Published on 2015/05/13

The Impact of Institutional Bureaucracy on International Recruitment

The EvoLLLution | The Impact of Institutional Bureaucracy on International Recruitment
The bureaucratic tradition of traditional universities makes it very difficult to compete with proprietary language program providers for international enrollments.

The international English language program marketplace was always immensely competitive, and the growth of proprietary language program providers—private companies that offer English language programming across the US and internationally—is only turning up the heat on universities. Cost and customer experience are significant differentiators in this space, and institutional bureaucracy often hampers universities when it comes to competing with proprietary providers on these issues. In this first installment, Bill Gaskill will discuss some of the competitive advantages the proprietary providers have over universities.

Click here to read key takeaways.

The EvoLLLution (Evo): What does the intensive English program (IEP) marketplace look like in the Unites States today?

William Gaskill (BG): The marketplace is composed primarily of proprietary language providers and university-operated programs.

I think of proprietary providers as businesses or companies that may range from one privately-owned/-operated language school to national or multi-national companies with program sites in multiple locations. They may be private or publically held companies. My comments here relate primarily to large national or multi-national language proprietary providers.

Similarly, university-operated programs vary greatly both in terms of where and how they are connected to the university and the degree to which they operate as a more or less autonomous unit. Some university-affiliated IEPs are located within the university proper and their students may or may not have been admitted to the university. Many university-affiliated programs, especially in public, tax-supported institutions, are operated in university auxiliary units, e.g., a university foundation, extension or continuing education unit. Funding sources also vary greatly. In some institutions, especially private universities, language programs may be funded directly by the university. In others, especially those in auxiliary units, the programs are either fully or partially self-supporting. My experience and comments here relate primarily to totally self-supporting university-affiliated programs, i.e., those housed in auxiliary continuing education units and receiving no government or institutional funding support.

It’s important to note that some proprietary IEPs are located on university campuses, either at the request of the university or through negotiations originating with the proprietary company.

Regardless of who runs the IEP, many students prefer to study English on college or university campuses.

Evo: How much competition do universities face from proprietary providers in the English language space?

WG: We work with many overseas study abroad consulting agencies that refer students to our programs. When it comes to working with these agencies, we face considerable competition from proprietary English language providers. The proprietary providers have a competitive edge with regard to pricing, offering multiple locations, and providing a variety of streamlined services ranging from housing assistance to application processing to insurance. Furthermore, many proprietary providers offer incentive-based commissions and pay higher commissions to agencies that refer larger numbers of students.

Evo: Proprietary providers are often based on a university campus because the institution chooses to outsource their English language programming. Why would a university outsource their language school?

WG: There are many reasons, the main one being the same reason that many institutions and companies opt to outsource services: convenience, efficiency, not having to invest in start-up costs, not having to deal with staffing and with government regulations involved with program certification and with visa-related services.

I suspect that most colleges and universities are compensated for allowing the proprietary providers to operate on their campus. Colleges and universities stand to benefit also from the likelihood that some students will matriculate into degree programs and pay out-of-state tuition.

Given that many colleges and universities are strapped for resources, some proprietaries promise not only revenue from the English language program but also the prospect of significantly increased enrollments through well-organized marketing and recruiting efforts that would be costly if the college or university were to mount its own marketing and recruiting campaigns.

Evo: It seems like operational efficiency and effectiveness are top-of-mind for proprietary English language program providers. What are the differences between the economies of scale that a proprietary program can leverage as compared to the systems and infrastructure of universities?

WG: Generally, large proprietaries have the advantage of aligning their business operations to meet specific market demands. They tend to be full-service providers; i.e., handling marketing and sales, student recruiting, enrollment services, housing, academic program development, and follow-up services such as conditional admission to degree and vocational programs and also internships. These services are often centralized so that one corporate office can handle business transactions for multiple IEP program sites, thus eliminating the replication of services at each site.

Through centralization of services and an emphasis on speed and efficiency, proprietaries position themselves to provide excellent service both to student consulting agencies and to individual students who wish to enroll on their own.

Some proprietary program providers have even established their own student consulting (sales) offices in strategic locations, e.g., Tokyo, Istanbul, Sao Paulo, in order to cut out the middle-man and save on commissions to education consulting agencies. Some also have English language schools in cities around the world.

Evo: I want to follow-up on the importance of central processing and an effective back-end. How does the institutional structure and bureaucracy impact a university-based program’s capacity to compete against competitors in the private space?

WG: Your question is insightful and cuts right to the heart of the issue. Unlike large proprietaries whose administrative departments are aligned to serve the core business, university-affiliated IEPs usually have to rely on existing campus offices that serve different departments and programs throughout the campus. For example, when university-affiliated IEPs need specific services, be they related to document preparation, processing enrollments and tuition payments, creating brochures, hiring instructors, or paying commissions, they typically have to engage the services of an office that serves many other constituencies. Often this means queuing up and waiting for service.

Our IEP is housed within a large continuing education division of the university that includes different program and administrative departments, and, although our administrative departments are dedicated to prompt and efficient service, some tasks take a long time to complete because they require processing not only by one of our departments but also by a campus department.

Just to cite a few examples: a recent promotional brochure was delayed for weeks because of red tape associated with vendor approval and permits to take photos on campus. Refunds and commission payments have to be processed through the university, and we routinely alert clients that it may take 4 to 6 weeks to receive a check. Our university, like several others, has only one wire transfer account, and it can take weeks before we’re notified that a client’s wire has been received. These delays and complications are not the result of indifferent or inefficient staff but of the competing demands for services from offices that are obliged to serve many other constituencies.

In addition, we are obliged to use institutional information systems that were not designed to accommodate our business. Thus, we often have to resort to manual processes and workarounds to accomplish reports and other tasks. Compliance with the rules and regulations of a large, multi-campus public university can also result in complications and delays.

Evo: What are some of the other major advantages proprietary English language providers have over university programs?

WG: The proprietary providers understand what study abroad consulting agencies need in order to meet the demands of students and parents for fast and efficient service. In many countries, students and their families traditionally rely on agents for school information, applications, enrollment, visa counseling, and often even travel reservations.

As I noted earlier, with centralization and dedicated service to many different IEP locations, proprietaries provide a standard application for all their schools, fast application processing, visa documents, and even a variety of housing accommodations.

For us, agents constitute 80-90 percent of our business, especially in the summer. Although we try hard to process applications and visa documents quickly, our services don’t compare with those of proprietary programs. Their commission payments are incentive-based, higher than ours, and paid much more quickly.

Evo: Let’s talk more about agent commissions. There seems to be a huge amount of criticism around the payment of commissions to recruiting agents. Is it difficult to work with agents when commission isn’t an option?

WG: The pendulum has swung back and forth for years regarding the payment of commissions to student recruiting agencies. Much of the controversy involves degree programs. Among proprietary IEPs and university-affiliated IEPs working with student consulting agencies and paying commissions is commonplace. And, yes, it is difficult to work with agents if you don’t pay commissions, i.e., unless the school has an outstanding reputation and is located in an extremely desirable location. In those cases, the agency usually requires a service fee from the student or family requesting services.

In instances in which an IEP and an agency want to work together and the school is prohibited from paying commissions, arrangements are sometimes made to cover advertising or other promotional costs in lieu of commissions.

Although our IEP is affiliated with a public institution, our division is totally self-supporting and receives no funds from the university or from the state. We function, more or less, as a business arm of the university, and we are freer to pay commissions for our self-supported programs, none of which are university degree programs.

Evo: You made an interesting point there that, because the extensions seem to operate more as business enterprises, the notion of using commission doesn’t seem so distasteful. Why is it that the idea of paying commissions is unconscionable at the traditional state university?

WG: State institutions, at least all with which I’m familiar, are funded largely by state taxes and, for the most part, qualified citizens are given priority when it comes to admissions. Because of state budget shortfalls and their ripple effect on state universities, universities have begun enrolling more out-of-state and international students to gain higher out-of-state tuition fees. This gives rise to sentiments among state tax payers that their sons and daughters are being denied admission in favor of international enrollments. The idea of state universities paying commissions for international enrollments creates the appearance of impropriety, i.e., giving priority to international students, a practice which is clearly prohibited.

Our university has worked hard to achieve a careful balance by giving priority to qualified state citizens and admitting a careful balance of the most highly qualified out-of-state U.S. citizens and international students.

This interview has been edited for length.

This is the first part of a two-part series on proprietaries competing with university IELPs. In the second installment, Gaskill discusses some of the advantages universities have over their competitors in the proprietary space.

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Key Takeaways

  • The lean structure of proprietary organizations gives them a competitive advantage in the international environment.

  • Expense is a significant concern for international students, and this is becoming more pronounced as lower-cost options are becoming available across the US and around the world.
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