Higher Education

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 18, 2016 By B. Baylis Leave a Comment

American Higher Education is a Sandy Beach

Who pays what in this new paradigm?” This is one of the provocative questions that I raised in my recent post The Paradigm of Surviving and Thriving. However, since American Higher Education is a complex system, there are many questions that need to be considered before we should even draw the conclusion that the current system even needs changing. If it is in need of changing, we must then determine the appropriate changes and who is responsible for implementing those changes.

Some of you are already asking why in the world would I, as someone who has spent more than 50 years intimately engaged in higher education, suggest that we need a new paradigm for American Higher Education? What’s wrong with the current design? Before I get to the topic of changing American Higher Education (AHE), I should start by describing the current state of AHE. I begin with a picture. AHE is very much like a sandy beach.

Shifting sands at Tentsmuir; image courtesy of Wikimedia Commons and geograph.or.uk

Sunset at Crystal Cove Beach; image courtesy of wikipedia commons

Eroded beach castle on unidentified beach; image courtesy of Wikimedia Commons

What were your thoughts as you looked at these pictures? My thoughts were that a sandy beach is an excellent metaphor for higher education. A beach can be a safe and secure place. It is often a desired destination for sailors at sea looking for a place of rest and safety, and a place to replenish their supplies. I find a sandy beach an inviting place to sit, relax, stare across the water and reflect on many things, including my own existence. One thing about a sandy beach, which is also very similar to higher education, is that it is never the same from one day to the next. The winds that naturally blow off the waters toward land and the waves breaking on the shore from the action of tides and storms move billions of grains of sand each day. Those sand castles that are painstakingly built in the wet sand left as the high tide slowly ebbs into low tide, are quickly eroded away into a mound that bears little resemblance to the original. The participants in AHE can build their little castles and silos, but the shifting winds of academic disciplines, all levels of government, public sentiment and the general economy can gnaw away at those once beautiful edifices. Sometimes the changes come gradually, when they are caused by gentle breezes and the endless cycle high and low tides. Sometimes the changes come quickly, especially when they are caused by storms. Not all storms are the same, and not all storms have the same intensity. Gentle rain with almost imperceptible wind will produce small changes that can build up over time. A severe storm can wreck havoc in a very short time., leaving behind irreparable harm. We are reminded of this by Jesus as he taught the multitude:

Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock: And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock. And every one that heareth these sayings of mine, and doeth them not, shall be likened unto a foolish man, which built his house upon the sand: And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell: and great was the fall of it. (Matthew 7:24-28, KJV)

Storm damage from Hurricane Ivan at Pensecola,FL; image courtesy of Jocelyn Augustino, FEMA, and Wikimedia Commons

When you live in a storm zone, you make plans for many different eventualities. When a storm is imminent, you don’t have time to make plans. You may only have time to react. In the case of a catastrophic storm, you take the precautions necessary to save people first. We are reminded of this by David in the Psalms: “I would hasten my escape from the windy storm and tempest.” (Psalm 55:8, KJV) Property is secondary. Property can be replaced. You can rebuild in the previous location, or a new location. There have been a number of storms to hit AHE. I can’t say that we have always had good contingency plans. We have not always reacted in a timely manner to hazardous conditions. We have not always built our castles wisely in terms of location or design.

This is just some introductory thoughts that will lead to a series on the American Higher Education system, where it is currently, where it should go, how we’re going to get there, how many much it is going to cost, and who should pay for it. In the meantime, find a nice, deserted beach. On a clear morning, go down to water’s edge and take in the beauty of the sunrise. As you meditate there on the beach, you should also pray like David in the Psalms, “Hearken unto the voice of my cry, my King, and my God: for unto thee will I pray. My voice shalt thou hear in the morning, O Lord; in the morning will I direct my prayer unto thee, and will look up.” (Psalm 5:3 KJV). Spend that time getting right with God, and being transported to another place. Then you can sit down, reflect on things like AHE, and enjoy the moment, with the only noise coming from the waves on the shore line or the mews, keows, ha-ha-ha-ha’s and huoh-huoh-huoh’s of sea gulls communicating with each other. Don’t be surprised if the keows of the gulls start sounding like the noise from that last committee meeting.

Sunrise at Virginia Beach, VA; image courtesy of Rae K. Hauk and Wikimedia Commons

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 7, 2016 By B. Baylis Leave a Comment

The Business Model for All of Higher Education is Broken

I recently came across a very thoughtful and extremely well-written blog post This Needs to Be Run More Like A Business written by Jason McNeal. In this post, Jason gives an impassioned plea for a different approach to private education since “the business model approach to higher education is helping to discourage giving.” Jason suggests that board members and I would assume he would include administrators should know better than to say, “Our business model in higher education is broken.” I am sorry Jason, but “The Business Model for All of Higher Education is Broken.” I say this as an administrator with 40 years of effective service in private higher education. I have also spent considerable time praying, studying, thinking and writing about higher education. You do make a valid point when you imply a criticism of the board member’s statement, “I simply do not understand why our tuition and fees are not sufficient to cover our costs.” In the worlds of private, non-profit, higher education and public, higher education, no traditional college or university covers its education and general costs with just tuition and fees. It is like one individual in a sinking rowboat trying to bail out the boat, with other sitting by, just watching and doing nothing to help. This model is broken. However, the model of using a leaking boat to try to get across a lake is also broken.

Why do we want to get across the lake? We want to build an excellent education that works for students, faculty, and the general public. This education must be affordable for everyone involved, including the students, faculty and the general public. This education must be sustainable not only in the short run but for the long run. I, for one, see problems in all the current approaches that we are using to reach these goals. For 40 years, I tried to work toward these goals in the best way that I could. I had some successes, but I also had some failures. I will discuss some of both in future posts. Why? Because we can learn from both our successes and failures. When Thomas Edison was asked about thousands of experiments on light bulbs that didn’t work, he is reported to have said, “We haven’t failed. We now know a thousand things that won’t work, so we are much closer to finding what will.” When we find something that partially works, we should try to determine why and what we could do to make it work better. These are the steps to success. Let’s work together to bail out the leaky boat, find the leak and fix it. Then we can row together across the lake to the land of success, where we will have excellent, affordable and sustainable education for all.

We can begin by looking at two partial successes. The two areas where we see tuition and fees possibly covering all the costs of fulfilling the educational mission of the institution are non-traditional higher education and proprietary, for-profit, higher education. I say “possibly” because more than half of the non-traditional programs or for-profit institutions lose money and eventually fail. The traditional higher education institutions have been variously described as time and location fixed, brick-and-mortar, bastions of teacher-centric delivery of education to late adolescents recently graduated from high school. Non-traditional education disrupts one or more characteristic of traditional higher education. In other blog posts, I will speak more about the differences between traditional and non-traditional higher education.

Institutions of higher education have five sources of revenue. I am sorry if I offend educational purists who do not want to use business terminology to describe operations within higher education. In using the term “revenue”, I did resist the temptation to use the more highly-charged business term “income.” Thus, I will label money coming into the institution to pay for the operations of the institution as “revenue.” There can be no argument that colleges are required to pay operating expenses like salaries, fringe benefits, construction and maintenance costs, utility and insurance costs, supply, equipment and service costs. Since I am focusing on the revenue side of the institution in this post, I will reserve discussion of the expense side to other posts.

There are four sources of revenue for the not-for-profit segment of higher education. There is a fifth source for public institutions.The five sources of revenue are:

Tuition and fees;
Fund raising, advancement or development efforts;
Endowment income, appreciation, interest or dividends;
Auxiliary enterprises;
Governmental appropriations (Reserved for public institutions).

There are two very distinct ways to look at these sources of revenue. The first is how the general public sees these categories of revenue. The second is how colleges and universities are legally required to report them in audit statements. (OOPS, another hint at the trouble lurking within the presence of the higher education business model) In this post, I will restrict my attention to how the general public understands these five sources of revenue. In future posts, I will discuss how colleges are forced to handle and report the revenues associated with these categories.

Tuition and fees: These are the charges (I apologize for another business term) the institution individually imposes upon students for the privilege of attending and obtaining an education, and possibly a degree or some other credential. By “tuition” I mean that portion of the financial obligation imposed upon students for enrolling in classes. By “fees” I mean extra charges for a number of other things such as student services or activities, laboratory, clinical, internship, practica, music, travel, technology, special class charges, health or insurance fees, parking fees, and a myriad of other add-ons such as application, matriculation, course change, graduation and transcript fees, . I also throw into this category “Room and board charges” because these charges are individually assessed to participating students. These are the financial obligations imposed upon students who reside and eat in college-owned or operated facilities. The students and their parents see these charges on their college bill (a residue of a business model). Student and their parents refer to these charges as the total cost or the price of attending. I haven’t yet considered financial aid. Whether the financial aid is not from the institution or comes directly to the student as a government appropriation, it is usually considered a discount by the students and their parents Either way, when we get to the accounting of financial aid, it must be treated as a cost to the institution(another business model problem lurking in the forest).
from Presenter Media
Fundraising, advancement or development efforts: For the private, non-profit, and public segments of higher education, this category includes all charitable gifts and donations. These gifts may be in the form of cash, stocks, bonds, or physical property, including real estate, art, supplies, or equipment. They may also include services in lieu of payment. This category seems to be the area about which Jason is most concerned. From reading Jason’s blog, I know he doesn’t consider fundraising and development work as begging. However, in the eyes of many of the general public, this is what it comes across as. In the for-profit segment of higher education, this category also includes what is known in financial circles as the investment of assets. Investments are the purchase of assets with the hope of generating a profit. Investments are not always profitable and may incur a loss. Many colleges and universities, across all segments of higher education, raise funds through gifts that are known as grants. Grants are funds or products that do not have to be repaid given by the grant maker, which can be a government department, corporation, foundation or trust to a recipient. Usually, grants are awarded after the recipient has made a written request for funding of a specific project through a process that is known as grant writing. Most grants that are awarded will require of the recipient some level of verifiable compliance and reporting of outcomes. In future posts, I will consider the topic of university fundraising, including its rewards and perils.
from Presenter Media
Endowment income, appreciation, interest or dividends: By an endowment, I mean a financial asset, which normally came into the possession of the institution in the form of a gift or donation. Endowments may or may not have a stated purpose at the bequest of the donor. This category of revenues also includes the return or dividends on the investment of charitable donations. It also includes the appreciation in value of the gifts that the colleges and universities are holding in “trust.” Most endowments are designed to keep the principal amount intact while using the investment income from interest or dividends for the “charitable” efforts of the institution. By “charitable” efforts, I mean those efforts which contribute to the stated primary mission or purpose of the not-for-profit institution. This category also includes what are commonly known as “quasi-endowments.” These are funds set aside by the institution from institutional funds. These funds may have come from donors or excess institutional funds. As with “endowments” the principal of quasi-endowments are reserved, and only the interest or dividends are expended. The management of endowment principals and investment demands close scrutiny on the part of professional managers, whether internal or external to the organization. In future posts, I will deal with the topic of endowments and their management.
courtesy of GrahpicStock
Auxiliary enterprises: Auxiliary enterprises are entities that exist to furnish fee-based goods and services to the general public, students, faculty or staff, acting in a personal capacity and not as an agent of the institution. Auxiliary enterprises should be self-supporting in the sense that the revenue covers the full direct and indirect costs of providing the goods and services. Some definitions of auxiliary enterprises exclude areas that are outside the core functions of an academic institution. For all academic institutions, core functions would include teaching and learning activities. For many, they would include research activities. For some, they would also include service activities. such as agricultural extensions for land-grant institutions. There are many possible uses of the wealth of physical facilities associated with a college or university, which could be used outside the core functions of the college. There is an army of experts at a college which could be deployed to service students and the general public in areas outside the core functions of the college. When auxiliary enterprises produce a surplus of revenue over expenses, those surpluses may be used to offset budgetary deficits in any area of the institution, including areas essential to the mission of the institution. Although there are many calls for colleges and universities to stick to their knitting, and stay clear of auxiliary enterprises, these programs may be a way for a college to fill in some budget gaps. I will speak to this argument in a future post.
from Presentation Media
Governmental appropriations: With recent rulings of federal and state courts, Departments of Justice and General Accounting Offices, this category may seem to be reserved for public institutions. Because education is not mentioned in the United States Constitution, including its ByLaws, it is one of the areas reserved for the prerogative of the states. However, Congress has enacted certain laws with which all employers and public buildings must comply. In addition, there is a federal Department of Education (DOE). The DOE exists primarily to safeguard the federal investment in education. This investment comes from the billions of dollars over the years that have been designated for educational concerns by Executive Orders and Federal Appropriations approved by the US Congress. These monies have been augmented by state and local appropriations. Although direct appropriations primarily only go to public institutions, the federal and state loans and grants to individual students greatly affect the well being of most private institutions. With the acceptance of federal and state funding, colleges and universities must also accept certain increased levels of governmental oversight. Compliance regulations control what colleges can and must do in many disparate areas. These areas include human subject research compliance, environmental health and safety compliance related to research, animal research compliance, export controls compliance, conflict of interest, technology transfer requirements, research misconduct requirements, accreditation, financial aid, FERPA, sexual misconduct (Title IX), Clery Act, drug and alcohol prevention, IPEDS reporting requirements, Title IX athletics administration, gainful employment, state authorization, and equity in athletics data analysis (EADA), immigration, disability, anti-discrimination, and environmental health and safety regulations outside of those related to research. Uncle Sam surfing the dollar is in control. The perverse version of the “Golden Rule: He who holds the gold, makes the rules,” dominates the day here. In future posts, I will discuss governmental funding and compliance issues in higher education.

As with any living organism, colleges and universities ingest monetary resources in order to perform the life functions of growing or producing fruit. For colleges, the desired fruit includes student learning, research and scholarship, and community service. The five categories listed above are the life-giving resources upon which colleges and universities depend. They are the food and water of colleges. If colleges and universities do not get enough funds for their nutritional needs over extended periods of time, they will starve to death. Thus, in higher education, we have three choices. We can 1) increase funding from these sources; 2) cut expenditures, or 3) do a combination of increased revenue and decreased spending. To me, this sounds like a business model. If we look more closely at each of the five funding sources, we will easily find huge difficulties in getting significantly more funds from any of these sources. Due to the length of this post, I will look at those difficulties in future posts.

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.

April 22, 2016 By B. Baylis Leave a Comment

Public Education: Public or Private Good?

In American education and political arenas, this question has unquestionably been front and center under the bright, spot lights and cameras during the recent presidential debates. In the P-12 scene it has also been a focal point of many contentious state and local election discussions and contests. I found the history of this hotly debated question very fascinating. This is not a new political or educational argument in America. It has been an issue for America’s schools since the 17th century.

The question “Public Education: Public or Private Good?” is very simply stated. However, it is really an extremely devious and furtive question. To begin to answer the question, we must have a firm handle on the five important concepts that comprise the heart of the question. These terms and concepts are: 1) Public; 2) Public Education; 3) Goods; 4) Public Good; and 5) Private Good. We will begin to parse these five terms in this post. Once we have a grasp on these concepts we will continue the discussion in future posts, attempting to unravel the tricky nuances that are fraught with danger. In so doing, we will immediately find that we have jumped into a snake pit of poisonous vipers, which have intricately woven themselves into a sliverly web worthy of any Indiana Jones movie.

I hope we will not be like the unsuspecting pilgrim trying to find the mother lode of inexpensive, high quality education, who comes upon a tree loaded with delicious looking Granny Smith apples. One of these green apples is especially appealing. It is hanging from a low branch, just in the reach of our intrepid seeker of truth. This potentially, prize-winning apple is crying out to the unsuspecting traveler, “Pick me; eat me. I am delicious!” However, as soon as the hand reaches out to touch the prize apple, it feels the fangs of the green snake hiding among the leaves.

Returning to consideration of our five concepts, let’s begin with the question:”What do we mean by public?” There are two primary answers to this question. The first is a more formal answer. Public refers to the collective whole, or the state. When we use the term state, we usually mean the government, whether it be at the local or national level. In the United States, we have a problem with this term since, we have divided up our land and people into a large unit which we call the country. We then subdivided that large unit into smaller units which we call states. States are further subdivided into units which are usually called counties, cities, and towns. Most of the time when we use the term public to refer to one of these units, we are referring to the governing body of that unit. The second answer is more informal. In this usage, we will refer to the people that compromise the unit as the public. How do we distinguish which definition we are using? It depends upon the context of the situation. Public law is concerned with political matters, including the powers, rights, capacities, and duties of various levels of government and government officials. A park that is owned by the state, and open for use by anyone is called a public park.

What is “Public Education”? The quick answer is that it is education under the control of and financed by the state. At the primary and secondary levels, this definition usually suffices to distinguish public from private educational entities. It is more complicated at the post-secondary level. We will work on breaking out and explaining the intricacies of this conundrum in a subsequent post. However, for the sake of this post, let us assume that we can distinguish between public and private post-secondary institutions.

“What is a good?” In economic terms, “A good is a material or service that satisfies a human need or want, or provides utility to people.” “Public Goods” are those goods which are controlled or dispensed by the general public, usually in the form of the government. “Private Goods” are those goods which are controlled or dispensed by individual, private citizens.

In trying to formalize and tighten up the analysis of the role of the government in dispensing public goods, the first economist who attempted to define “Public good” was probably Dr. Paul Samuelson, winner of the 1970 Nobel Prize in Economics. His world famous textbook Economics was initially published in 1948. In all its various editions, it is one of the top ten best selling book of all times. It is currently in its 19th edition. When I took Economics during my sophomore year in college, my professor had selected this classic as the textbook for the course, because Samuelson had been his instructor in his college days.

An academic paper published by Samuelson in 1954 may have one of the greatest pedantic titles of all times. The title was “The Pure Theory of Public Expenditure”. The paper appeared in the Review of Economics and Statistics, Vol 36, No. 4. In his paper, Samuelson suggests that his predecessors neglected the very important point of optimal public or government expenditure in their economic analyses. To remedy their omissions, Samuelson defined two categories of goods:

Private consumption goods: goods which are distributed according to individual preferences, primarily focusing on the consumption side, but also including the preferences of the individual producers and providers
Collective consumption goods: “goods which all enjoy in common in the sense that each individual’s consumption of that good leads to no subtraction from any other individual’s consumption of that good,”

Subsequent economists labeled Samuelson’s “Collective consumption goods” as “Public Goods“. They broke Samuelson’s description of the definition of collective or public goods up into two distinct characteristics:

Non-excludability: “..enjoy in common” meant that It was impossible for the government to exclude non-payers from consuming the good.
Non-rivalrous: The “no subtraction” concept was translated into the idea that consumption by one individual does not exclude any one else from consuming the good.

Today’s economists employ national defense and clean air as two standard examples of public goods. One of the basic illustrations of the principle of non-excludability involves national defense. The federal government can’t reasonably deny an individual national protection, and adding one more individual under the protective umbrella of the military doesn’t subtract any protection from anyone else. It should be clear that pure public good and goods that are strictly private are mutually exclusive. The difficulty comes when we begin to see that there are very few pure public or private goods. This is a topic for another post.

Samuelson considered the concept of a public good as the most essential component of his economic analysis in the allocation of governmental resources, and central to his theory of an optimally functioning welfare state. He did admit that people would be “tempted” by their “selfish desires” to revert to acting on their private goods appetite, thus making it very difficult to come to a point of optimal public consumption. When he formulated this theory in the mid-20th century, he conceded that there was no “magical adding machine” that could do all of the calculations necessary to solve the mathematical, optimization problem at the heart of his theory. However, he wishfully added that huge strides were being made in the realm of computing machines, which he hoped one day would arrive at a solution. We’ve come a long way in the past 70 years in computing capabilities. However, we still haven’t found Samuelson’s silver bullet. The perfect welfare state, utopia, is still an illusion. However, on the other side of the coin, the state governed by peoples’ selfish desires is a maelstrom of gigantic proportions. Is there a solution somewhere in the middle where we live and thrive together?

Returning to the question that began this discussion: Public Education:Public or Private Good? Many commentators since Samuelson’s ground-breaking work have tried to force public education into the category of a public good. They argue that providing everyone a free education “has to advance society.” Unfortunately, public education does not meet the two uncompromising characteristics of a public or common good. Public education does meet either the non-excludabilty or the non-rivalrous criteria. Why is this the case?

An individual can be excluded from receiving an education at the public’s expense in many different ways. Some of these ways are subtle, and others are very blatant. To enter the temples of learning, you have to be an “authorized person.” What keeps people from being authorized? In one word: Discrimination. Before you go running off, crying FOUL!, there is legal and illegal discrimination. There is ethical and unethical discrimination. There is proper and improper discrimination.

Discrimination is just the process of separating things into two or more categories. When colleges admit some students and reject others, they are discriminating among students. It is an educational truth: Some students shouldn’t be accepted into some colleges. Even with an abundance of assistance, some students would not be able to do the work to succeed at Harvard University. The DoE actually encourages colleges to discriminate on the basis of academic ability. For a given student to receive federal or state financial aid, the college must demonstrate that the particular student has the ability to do college level work at that given institution, and can benefit from the degree program in which the particular student might enroll. As a student progresses through their college career, they must maintain satisfactory progress as defined by the DoE, or their given institution if the institutional criteria are stiffer than the federal criteria. There are three parts to the federal satisfactory progress criteria. The first criteria is that students must have a grade point average of at least a “C” or its equivalent by the end of their second year of enrollment. The second criteria is that students must complete their degree or certificate within a maximum time frame measured by attempted credits equal to 150 percent of the number of credits required for their primary degree program. The third criteria is that a student complete (earn) a minimum of 67 percent of the credits they attempt in order to remain eligible to receive student financial aid. If a student fails to meet any one of the above criteria, that student is denied federal and state aid. For many students, denial of federal or state aid is tantamount to dismissing the student from the institution.

Students are excluded for academic reasons from every institution of higher education, even those that label themselves “open admissions.” If a student does not have a high school diploma or its equivalent, then that student is routinely excluded. Other forms of exclusions may not be for academic reasons. Students adjudged to be a danger to themselves or others may be prohibited from enrolling. If they have already enrolled, they may be dismissed. At many public institutions, sexual offenders or sexual predators may be prohibited from enrolling, and again, if they have already enrolled, they may be dismissed.

By definition, rivalry could be considered a form of exclusion. If consumption by one individual prevents another individual from consuming the product, the second individual is excluded. College enrollment is obviously rivalrous. There are only so many spaces to be taken. When all the seats in a given class are filled, the class is closed, and no more students are permitted to enroll. This is the way that colleges have operated for many years. This has particularly been the modus operandi since the middle of the 20th century. In many states, this is a big problem. Students need certain classes to fulfill the requirements for their programs. The students believe that the college has “promised” to offer those classes, according to schedules laid out in the college catalog or advising manuals. When the students try to register for the classes, they discover that there are not enough spaces for them. What are the reasons for this form of discrimination and exclusion of students? This also will be a topic for a forth coming post.

So what do you think? What’s your definition of public good? Is there really such a thing as a public good? If so, is public education a public good? Should it be available to everyone without charge?