart public relations more than anything else. Lauren Asher, president of the Institute for College Access and Success, said that it’s “not possible to tell how shifts in rhetoric or internal policies might translate in terms of outcomes for students.”

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