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Why the Business Model Doesn’t Work for Higher Education

By Susan Hague

Back in the ‘80s, corporations, especially publicly-traded ones that answered to stockholders, went through a purging of employees to maintain profits. The phrase, “lean and mean,” described the lack of loyalty businesses had toward the people they had hired and trained, as managers jettisoned the extra baggage of employee expense to maintain profit margins. CEOs bailed out with golden parachutes in some cases.

Within six months to a year, the companies that had fired or downsized or rightsized or eliminated positions or whatever euphemism you want to use for ditching your workers, found themselves with a shortage of qualified personnel and tried to hire back the people they had fired months earlier, only to find that they had to pay them more as consultants than if they had kept them on the payroll.

This is an example of the phrase, “penny wise, pound foolish,” or making a shortsighted decision based only on the bottom line that can cost more in the long run.  This focus on profit is part of the business model, and the other part is that businesses need to know who the client is, where the money comes from (follow the money), and the business must meet the needs of the client.

But when this business model was applied to higher education by administrators, they failed to acknowledge that the education the student/client is paying for is not the same as the grade that the student/client needs or wants, and that the customer/student may not always be right.

The business model works if it is applied to administrative support services for students, such as admissions, financial aid, registrar, advising, computer and IT support, but it does not work when applied to the classroom and the transactions between faculty and students regarding quality of work and student effort, mastery of material and grade earned.

In this case, the community and industry would be considered the clients, not the student, who would be the product intended to benefit the community and industry. Unfortunately for higher education and the students and faculty involved with them, the business model has persisted when applied to the classroom but ignored when applied to administration and student services.

If admissions, registrar, financial aid, advising, all treated the student as the most important client, the business model could work. But if the bottom line is all that matters, profit over principle and the business model is wrongly applied to the faculty-student transaction as a way to determine customer/client satisfaction, with the customer always being right, then higher ed deserves to be viewed as just another business, and not a very good one at that, and it makes no sense for it to enjoy nonprofit status.

Instead, make higher education institutions publicly-traded companies with boards and shareholders, mergers and acquisitions, and even more political infighting and inability to deliver the product, because higher ed has lost sight of its purpose — to provide an opportunity for students to explore different subjects and majors, to learn how to learn and to think more deeply and logically, to create lifelong connections with like-minded individuals and mentors, and to learn what is involved with both making a living and making a life.  Isn’t that the point of a college education? If not, shouldn’t it be?

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