Education and the Business Model

More and more state legislators across the country are demanding that education be run in a more business-like fashion. While greater efficiency is likely necessary in many educational systems, running higher education “like a business” is not only counter-productive, but it’s more likely to create more problems than it purports to solve – and business-like approaches so far haven’t shown much success at the university level.

One of the tools employed by both business and educational systems run by the “business model” is to reduce costs by reducing the number of employees and their compensation in relation to “output.” In the business area, this has given us outsourced manufacturing or high-tech automated manufacturing or, on the other hand, in retailing, lots and lots of underpaid, part-time employees without benefits. In education, a similar change is occurring, particularly in higher education, where university faculties have shifted from those primarily comprised of full-time dedicated professors to faculties where the majority of teaching faculty are part-time adjuncts, many of them far less qualified or experienced than seasoned full-time faculty. At the same time, administrations spouting the “business model” mantra have burgeoned.

At virtually all public universities, administrative overhead and full-time administrative positions have increased two to threefold over the past twenty plus years, while full-time faculty positions have decreased, except in the case of some smaller state universities that have expanded massively so that full-time positions have increased somewhat, even though the percentage of full-time positions has decreased to the same level as at other state universities, if not more.

The chief reason for this emphasis on part-time teaching positions is cost. As I’ve noted before, fifty years ago, on average, state legislatures supplied the bulk of higher education funding. In 1974, states provided 78% of the cost of educating a student. Today, although total funding is actually higher, because almost four times as many students attend college today, the amount of state funding per student averages around 20%, although it varies widely by state, and in some cases it is around 10%.

For example, almost until 1970, California residents could attend the University of California [Berkeley] tuition-free. Today, tuition and fees for in-state students are around $15,000 a year. This trend, if anything, is accelerating. Just since 2008, state funding of higher education has dropped by 20% per student

The response by legislatures, predictably, is to push for more efficiency. Unhappily that has translated into “get lower costs however you can.” The problem with this is that the emphasis, no matter what administrators say, is to turn out the most graduates at the lowest cost. Universities also tend to phase out departments with small numbers or high costs, and expand departments with large numbers and low costs, even if students that major in that area have difficulty getting jobs.

In addition, political pressure, both to “keep” students in school for budgetary reasons and to graduate a higher percentage of students, has inexorably decreased the academic rigor of the majority of publicly funded universities and colleges. This, in turn, has led to more and more businesses and other employers demanding graduate degrees or other additional qualifications, which further increases the tuition and debt burden on students. That’s scarcely “economic” on a societal basis because it pressures students to aim for high income professions or high income specialties in a profession, rather than for what they’re good at doing and what they love. It’s also created an emphasis on paper credentials, rather than the ability to do a job. On top of that, it’s meant more highly qualified individuals are avoiding professions such as teaching, library science, music, art, government civil service, and others; and those professions, especially teaching, are being filled by a greater percentage of less highly qualified individuals.

The end result of the combination of stingy state legislatures and the “business model” is less rigorous academic standards and watered down curricula at the majority of public colleges and universities, skyrocketing student debt, a smaller and smaller percentage of highly qualified, excellent, and dedicated full-time professors, and a plethora of overpaid administrators, the majority of whom heap even more administrative requirements on full-time teaching faculty.

No efficient business actually operates this way, and why higher education gets away with calling what it’s doing “the business model” has baffled me for more than two decades.

4 thoughts on “Education and the Business Model”

  1. TOM says:

    It may not be that there is difficulty in finding a business model that is suitable for the administration of education. This may take time. Business models don’t suit all venues, as we see daily in the White House. That maybe a problem with the CEO and not a problem with the business model chosen for the business. Eventually the business fails or the competition takes it over. In the meantime, as per your penultimate paragraph, everyone suffers. The scapegoat is usually the one with least control over the system; in the education system, the teacher.

  2. R. Hamilton says:

    Between the burden of compliance with federal requirements, and universities being an easy hiding place for overpaid useless political appointees, is it any surprise that administrative costs are out of control? Get the federal government to reduce the burden it imposes, and hold local politicians accountable to stop padding payrolls, let alone with often useless donor cronies.

    But everyone has to give up something to get costs under control, and that even includes the worthy among the long-suffering academic staff.

  3. RRCR says:

    Most administrative college positions are not held by poltical appointees. Most colleges don’t articulate with government in such a way as to make that even possible. There are almost to no political appointees as actual academics. So I don’t see R. Hamilton’s point at all. Seems like boiler plate for the typical “business is best” model that is pretty much a complete failure in areas where capitalism isn’t really a reasonable or comprehensible way to manage the functions of the institution. The essential point of the author’s post.

    To counter/add to Mr. Modeseitt’s point, the inflation of the need for paper degrees has also resulted in LESS competent people who happen to the right “papers” getting jobs both in academics and administration. Just because someone has a PhD in anything doesn’t mean they are more competent in their field or a decent instructor. I have seen those precious few full-time positions go to inexperienced academics with less competence and less teaching ability when there are several adjuncts on staff with less impressive “paper” credentials but amazing amounts of experience and the ability to actually teach the material to eager students.

    Not to mention the academics who feel the pull to administrative positions with the addition of perks, substantial pay increase and reduction of additional duties. Considering the onus of all the new business requirements (“Dedicate to Graduate” or some other similar requirements), plus all the academic requirements, plus teaching…. Getting another degree in Educational Administration to “move up and over” to an administrative position seems like an attractive option.

    Administrative bloat has also lead to the administration “capture” of many able academics.

  4. darcherd says:

    Leaving aside R. Hamilton’s comment about political appointments in academia, he does have a point about increased governmental regulation. While I don’t have as much experience with the funding models for higher education, in K-12 schools I’ve seen significant bloat in administrative functions. The main driver is the increase in special, targeted funding, e.g. for special education or any number of worthwhile goals. But each new, separate funding program more complex than a simple block grant requires someone to administer the program, track and report the results and performance of the program, and write proposals and submissions justifying the continued need for the funding. It’s all very well-intentioned; after all, no taxpayer wants government funding wasted. But the net result is that administrators multiply geometrically while teachers grow arithmetically.

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