Business and Economics

June 5, 2016 By B. Baylis Leave a Comment

Higher Education and Toilet Paper, Part II

This is the first of several follow-up posts to the posts What does higher education have in common with the watch industry, the chocolate industry and toilet paper manufacturers? and Comparison of American Higher Education with the American Automotive Industry that I published six years ago. I have been thinking about reprising the idea after seeing the YouTube video, HoboTraveler.com The AskAndy Show, about toilet paper with no center core. Although Kimberly-Clarke introduced the “Natural Roll” under the Scott Brand name about 8 years ago with much fanfare as to how it was going to reduce landfill, incinerator and recycling waste in the United States, it seems to be a colossal flop here, but it has caught on in Europe and Asia. Witness the following U.K. news article from 2014, Roll with the times: U.S. company takes the cardboard OUT of toilet paper for first time in a century in move to cut down on waste.

In the initial roll-out of the tubeless toilet paper, Kimberley-Clarke indicated that approximately 17 billion rolls are used world-wide, each year. That would be enough to fill the Empire State Building twice. Placed end-to-end, this many rolls would stretch around the Earth at the equator 40 times. They also represent 160 million pounds of waste, roughly equal to the weight of 250 Boeing 747s. In an effort to encourage the use of the core-less toilet paper rolls, ScottBrand has published the following website for consumers to estimate how many rolls their families would typically use: How many tubes do you use?

Why would the core-less roll find a burgeoning market in Europe and Asia, but not in the U.S.? There is probably no one answer. Most likely, it is a combination of a number of factors. Most US consumers give lip service to going “green.” However, if it costs more or is a little less convenient, the US consumer seems to stick to the old way of doing things. Consider recent pushes for light bulb, battery and electronic equipment recycling. In Asia and Europe, particularly Eastern Europe, consumer products are far more controled by central government decisions.

What’s all this have to do with higher education? Let’s go back to the 1890s when toilet paper rolls were introduced. Toilet paper rolls were a new convenient way to provide a sanitary way for people to clean themselves after the elimination of bodily waste. They didn’t catch on right away. Their use skyrocketed with the almost universal introduction of indoor plumbing, community sewer systems, and private septic systems that were built on the premise of the disposal of only biodegradable products.

www.madblog.org/2011/09/an-unexpected-catalyst-the-gi-bill/

Prior to the return of soldiers from World War II and the introduction of the educational benefits contained in the G.I. Bill (or Servicemen’s Readjustment Act of 1944), American colleges could be divided into three models. The first model was the small, quintessential residential liberal arts college. The second model was the land grant college that grew out of the 1862 and 1890 Morrill Acts. These IHEs tended to be larger schools that emphasized agricultural education and research, and community service outreach programming. The third model was born out of the European research-based educational institutions that began in the US, around the turn of the 20th century, with the flourishing of the Ivy League institutions and the birth and growth of the University of Chicago and Stanford University. With millions of servicemen and women looking for educational opportunities in the latter half of the 1940s and the first half of the 1950s, the existing IHEs didn’t have the capacity to handle such a load.

One very surprising solution to this overcrowding was the unexpected growth of for-profit institutions in the late 1940’s. Many of these institutions were labeled “fly-by-night” schools at the time. Sound familiar? There was a two pronged approach to tackling the problems created by these schools. The first was to increase restrictions by the federal government and accrediting agencies. Sound familiar, again? The second was the unprecedented expansion in the latter half of the 20th century of existing traditional colleges and universities in terms of enrollments, programs and facilities. These expansions created a secondary market demand for an increased number of faculty, which further drove the expansion of graduate programs. Since the early 1990s, the job prospects, in and out of academia, of recent doctoral graduates in almost all disciplines have tanked. In many disciplines we now have a surplus of PhDs. What are we going to do with all of them?

As all of this has been happening, there has been call after call for more education. Politician after politician has pushed for more college graduates to meet the unmet demand for qualified job applicants. To meet these demands, American society has turned to three sources. The first has been for-profit institutions, that many accuse of operating unethically. Sound familiar? The second source is an explosion of non-traditional programs emanating from the traditional IHEs. If you can’t beat them, you might as well join them. The number of traditional IHEs with “adult educational programming,” online programs and even MOOCs has exploded. The third has been pressure from multiple sources on the traditional IHEs to be “more efficient” in their traditional programming. Everyone has THE SOLUTION.

However, when we try to partially implement these solutions, the situation seems to get worse. Enrollment in higher education has reached an all-time high. However, so has the number of attriters who enrolled in programs but don’t complete them. The level of borrowing for education has reached all-time highs, as has the number of defaults. As more under-prepared students have enrolled, accusations of dumbing down the curriculum have escalated.

What lesson can we learn from the toilet paper industry? Once American society has become accustomed to a particular approach to a particular problem, it is very difficult to move it to try something new. It makes no difference that the new product or service may be less expensive in the long run, and a better use of natural resources. It takes overwhelming pressure to introduce a new behavior and have it take hold a significant segment of society.

For those of us who are old enough to remember the early days of cable television, we can’t forget the overwhelming pressure from the ubiquitous MTV ads that shattered our ear drums with the droll, repetitive chant “I Want My MTV!!!” MTV hooked the adolescent crowd with a constant barrage of their ads and free introductory offers of music videos . For those of us who were somewhat beyond the adolescent years, we had athletically inclined ESPN, the first 24-hour sports and entertainment network. Fortunately, there was more sports than entertainment. Who can forget camel races, ostrich races and Australian rules football? Once the American public was hooked, ESPN is now a staple on all cable and satellite systems, usually with multiple channels. What’s the secret? Start early and small with a product that people want, then keep feeding them the candy to get them addicted.

Is it too harsh to suggest that we need to get people addicted to education? We need to start hooking them on education early. Trying to get the late adolescent or an adult to see that they need education is too late. Talking to an early adolescent about the need to read can be like talking to a brick wall. We need to introduce children to books before they start schools. Kindergarten may be too late. This was the conclusion of the report STEM and Early Childhood — When Skills Take Root, commissioned by Mission: Readiness, a nonpartisan national security organization of more than 600 retired generals and admirals calling for smart investments in the upcoming generation of American children, and ReadyNation, an organization of more than 1400 business leaders who work together to strengthen American business through effective policies for children and youth. If we were to follow the recommendations of “When Skills Take Root” it would mean that parents would be responsible for introducing books and learning to their children at pre-K ages. That’s a tall order in this society, when many adults have not read a book in years.

Trying to get the late adolescent or an adult interested in educational programming that forgot them years ago is nonsensical. Attempting to lure a late adolescent or adult into academic programming that uses approaches that they rejected years ago is a nonstarter. We need to go where they live and think like they think. We must bring the reticent adolescents and adults slowly into the light. We need to speak their language and use their media and methods as a starting place. I know this goes against grand educational traditions, It is NOT how we learned. That doesn’t matter. We are in a war for peoples’ minds and we need to use the most effective weapons. If we don’t have those weapons in our arsenal, we need to add them. I know that this doesn’t solve our immediate problems. However, I can almost guarantee that it will eventually bare fruit, both for the general public and for IHEs.

Pair of boots, service rifle, and helmet stand in tribute to fallen soldier; courtesy of largeart.com

This next two paragraphs are probably the strongest statement that I have ever made about the future of higher education. We are engaged in a war. As in any war, there will be casualties. Some of the casualties will be civilians, while others will be educators. We will not educate every adolescent or adult in society. However, we have a responsibility to try to save and educate as many civilians as we can. Some we will lose because they refuse to help themselves. If individuals refuse to be educated, we can’t force it on them. Some we will lose because we don’t have the forces to reach them or we have deployed our assets incorrectly. We need to carefully study our battle plans to reach as many as we possibly can. We will lose some educators in the battle, because we haven’t trained, equipped, deployed or supported them properly. These loses are the most unfortunate because they could have been prevented.

We will also lose some IHEs along the way. We lost four within the past month with the announcements that St. Catharine College (KY), Dowling College (NY), Wright Career College (KS) and Burlington College (VT) will close their doors this summer and not offer classes this fall. Some IHEs will find themselves in untenable financial positions from which they can’t recover. The most unfortunate cases are probably those that we lose to friendly fire. If you are uncomfortable talking about the future of higher education in these terms, then I suggest that you might look for another profession. This war is only going to get messier. I am not a prophet of doom. Higher education will survive this onslaught and will regain some high ground. Will it recover all of its loses? It is possible, but not likely. However, the new emerging higher education will be different from the higher education of the late 20th century.

I began this post referring to a post in which I compared higher education to the watch, chocolate and toilet paper industries. In future posts, I will deal with the watch and chocolate industries. In the meantime, I would not recommend TPing anyone’s house or car.

May 14, 2016 By B. Baylis Leave a Comment

The Paradigm of Surviving and Thriving

Rebekah Basinger’s Generous Matters blog post Surviving, Thriving and Six Degrees of Separation has started an avalanche of thoughts in my mind. My initial thought was that Rebekah is working with a Surviving/Thriving Paradigm. This paradigm can outline a common pattern of organizational behavior. Undeniably, from reading Rebekah’s post, I know that it is specifically being applied to ministries and organizations. As I continued to delve into the steps of separation, I came to see a natural and obvious spill over of applications of this paradigm to for-profit businesses. However, during those periods of semi-consciousness when I was trying to go to sleep and trying to wake up, my thoughts settled in on a number of very wild, but related ideas. This concept could also have traction for individuals. In addition, if we can apply the ideas generated in these thought games to individuals, ministries and businesses, would it not make sense to try to scale them up the organizational ladders? Can we apply the Surviving/Thriving Paradigm to whole industries and even countries? We may just be following in the footsteps of Paul Kennedy with his book The Rise and Fall of the Great Powers, or Karen Blumenthal with her biography, Steve Jobs: The Man Who Thought DIfferent.

It’s not the first time that I have had similar thoughts. One thought in particular has been the cause of nightmares on occasion: “Does the Higher Education Enterprise go through periods of thriving and just surviving?” You will notice that in deference to some of my sisters and brothers in higher education, I didn’t use the term “industry.’ In June 2010, I published the post What does higher education have in common with the watch industry the chocolate industry and toilet paper manufacturers? I am convinced my watch/chocolate/toiletpaper post is directly related to the surviving/thriving topic. In my post, I first looked at how the watch industry was completely revolutionized by the introduction of a new technology and a new idea. Watches didn’t have to run on jewels and finely manufactured gears. Time be could kept by crystals excited by electrical current. Watches didn’t need dials to tell you the time. They could do it with lighted numerals. Watches didn’t need to be expensive works of art to be useful. Not everyone wanted an expensive piece of jewelry that told time. This revolutionized the watch industry right out from under the noses of the staid, historic brand names, some of which disappeared. They were replaced by upstart technology firms that had little concern about beauty, with the exception of Steve Jobs and Apple, who had a new definition of beauty. In comparing higher education with the chocolate industry, I focused on two extremes within the chocolate industry which were able to bifurcate the industry and not only survive, but thrive. Not everyone wanted the expensive Dove, Ghirardelli, Godiva or Cadbury chocolates, but these chocolates were still able to maintain a sizable market share and thrive as businesses. At the same time Hershey thrives with a completely distinct market, pricing structure and marketing plan. The third example in my post, toilet paper, is a product that has been used universally for many years. Over five centuries the distribution plan in this industry has radically changed. The old methods have been completely replaced by a new model. Is this a warning for higher education? Are we unnecessarily flushing money down the drain?

I published a second post in June 2010 entitled: Comparison of American Higher Education with the American Automotive Industry. In this post I obviously attempted to compare American higher education with the American automotive industry. This was not a great time for the American automotive industry. In my post, I outlined some of the problems that brought into question the survival of the upper midWest, rust belt automotive industry. A November, 2005 WSJ piece A Tale of Two Industries posed doubts about the health of the American automotive industry that had ruled the roost since the middle of the twentieth century. This article began with a story that hit home to a number of people who had been our neighbors when we lived in Indiana. Grant County, Indiana, had been reliant on heavy manufacturing since WWII. General Motors was the county’s largest employers. Buried in the WSJ article was an announcement that GM was closing its Marion plant and eliminating 2,000 jobs. This hit the small county seat very hard. The county’s unemployment rate was already hovering around 10%.

In my post, I noted the similarities between the decline of the once dominant model in the American automotive industry of manufacturing plants in the upper midWest with the rise of a “second American auto industry” in the South. This new competitive model was providing lower cost cars while still paying employees well for what they had been receiving in the new region. By 2005 it had captured 26% of the market for all new cars made in America. The WSJ article suggested that this switch came about because the old model of producing premium cars at premium prices no longer was bought unquestioningly by the American consumer. They were staging a price strike.

Meanwhile headline after headline each week, in educational news outlets, as well as the general public press, announced the closing or merging of colleges and universities. Many pundits were predicting the demise of higher education as we knew it. Why all of the gloom and doom? However, in my research of college closures, I found that the first decade of the 21st century was the decade with the fewest closures or mergers since 1850 when people started keeping track of these things. In my post I postulated that this reading of conditions by the higher education community was what I suggested was the Crab Pot Syndrome. Higher education had just experienced enrollment and building booms in the last two decades of the 20th century which had only been surpassed by the boom created by the return of WWII soldiers and the GI Bill. In addition, many proprietary institutions were prospering, as well as the online educational operations of public flagship universities and many residential liberal arts colleges. Why? They were providing a product at a reasonable price in a fairly convenient format for a public which did not believe that the premium that the residential liberal arts colleges and flagship universities were charging was worth the difference in price. On the whole American higher education seemed quite comfortable. It could be compared to a crab in a pot of water sitting on a stove, before the heat is turned on. The crab just sits there lounging in a pot. As the heat increases, it actually begins to enjoy the warmer water. It isn’t until the water almost reaches the boiling point, does the crab realize that it is in trouble. It begins to try to claw it’s way out of the pot. However, by this time it is too late, and this crab will soon be eaten for dinner.

At the conclusion of my aforementioned post I stated that: “I think we should be taking seriously the question raised by Joseph Marr Cronin and Howard E. Horton in their May 22, 2009 Commentary in the Chronicle of Higher Education entitled, Will Higher Education Be the Next Bubble to Burst?“ In the six intervening years since I wrote that post, a number of events have dramatically changed the landscape of higher education. Do those events alter my conclusions? My first conclusion now is that the bubble has already burst. As a fallout to that explosion, I would now say that we MUST reevaluate the whole enterprise of American higher education. This reassessment must answer all of the following questions concerning a new American higher education paradigm:

What are the appropriate differences between the public and private education sectors?
What roles should the federal and state governments play in public education?
Do the federal and state governments have any role in private education?
Who pays what in this new paradigm?
What role do student loans pay in this new paradigm?
What role does accreditation play in this new paradigm?
What role should proprietary institutions and corporate universities play in this new paradigm?
What role should career and technical training play in the new paradigm?
What role should online education, eLearning and MOOCs play in the new paradigm?
What role should non-traditional learning modalities play in the new paradigm?
What role should badges and credentials play in the new paradigm

I don’t want to be Chicken Little running around yelling “The sky Is falling! The sky is falling!” However, if we are not careful, it is quite conceivable that the tornado that is bearing down on us will level our enterprise and scatter the debris of what’s left all over creation.

May 1, 2016 By B. Baylis Leave a Comment

The Business Model for Higher Education is Broken, Part II

In Part I of this series on the business model for higher education, we postulated that higher education must be operated as a business. I begin this post by reinforcing that assumption by referring to two articles. The first one is the blog posting According to the Duck Test, Higher Education is a Business that I wrote and published here in By’s Musings in August 2010. I began that post by relating an incident that occurred on the farm next door to our home as I was growing up. I remember vividly one instance when the farmer, completely frustrated with his broken down tractor, was yelling and screaming, and calling the tractor a “piece of junk,.” and threatening to send it to the “tractor graveyard.” From my experiences of watching and working with my father as he fixed broken machines, I learned that nothing was irreparably damaged. He operated under the principle that anything could be fixed. Our heavenly Father operates under this same principle. From scripture we know that if we confess our sins, truly repent of them, then God the Father will forgive us, cleanse us, repair us and not condemn us. If we confess our sins, He is faithful and just to forgive us our sins, and cleanse us from all unrighteousness. (I John 1:9, KJV) and There is therefore now no condemnation to them which are in Christ Jesus, who walk not after the flesh, but after the Spirit. (Romans 8:1, KJV) When my facial and body expressions questioned the farmer’s judgment, he proceeded to teach me a lesson that I never forgot, and one that I have used many times since then.

The farmer looked at me and said, “Son, do you know the Duck Test?” I hesitated a little and finally said sheepishly, “No Sir, I don’t.” The farmer, with a condescending glance said, “Well you really should, so let me tell you. When I see an animal in the farm-yard that looks like a duck, waddles like a duck, quacks like a duck, swims like a duck, and flies like a duck, I am very confident that animal is a duck.”

In my 2010 post, I went on to delineate many of the ways that Institutions of Higher Education (IHEs) resemble businesses. Relying on the duck test, my argument that institutions of higher education (IHEs) are businesses consisted of the following premises:

IHEs must be incorporated or chartered by the state.
IHEs own or rent property.
IHEs pay taxes or users’ fees.
IHEs have employees, who form or threaten to form unions to gain bargaining power against an entrenched management known as the administration.
IHEs must pay their employees wages at or above the federal or local minimum wage.
IHEs must pay FICA for all employees, except those excluded legally. If the institution doesn’t pay FICA, the employees are required to pay FICA as self-employed individuals, making those individuals businesses.
IHEs must provide medical insurance consistent with federal or local laws.
IHEs must meet all federal and local compliance regulations placed upon businesses.
IHEs offer products or services to individuals. Whether, you label those products or services courses, credit hours, instruction or an education, the institutions collect money in exchange for those products or services.
IHEs compete for students (just like businesses compete for customers).
Just like a business, the expenses of a given IHE can only exceed its revenue for a limited period of time. It doesn’t matter whether the IHE is classified as a not-for-profit or for-profit organization. If its expenses exceed its revenue for too long, the IHE can be forced to declare bankruptcy and close down.
IHEs are required to undergo annual audits of finances including balance sheets and cash flow sheets, and submit them to the appropriate federal departments, including the Department of Education. In some states, these audits must be submitted to the Department of Commerce.

Since institutions of higher education look, act and speak like businesses, I am very confident that according to the duck test, IHEs are businesses.

The second article I mentioned in my introduction, A University Is Not a Business (and Other Fantasies) is probably the more powerful of the two articles. It was written by Milton Greenberg and appeared in EDUCAUSE Review, vol. 39, no. 2 (March/April 2004): 10–16. Professor Greenberg was professor emeritus of government at American University until his death in 2015. He previously served as provost and interim president at American University, and as such devoted much of his work to developing and rewarding high-quality faculty. Greenberg once said, “College and university teaching represents more than expertise in a scholarly discipline. It means that you are privileged to be part of an extended community that constitutes one of the most important professions in the world.” Provost Greenberg was also known as the most eloquent expert on and spokesperson for the Servicemen’s Readjustment Act, also known as the “G.I. Bill,” which gave veterans across the country access to federal money to pay for higher education after it was passed in 1944.

In Greenberg’s article, he wastes little time in laying out the opposing positions in this war. His opening paragraph sets the stage for the epic battle that was to ensue. The battle lines are clearly drawn.

Academe emerges from—and largely remains within—a culture that sees only a remote and sometimes hostile relationship between its activities and the economic system. This view takes the form of an often-heard campus expression: “A university is not a business.”

Greenberg begins his attack with the two Washington Post December 2003 articles, “The Lesson Colleges Need to Learn,” and “An Educating Use of Business Practices.” These articles were written by one of their leading business columnists, Steve Pearlstein. Pearlstein committed the “ultimate sin” in the eyes of the academy by questioning the efficiency of teaching the “same course” on many different campuses using many different faculty of varying calibre. Pearlstein suggested the unthinkable: greater efficiency and perhaps better learning could occur by using a simple technology like CDs to provide the same superior lectures by superior lecturers to all students across the many different campuses. Pearlstein came under general hostility and heavy fire from the higher education establishment, which considered learning “too special to be run like a crass business enterprise.” You can’t use the word efficiency in the same sentence with learning.

Greenberg continued by noting that although the usual readers of the EDUCAUSE Review had probably heard, and possibly even uttered, that same thought many times, this was most likely the first time it appeared on the front page of the business section of a leading U.S. newspaper. Pearlstein had done the unthinkable. He challenged one of the basic tenets of the academy right in front of the general public. How dare he do this? Higher education was one of the untouchable foundational columns of our society. It was beyond the pale of criticism or suspicion. It held such a position of high esteem that people didn’t dare question the academy or what it did. They trusted the academy. However, here was one of the leading newspapers in the country, raising doubt. This was treason! This was war! Faculty took to the streets, and joined the barricades. They raised their torches of the “true light” and shook their fists at this interloper who had the courage to question their legitimacy. How could higher education be a business? The guiding principle of the business world was antithetical to everything for which academy stood. What standard was this pariah attempting to foist on the academy? Simply stated the principle was “the hierarchical and orderly management of people, property, productivity, and finance for profit.” Greenberg didn’t let up his attack. He continued by noting that in his observation, the ” ‘not a business’ mantra arises on a campus whenever an administrator expresses concern over a program that is losing money or whenever a governing board suggests that the faculty be better managed or supervised in their work. Any mention of such matters will call forth the faculty judgment that the administration has a corporate mentality and is treating the university like a business, the ultimate sin.” The implication was clear. Faculty had the truth. Everyone else, especially those outside the academy, had to have faith in them and trust them. Here we had the first chink in the armour, the first admission from someone of stature, that essentially all IHEs were essentially faith-based institutions.

To be fair, Greenberg attempts to present another side to this argument by appealing again to the Washington Post for his ammunition. This time he turns to an October 2003 op-ed piece, “When States Pay Less, Guess Who Pays More?” by two economists, Robert Archibald and David Feldman. In their article they claim, “Our universities are not inefficient institutions on a bad business plan. Their administrators understand that a college degree is the ticket to the 21st-century economy. There is a crisis in higher education today, but it’s not well-publicized tuition spikes. It’s the long-term decline in political and financial support for the idea that all students should have access to higher education, regardless of ability to pay.” At this point Greenberg leaves the revenue side of the equation and focuses his attention on the expenditure side. Since we’re not looking at the expenditure side in this blog post, we’ll leave Greenberg’s arguments for later posts, However, to whet your appetite for a good debate, at this point I include his closing statements: “…how the academy perceives itself matters. If higher education is to lead its own renewal, it must think about its people, its property, and its productivity in business terms.”

I am sorry Professors Archibald and Feldman, but our universities are grossly inefficient and operate on a very bad business plan. If you consistently have more expenditures than revenues, and you know your projections for increases in expenditures far outstrip projections for increases in revenues, then you have a bad business plan. We can (and probably will) debate why your education model is the very best model available. Before we proceed to the expenditure side of the equation, we will still have much to discuss concerning the revenue side. I am sure that we will end up debating many questions about the sources and potential magnitude of revenue sources. The debates will continue to expenditures as we argue about the manner in which we are using our given resources and, possibly of greater importance, how we should use them. To my readers, I apologize for adding argument after argument, seemingly complexifying this issue unnessarily. However, I am very interested in this topic and feel very strongly about it. Oliver Wendell Holmes Jr. reportedly said, “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” Friends I am seeking simplicity, but I am afraid we will have to battle through complexity to get there.