Cornell University and Citigroup would seem to have very little in common aside from the fact that Citi’s former chairman, financial deal-maker Sandy Weill, is a noted Cornell graduate who has given generously to his alma mater.
But there’s another, more significant commonality. Both institutions are suffering immense pain and dislocation because their balance sheets are tarnished with illiquid assets. As with Citi’s balance sheet, the plummeting financial markets have ripped a hole in Cornell’s endowment, which was heavily invested in private equity, real estate and hedged equity instruments. It’s unclear exactly how big a loss Cornell’s endowment has thus far suffered, since a large chunk of the university’s portfolio consists of illiquid, complex and hard-to-value assets. But for now, the decline is officially put at 27 percent for the last six months of 2008.
Cornell is far from alone in grappling with the fallout from endowment losses. The overall value of university endowments in the United States fell about 23 percent on average for the five months ending November 30, 2008.
The steep declines are forcing many colleges and universities to adopt wage freezes, layoffs and a halt to on-campus construction projects. The hope, of course, is that endowment losses don’t ultimately cut into or curtail financial aid for students. But, given the markets’ continued turmoil as we head toward the end of the first quarter of 2009, students will be inevitably impacted.
The Clubby Origins of Decline
How did we get to this painful point?
During the past decade, universities stood by as competing investment managers pushed more and more of their endowment money toward increasingly risky bets. So long as the game was rolling, endowment managers could report outsize returns while drawing hefty compensation. During the halcyon days, Harvard investment manager Jack Meyer hinted at the clubby competition in a jacket blurb for his Yale counterpart’s new book, Pioneering Portfolio Management: “A masterful work by the master himself. We at Harvard wish that David Swensen would find a new job.”
Indeed, playing high-stakes poker with other people's money is a great game, particularly when you can claim a cut of the winnings. It gets even better when you can take full credit as the stacks of chips get taller and taller, even though donors keep shoving high denomination chips your way. But now that we’ve reached the financial reckoning, the poker games should finally be seen for what they were.
The New York Times hints that Harvard’s illiquidity problems trace to endowment decisions under the recent guidance of Mohamed El-Erian. Harvard’s Meyer draws a pass as the Times lumps him into a group of "legendary predecessors." But this analysis fails to admit that Meyer and Yale’s Swensen were part of a vanguard who pushed portfolio management increasingly towards alternative asset classes.
The legend spinning should better reflect the fact that the clubby competition between managers for juicing returns led to widespread pouring of endowment money into opaque investments. The simple truth is that opacity equals infinite risk, and infinite risk doesn’t compute and will never balance.
Endorsing the Casino Society
Perhaps most troubling is the fact that the puerile competition among investment managers chasing higher and higher returns led colleges and universities to effectively endorse the conduct and structure of the shadow banking system. It is the lack of transparency and lack of regulation in this shadow banking system that encouraged overleveraged bets on exotic, and now illiquid, CDOs and CMOs – bad assets now smoldering at the center of our current economic meltdown. How can aligning institutional prestige with the shadow banking system – an alignment that flowed from avarice for higher and higher returns – square with university mission statements that aver commitment to the common good?
The fact is that allocating even a single dollar of endowment money to the hedge fund kin of the Greenwoods, Madoffs and Stanfords – all of whom insisted on opacity – had nothing to do with balancing risk or upholding fiduciary responsibility. It’s the first job of any endowment manager to understand what the hell is going on.
After so many years of strong returns, should one very bad year be allowed to tarnish the reputations of so many college and university endowment managers? The answer is clearly “yes” – if accountability and transparency are indeed going to play a larger role in the management of money in our post-Madoff culture.
Another step towards more accountability would be to dispense with what economists term the “money illusion” when reporting endowment performance. The money illusion assesses risk and reports economic performance in nominal versus real purchasing terms. For example, on December 16, 2008 president Richard Levin explained to Yale faculty and staff that: “Our best estimate of the Endowment’s value today is $17 billion, a decline of 25 percent since June 30, 2008.” But what this “best estimate” failed to point out is that in real dollar terms, Yale’s sudden six-month loss wiped out the reported endowment return of 22.9% for fiscal 2006, the reported 28.0% return for fiscal 2007, and the reported return of 4.5% for fiscal 2008! By the Higher Education Price Index, the six month loss had set the Yale endowment back nearly four years to the same purchasing power it held as of June 30, 2005.
The Commonfund reports that by December 2008, college endowments had suffered estimated average six-month losses of 24.1 percent. It is now expected that by the end of the fiscal year (June ’09), full-year losses will be even greater. Already the widespread carnage is being rationalized by comparing results to similar or greater losses in the broader equity markets. But the fact remains that epic losses have no precedent in endowment management. For example, Harvard’s endowment actually grew during ’29-’32--the most devastating years of the Great Depression.
Will endowment managers, who in recent years sought to juice returns by leveraging endowment monies into hedge funds and other corners of the shadow banking system now be held accountable? And can we expect them to give back any of the lavish investment-banker level bonuses they were paid during the go-go years?
We’ll surely be waiting a long time for this kind of accountability. But perhaps we can hope that in the face of huge losses, universities will begin reappraising the ego-driven competition around celebrity investment managers while re-acknowledging the central importance of contributions to the long term health of the endowment. Then, perhaps, we might realistically hope that rather than placing monies into exotic investments, they will think about putting money to work in ways that stimulate and inspire donors over the long haul.
Endowments Are Not Mutual Funds
Because of the essential nature of contributions, the management of endowment monies can and should be approached differently from the management of mutual funds, retirement funds or pension monies. In these latter realms, maximizing short-term measurable investment returns plays a key role. Since donations are absent, there can be no strategic initiative to increase them. By contrast, the power and importance of contributions in university endowments opens novel strategic opportunities around which endowment managers must learn to creatively think and act.
Swensen noted in his book that since 1950, approximately two-thirds of Yale’s endowment corpus was ultimately attributable to gifts. “Note the importance of new gifts to the endowment, with roughly two-thirds of 1998’s targeted value stemming from gifts made since 1950. In other words, in the absence of new gifts over the past forty-eight years, Yale’s endowment would likely total only about one-third of today’s value.” Given the importance of gifts, and in view of the financial meltdown, college and universities might now consider new ways of investing such as placing money alongside constituents who are likely to contribute.
Why not, for example, allocate part of the endowment to first-time mortgages for graduates, faculty and administrators? If a university advanced the 20 percent cash down payment for a young graduate’s first home while bargaining for, say, 30 percent of the capital gain at the time the house sold, the university would, over time, enjoy a solid return. But more importantly, each such investment would powerfully reinforce allegiance from a potential contributor or donor.
Similarly, if the college on its own, or in concert with other institutions, pooled venture funds to invest in the new and creative businesses of its own graduates, the endowment fund manager might negotiate for the college a small percentage royalty as a return on invested capital until a transaction event for the business took place. Again, returns would come not only in measurable cash, but also in immeasurable allegiance and appreciation.
Or how about applying endowment monies toward microloans for third-world nations, or as debt financing for worthy initiatives on the energy or microbiology fronts here at home? While the short-term cash returns might not be as sexy as those earned during the endowment bubble, the long-term returns in goodwill from future contributors would be significant.
Of course, even if the relative power of contributions in endowment growth gets the reconsideration it deserves, most colleges won’t adopt anything like what I am proposing here because they will worry that the returns would be too low. But whether returns would or would not be too low following such basic strategy changes is fundamentally an empirical question. In the face of crashing returns, now is the time to rethink.
Looking at the Obama campaign as an example, it is obvious that millions of people contributing small amounts can overwhelm the traditional large donor focus for campaign funding and finance. (To be sure, plenty of large donors were also making contributions to the Obama campaign as wealthy people were also inspired.) What might happen for universities if more ordinary people also became genuinely inspired to give to higher education? That inspiration hasn’t happened (note the very low alumni participation rates in giving) and won’t happen as long as the basic message from higher education remains how “prestigious” colleges are, and how “legendary” their endowment managers happen to be.
Colleges and universities need to comprehend and act on the fact that endowments are different from pension or retirement funds owing to the critical importance of protecting and enhancing contributions. If deployed creatively, today’s $400 billion in higher education endowments could become a great power for good that would inspire students, graduates and constituents – the people who hold the real potential for growing endowments over the long term.
Note: An earlier version of this essay applied an incorrect formula to Yale's investment return that was derived from a table published in the 2008 Yale Endowment report. Yale has since provided to the editor supplementary data and a formula contesting the earlier calculation. The author agreed to remove his earlier calculation based on the information provided by Yale.
Jim Wolfston is the president and founder of CollegeNET, Inc.
When confronting economic turmoil, the demands of short-term crisis control can overwhelm colleges and universities. In a higher education version of Maslow’s hierarchy that prioritizes survival above other needs, the institution neglects vision, strategic thinking, and sound management as it struggles to reach enrollment targets or make payroll. Such practices may meet immediate needs at the expense of long-term sustainability. What classic mistakes do colleges and universities make in economic downturns?
Mistake #1: Forgetting danger signs. Many presidents and boards use a “dashboard” of strategic indicators to monitor academic and financial health. They help separate facts from fears. Yet, a common problem is that the dashboards do not have targets (when will we be satisfied?) or, related to current circumstances, minimums (when should we be worried?). Using Guilford College as an example, fiscal danger signs that would get our attention include fewer than 380 traditional first-year students (when 400 or more has been the norm since 2004), student fees above the average of our competitors, financial aid discount much above the 39 percent rate of recent years, an increase in expenditures higher than increases in revenue or enrollment, graduation rates below 6-year averages, and an alumni giving rate less than 20 percent. We would also be concerned if operating net assets decrease or endowment spending exceeds 5 percent of its lagging average market value.
Mistake #2: Not considering all budget options. When a budget deficit looms, the easiest cuts in spending and personnel are across-the-board. They are also wrong to the extent that they ignore differences in centrality to mission, size, and efficiency. Few budgets can be fixed without attending to personnel numbers and compensation.
Consider making some positions part-time, offering early retirement, using vacancy savings to pay more for added responsibilities, and using student labor paid with credits and not cash.
My own bias is to reduce positions before reducing salaries because employees ought to be fairly compensated. Institutions can often lose positions, at least at the start of the crisis, with less stress and effect than anticipated. When I was the new CFO at Bowdoin College, we cut 70 positions — not a catastrophe when you consider that we had 1350 students and 630 faculty and staff — while budgeting raises of 19 percent for faculty over two years and lesser amounts for administrative and support staff.
With growing enrollment, significant savings are possible by increasing average class size and the student-to-faculty ratio rather than new hiring. An increase in average class size from 20 to 22 gains 10 percent in productivity that would not turn seminars into large lectures. Sometimes tightening up on course reductions for faculty with administrative duties has the same effect.
“Growth by substitution” may allow you to take some budget savings to invest in “signature” programs or other programs with great market interest. Pay attention to effects on cash inflows and outflows when major construction or renovation projects are planned or deferred. A $1 million renovation may have minimal effects on the budget and financial statements because the cost is spread out or depreciated over the years of useful life. On the other hand, payment of the $1 million to construction companies and other vendors occurs now and depletes cash. In any case, develop multiple scenarios of revenues and expenses. Budget as conservatively as possible based on the least optimistic but still plausible scenario. Make the hard choices early; for example, waiting until the middle of the fiscal year to cut the budget means that any reductions in positions or spending have only half the year to take effect. If you get good surprises later on, you can restore some of the reductions.
Mistake #3: Thinking that bigger is always better. If student fees, fund-raising, and endowment are not supplying sufficient resources, institutions often turn to enrollment growth. As a short-term measure, more students can boost revenue if financial aid is controlled and related increases in faculty and staff are contained. When Guilford increased our enrollment by 45 percent in five years, the good news was administrative and support staff increased only 20 percent. The bad news was that the faculty grew by 60 percent, which undoubtedly reduced average class size and improved course discussions but mitigated the financial benefit of enrollment growth. Students transfer more often these days — sometimes starting at less expensive community colleges and then transferring to four-year institutions — so actively recruiting upperclass students can supplement intake of first-years. Just be sure that the transfers get the same kind of welcome and orientation. Pay attention to student retention and persistence. What factors at your college or university prompt students to stay or leave? Many institutions, including Bowdoin when I was there and Guilford today, have targeted programs for sophomores, who can feel neglected and unguided in comparison to the special attention that they got as first-years. It is usually more cost-effective to keep a current student than to recruit a new one.
New academic programs are not an economical way to attract more students, especially if the lack of resources diminishes course quality, advising, programming, and placement in graduate schools or jobs. Enrollment growth in an institution with excess capacity is far more beneficial to the budget than growth that necessitates new construction of academic and social spaces. Finally, among the most significant indicators of financial health is endowment per student — a study I conducted a decade ago as Bowdoin College’s CFO showed a high correlation between endowment per student and rankings of national liberal arts colleges in U.S. News — which is diminished when enrollment grows more rapidly than endowment.
Mistake #4: Not managing the crisis. No matter how severe the crisis, campus leaders cannot act like passengers on a whitewater raft who have little control over their situation. Never panic. It helps to have a strategic plan or at least strategic thinking to guide actions. Increase visibility and communications. Use a variety of media and methods, including web-based, to discuss problems and proposed solutions. These might include community meetings, open office hours, letters to alumni and parents, and articles in the student newspaper and staff newsletter. It is better to have periodic updates rather than one large and often impenetrable “state of the campus” address. Be sure that the institution has a spokesperson with a clear message that is truthful and instills confidence without underplaying the danger. Community members may not support major budget reductions that upset the status quo but at least they will get the process and parameters.
Do not let economic crises hide longer-term strengths or weaknesses, and the need to act on them. For example, an institution may try to explain to its accrediting agency that a financial predicament is due to the economy when, in fact, they have been running budget deficits and overspending from endowment for years. Find the money to invest in marketing, recruiting and fund-raising because a steady enrollment and gift flow help maintain revenue. Solicit donors to replenish endowed funds with special attention to financial aid funds essential for student access and affordability. Respond to greater needs in counseling and career services caused by anxious students and families. Do not let others use the crisis to further their own agendas to challenge the administration or push “pet” programs.
Mistake #5: Not properly involving the board. Given their ultimate fiduciary responsibility, the governing board has to be informed and involved. Use the executive committee or other leadership team to work with the president or chancellor. The CEO and board should speak with one voice to ensure clarity of message and calm the community. Show that you appreciate their anxieties. Design special messages for the board that provide data and recommendations not necessarily shared with the wider community. In the spirit of “give, get, or get off,” board members should be expected to donate money themselves, encourage others to give, and to lobby with legislators and others whose support is essential.
Mistake #6: Confusing strategy and tactics. Strategy is about the basic direction of the institution and its mission, priorities, and role in the world. Tactics are the means we use to achieve the strategy. Tactics deal with “how to” questions; strategy is about “why.” A strategic response to unfavorable economic circumstances might involve, for example, adding a new student population like working adults; transforming the business model from low tuition/low financial aid to high tuition/high financial aid, as many public universities are now considering to cope with plunging state aid; and dropping major programs in liberal arts to focus on pre-professional programs. Students will be attracted to majors with excellent job prospects. If the strategy is embedded in a formal plan that is aimed at long-term competitive advantage, protect the plan’s financial resources even while cutting the budget or the crisis will get worse or reoccur sooner. We made this mistake at Guilford during two years of tight budgets when the strategic plan was among the first items cut, and should have been among the last. Depending on the strategy that the institution selects, tactics often involve improving efficiency and work processes, better ways to recruit new students, and more profitable bookstores, summer programs, and other auxiliary enterprises.
Mistake #7: Not asking the right questions. It is hard during an economic crisis to ask fundamental questions about the institution. Yet answers to these questions can position the college or university more effectively to deal with whatever develops. Some of the best questions are:
How does the economy affect our strategic plan and priorities?
How much of our revenue is at risk?
What would we do if the budget had to be reduced by 20 percent?
Do we know which of our programs and activities are mission-critical, and what each costs?
Who are the people most critical to our success?
How do we differentiate ourselves from the competition? What is our competitive advantage?
What are we communicating to major donors?
What does our community know and when/how do they know it?
“This too shall pass” was a warning to King Solomon, and it should be a comfort to college and university leaders. The current crisis will subside as the economy inevitably swings between boom and bust and the financial markets fluctuate between bull and bear. It would be tragic if higher education did not learn from our mistakes and apply these lessons both now and the next time that the economy falters. History can be a great teacher if we pay attention.
Kent John Chabotar
Kent John Chabotar is president and professor of political science at Guilford College, in Greensboro, North Carolina.
It’s a dramatic tale: The story of the once-wealthy institution that houses America’s smartest -- our leading university, perhaps the world’s -- now just scraping by. Searches frozen and secretaries dismissed, hot breakfasts suspended, trash piled high: Harvard is “poor,” its endowment “collapsed,” according to Vanity Fair magazine.
Harvard isn’t taking issue with this impoverished profile. In fact, the stream of leaked letters and memos pouring out of this typically proud and stoic institution seem to suggest it is unopposed to its characterization as strapped. But is it true? Is Harvard really poor?
The university has lost a lot. The precise numbers will be in soon, but Harvard’s endowment appears to have lost about a quarter to a third of its value, or at least $8 billion.
Yet this massive loss has not made Harvard poor by any measure. At over $28 billion its endowment continues to tower over that of any other university, museum or private foundation aside from the Bill & Melinda Gates Foundation, which has a couple more billion in the bank. Today, Harvard has more than $4 million in its endowment for every undergraduate it enrolls. It has not lost generations of wealth, as reports imply, but merely returned to around its 2005-2006 value. Harvard remains the richest school in our nation’s history.
So why the firings and belt tightening? Because Harvard, like many universities, is committed to spending only meagerly from its endowment. In 2008, before the present economic disaster, Harvard spent just 3.25 percent of its endowment to support its operations. While the absolute amount may be large, this is a miserly level of spending.
Now, with the value of its endowment plummeting, Harvard appears unwilling to break this habit, even at the cost of imposing a hardship on education and research. This is stunning given that, even with Harvard’s shrunken endowment, just increasing spending to slightly more than 4 percent would maintain support to the institution’s operating budget.
News reports, again unopposed by Harvard, would have us believe that donor restrictions prohibit a higher rate of spending. But in 2008, 46 percent of funds in billion-dollar-plus endowments at independent colleges and universities were completely unrestricted, according to the data in a table produced by the National Association of College and University Business Officers. And Harvard hasn’t released any information to suggest that its endowment is more restricted than most.
Harvard's funds may be restricted in this peculiar sense: The institution appears, in effect, to have restricted its endowment itself by tying up huge portions of it in long-term investments that are costly to pull out of. Yet those costs should be paid if they are necessary to maintain the operating budget. After all, that's the “rainy day” purpose for which endowments were created. But even cutbacks and widespread talk of Harvard's demise don’t appear to be enough to get the institution to alter its assumptions about endowment spending. Harvard refuses to spend from its rainy day fund even when it is pouring.
That Harvard’s endowment exists to advance education and research is not what an observer would infer from the institution's behavior. Instead, Harvard appears to have decided to put financial dominance ahead of the current needs of students, families, and citizens -- even while the institution remains almost unfathomably wealthy. Taxpayers, who help to support this nonprofit, have reason to ask whether this is the best choice.
Harvard has options, even if its financial gurus find many of them unattractive. The institution’s academic leaders need to remind them that endowment investment and spending decisions must be guided by the twin goals of furthering education and research, not winning the hedge fund Olympics.
And if Harvard’s gurus found it acceptable to follow an investment strategy that could, and did, lose close to 25 percent in a year, then they should certainly deem spending a few tenths of a percent more to hold harmless the operating budget acceptable, too.
More than a decade ago, the Yale University law professor Henry Hansmann said that “a stranger from Mars who looks at private universities would probably say they are institutions whose business is to manage large pools of investment assets and that they run educational institutions on the side… to act as buffers for the investment pools.”
These words have only become more true with time.
Lynne Munson and Donald Frey
Lynne Munson researches college and university endowments for the Institute for Jewish and Community Research. She has testified on endowment spending before the Finance Committee of the U. S. Senate. Donald Frey is professor of economics at Wake Forest University.
It turns out that academics, at least in lore insulated from the pitches and rolls of the private sector, are not immune to the effects of recession. Even a cosseted tenured professor like me, creature of the humanities, unable to tell a bull from a bear, a credit default swap from a collaterized debt obligation, realizes that times are tight and that the economic downturn has changed everyone’s world. But as scary as words like “furlough” and “restructuring” are, it is the silence that unnerves me the most.
It has been months since somebody told me that “a university must run like a business.”
I’m alarmed to think that the era of the Business Simile is over.
I think I speak for many liberal arts types when I say how scary it is to lose that surety, that hard mooring in the results-oriented world, that comforting discipline of being told from across the conference-room table that the market imperatives must be paid heed, that we in the academy merely deliver a product to our clients, and that the efficiencies of the private sector can and must be brought to bear on the out-of-touch ivory tower. See, I liked that. There was a bracing firmness in such announcements. One the one hand, it fed my craving for intellectual loftiness — to be on the receiving end of such pronouncements allowed me to position myself as a defender of the faith, as true educator unsullied by a preoccupation with filthy lucre. On the other hand, I was secretly reassured when I heard that the important decisions — how to find the money, how to spend the money — were in the hands of realistic, highly-qualified, private-sector types who knew how the world worked. I wanted them on that wall. I needed them on that wall.
I admit that in the heyday of this tension between university-as-academy and university-as-commercial-enterprise there was some weird gendering going on that I try not to think about too much. “Business” was implacably male and strong, and the logic of the market (and all its attendant terminology whereby faculty became Full Time Equivalents and students became Credit Hours Produced) shone like Apollonian reason. Meanwhile the liberal arts, with their vague goals and misty-eyed idealizing, their lack of standardization and frustratingly inconsistent outcomes — well, they were female, areas to be protected and subordinated by a tough-minded business-oriented administration. Admit it: “pure research” has a virginal ring to it. So I confess that I liked being told that the university must be run like a business. After all, it left me time to think abstractly about big ideas (and picturesquely, I might add, leather-bound books at hand, maybe wearing a scarf). It allowed me scoff at the bean counters even as I consumed the revenue they wrung from the institution. I came to depend on the kindness of those strangers who understood accounting and statistics, core competencies and market niches. Who better to protect me from the real world than the agents of the real world?
But now the “university like a business” simile has been undercut by, well, the real world. Some of the most prominent companies in the United States are starting to resemble universities. They receive massive government aid, suffer from significant new government oversight, cling to inefficient fiscal models, and are buffeted by a howling public who sees tax dollars being thrown down the hole without concomitant results. But besides the human cost of such devilments, we must account for the metaphorical costs of AIG, Chrysler, and Bear Stearns: What happens the next time somebody deploys the Business Simile to eliminate a small, unpopular major (physics, I’m looking at you) or hire three adjuncts where once a tenure-track colleague might have served (hello, foreign languages)? It just won’t have the same effect. Now when somebody says “a university must run like a business” I won’t feel that same secret warmth of the Invisible Hand’s caress — too many businesses are looking pretty un-business-like these days.
We were all a lot happier when the Business Simile was untarnished.
Back in 2004, when my house was worth a lot more than it is now and my TIAA-CREF account was a lottery scratch ticket that always paid off, professor emeritus and former interim president of American University Milton Greenberg gave the Business Simile a good workout in Educause Review,pining that since business “involves the hierarchical and orderly management of people, property, productivity, and finance for profit,” then some hard-eyed pragmatics were in order. He riffs on the Business Simile with gusto: “Numerous realities define the business nature of higher education,” he says, and “claims that education is not a business are seen as cloaks for behaviors and expenditures that violate reasonable expectations of responsibility and accountability.” He winds up with a market-driven aria: “If higher education is to lead its own renewal, it must think about its people, its property, and its productivity in business terms.”
See, that’s the stuff … the Business Simile writ so large it is presented not as a rhetorical flourish, but as the conditions on the ground. We like our realities defined for us, our course charted, and that was what the Business Simile could be made to do in the hands of a master.
Fast forward to 2006. My house and my retirement account were worth even more then, and the Gallup Management Journal ran an admiring profile of late Drexel University president Constantine Papadakis, praising him for having “no patience with people who decry profiteering in the nonprofit world of education” and for his insistence that “academia should transition into business.” In the ensuing interview, President Papadakis, without irony, declares that in higher education, "If there's no profit motive, then you are doomed.” Vicariously and years removed, I still thrill to that kind of leadership. It is clear-eyed and results-oriented; it gives the term “businesslike” its good name.
Even as late as 2008, the year my home equity vanished and my TIAA-CREF statement actually burst into flames when I opened the envelope, one could against all odds still find Business Simile boosters. Business Week, which is apparently a magazine devoted entirely to business, ran an article in its August 3, 2008 issue exploring the conjunction of higher education leadership and the captains of industry. We’re told that Philadelphia University President Steve Spinelli helped found Jiffy Lube before becoming an academic, and that the Jiffy Lube experience helped him learn how to run his university “like a business.” Robert J. Birgeneau, chancellor of the University of California at Berkeley, had to “professionalize” his staff, because, he says, a “university is a very complicated business enterprise.”
But the article, which should have assured us that the Business Simile is so inexorable that we can depend on it even as layoffs and cutbacks are endemic, ends on an unsettling note. Making the point that many universities are hiring corporate CEOs to help them through these troubled times, Business Week notes that the University of California at Berkeley turned to Citigroup for a new vice chancellor and Harvard just filled an executive vice president position with a former Goldman Sachs executive.
Wait a minute, says I, finally getting to use the word schadenfreudecorrectly. Goldman Sachs? Citigroup? That’s $55 Billion in TARP funding right there. We should note here that the former Goldman Sachs manager Edward Forst lasted less than a year at Harvard, but the existence of TARP funding, government bailouts, and the general collapse of the economy has led not just to a general crisis in business confidence, but more importantly a crisis in my confidence in business and, by extension, the Business Simile. We are witnessing the death of a once-potent figure of speech.
As long as “business” represented competence and “university” represented inefficiency, then the Business Simile was able to win many an argument. But similes die, and they die when their referents stop making sense. Hardly anybody says “in like Flynn” anymore because very few people remember who Errol Flynn was, much less that he was associated with skillful swordplay and copulation. Who says “like clockwork” anymore? Only those who remember what clockwork was, or those who use the simile as a nostalgic gesture.
And maybe nostalgia will be my refuge. The Business Simile will not end with a bang, here in the midst of the 2009 recession. It may linger on, neutered, in faculty senate minutes and university strategic plans, in the inauguration speeches of university presidents yet to come, invoked not because it is timely or sensible, but because it reminds us of earlier good times, like folks in Hoovervilles humming Al Jolson. One can “sleep like a log” even though few of us saw our own fallen trees and snoring can be treated medically. One may still “work like a Trojan” even though it is only those with spectacularly unmarketable Classics degrees who can explain why Trojans were once known as hard workers. But those similes refer to past time, not present realities. They’re as antiquated as Bob Seger singing that my Chevy (its GM warranty now looking suspect) is “like a rock.”
So I’ll pine for the old, sure Business Simile, but settle for a new formulation: “A university must run like a business, but without the crazy risk-taking, the lack of accountability, the bankruptcy and the indictments.” It doesn’t have the same ring to it, but in these times we must take our comfort where we can. I’ll miss you, Business Simile. Losing you hurts like the dickens, whatever that means.
Daniel J. Ennis
Daniel J. Ennis is professor of English at Coastal Carolina University.
Some fellow deans and I have noticed that when faculty conversations turn to administrative travel, there’s a curious split. A good number of our faculty colleagues suspect that we go jetting off to Cabo San Lucas, to luxuriate in radiant warmth amidst drained snifters of cognac and the fragrant waft of smuggled cigars.
By and large, those are the ones who like us.
Others suspect a furtive rendezvous with Lord Vader and Emperor Palpatine arranged so as to advance our plans to crush the rebel departments and rule unchallenged.
Those are the ones who think like us.
I jest. Alas, the reality of my own conference travel is, by contrast, so dull as to explain the persistent rumor that deans suffer disproportionately from narcolepsy. The average experience comes down to a January day in Calgary, where I'm left to choose between such enriching topics as “Formative Assessment as Instructional Practice” and “Meeting the Challenge of Deferred Maintenance in a Constrained-Endowment Environment” (here I have to say that only a career change to administrative work could have made me pine for an MLA panel on, say, poststructural critiques of the Victorian nautical drama).
But there are some payoffs. It was at just such a gathering a few months back that I joined a troubling discussion on a simple question:
“Amid international economic collapse, what keeps you up at night?”
The room -- packed with we former starry eyed types who had entered academic administration to pursue the dream of strengthening the academy -- reported on the nightmare of slashing budgets (sometimes by a third), layoffs (sometimes by the dozen) and closing academic departments (sometimes their own). But of all the answers, the hardest to hear was one of the last:
“I don’t think we’ve seen the worst yet.”
Thoughts about that possibility kept me up nights all summer.
In the end, though, it isn't the prospect that we might fail to make conventional changes in response to new economic realities that worries me.
My real concern is that we will cling to the status quo rather than bring the creative energy of our talented faculty to re-imagine our goals for student learning and the nature of faculty work. That conversation is one we in academe must have -- apart from the present crisis -- if we are to serve the nation and the world in ways that will meet present needs. It may be that we in academe are collectively whistling past the graveyard in the hope that this crisis will pass in time for us to avoid transformative change.
Of course we must do the things we’ve always done to address financial exigency: trim budgets, cut expenses, pull back on maintenance, and the like. These conventional responses won’t guarantee that we will thrive, but they can buy us time to take the next step: trying initiatives that we’ve never tried before.
These new initiatives will bring no guarantees, either, but they can buy us time to take the critical step: we need to imagine a college that we’ve never been before and work to embody it.
We've taken the painful and practical steps to bring our budgets back into balance.
The challenge for deans in a budget crisis such as colleges across the country are facing now is clear: how to reduce the budget by five or ten percent while maintaining the elusive "excellence" that so often finds its way into presidential rhetoric? In the absence of genuine conversation across the campus, the conventional choices are clear enough. For our part at Augustana, even as we have completed two record years for the college, we are nonetheless cutting back on administrative costs, reducing funds for travel, and curtailing reassigned time.
But such measures won't create a sustainable college. Such actions, for campuses across the country, are a way station, not a destination. They’re unpleasant; they're occasionally productive; and they are merely expedients, buying us time.
But time for what?
At Augustana, we're using this time to try initiatives we’ve never tried before, and the early conversation is promising: amid demographic decline across our Middle West, we're seeking students through all manner of new partnerships -- with high schools, junior colleges, and peer colleges alike -- that we expect to improve student learning and reduce costs. We’re exploring opportunities, for example, to offer liberal education to local high school students who may not have encountered the kind of pedagogy we value most; we hope such outreach will result in more students for our college.
We're building revenue by developing a 12-month academic program through expanded summer offerings linked to our admissions effort. And we're offering majors that affirm our identity as a liberal arts college even as they speak to new areas of interest for today's high school students, such as environmental studies.
Ultimately, I've come to believe that these initiatives, valuable as they may be, still will not help us to create the model that will enable our college to thrive for the next century. The fundamental flaw in the budget cutting/revenue expansion model is that it remains grounded in a series of assumptions bequeathed to us by the academy of the 19th century. Those assumptions reflect the pedagogies and institutional expectations of another age. They constrain, rather than support, those of our own. And so we need to take a further step: to re-imagine what our college might be for students of the decades to come.
At Augustana, we're engaging faculty deeply in that conversation, asking colleagues to think creatively about how we will change in response to the challenges before us. For deans, this is the opportunity of a career: we now know we must reframe the work that we do in order to create a new model that will better serve our students and our communities alike even as it will sustain our institutions.
We might, for instance, seek to learn from years of assessment data that tell us that traditional classroom learning contributes only a fraction to student growth and learning in college. One result might be that we further our efforts to build connections between the traditional curriculum and the co-curriculum. We might imagine new partnerships with our community that will form a central place in our students' experience and that might help to revive struggling neighborhoods; at Augustana, we have forged a relationship with an elementary school in our neighborhood with just such a goal in mind.
I believe the answers to these questions will best come by engaging the faculty. The challenge for academic administrators these days ought to be how we might better utilize the creativity and imagination of our faculty so as to avoid these conventional approaches.
How can we enable faculty to take on an entrepreneurial approach to their work, such that the resources of the college are not seen as a bank account from which one draws funds but rather as an investment into which all must contribute for the greater good?
How can we bring the intellectual creativity of faculty to the hard questions that are before us?
Can we change the question from “How can we best manage budget cuts?” to “How can we make it again possible for bright students of moderate means to attend the college?”
I am hoping to start with some stakes in the ground:
Focus on student learning. The point seems obvious, but once the specter of budget cuts is raised, it will be difficult to focus on anything but finance. Deans and faculty alike need to focus first on the primary question of what our students are learning and how we know.
Take into account the ways new pedagogies affect faculty work. Over the last two decades, the faculty's work at liberal arts colleges has grown infinitely more complex. With the addition of undergraduate research, investigative labs, process writing assignments, intensive mentoring and advising, service learning, and a host of other pedagogical reforms, we are asking faculty to do more than ever. Often, such reforms have been added on to a curriculum that has remained essentially unchanged, so that demands on faculty have increased substantially.
Work as a team. The adage that curriculum is determined by faculty and finances by administrators is laughably false. It rests on the absurd premise that curriculum and budget can somehow be separated (if they could, I would advocate for Oxbridge style mentoring for each and every student, from freshman year on!).
Commit to completing the conversation. Too many dialogues are shut down every year on campuses because of the threat of divisiveness. If administrators want faculty to bring all of their creative energy to the table, they have to be prepared to arrive at answers they might not have expected. If faculty want to guide decisions about resources, they can't throw up their hands and suggest that they won't have a role in decisions that lead to actual reductions.
What would transformative change look like? Every college and university will have a different answer. At Augustana, we hope to find ways to deepen student learning through the experiential pedagogies that the faculty have made a priority over the past two decades while easing the burden of the new methods on faculty. We hope to build on our efforts to connect a traditional liberal arts curriculum with vibrant and exciting careers, while helping students to see that a vocation -- or calling, in Martin Luther's sense of the word -- is considerably more vast than career. We hope to find ways to extend their learning in blended learning environments that have just begun to take shape on the horizon for academe.
Of course we can't be sure that our approach to the conversation will yield the sort of transformative change we seek. At Augustana, we are just starting to ask hard questions about how we will sustain our strength for the years ahead. I do know that 180 of the brightest people I know are turning back to the foundations of our community to study what we do best, what we know deeply about ourselves, and what we might be in the years to come.
Once we get that figured out, I'll return to the underrated charms of subzero Calgary for a good night's sleep.
Jeff Abernathy is dean of the college at Augustana College, in Illinois.
In 2001 I donated my collection of prints by sculptors to the Block Museum of Art at Northwestern, though some of the prints still adorn the walls of my house and won’t get to Evanston until after my death. You can assume -- and you would be right -- that a collector of such works has been a lifetime “consumer” and supporter of the arts.
And yet, I said to myself “good for them” when reports first surfaced last winter that Brandeis intended to sell its collection of modern art, so that the considerable (envisaged) proceeds could support functions closer to the central goals of the university.
Understand that my print collection went to Northwestern because I had been dean of arts and sciences there for thirteen years. Understand also that regarding this issue, my experience as dean trumps my love of art and that is why I disagree with the views expressed in numerous articles in The New York Times and one this month in Inside Higher Ed called “Avoiding the Next Brandeis."
I see a significant role for art museums on higher education campuses. But, with quite special exceptions, I see a very small pedagogic function for colleges and universities to own works of art, especially given the current cost and value of so many of them. I’d rather those museums were reclassified as galleries. To be sure, the provisions of deeds of gift must be scrupulously observed; but assuming that to be the case, let them sell their works of art if the funds thus gained will better serve the institutions’ educational mission.
The premise here is that the roles of museums on campuses are not like those of museums downtown, since the former exist to serve the specific needs and interests of a campus’s students and faculty.
This month’s article in Inside Higher Ed quotes a task force formed by arts groups to figure out ways to avoid the next Brandeis as saying that campus museums should be regarded as “essential to the academic experience and to the entire educational enterprise.”
But why should they be so regarded when, by my admittedly not systematic observations, most of those museums do nothing or very little to deserve to be so regarded? As dean, I had to bludgeon the Block Gallery to present an exhibit of the work of Northwestern’s prize painters, William Conger, Ed Paschke and James Valerio. (This was before the Gallery was transformed into a Museum and long before its current director, David Robertson, came to Northwestern.) Art history departments are mostly held at arm's length by campus museums who prize their (inappropriate) autonomy. Mostly, the museums don’t even know how to communicate with other than art faculty on campus.
It is excellent, therefore, that this cluster of issues is being looked at. In my view, however, the goals sought by the task force for campus art museums are not likely to be realized by means of works of arts owned by museums, but rather by means of exhibits brought in and often locally curated for specific pedagogic purposes.
Members of the task force, make sure, therefore, that you are not just talking to yourselves. You are looking for ways to relate A to B; there must thus be strong representation from both poles. As announced, the organizations participating in the task force are mostly from the Category A: the art museum community.
I strongly recommend that it also include not only representation from the art history and studio art departments, but knowledgeable people who have thoughts about how to involve art museums in educating students who are not primarily concerned with the arts. Indeed, given the way in which so many campus museums lead existences so separate from their campus surroundings, it might even be necessary to initiate reflection about about their possible wider functions. The task force might want to consider forming a committee consisting of a couple of department chairperson, a couple of deans or associate deans, perhaps some interested students assigning them the task of reporting to the museum-powers-that-be how those museums might serve a broad campus constituency.
Accordingly, if the just-formed task force keeps its eye on the ball (as I see it), that Brandeis bomb will have very positive, if unintended, consequences.
Rudolph H. Weingartner
Rudolph H. Weingartner is former dean of arts and sciences at Northwestern University.
When I first learned last winter that the Brandeis University trustees had voted to sell the collections of the Rose Art Museum and close the museum, my reactions were many: concern for Brandeis students who were losing an important learning tool; sadness that a great university was breaking trust with many benefactors; annoyance that the museum industry would be yet again living the trauma of defending our collections as other than semi-liquid assets.
To these were added a suspicion that somehow the Rose must have failed in its campus-wide engagement and in its outreach to key campus constituencies (including its trustees), or those very trustees would never have felt they could make that particular decision, no matter how great the budget gap facing them. Even as I recognized the right of any university to shutter any program no longer deemed sufficiently important, I shuddered at such a reactive decision.
Nowhere in my response did I consider the “good for them” proclamation made by Rudolph Weingartner in his Views column of October 23 for Inside Higher Ed, arguing against both the pedagogic value of owning works of art and the effectiveness of university museums generally. Most troublingly, in reading of the view of a panel of experts arguing that university museums should be regarded as “essential to the academic experience," Dean Weingartner observes “by my admittedly not systematic observations, most of those museums do nothing or very little to deserve to be so regarded…. Mostly, the museums don’t even know how to communicate with other than art faculty on campus.”
Drawing such conclusions -- and a kind of pleasure in the demise of a fine museum -- on the basis of random evidence seems not to represent the rigors of academic policy making at its best.
More dangerously, this view fails to note either the sheer range and variety of campus museums in the United States or the extent to which many have worked mightily in recent decades to make themselves central to their parent institutions. Long gone are the days when most university museums could be seen as, at best, the laboratory addendum to a department of art or art history. Seeking not merely (although importantly) to shape future art historians and museum professionals, the nation’s best university museums have long been engaged in the practice of fostering critical thinking and visual literacy, the understanding of times and cultures dramatically distinct from our own, the awareness of a common humanity, and thus, ultimately, the shaping of good citizenship.
Here at Princeton University, we have long crossed boundaries to partner our museum with disciplines and departments from the humanities to creative writing to architecture to civil engineering. The Yale Center for British Art routinely connects with fields ranging from natural history to cultural studies; their exhibition this year on the impact of Darwin’s theory of evolution on subsequent creative practice was a model for cutting-edge investigation of value to us all.
The Wolfsonian Museum at Florida International University offered an almost shockingly timely exhibition looking at the art of propaganda during last year’s presidential campaign. The new wing opened this year at the University of Michigan Museum of Art -- which I led until recently -- was designed to architecturally embody and make possible a commitment to deep campus-wide engagement, providing a second home for programming in performance, creative writing, film, and the humanistic disciplines generally.
And many universities increasingly use their art museums in medical curriculums, having discovered that sustained close looking makes their doctors-in-training better diagnosticians. From Dartmouth, to Emory, to Wisconsin, to UCLA, great university museums have shown themselves deeply capable of being essential to the lives of their universities, even as they also often function as enormously beneficial gateways to those universities for the general public.
The argument that academic museums can do these things is no mere abstraction. They are doing these things, and are increasingly recognized as playing an essential role in a time of bottom-line driven programming at many of even our greatest civic museums. With less at stake in the battle for attendance, the university museum can often take on difficult projects whose popularity cannot be assured, advancing the cause of new knowledge presented in accessible ways that yet seek to avoid pandering or the much dreaded “dumbing down." Many of the first thematic exhibitions -- sometimes operating in the sphere of a social history of art, the so-called “new art history” -- took place in our university museums. Increasingly, and happily, the special role of the university museum is recognized by the media: Writing in The New York Times this year, the art critic Holland Cotter observed “The august public museum gave us fabulousness. The tucked away university gallery gave us life: organic, intimate and as fresh as news.”
And why do we university museums so annoyingly feel the need to collect artworks, creating the inevitable drain on resources caused by those pesky stewardship requirements? I offer in answer a fundamental article of faith, that even in the digital age, the sustained engagement with original works of art necessary for teaching, research, and layered learning would be difficult if not impossible if we ceased to be collecting institutions and instead taught only from objects temporarily made available for exhibition.
In the way that great texts live in our libraries, available for revisiting and sustained scholarly investigation, the works of art in our museums offer the possibility of deep critical engagement, close looking, and technical analysis -- made all the deeper when brought together as collections in which dialogues arise through the conversation of objects with each other and with their scholarly interlocutors. Surely a key role of the academy -- the advancement of new knowledge and the challenging of past knowledge -- is that fruit of curatorial, faculty, and student research made possible by the sustained presence of great works of art, whose survival for the future is also thus (and not incidentally) guaranteed.
Like libraries that often also find themselves embattled in times of budget cuts (since typically neither museums nor libraries directly generate tuition streams), great university art museums are a “public good," offering value and possibility to the whole of our university communities as well as to users from outside the walls of the ivory tower. That all university museums do not achieve this centrality of purpose -- often, I suspect, for lack of adequate resourcing by their parent institutions in the perpetual fight against the perception that art represents a “luxury” in the logo-and data-centric university -- is to be regretted. Without question much work remains to be done to make our museums central to the academic experience.
But just as any academic department desires a certain autonomy to define its foci and particular strengths within the university curriculum, no academic museum should be “bludgeoned” into showing the work of particular artists or serving as the handmaiden of narrow administrative modishness. The academic model has never, thank heavens, been one of pure utility, even as we seek to be responsible, effective, and impactful.
For me, the lesson of the Brandeis debacle is the reminder that the fight for the central role of our museums is not won. Contrary to Dean Weingartner’s views, however, that fight has long and often successfully been underway.
James Christen Steward
James Christen Steward is director of the Princeton University Art Museum.
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.
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.
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.
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.
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.
David Stinebeck, a former college president, is President and CEO of Concordant Consulting, LLC, a firm that specializes in managing personnel issues.