Solving the Higher Education Problem via Disaggregation

There is little question that higher education is a difficult field of endeavor right now.  Though the MOOC experiment clearly seems less a threat now than a year or two ago, there are major challenges which have to be surmounted.  There are two that come immediately to mind.

First, cost has become a serious problem.  Tuition prices have risen in a way similar to healthcare prices.  The existence of third-party payers in healthcare finds a mirror image in the third-party financiers in higher education.  Many students and families obtain loans and push payment off into the future, thus creating some insensitivity to price.  At the same time, institutions have managed the price of tuition in a non-sustainable way.  They make their budgets in a highly incremental fashion.  “It cost us this much to function this year.  It will cost a bit more next year.  Plus, we have to provide raises to everyone.  That means we will need to increase tuition.  Ask the board to declare a 5% increase.”  Do that enough times and the compounding effect of all those tuition increases becomes quite substantial.  Thanks to government financing, the reaction to the massive increase in tuition has been delayed, but it is growing.  Parents and students are looking for a better deal.  Institutions will have to find a way to give it to them.

Second, universities are governed in an unusual fashion.  While the endeavors carried out within the university can be quite different (compare the business school to the nursing program to the philosophy department to research-driven physics), the governance can be highly collective and democratic in nature.  The differences become even more significant when you start to mix-in fully online programs, continuing studies programs for adults in the evenings, and other programming.  A problem that arises out of this situation is that the very broad decision-making group is not necessarily appropriate.  As an example, the people who love online education are quite different than those who have staked their lives on classroom teaching and mentoring during office hours.  Yet, these same people are often tied up in the same group in terms of curricular decisions and other matters.

The major problems I have identified are related to cost and governance/policy/administration.  It seems to me that a good strategy for meeting those challenges might lie in disaggregation and decentralization.  Rather than having one university with one tuition rate and lots of centrally made decisions, I think we should have a university comprised of several distinct entities with a great deal of independence.  The colleges within the university should really operate as colleges with different tuition rates and a lot of ability to run their own affairs.  The professional colleges/programs can charge a significantly different tuition rate from the college of arts and sciences.  The online program will have the ability to hire its own professors who have a special interest in that type of instruction.  Each group will be able to make important choices about their curricula and methods.  They should even be able to make some of their own choices about marketing.  By breaking up the constituent parts of the university, we will increase the likelihood that innovation will occur and that cost challenges can be attacked.

But universities, especially the private ones, have missions they are trying to fulfill.  How will they make sure a group of decentralized operations manage to achieve the overall mission?  I think the answer there has to do with Peter Drucker’s early insights about General Motors at its peak in The Concept of the Corporation.  GM’s separate lines were able to do what they needed to bring about the greatest success within their market segment, but the execs at the top set the policy within which the sub-groups operated.  In other words, the executive management exercised an almost constitutional type of authority over the Buicks, Chevrolets, Pontiacs, and Cadillacs.  Permit the widest independence consistent with the overall policy and mission of the organization.

Now, I am not making the case that decentralization is always a panacea.  One of Machiavelli’s better points is that different types of leadership are more applicable to particular times and circumstances.  But it seems to me that decentralization is the best answer for the ills that plague the universities.

How would it all work out from a budgetary perspective?  After all, some parts of the university are clearly more profitable than others.  Yet, the unprofitable parts might represent critical elements of the overall mission?  The budget would need to be set-up in such a way that the profit-making sections are able to benefit from their successes and can reinvest in their own efforts.  However, it would also be a simple matter to require them to make a contribution to the broader institutional treasury which could be used to subsidize the areas of the university worth subsidizing.  That point brings me to another one of Drucker’s propositions.  He argued that the market should rule where it is good for it to rule, but there should be some activities or principles that are not exclusively guided by market response and thus deserve some protection.  I would argue that something like a philosophy or theology department fits that description.  Whether or not the market values those offerings, they should be part of the university’s program.

These are all just preliminary thoughts, but I think decentralization provides the potential for real, substantial gains in the intermediate term and still more in the long run.  I hasten to add that this same advice would not necessarily apply to an entity which has avoided the university designation and has remained a true college.  A true college may well be small enough and have a cohesive enough community of interest to keep the parts together.

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