Business Model

July 18, 2016 By B. Baylis Leave a Comment

The Business Model of All of Higher Education Is Broken, Part III – Tuition and Fees

In this current post, I return to the discussion of the Business Model of All of Higher Education. In a previous post, The Business Model of All of Higher Education Is Broken, I introduced the five sources of revenue for Institutions of Higher Educations(IHEs): 1) Tuition and fees; 2) Fundraising, advancement and development efforts; 3) Endowment income, appreciation, interest and dividends; 4) Auxiliary enterprises; and 5) Governmental appropriations. In this post, I had originally planned to consider all of those sources of revenue in one post. However as I began to work with that idea, I found the explanations growing too large for one post. In addition, no matter how hard I cranked the revenue generating machine for each revenue source in an attempt to create additional funds, I discovered that increasing the effort in any given area did not produce a commensurate return on investment (ROI). Therefore, I decided that I needed to expend more time and coverage in this series to each source of revenue to give it the analysis I felt it deserved. Thus, I have decided that I will begin to plan to cover each of the revenue sources individually in separate posts. As I get into the ins and outs of the revenue source, I may have to add more posts. I begin this process with the source of revenue with which all students and their families are most familiar, Tuition and Fees . It is also the revenue source that the general public most clearly associates with Institutions of Higher Education (IHEs).

The revenue from tuition and fees obviously depends upon enrollment. This means that there are really only five ways to increase the useable revenue from tuition and fee. These five possibilities are:

increase the tuition and fees, thus increasing the base amount each student pays;
increase the number of students paying the tuition and fees, i.e, increase tuition-paying enrollment;
decrease the discount rate on tuition, thus decreasing the average amount of institutional financial aid given to enrolled students;
change the model of teaching and learning in order to increase the efficiency of the use of this revenue stream;
do a combination of two or more of the above at the same time.

With points 3 and 4 above, I apologize for sneaking the expenditure side of the business model into the conversation. However, much of the general public acts as if it believes that tuition and fees cover the cost of a college education. This is definitely not the case, and has not been the case since the beginning of formal American higher education in the mid-17th century. Since this rabbit trail would take us deep into the expense side of the budgets of IHEs, I will leave the exploration of this topic to another post. I will devote the remainder of this post to just addressing the issue of increasing tuition and fees. I will cover the problems of increasing the number of students, decreasing the discount rate and changing the model of teaching and learning in additional posts. I will also address the four other IHE revenue sources in additional posts.

When IHEs announce tuition increases each spring for the following fall, it is usually met with varying degrees of disdain. Students, parents, the general public, as well as federal and state governments are already enraged at the current level of tuition and fees. The data are clear. Tuition and fees have increased at rates exceeding the annual general inflation rate for years. Just at the suggestion of another increase, the reaction varies. It runs the gamut from a reluctant acceptance to a loud murmur to a campus uproar and rebellion.

The following three charts use the same data extracted from the College Board Pricing Trends, which has the most comprehensive collection of data on college pricing trends. Although the charts are based on the same data, they give us three different pictures of the history of Tuition and Fee Increases over the past 40 years. Why have I chosen to present this information in three ways? It is to try to help my readers understand that there are different ways to look at the same data and that one’s first impression may not be the only or best way to view the subject.

The first chart is a 40-year history of tuition and fee increases in “current dollars,” i.e, the average list price of tuition and fees for all colleges in a given segment weighted by full-time undergraduate enrollment. These list prices are compared against the 40-year average increase in list prices. The current dollar tuition and fees are the prices that students, their parents, and government officials will see first. These are the dollar figures against which everyone reacts. The first impression from the graph is how similar the tuition and fees were for all three segments in 1975. Based on the scale of this graph, it is almost impossible to distinguish the price of the four-year, public institutions and the two-year, public institutions. Although the private, four-year institutions were more expensive, on the scale of this graph, in 1975 they did not appear “that much more expensive.”

CHART 1: History of Tuition and Fee Increases Compared Against 40-Year Average Annual Increases

The second impression that this graph conveys to me relates to how the actual increases fall below the projected increases based upon the 40-year average annual increase. This means that the early increases were less than the average annual increases and it took quite awhile for the actual increases to catch up with the average annual increases. It appears that the sharp increases in both public and private four-year schools occurred in the period from 2000 to 2010. This would coincide with decreased support from government appropriations for financial aid.

This graph clearly gives the impression that the gap between the three segments has grown significantly. This is the feeling that students and their parents get when they start looking at colleges and the tuition prices. The fourth and fifth impressions that this graph gives me revolve around the two-year public institutions. The first of these impressions is how much more affordable this choice seems compared to the other two choices. The second impression is how close to a straight line the actual increases appear. To me, and many other commentators and critics of higher education, this raises the spectre of whether these institutions “know the secret” for holding down tuition increases.

The two primary conclusions that many will draw from this graph are: 1) the two-year, public institutions are the most affordable choice for an education; and 2) the four-year, private institutions have had uncontrollable tuition increases over the past 40 years.

The second graph, entitled Growth Factors of Tuition and Fees from 1975 to 2015 Across College Segments, Selected Academic Years, portrays the same data that the first graph did, but gives a very different slant to that data. This chart tells us how fast tuition and fees grew. Surprisingly, it says that the time to double has been relatively constant. In rough terms throughout the 40 years from 1975 to 2015, it has generally taken 15 years for tuition in any of the college segments to double.

CHART 2: 40 Years of Tuition and Fee Growth Factors

SInce the blue bars representing the public, two-year institutions increase in height the most consistently, this is another verification of the steady, almost constant rate of growth of tuition and fees for the colleges in this segment. During the first 20 years, I find it very interesting to note that the public, two-year institutions increased their tuition and fees at the fastest rate, while public, four-year institutions at the slowest rate. In the second half of the 40-year period, the growth rate of public and private four-year institutions shot up, far out stripping the two-year public institutions. Does this represent a shift in public funding priorities for higher education?

Although the growth factors were very close since the private four-year institutions started out with higher tuition and fees, doubling the higher rate increased the differential. Thus, the actual dollar spread in tuition did indeed produce growth.Two different graphs give you two different pictures.

The third graph is entitled the Five-Year Percentage Changes in Tuition and Fees Across College Segments, From 1975 to 2015. This graph plots the percentage change in tuition and fees over five-year periods from 1975 to 2015. This graph gives one a very different picture of tuition and fee increases over these 40 years. The overall trend of data points in this graph are actually decreasing. This doesn’t say that tuition and fees are decreasing. What it says is that the rate of change is slowing.

CHART 3: Five-Year Percentage Change in Tuitions and Fees, 1975 to 2015

Looking at the three different sets of points and lines joining those points, it is not surprising that the blue points representing the two-year, public institutions show the least variation. That confirms what we have seen in the other two graphs. The red points show the most variation away from a straight, decreasing line. The four-year, public institutions have been the institutions most affected by the whims of state legislatures or governors. Again, even though the rate of increase for private, four-year institutions is slowing down, don’t look for the public, four-year institutions to catch them in list price anytime in the near future.

Chart 1 hit me right between the eyes. To those who can remember, I challenge you to go back to your college days and put your tuition and fees into an appropriate year in the chart. For some of us we will have to add lines at the beginning of the chart. My experience would extend the chart another 10 years to the left. In the early sixties at the flagship university in a small state, I never paid more than $175.00 annual tuition plus $10 lab fees per science course, which usually added $20 or $30 per semester. Since computers were just coming into use, as a mathematics and physics major I had to pay a $25 per semester technology fee for the right to put my card decks in the hopper each night and come back the next morning to get the print out from the pin-fed line printer. In addition, as a commuter, I had to pay $50 per semester for a “hunting license” to try to find a parking space in an on-campus parking lot. Thus, my total annual tuition and fees bills were less than $550. My textbooks and supplies were less than $150 per semester. I lived at home, and my mother never charged me anything for room and board, because I took care of everything around the house since my father died during my freshmen year in college. Gasoline averaged about $0.30 per gallon, and I spent maybe $10.00 per week to keep my car in gas, and $25 per week for coffee and lunches. Thus, my total out-of-pocket expenses to go to college were less than $2000 per year, or $8000 for my entire undergraduate education. If you subtract the $6000 in scholarships that I won or was awarded, my B.S. degree in mathematics cost me less than $2000 out of pocket. Even in early 1960 dollars, that was entirely possible to pay for out of summer or part-time school year earnings. For my four years in graduate school, I had a fellowship that paid tuition and living expenses. I didn’t pay one nickel out of pocket for my Ph.D. I graduated in eight years of schooling, with a B.S. and a Ph.D.in mathematics, with a wife, a child, a house, two cars, money in the bank, NO DEBT, and an offer of a tenure track job! In today’s world that would be definitely an anomaly. According to CNN, for the most recent year for which data is available, the undergraduates of the class of 2013 walked off the commencement stage with an average debt of $35,200, while Ph.D. graduates “stumbled” off the platform with an average debt of $57,600. Among Ph.D.s, more than 28% had debts of more than $100,000. The average J.D. and M.D. graduating from Law School and Medical School respectively, had a debt of more than $140,000. Much has been written and debated about the debt bubble that has overtaken or is overtaking American higher education. It looks like I have created at least one more blog post on the Debt Bubble.

Why does this picture look so bleak? I believe it looks bleak because we could be on the verge of very bleak times for higher education. American higher education is heading for a perfect storm, unless it changes course or one or more components of the storm change direction. A perfect storm is the confluence of events which individually may not necessarily be dangerous, but the combination of these events creates a potentially disastrous situation. Here, too, I am taking you to the suspenseful edge, and leaving you to dangle. The perfect storm will be another post in this series on the broken business model of American Higher Education.

http://www.hamiltonproject.org/assets/legacy/images/uploads/thp_image_uploads/charts/college_cost_large.png#college%20cost%20chart%20520×520

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.