Published on 2014/01/22

Partnerships: The For-Profit Side of the Story

Partnerships: The For-Profit Side of the Story
The for-profit approach to procurement allows for a faster and more efficient purchasing and implementation process for major purchases.
It stands to reason that if the for-profit education sector is known for its focus on the business of education — integrating business practices into the educational endeavor in ways that most traditional institutions often cannot even imagine — then the processes for entering into service partnerships with outside vendors will, necessarily, follow standard business practices.

But is that any different from the way schools in the traditional sector enter into partnerships? It depends. We need to be careful about painting a very large, diverse industry with too broad of a brush. Instead, let’s agree that every institution is different, and while we can group them into sectors for convenience, those categories become meaningless when we drill down into a given school or company.

With that said, in my experience, there are more similarities than differences between the not-for-profit and for-profit sectors when it comes to securing services and goods. Most institutions use some form of a competitive bid process, particularly as the stakes grow larger, and when the stakes are small the creation of partnerships is often based on familiarity with a vendor or referral regardless of the sector. However, there are several small differences — and one pretty big difference — between the two that are worthy of exploration.

Many “traditional” institutions and systems are mandated, often by law, to use a competitive bid process when choosing a vendor. While this often results in lower costs, it can create a timing challenge as weeks, months and even years can go by while the process unfolds. For-profit schools are susceptible to the same pitfalls when it comes to a bid process. However, they can typically move much more expeditiously, and that is a small difference with a big payoff.

While serving as the chief academic officer of a for-profit school some years ago, I had an experience that will illustrate two more small differences. The school had transitioned from not-for-profit to for-profit before I arrived on the scene, but not all of the systems had caught up with the changes. In the course of revising a core course, a curriculum team, comprised primarily of faculty members, had decided to change the textbook; a relatively small change at face value. The first I heard of this was a call from the parent company asking if I was aware this action would cost our school approximately $2 million in the next year. That figure was based on agreements and guarantees the parent company and, by extension, our school, had with our publishing partners, and the textbook change had resulted in a change in publishers. Not wishing to impose upon the school the consequences of their choice (which would have included cutbacks in student services, fewer support personnel and so on to make up for the shortfall), the curriculum team agreed to return to the original publisher.

While it is easy to see a similar process unfolding at a more traditional school, two small differences are brought to light by this example:

1) For-profit sector partnerships and vendor agreements are frequently much more high-stakes, rule-bound and complex than those found in the public sector.

2) Due to the greater clarity of roles, in the for-profit sector, it is common to see a compromise such as the committee’s reversal of their decision. In my example, while the faculty were entrusted with the responsibility for choosing textbooks, they were expected to do so within the boundaries of institutional agreements and resources.

A few years ago, these would have been relatively large differences, but over the past decade, most institutions have been seeking to clarify matters of governance as cutbacks in funding have forced conversations about how to serve students and communities with fewer resources. So, the distinction today between the two sectors is less evident in more cases.

There are other small differences that impact some institutions more than others, and I invite readers to address them in comments so we can broaden this conversation. However, there remains one big difference we need to address: for-profit schools are simply better equipped to enter into and execute partnerships than traditional schools. Regardless of the process used to form a partnership, the confusion often found at traditional institutions around who can make a decision and what the decision-making process needs to be simply does not exist in the for-profit world. Once a for-profit institution makes a decision to form a partnership, that agreement will a) be mutually beneficial and b) be built to last for the defined term.

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Readers Comments

anon 2014/01/22 at 12:22 pm

Is Rawls suggesting that professors at a non-profit institution would have made a different decision and gone with the more expensive option simply because they didn’t have shareholders to answer to?

I beg to differ. Non-profits have stakeholders, including boards and governments, whose demands for financial accountability would equal those of private shareholders. Just because non-profits aren’t driven by a profit motive, it doesn’t mean they pay absolutely no attention to cost or value-for-money.

Gene 2014/01/23 at 2:19 pm

I think you might have turned his point around. Rawls was not suggesting non-profits do not pay attention to costs, but rather sometimes for-profit institutions may have to spend more to adhere to larger corporate agreements and alignments. In the non-profit world the decisions can be more straightforward (e.g. what is the least expensive option?); however, the complexities of for-profit corporate requirements may force the less attractive option.

I believe his article provided great insight into the implications and better understanding of the forces at work in both types on institutions.

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