The Rise of the For-Profits: Assessing their True Impact (Part 2)

The Rise of the For-Profits: Assessing their True Impact (Part 2)
For-profit higher education institutions forced every college and university to start thinking about themselves as businesses and adjust to meet the specific needs of their customers.
This is the conclusion of Marc Singer’s two-part series exploring the lasting impact of the rise of the for-profit higher education industry. In the first installment, Singer addressed the criticism these institutions have faced since coming onto the scene and discussed their success in disrupting the industry. In this piece, he outlines some of the most valuable lessons non-profit and public institutions can learn (and have learned) from their for-profit competitors.

Not to suggest that they were working in concert, but by and large these institutions — some of which were new, others that had been hanging around on the margins for many years — applied some of the basic principles of the marketplace to an industry that had not been treated like a marketplace before.

Market segmentation: yes. Not all students are the same, nor do they want or need the same things. You can’t talk to all of them the same way. Adult students, for example, are paying for college themselves, or are accountable to their employers for how they spend their money. Many non-profit institutions simply grafted their traditional model onto adult students — “Yes, we have evening classes now, but the administration goes home at 4:30 p.m.” — and hoped for the best.

Another lesson: we can’t wait for students to come to us — they need us to go to them. Otherwise, how did so many students end up enrolled in for-profits? Yes, it should not be minimized that some of these students were taken advantage of, especially in the past few years, and many dropped out within a few months, leaving their Pell Grants and other funds behind. But initially, schools such as the University of Phoenix focused on adult students and had somewhat strict admissions standards that would exclude students who might not be in a position to benefit from a college education. Still, they grew at rates of 10 percent a year or more. Of course, this unraveled later when shareholders pushed for profits and growth at the expense of quality. DeVry University, for example, spends only about a third of what other institutions spend on instruction and related services, according to a Senate Committee Report, and substantially more than that on marketing.

Another aspect of the for-profits’ approach that some non-profits have begun to embrace is their focus on meeting the individual student’s goals, rather than on the mission of shaping young minds. Most adult students return to college in order to change careers or move up within their fields. They need specific instructions, pathways and advising on how to get to where they want to be. A traditional college student has the time to explore new areas of study, and should be encouraged to broaden out his or her knowledge. An adult student, on the other hand, just wants to get where he or she is going in as short a time as possible. And adults don’t need dorms or a fitness center or most student social organizations.

By understanding this, and stressing the alignment between education and workplace goals and opportunities, for-profit schools became the first ones to “unbundle” services. This gave them a leg up on the competition (as they saw us); they could speak directly to students’ needs. Non-profits usually prefer to avoid the discussion of how higher ed can lead to career development, unless it’s done defensively.

In addition, higher ed has learned from the for-profits to embrace, or at least accept, online learning. While online learning predates the rise of the for-profits, online learning moved more into the mainstream as for-profit institutions promoted the flexibility of the online course. Again, their focus on adults and others with busy schedules and competing commitments made online education — and hybrid models, and Massive Open Online Courses — a natural part of the approach.

Others are still playing catch-up.

Before the non-profits showed up, what was our motivation for innovating? In fact, there was more incentive to oppose innovation, so that higher ed was an industry practicing purely artisanal business models. Yes, some schools have begun outsourcing some non-education-related functions: food service, parking and so on. However, in reality, most were not thinking about scale or more effective use of resources to help students achieve their goals. For-profit institutions such as Kaplan, Strayer University and Phoenix put effort into how to increase access and opportunity at a lower cost. Few others did.

As a result, the marketplace of higher ed has started to change. Cost remains a serious concern, as does the question of accountability. But at least we’re asking the right questions now: are we doing what we can to enable students to get the education they need and want? Are we supporting them in this pursuit? Are we getting in their way?

Along with some of the negatives, this has been the true impact of the rise of the for-profits.

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Readers Comments

Erwin Bedford 2014/07/17 at 11:16 am

I was surprised last week to read some of the backlash Singer received for this series on the positive impact for-profits have had on the higher education industry. There’s no denying that for-profits have forced an otherwise status quo-maintaining industry to innovate not only services but its core functions (like curriculum delivery). There’s no doubt there exist unscrupulous for-profits, but they should still be recognized for the changes they’ve forced legitimate institutions, both non-profit and for-profit, to make.

Timothy Bird 2014/07/17 at 12:58 pm

I can’t speak for others, but my issue with the Singer pieces is that his pieces accurately describe the changes we’ve seen in higher education, but he misattributes them to the rise of for-profits. In fact, things like market segmentation can be attributed to the partnerships many public institutions have formed with private service providers, a trend that was already well underway before for-profits really took off.

Marc Singer 2014/07/21 at 1:41 pm

I think Timothy’s point is an interesting one. He is right that there were partnerships between public institutions and private providers like Pearson and Thomson, occurring at the same time as Phoenix was rising (sorry…). But both are different aspects of the same phenomenon: for-profit businesses seeing opportunities in higher ed. Publishers found a toehold in higher ed’s marketplace, but that was more of an extension of their established role as purveyors of textbooks and other classroom tools. But they didn’t really market straight to students, and most colleges saw burgeoning partnerships as cost-savings for them, not transformational. Lots of factors account for this change, from technological innovation that promoted online learning to globalization (both of the higher ed world and the competitive nature of the global business world) to the ripple effects of No Child Left Behind in the US. And more.

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