Platt Perspective on Business and Technology

If it’s not broken don’t fix it, but it is broken 2 – some thoughts on education’s problems as viewed from a business perspective

Posted in career development, job search and career development by Timothy Platt on January 8, 2013

This is my second installment to a longer discussion of one of the more important challenges that we face in the United States, impacting on long term employability for those who seek to enter the workforce, and more generally on our national economy as a whole: a worsening crisis in our educational system. Our colleges and universities are literally pricing themselves out of their markets (see Part 1: a fundamental need to reframe and reconsider education in America.) The issues I write of here are structural, and do not simply reflect cyclical and passing downturns.

I recommend reviewing Part 1 to this but note here in summary of some key points raised there that:

• Higher education still significantly increases opportunity for employment, and for more productive and personally rewarding career paths with higher salary and lifetime total income expectations.
• The price of a college education has become so high that any compensatory value that obtaining a degree might offer, is easily outweighed by the crushing debt that gaining that degree now brings, and for so many.
• And this has become more and more obvious and to more and more would-be college students as they see new graduates failing to land jobs, and as they hear the steady drumbeat of news stories of debt and its consequences among college graduates.
• And tuition and other/related costs keep spiraling up and at a much faster rate than inflation, and unemployment is still up near 8% nationally when measured across all potential job candidate demographics, as of this writing. Even the rosiest predictive scenarios I see coming out of the US Federal Government do not claim this to drop as low as 6.5% until at least 2015, and that assumes positive outcomes at a series of decision points where failure to reach compromise between the major political parties could send us back towards recession again – and with a return of the higher unemployment rates we are still slowing moving away from.

I ended Part 1 by stating that I would at least attempt to propose a few points of direction that any viable resolution to this would most likely need to address. As I acknowledged then and in that context I do not claim any ultimate answers to this challenge. My goal here is simply to outline some essential parameters that any viable solutions would most likely have to work within. And I begin that by making a statement that is both obvious and overlooked:

• A school as an organization is a business, and in order to meet any of its mission and vision goals as an educational institution it has to be an effective business. This certainly holds if that school seeks to endure and to provide value long-term.

Schools are much like the nonprofits I have been writing about in this blog (see Nonprofits and Social Networking), in that respect and in a second and crucially related detail too:

• They all too often get caught up in the vision of their mission and fail to see their need to operate as an effective business, and almost as if that would be a violation of the purity of their intended goals. Here, knowledge and education are too often seen as being somehow above all of this.

So the points I would raise here that more specifically require addressing are both educational and education needs-driven, and also business oriented and driven. A school cannot long-term meet its educational purpose and provide value in doing so if it does not or cannot do so as an effective business. And I begin with an eye to the growing and increasingly crushing cost of paying for a college education, and what that means both for students and potential students and for the colleges that they would attend.

Fiscal effectiveness and the cost of an education: One point I have seen with my own eyes and read about in the news and in news commentary is that way too many colleges and universities build and build new buildings and at times seemingly just to be able to say they are building and growing. I write here of growth in physical plant that is not grounded effectively in both short term and long term assessment of needs. And this growth always carries with it very significant up-front costs that might be covered through allocated and committed funds, but it also means acceptance of new, permanently ongoing fixed operating expenses related to facilities maintenance and other ongoing new requirements. I write a lot about business effectiveness and about lean and agile businesses. Think of schools that pursue the build to build approach as their more bloated counterparts. And ongoing funding to sustain these infrastructure systems has to come from somewhere.

Physical plant expansion is just one area that would enter into overall operational expenses, and expenses are only one side to a business’ financial accounting. Revenue has to be included too, and for many schools it appears they could do this in a more business-like manner too. For that I will consider three sources of revenue:

• Federal funds coming in as grant support for faculty research,
• Alumni and other donations as a revenue stream, and
• Student tuition, which might or might not be off-set for specific students or for groups of students through tuition waivers or reductions, or by other means. But here I am only considering tuition actually paid by the student and their family and received as revenue by the school.

What happens if a school goes on a building boom or otherwise increases its fixed, ongoing operating expenses, and then sees the following?

• The Federal Government, faced with mounting deficit, cuts back significantly on levels of research grant funding, and for all research-supportive agencies. Or alternatively decisions are made to maintain significant levels of funding but only for direct support for the researchers funded and for their research in that, with greatly reduced indirect funding in general support of the institutions that these researchers work for? When I was working as a research scientist in university settings, it was common for that indirect funding support that went to the school to amount to an equivalent of 40% of the funding that went towards the research itself. What if that side of this support that would go into the school’s more general coffers were to thin down or substantially dry up? With current federal deficits in the United States budget, that needs to be considered a realistic possibility that would have to be planned for.
• With our still continuing economic uncertainties what would happen if alumni donations were to significantly drop? Here, it is important to note that just like the nonprofits I write about, this revenue stream for colleges and universities comes in as discretionary income from donors who have been convinced to share of their wealth for a good cause. But what if the overall pool of discretionary income that this revenue stream would come from were to drop, and it has, what impact would that have?
• And this brings me to tuition, and to a simple principle. If expenses are not controlled to keep the organization lean and nimble and focused on what it should be doing, and income from several or even many of its standard revenue streams prove less than needed to cover their share of this burden, then any potential revenue shortfalls have to be made up for where possible from any revenue streams remaining. And while college administrators may argue the case that they do control fixed operating expenses, tuition rates have been increasing and at a rate way above inflation, and to unsustainable levels for the people who would attend those institutions – their customers where these schools are viewed as businesses.

So if colleges and universities in the United States have to find ways to make their degree programs and other offerings more affordable, that has to at least begin with business decisions. And I specifically refer here to business decisions that would help to reduce the need for tuition revenue, to carry so large of what has become such an under-controlled fiscal burden. And simply transferring this debt obligation onto Federal or State Government cannot be relied upon and the same goes for increased alumni and other donations, and particularly for alumni who have college age children and who are facing the sticker shock of those tuition bills.

I am going to turn in my next installment to consider the very controversial issues of educational relevance and the need to offer students the resources they need to transfer successfully into the workplace after graduating, and with a full time job that can help them launch a career. And as a foretaste of that I note here that I will be discussing degree programs and what is offered in them, jobs placement support as that has traditionally been offered and what is needed now, and the less operationally expensive options of virtual classrooms and distant learning – which can be realistic or fantasy as a source of educational and business effectiveness. Yes, I add that this topic has to take the issues that I have been discussing here in this posting into account too. Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 2. I have also posted extensively on jobs and careers-related topics in my first Guide directory page on Job Search and Career Development.

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