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.