Wednesday, May 11, 2011


The Achilles’ Heel of the For-Profits

Quick -- what’s the fatal flaw of for-profit higher ed?

Adjuncts? Nope -- the nonprofits invented the genre, and have carried it to extremes.

Online instruction? Nope -- they don’t have a monopoly on that, either.

Low standards? Nope -- they didn’t invent low standards, and some of them are as immune to the charge as are many nonprofits.

Employer focus? Puh-leeze. Have you seen community colleges lately?

To be fair, it’s a bit of a trick question. The fatal flaw of for-profit higher ed is the same fatal flaw for public higher ed. It hasn’t solved the cost disease.

The news that the Princeton Review has dropped its community college program really didn’t surprise me. The program consisted of teaching the same classes as a local community college, often using the same faculty, but charging more. The idea was to provide additional capacity that the community college couldn’t -- in this case, in a Nursing program -- and to turn a profit by charging more.

I’ll repeat that last part for emphasis. To turn a profit by charging more.

The program wasn’t any more efficient at the core business of teaching. It had not figured out any breakthroughs in pedagogy that would help otherwise-struggling students to get it. It did not find a disruptively brilliant use of technology. It simply offered additional capacity at a higher price.

When I worked at Proprietary U, I remember occasionally wondering what enabled it to be as profitable as it was (and it was). The classes weren’t outlandishly large when compared to the local competition. When I got there it didn’t even offer online courses. (I’m dating myself a bit with that.)

It eschewed some of the cost centers that weigh down other colleges, like athletic programs and manicured quads. It had a twelve-month teaching calendar, so students could finish eight semesters in less than three years, and the building seldom lay fallow when it could have been producing revenue. It kept its programmatic offerings relatively few, so it didn’t have to run low-enrolled sections of zombie majors. And it charged more, and paid less, than the local publics.

(To be fair, it actually incurred higher costs in marketing and admissions. I’m constantly surprised at how small the Admissions staffs are in the cc world.)

But the nut it couldn’t crack was teaching. It tried, sometimes in stupid and offensive ways, but it couldn’t.

This Chronicle piece reminded me of those stupid and offensive ways. Every Tuesday the deans used to get a report -- anyone remember dot matrix? good times -- showing the sections with the highest drop rates up to that point, with instructor’s names attached. The idea was to hector the offending instructors into mending their alienating ways. I foot-dragged on that until I got another job, but the institutional direction was there.

At the time I was offended by it. Looking back, though, I’m struck at how primitive it was. The entire competitive advantage in the classroom consisted of telling instructors to try harder. As barriers to entry go, that ain’t much.

The actual classroom instruction looked pretty much like actual classroom instruction anywhere else. The faculty thought of them/ourselves as college faculty, with all the same complaints and points of pride. (The lack of summer breaks was unique, but otherwise it was pretty much the same.) Department meetings looked much like department meetings anywhere. The student body was very much like the student body at most community colleges, if a bit more male.

That’s probably why I’ve been so unsympathetic to blanket condemnations of for-profit higher ed made by people who’ve never worked in it. They often rely on stereotypes or overheated fantasies of the worst possible corporate caricatures. They simply don’t describe the on-the-ground reality.

The reason the for-profits are struggling now -- beyond the obvious missteps of a few conspicuous morons -- is that they never actually solved the underlying productivity problem, and the political/economic room for cost premiums is shrinking. They aren’t flawed by being radically different. They’re flawed by being very much the same.

One thing I've noticed about the for-proits around here is the amount of money they spend on advertising/recruitment. It's significantly more than non-profits. Tuition is significantly higher, too, yet the recruiters I've met all claimed they were cheaper to attend.

They did this by comparing the tuition+books cost of a 3 year college diploma to the total cost (tuition, books, residence) of a 4-year university degree. Given that the college is beside the university (so living expenses should be identical) this is deceptive, and when you subtract the cost of residence the college becomes more expensive. Then factor in having a diploma instead of a degree (electronics technician vs. electrical engineer, for example) and I'd go as far as to claim that their recruiting is deliberately deceptive.

Basically, they do things that would get a non-profit castigated by the media, but because they are a business it is suddenly just normal practice.
Resume Service at 6:20am - Wow, is that the kind of grammar you would use in your resumes?!
For a bit more info on the "cost disease," there's a nice explanation here.. It's insidious.

Someday I hope to be called "insidious."

I'm just sayin'.
Anon 6:26 is a spammer. I received exactly the same message in my blog, which is on an entirely different topic.
The real problem is massive excess capacity in higher ed, coupled with demographic shifts that will lead to lower demand for a product whose perceived value is in decline. Could be a perfect storm.

We love to believe that colleges and universities are teaching our young adults how to think. In the vast majority of cases, they don't learn that. The economy needs those people to learn how to do.

Unfortunately, higher ed has allowed itself to evolve from being a learning factory to being a credentialing and sorting machine.
Of course, for-profit colleges are similar to their nonprofit brethren, and if for-profits want to charge more for the same product, that is certainly their right. The big problem is that they are sucking up a disproportionate amount of the federal and state financial aid pie. If students get enough aid, the fact that a for-profit is more expensive becomes much less of an issue. And, that leaves less aid for students who want to attend colleges who have a larger goal than their own bottom line.
The last thing our elites want is an economy full of people who know how to think. That's why they pound it out of our children, and it's why college can't magically resurrect it in a culture devoted to not doing it.

The for-profits are an elaborate mafia scam, like skimming construction contracts. When asked to actually educate, they can't, because that's not their purpose. Their purpose is to turn Federal grant money into official-looking diplomas.
Thank you for writing this piece. As someone who teaches at a for-profit that actually "educates" (that was for the previous comment), I am frustrated with many of the comments of those who do not know the world of the for profit. At my institution, we work diligently not to fall into that stereotype of giving a degree to anyone who has a pulse.

Granted, there are those for-profits that deserve the backlash. They come by it honestly. But, the public institutions are not so innocent either. Regardless of where one teaches, we all have a responsibility. It's only a mater of time before the Feds come after the private and public not-for-profits with respect to "Gainful Employment". That means you will also have to justify why it costs so much money to earn a degree in journalism when the only employment one get obtain is evening manager at Bares and Noble. Just sayin',
What you say about the minimal distinction between FP and NFP also makes a lot of sense in the Australian context, where we see distinctly profit-y practices in public institutions. It's just that in the for-public sector we call these things like "cost recovery", and sometimes more dizzyingly "full cost recovery". And we explain our concern about student attrition in cultural and social terms (yes, we also ring them up and ask them to come back to class). So I think you're right, the distinction isn't between the relative degrees of profiteering, so much as whether or not any of us are ready for the coming perfect storm.
Is it possible to imagine that all the different providers in the globally mixed higher education realm could get better at learning from each other about what we have in common, or is too much of a risk to the reputations of the NFPs and PUs? Just curious.

Why don’t you try other variables of this area? This will be worthwhile for you. And of course, we will learn something more from your thoughts.
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