Public vs private – Arguing from different perspectives

US traditional public and non-profit private tertiary institutions have frequently criticised their for-profit competitors for failing to ‘be like us’. The latter’s business plan does not complement the former’s self-anointed purity. If for-profits pursue an operating surplus or profit for their owners, it must be at the expense of academic quality, they surmise.

In recent years, as the for-profit’s aggregate enrolments have dramatically grown, so has the volume of criticism.

The public and non-profit private sectors through their professional organisations and lobbyists question the quality of for-profits’ academic programmes. Supporting the purists are data reported by the National Center for Educational Statistics. In 2010 for-profits spent far less than their competing sectors, $2,659 on average per student.

At the other extreme the purists point to the for-profits’ relatively high marketing expenditures. For example, in 2007 and 2008 the Apollo Group, owner of the University of Phoenix, spent over $800 million on sales and marketing, significantly more than the $675 million it spent on teaching and classroom expenses.

Moreover, the detractors assert that these high marketing expenditures are focused on misleading prospective students regarding their employability after they have graduated and the debt incurred by them to pay tuition fees.

Smoking gun

Clearly, with the profit motive coupled with relatively low instructional and high marketing expenses, there is a smoking gun. There are, however, some mitigating factors worthy of examination. The for-profits truly are not like their public and non-profit private peers. An entirely different business plan drives their operating expenditures.

The public and non-profit sectors tend to offer a broad array of major subjects favouring the arts and sciences. In addition to the required courses, their programmes typically come with a smorgasbord of elective courses, often serving the teaching preference of their full-time faculty.

Without this curricular overhead burden, the for-profits tend to offer leaner curricula focused on employment-ready skill-sets in a relatively narrow range of career programmes. Their leaner curriculum leads to savings. Fewer full-time faculty need to be employed and their teaching expenditures are curtailed.

The public and non-profit sectors tend to rely on full-time faculty whether they are tenure track or not. Traditionally their academics enjoy roles in institutional governance via senates or advisory councils and other service activities. These added responsibilities are offset by relatively light teaching loads compared to the for-profits.

Their for-profit counterparts tend to retain a small cadre of full-time faculty employed to primarily teach with few, if any, additional responsibilities. Unlike the fault-finding sectors, the bulk of their teaching staff are part-timers screened for specific professional proficiencies and a desire to teach rather than their academic pedigree.

In addition, public and non-profit private faculties are expected to engage in professional development activities, usually expressed as publication of journal articles. In reality, enforcement of this expectation varies widely among the publics and privates. Yet teaching loads are adjusted downward as a result. Part-time faculty typically qualify for fewer benefits, resulting in lower teaching charges.

In sum, one could safely speculate that the traditional sectors’ aggregate teaching expenditures are bloated by expansive curricula, unnecessary load reductions and overhead benefits.

Again the for-profits are not like their competitors. They tend to exclude teaching staff from managing the enterprise and do not expect publishing or award tenure. Only a relatively small cadre of full-time faculty with relatively higher teaching loads are employed when compared to the other sectors. Simply put, they have more money to allocate to marketing and rewarding their owner’s investment and tolerance to risk.

At the other extreme, for-profits unquestionably spend a great deal on marketing, but not to lure gullible prospects, as the purists suggest. It is demeaning to categorise these students as naïve consumers.

Rather, the vast majority of students electing to enrol in for-profit higher education institutions are discerning, perceptive consumers. They know what they want in educational programmes and are willing to pay for career programmes, no-frill services and convenient scheduling that are too often unavailable at nearby public and non-profit private institutions.

In order to reach these prospective students, many of whom are working adults with families and other non-academic responsibilities that exclude consideration of the traditional sectors, direct marketing is appropriate. The use of direct marketing again reflects the pursuit of a business plan seen as disruptive to the purists.

While their carping continues, there are signs that the purists are starting to adopt some of the elements of the for-profit business plan.

Tenure is clearly on the demise, part-time faculty on the increase and a growing number of traditional institutions are using direct marketing tactics. The latter include radio and television advertising and even billboards on major motorways.

New Hampshire’s move to open no-frill public regional campuses appears as a muted compliment to the competition. Thus, it seems that some of the purists are becoming more like their adversaries. The bid for students continues as the publics and privates compete to retain their eroding market share.

* William Patrick Leonard is vice dean of SolBridge International School of Business Daejeon in the Republic of Korea.