The Worrisome Ascendance of Business in Higher Education

Sabrina Schaeffer, The Daily Progress

Mark Kington, vice rector of the Board of Visitors at the U. of Virginia, and Helen Dragas, rector, attend a meeting to appoint an interim president.
June 21, 2012

Recently the Board of Visitors—not a particularly apt name given their actions—at the University of Virginia forced the ouster of President Teresa A. Sullivan after two years in office. Since then we have learned that the rector and vice rector of the board, Helen E. Dragas and Mark J. Kington, who has since resigned, have M.B.A.'s from UVa's Darden School of Business. Peter D. Kiernan, a powerful alumnus who evidently weighed in on the decision, is also a Darden graduate and, before he resigned in the midst of the furor, was chairman of the Darden School Foundation Board.

The trio, having made their chops in real estate, construction, and investing, apparently saw an opportunity to transfer their knowledge to higher education. Though colleges can learn many things from the ways businesses operate, treating a college strictly like a business would be a mistake.

In an e-mail to Darden board members justifying Ms. Sullivan's ouster, Mr. Kiernan uses the business term du jour "strategic dynamism" to describe the ever-reactive leadership style he prefers, which is opposed to the older, more static "strategic planning" style employed by Ms. Sullivan. (Apparently engaging in "strategic dynamism" means excluding faculty, students, and most alumni.) In truth, when challenges arise quickly, successful businesses have always responded accordingly­—i.e., dynamically. Strategic dynamism at UVa is nothing more than a euphemism for Thomas Paine's adage, "Lead, follow, or get out of the way."

To be sure, higher education faces unprecedented challenges: growing competition for new populations of students at home and abroad; the opportunities, costs, and uncertainties of new technology; declining state support for public institutions; rising tuition; increasing student debt. All demand a careful look at budgets. Stagnant or declining incomes and uncertain employment prospects sharpen pressure to demonstrate what a college degree offers.

In response, some critics have called for a more businesslike approach to higher education. Why? Because colleges face the same fundamental challenges of any business: securing steady revenue streams, covering expenses, using resources well, and planning for an uncertain future.

Over recent decades, we have heard about students as customers, learned to "manage" enrollments, shared and decentralized budgets with the goal of increasing accountability, identified per-student costs per major, and generally dissected the "service" of higher education. We have learned that programs in art and music are not cost effective. Engineering and equipment-intensive courses are expensive. Even as students and parents in the United States rail against the lack of low-cost public education, those in other countries that have such systems face unprecedented tuition increases.

So what have we learned? First, the student-as-customer model fits poorly. Certainly some educational experiences are better than others, and information about quality differences needs to be readily available. However, anyone who has listened to students and parents demand results not earned or special privileges at special prices knows the customer model has flaws. Of course that does not prevent some institutions from using customer satisfaction to determine the price of a dorm room. I remember the well-heeled student who told me that the university could gain revenue by "selling" preferred parking places to those willing to pay.

Second, discussions among faculty and administrators about multiple revenue streams, costs per student, program efficiency, budget accountability, and the like can be difficult. As an institution, academe has much more experience resisting change than embracing it.

Third, even as some people resist change, there is an increasing awareness that the future will be different. We will not go backward. Budgets present real constraints, public support will not return to previous levels, domestic and international competition to offer new educational options will continue, as will calls for increased accountability.

What we need is to learn the discipline of business without the short-term orientation. Markets are amoral. A competitive market will determine a fair price—whether for cocaine or cocoa—but not necessarily the enduring social value. A one-year increase of 25 percent in the price of a house does not reveal the underlying forces causing the price increase, or its real value. Markets do not know the worth of a mature forest three generations hence. Nor can a market accurately determine the lifetime value of thoughtful exposure to the classics or art or music. Enduring acts of civility are not bought and sold. The qualities that professional educators worry about often do not lend themselves to short-term market valuation.

We can learn from business to allocate resources responsibly, have transparent and disciplined budgets, and plan for a more secure financial future. At the same time, we need to avoid the hubris of business "success." Too many successful business leaders espouse the benefits of a free-market system while accepting that some sellers can be too big to fail and must be protected from market forces. Too many successful business leaders hypocritically accept money from the government while at the same time decrying the intrusion of government in the economy. And what happens when money is at risk? Manhattan prosecutors recently opened an investigation into grades in M.B.A. courses at the City University of New York's Baruch College, some of which were apparently falsified for the purpose of maintaining revenue.

If Rector Dragas, former Vice Rector Kington, and Mr. Kiernan know all of this, the evidence is lacking. Ms. Dragas and Mr. Kington also serve on the board of the parent firm of Dominion Power, a business whose code of ethics calls for "the highest level of ethical standards," with board members expected "to behave with respect, honesty and decency toward everyone affected by our business." We in academe need to choose carefully between those aspects of business that serve us well and those that do not.

William W. Keep is dean of the School of Business at the College of New Jersey.