Paying for Performance

As more college students have found themselves adrift and in debt following graduation, colleges have found themselves under increasing pressure to prove their value to stingy legislators and cost-conscious shoppers.

Now one university is working with a major educational content company to shift some of that accountability from the institutions that enroll students in courses to the companies that supply them with educational texts and tutoring software.

McGraw-Hill, which sells textbooks, course modules and e-learning software, today will announce that it will provide those resources for a dozen courses at Western Governors University (WGU), an online, nonprofit university. But instead of selling licenses to WGU based on enrollment, in several of these courses McGraw-Hill will only get paid if students attain a grade of B or higher on WGU's competency exams. While McGraw-Hill is announcing the model today, Pearson officials said that it too has "performance-based agreements" with the university. But Pearson to date hasn't drawn attention to the model.

“We’ve desired this model for quite some time,” said Steve Klingler, the vice president of student experience at WGU, in an interview. “It aligns [McGraw-Hill’s] interests perfectly with ours and the students… We’re not content to buy the book — we want the students to actually learn from the book and pass the assessment.”

Under the terms of the deal, WGU will pay “a significantly discounted flat fee for McGraw-Hill’s course material,” plus “a premium for each student who uses the materials and passes the course,” according to a release. This makes the deal different from usual arrangements, where content publishers charge university clients based on how many students are enrolled in the course.

According to Klingler, the deal will apply to all the courses at WGU that use McGraw-Hill’s LearnSmart software, which drills students on concepts and gives them feedback based on what they seem to understand and what they don’t. “We’re making a statement that we know that it works,” said Brian Kibby, president of McGraw-Hill Higher Education, in an interview. The company expects to make about “10 or 20 percent less” than it would if it charged based only on enrollment, according to Tom Malek, the senior vice president of learning solutions and services.

In return for McGraw-Hill agreeing to take on some responsibility for student performance, WGU says it will share intelligence on how students are using the McGraw-Hill content — such as what course modules and e-texts portions students are looking at and how that correlates with student success.

That way McGraw-Hill will “get some insight into what’s working and what’s not,” said Klingler. If students are glossing over certain content, that might be a cue that it needs to be more engaging, he said. Likewise, if students are engaging heavily with particular modules and e-textbook chapters and yet are not doing well on exams, that might be a cue that the educational quality of the content needs improving, he added.

Student names will be scrubbed from the data, in compliance with educational privacy laws, before WGU shares it with McGraw-Hill, Klingler said.

WGU’s unusual, “competency-based” model of delivering education makes it well-suited as a proving ground for publisher content. The university does not have traditional class sessions or professors; students work through the licensed content at their own pace, with only occasional intervention from “coaches.” This eliminates the skill and style of individual instructors as a confounding variable in assessing the effectiveness of the publisher’s e-texts and adaptive tutoring software, Klingler said. Within each program, “all WGU students are consuming the same material and taking the same assessments,” he said.

McGraw-Hill nonetheless intends to pursue similar deals with traditional institutions, such as community colleges and research universities. The specifics of the deals might vary, but future deals “would still contain the same performance-based elements,” said Malek. “I think that when the word gets out that this is how we’re aligning — as a performance-based company — it will generate interest,” he said.

Pearson Education, another educational content company, says it also has arrangements with several clients that tie pricing to student performance. “As the leaders in online learning, we have a number of  performance-based agreements with online institutions, including Western Governors University," said Don Kilburn, CEO of Pearson Learning Solutions. "We’re strong supporters of accountability and expect to be held accountable for producing materials that support successful student outcomes.”

As accountability and data continue to become driving forces in higher education and more institutions begin to rely on software to teach students, these deals might become more common.

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