Tuesday, January 01, 2013

 

Barriers to Entry


My fellow IHE blogger, Lee Skallerup-Bessette, got a bit of a discussion going on Twitter over the break when she posted a real estate listing for an abandoned college campus.  In the context of adjunct activism, she proposed pulling people together to buy the campus and start their own college.

Two thoughts.

First, yes, I like the idea of trying something new from scratch.  I disagree that the first step is buying a campus, especially one that has already failed; I’d suggest coming up with the business plan first, and then deciding on a facility (or not).  But the entrepreneurial spirit strikes me as healthy and welcome.  Given the issues facing traditional institutions, it seems like a great time to try something different.

Second, though, the barriers to entry in higher ed are among the highest in any industry.  I suspect this may explain a lot.

On the employment side, of course, the primary barrier to entry is graduate school.  By consistently raising the bar on future faculty, we keep many interested people out.  We refer to the process as “having standards,” which is both true and not.  Progressively raising the barriers to entry benefits the incumbents.

But what’s unique to higher ed is the barrier to entry on the institutional side.  It’s harder to start a new college than it is to start a new law firm, medical office, store, or really just about anything.  

On the institutional side, the main barriers are accreditation and state licensing.  

Both have valid reasons.  If we assume that unscrupulous people aren’t above setting up cheesy little operations to scam money -- shocking, I know -- then it makes sense to have some sort of seal of approval that the general public can use when trying to decide whether a given college is legit.  Accreditation isn’t a perfect process, but it does serve to ensure that a given institution actually is what it says it is.  When people often aren’t in a position to make that judgment for themselves, that’s a real service.

Accreditation has become a de facto requirement for financial aid eligibility, which is a de facto requirement for a college to make a go of it.  Getting accreditation requires showing not only that a college has strong faculty and curriculum, but also that it has effective outcomes assessment, student services, financial aid, fiscal planning, fiscal resources, information technology resources, long-term planning, and more.  (City College of San Francisco, has recently discovered just how serious this actually is.) Every single one of those comes with costs, and every single one must be in place at an acceptable level before accreditation will be awarded.  In other words, anyone opening a new college had better have not only a chunk of capital for startup, but a chunk of capital to lose money for the first several years of operation.  

MOOCs and various online alternatives are trying to disaggregate the bundle of services that a college provides.  I’ve been surprised and impressed by the speed with which they’ve moved.  But at this point, they’re still very much supplemental to accredited education.  They’ve found ways to ally with existing institutions -- critics might say, to feed off existing institutions -- but they haven’t found ways to handle accreditation themselves.

In most industries, the barriers to entry for new entrepreneurs are much lower than in higher ed.  Yes, individual faculty can ply their skills in a number of places, and many have sidelines as consultants in various fields (or as adjuncts elsewhere).  But it’s much harder to set up a new college than to set up, say, a new store or a new law firm.  Starting small really isn’t an option; the resources required to attain critical mass are so substantial that very few interested people can do it.

Higher education needs to experiment with various institutional structures if it wants to thrive in the next few decades.  In practical terms, that means finding ways to make it easier for new actors to hang out shingles.  As long as most of higher ed consists of “mature” institutions, the sector as a whole will behave accordingly.  It’s more difficult -- possible, yes, but much harder -- for an institution with decades of obligations to make significant changes than it is for a newcomer.  If we want a badly-needed infusion of new ideas, energy, and approaches, we need a host of new institutions with the ability to try new things.  

We need it to be possible for Lee and her allies to start their own college.  I still wouldn’t recommend buying the campus, though.

Comments:

Dean Dad, welcome back from your holiday.

These days, it is difficult to see why anyone would want to consider starting up a new “bricks-and-mortar” college or university. As Dean Dad points out, the startup costs would be staggering—the hassles involved in getting the school accredited are mind-bending. You would have to figure out how to do outcomes assessment, how to handle financial aid, how to manage information technology, as well as how to set up a curriculum that would pass muster from the accreditors. All of this would cost a ton of money before even the first tuition-paying student shows up.

One possibility is for entrepreneurs to buy out a school which is experiencing financial difficulty but which is already accredited—as has happened in a couple of recent cases. Provided that the new owners are not so rash as to quickly turn their school into a diploma mill, in most cases the accreditation stays even if the ownership of the school changes.

However, there are several new colleges here in Big City that have recently come into existence. A lot of their ads have appeared in the local media. But it seems that these new colleges are exclusively online--they don’t have to incur the expense of maintaining expensive bricks-and-mortar facilities such as classrooms, parking spaces, dormitories, and extensive IT facilities. They appear to be mainly for-profit institutions and are intended to attract students who want to major in fields such as the culinary arts, business management, criminal justice, public administration, health sciences, and counseling. They target students who are working full-time or who have family responsibilities, and who want to improve their job prospects or perhaps to enhance their possibilities for promotion. These schools are probably little more than mailboxes, perhaps with just a few administrative staff on site, and their classes are taught largely by off-site part-timers who are poorly paid and who have no benefits.

Online education seems to be just about the only growth area in Higher Ed these days. In the not too far distant future, just about the only place you will still be able to see a live professor teaching a classroom full of students will be at the most prestigious of the R1 universities or at the snootiest of the SLACS. Just about everything else will be taught by remotely-sited part-timers.

 
The big cost is the library without which you will not be accredited
 
You can get some really good deals on real estate these days. That campus might even be cheaper than an office building in a big city.

The reasons for needing accreditation are valid, but my understanding is that you do not have to be fully accredited to open your doors. Wasn't there a story in IHE about one of the State Colleges in Florida offering a BS degree (in Nursing?) and failing to disclose that it was not yet accredited?

It is true that there is a lot of work to do, but one advantage is that there is no penalty for copying degree programs elsewhere. The framework for a degree program has been pretty clear for a long time. Outcomes Assessment is the new challenge, right up there with a library, since it is a major time suck even at an established college.

I don't think you can start a new university, on-line or not, without a faculty that is more than just "staff". Haven't you followed the challenge facing a certain large university that even sponsored a bowl game this year? I haven't seen any updates in IHE on how their appeal is going, but one key issue was two few permanent faculty to oversee the adjunct army.
 
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