For-Profit Universities 2.0

The institutions must recapture public trust and return to their roots as work force-focused innovators if they are to recover from their woes, Deborah Seymour and Michael Horn write.

June 15, 2017
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The election of President Trump and shifts in the regulatory environment due to Republican control of Congress have, of late, been sparking speculation that regionally accredited for-profit higher education institutions would be poised for a comeback. The acquisitions of Kaplan University by Purdue University and of EDMC by the Dream Center add another dimension to this landscape, as the online nonprofit competition grows and the pressure becomes greater for those remaining for-profits to stay viable.

There is an important niche that for-profit institutions can fulfill, and the opportunity is available for these institutions to jump (back) into this niche under potentially relaxed regulatory circumstances. The full spectrum of postsecondary education can benefit from proprietary education returning to its roots while still looking toward the future.

Yet for the enduring for-profit institutions to make a comeback, they will have to reinvent and reinvigorate themselves and recapture public trust damaged by a mix of ill-conceived business models, bad behavior and years of harsh regulatory scrutiny. That’s easier said than done.

To execute, for-profit institutions can’t just articulate a new vision for the future, but will have to live it. That will require a commitment to stronger student outcomes and a commitment to transparency in practices and measurement, regardless of the regulatory landscape. But it also requires that for-profits return to their roots and modernize their commitment to the twin origins of offering programs that lead to jobs and innovating in the ways those programs are delivered.

Connecting Students to Jobs

For-profit institutions have always made it a priority to offer programs that lead to employment, but as the current jobs landscape and new nondegree credentials keep evolving and growing, proprietary institutions must redevelop the programs they offer to stay ahead of the demand curve. It’s time for these institutions to refocus on adult learners who need to skill up for the jobs of the current era, and who may be less employable in the industries of their former occupations. For-profit institutions in the past were very adept at championing quality programs that were practical and vocational in nature, and there is a need for updated practice-oriented programs today that these institutions can help fulfill. Growth and variation in the general education space have not led to success for many for-profits. These institutions would be better served with a solid focus on new and more employable categories of study.

A first step toward this redevelopment is sunsetting existing programs that are no longer meeting current needs and whose enrollments have steadily decreased over the past five years. For-profits must then introduce new fields of study based on future-oriented employability research. There has to be an increased recognition that part of enrollment and academic advising is the guidance of students, especially adult students, into fields that will increase or augment their present-day and future employability.

The proprietary higher education sector may find new opportunities in contracts for government-driven job markets such as defense, public health care, cybersecurity, environmental solutions and infrastructure development. To serve these areas, the institutions will need to bring on new faculty members expert in these areas, as well as in other much-needed disciplines such as artificial intelligence and machine learning.

Another credible area of growth for proprietary institutions is in offering career-oriented programs targeted to Section 127 of the tax code, which makes employer education benefits tax-exempt so that they aren’t counted as employee income for tax purposes. As the overarching barrier to education for adults is cost, employer-paid tuition can alleviate some of the cost burden for working adults -- particularly given that many do not qualify for federal Pell Grants.

By expanding program offerings for which employers are more likely to pay the learner’s tuition, proprietary institutions can grow their own portfolios while assisting students with means to pay tuition other than through the use of financial aid. This expansion can help for-profit institutions fill market gaps not currently being addressed elsewhere in the postsecondary education ecosystem.

Program Delivery, Systems Innovation and Cultural Shift

For-profit institutions were among the original pioneers in online education and yet seem to have stalled in their position as unique program-delivery innovators. Now is the time to innovate again not just on delivery modalities, but on how to make sure students are successful. Doing that requires a cultural shift.

A good lever for revamping both programmatic approaches and reprioritizing student outcomes would include a next-generation student information system that is integrated with a learning relationship management system. The new system would provide end-to-end student metrics and tracking data that can be used to improve retention, completion and placement outcomes. These systems integrations, including learning assessment and employment outcomes tracking, would ideally integrate with vehicles for alumni tracking.

The idea would be to create a feedback loop so that real-time, continuous data about alumni employment could be fed back into the “engine” and inform both new program development and student advising over time, not just at the moment of enrollment and admission to the institution. Technology and information systems advances would once again bring proprietary institutions into the foreground of innovation in higher education, where a number of such institutions were positioned in the early days of online learning.

And yet, for all of this to happen, fundamental cultural change and change management in the for-profit space will need to occur. The extreme focus on profit has led to the downfall of several proprietary institutions in recent years. Although a number of for-profit institutions have always had, and have maintained, strong reputations for student-centeredness and a dedication to student outcomes, pressure to produce profits has led some institutions astray.

The original primary intent in the for-profit sector of providing programs to support students in their professional development has in some cases given way to extreme vocationalism. In some cases, a rush to enroll large numbers of students without paying sufficient heed to their retention, completion and employability has cast a shadow over the sector more generally. Dissolution of this shadow will require both cultural change within and evolution of perception without. A more favorable policy climate cannot -- and should not -- by itself solve these issues for the sector.

There will have to be a melting of the silos that traditionally exist within the proprietary environment between academic and support departments. Although this may be representative of the higher ed environment more generally, siloing of academic departments from support departments can often be seen more intensely in the proprietary space because of the nature of the for-profit drivers at play.

The newly culturally healthy proprietary institution will encompass stronger institutional research, which will be necessary to elevate student completion and employment outcomes. One approach to achieving stronger, higher-quality outcomes would be through distribution of responsibility for outcomes throughout the institution. Ownership of student outcomes by the various academic and support departments, now newly collaborating through cultural change and reinvention, would provide a stronger base for the institution’s achievement on a holistic scale. The internal networks created would be more powerful than the research and reporting of one institutional research department alone for the entire institution.

For-profit institutions have a distinct history of being on the cutting edge of new delivery models in higher ed, and this history should be retained and continued. The structure of these types of institutions allows them to experiment and take risks not usually found in the public sector. There remains a potent opportunity for the proprietary sector to remain a leader in new delivery models and thoughtful market research.

Transforming public perception and trust will of course be an important factor in this, but through a focus on updated, quality programs and improved metrics, as well as new models for revenue generation and student outcomes tracking, over time the transformation is possible.

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Deborah M. Seymour and Michael B. Horn are principal consultants at Entangled Solutions.

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