A Philosopher's Blog

The University as a Business

Posted in Business, Philosophy, Universities & Colleges by Michael LaBossiere on December 12, 2011
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Some time ago many university administrators became enamored of the idea of the university as a business. In this model, students are customers, faculty are workers, and the universities, like soft drinks, become brands.

There is, of course, a business side to universities-fees, housing, services and so on. This side of the university should, of course, be run like a business. However, it seems to be a mistake to treat the entire university as a business.

One reason is that the student is not simply a customer who is being sold a product and service. Rather, the student is supposed to become part of a learning community and undergo a journey of education. The business model is to get the most money from the customer for the least possible return. This, as might be imagined, seems quite in contrast with what education is supposed to be all about.

A second reason is that adopting the business model seems to lead to adopting the tendency of businesses to focus on the good of the upper management rather than on the good of the employees and the customer. While administration is an important aspect of a university, the trend at many universities has been towards higher salaries for administrators relative to faculty (the people who do the actual teaching) and also an increase in the number of administrators. The impact on the university is similar to what is seen in the business world: those who perform the actual mission are underpaid, those who “administer” are often paid very well, and those who are supposed to be served find that they are getting less for their money. At my university, faculty have been let go, staff members have been fired, salaries of faculty and staff cut, class sizes have been increased, and so on. In contrast, the president has a base salary of $325,000 per year and is guaranteed a bonus of 25-35% of his base salary. For the faculty, the yearly bonus is getting a contact for next year. For the students, this situation means that it is harder to graduate on time because of the difficulty of getting into needed classes. It also means that there are more students per faculty member, which can dilute the education process (for example, my Intro to Philosophy class has 75 students when it is supposed to have 35).

A third reason is that adopting the business model leads to thinking of the university in terms of a profitable brand-presumably on par with a brand of soda or snack chip. This focus can lead to paying less attention to the university as an institution of education and more attention being focused on the commercial aspects. This sort of outlook can lead university officials to sound very much like corporate spokespeople when a problem arises. For example, in response to the tragic death of Florida A&M University student Robert Champion in a suspected hazing incident, the president of the university wrote in a response letter that “preserving the image and the FAMU brand is of paramount importance to me.” What is more troubling is that this model also encourages university officials to act in ways intended to preserve the “brand” that can protect people who are doing rather bad things, as seems to be the case at Penn State. To be fair, an institution acting to conceal the misdeeds of its members is not unique to the business world (see, for example, the Catholic Church’s handling of the sex scandals). However, a business style culture does seem to encourage such behavior and the model of the institutional cover up is well grounded in the business world.

A fourth concern is that the university as business approach can be extremely detrimental to the students. The troubling problems with American for-profit colleges are have been a point of serious concern and they are generally seen as being rather predatory rather than pedagogical. While “conventional” colleges and universities have not yet fully embraced the for-profit model, this is clearly a danger.

A fifth concern is that the business approach grants administrators power over the academic aspects of the university. They can determine which classes are offered and who is retained (or fired) by using their control over the funding and other administrative aspects. While this is standard practice in business in which governance is not shared, universities have a practice of shared governance in which the faculty play a role in the governance. To put things a bit simply, the faculty are supposed to handle the academic aspects. This division is sensible, given that faculty are experts in their areas just as administrators are supposed to be experts in their areas. Having the non-academic administrators decide what classes can be offered is on par with assigning the faculty to set up the contracts for the bookstore, cafeteria services and so on.  Undermining shared governance is to erode the academic aspect of the academy in favor of the business aspect-and this cannot bode well for the education of the students.

I do agree that universities should be properly run and that there is clearly a role for the business approach at the academy. However, this should be limited to the aspects of the university that are, in fact, pure business.

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11 Responses

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  1. magus71 said, on December 12, 2011 at 8:01 am

    The business model can’t possibly work for universities now as the value of their product is wildly distorted from government loans (that many students default on). Government increases loan money=university increases cost. Just like Section 8 housing: No matter how much more the government gives Section 8 recipients, the housing costs always rise to meet the new number.

    Most references to the business model that I’ve made have been because I take the opposite view that you do about how businesses become successful. The age old saying that the customer comes first works well at universities I would think.

    • anon said, on December 12, 2011 at 9:33 am

      “The business model can’t possibly work for universities now as the value of their product is wildly distorted from government loans (that many students default on).”
      – Simply false, student loan debt is non-dischargable

      “Government increases loan money=university increases cost”
      – Evidence please.

      “No matter how much more the government gives Section 8 recipients, the housing costs always rise to meet the new number”
      – Also not true

      • T. J. Babson said, on December 12, 2011 at 11:23 am

        “- Simply false, student loan debt is non-dischargable”

        Not exactly true. There are programs in which one pays a certain percentage on one’s income for 20 years or so, and after that the loan is forgiven (more accurately, covered by the taxpayers).

        And let’s remember that one of the main “demands” of the OWS movement was for college debt forgiveness.

        Check out the graphic at this link comparing college costs to inflation:

        http://www.doctorhousingbubble.com/a-mortgage-every-college-graduation-student-debt-to-stifle-home-buying/

        • magus71 said, on December 12, 2011 at 12:01 pm

          You beat me to it, TJ. I haven’t looked at your link yet (I will right after I write this) but from memory, college expenses have increased at four times the rate of inflation in the last decade or so.

          • WTP said, on December 12, 2011 at 12:43 pm

            But he used a big-boy pants word like “non-dischargeable”…why didn’t that throw you off? You’re not supposed to question such statements.

            Notice the Christmas card is gone. A thank-you is in order…I think.

          • Michael LaBossiere said, on December 12, 2011 at 6:39 pm

            Quite so. A retired colleague of mine spent his last few years tracking university spending at FSU. He found that faculty positions stagnated or declined while administrative positions increased significantly. That is where a big chunk of the money now goes. As might be imagined, budget cuts come from staff and faculty first (you know, the people who teach classes and actually do things).

        • Michael LaBossiere said, on December 12, 2011 at 6:37 pm

          College costs have increased quite a bit over the years. I can assure readers that there has not been a comparable increase in faculty salaries-most of the costs are in other areas (like administration). Perhaps the best way to address the student loan program is to asses the non-education costs as schools and see where the money is really going and whether or not this is the best for the students.

      • magus71 said, on December 12, 2011 at 12:37 pm

        “- Simply false, student loan debt is non-dischargable”

        -Not sure what non-dischargeable loans have to do with the prices and market value of college education. It had to do with whether a person has to pay the loan after bankruptcy or not. You can still default on non-dischargable student loans and the consequences are rather unpleasant:

        “Default has consequences that are extremely serious and hard to recuperate.
        By federal regulations, if you are in default on a federal student loan, you are not eligible for further Title IV student aid.

        *You are also no longer eligible for loan forgiveness or payment relief.

        *Reports of default are made to all national credit bureaus. This will affect your ability to buy a car or house, or to get a credit card.

        *You will be subject to more serious collection activities such asthe demand for immediate payment in full
        lawsuits where a judgment can be placed to prevent you from purchasing or selling your assets
        the assignment of your account to a collection agency, with up to a 25 percent fee added to your outstanding balance.”

        http://www.ombudsman.ed.gov/loandefault.html#dontresolve

        -” Evidence please.”

        It’s pretty basic, anon. Please. Increase the mount of money in the system and you increase prices. It’s a giant bubble waiting to burst–maybe bigger than housing.

        http://www.usnews.com/education/blogs/student-loan-ranger/2011/09/28/college-tuition-growth-rate-is-biggest-bubble-of-them-all

        “The government should get out of the student-loan business. Its involvement causes tuition to rise, people to attend college when they would be better off in vocational training and wasted use of taxpayer funds.”
        –David Shellenberger

        Section 8 doesn’t increase prices?

    • Michael LaBossiere said, on December 12, 2011 at 6:34 pm

      Public and private schools generally have a good return on the investment-most have good graduation and placement rates. Interestingly, the for-profit schools are horrible. One reason might be is that the public and private schools are schools first while the for-profit schools are all about profit.

  2. […] second concern ties back to a piece I wrote in 2011, “The University as a Business.” This essay was written in response to the reaction of Florida A&M University’s president to […]

  3. […] second concern ties back to a piece I wrote in 2011, “The University as a Business.” This essay was written in response to the reaction of Florida A&M University’s president to […]


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