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New Players, Different Game: Understanding the Rise of For-Profit Colleges and Universities

Tomorrow's Academy

Message Number: 
925

The authors apply the interesting concept of "disruptive innovation" to their analysis of the for-profit sector. They note that FPCUs (for profit colleges and universities) use a different overall approach-different decision-making models, different ways to deliver instruction, and different ways to measure success. FPCU innovations include serving new markets; achieving lower unit production costs (not price) through small size, simplicity, and convenience; and initially offering a narrowly defined, underperforming product that has since improved in quality, leading to competition over more products. 

 

Folks:

The posting below is a review by Carol Everly Floyd of the book, New Players, Different Game: Understanding the Rise of For-Profit Colleges and Universities, by William G. Tierney and Guilbert C. Hentschke.  The review originally appeared in Planning for Higher Education. January - March, 2009. Planning for Higher Education.  36(4): 46-48.Copyright © 1998-2009 by Society for College and University Planning (www.scup.org). Reprinted with permission. Planning for Higher Education book reviews appear at: (www.scup.org/phe).

Rick Reis

reis@stanford.edu

UP NEXT: On Course, Common Problems in the First Semester of College Teaching

 

Tomorrow's Academia

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New Players, Different Game:

Understanding the Rise of For-Profit Colleges and Universities

 

reviewed by Carol Everly Floyd

William Tierney and Guilbert Hentschke are distinguished professors at the Rossier School of Education, University of Southern California. Tierney is also the director of the USC Center for Higher Education Policy Analysis, and Hentschke is a former dean of the Rossier School of Education.

In New Players, Different Game, Tierney and Hentschke look at the primary operating assumptions of for-profit colleges and universities (FPCUs) and the critical elements of students, faculty, and programs. The authors build on their own direct examinations as well as on the sizable for-profit sector research base that has been developed over the past 10 years using organizational, economic, and political concepts. They provide a reasonably thorough introduction to and analysis of that portion of the for-profit sector of greatest interest to most planners-large university systems that are regionally accredited degree-granting institutions owned and operated by publicly traded for-profit corporations. As a part of sketching the broader for-profit postsecondary universe, they also discuss those FPCUs that offer credentials less than two-year degrees. They do not focus on corporate universities, smaller local operations, or degree mills.

Tierney and Hentschke emphasize that both the FPCU and not-for-profit sectors are important for the delivery of higher education services to meet the educational and economic needs of the American population. Each sector can learn something from the other, although they operate within significantly different cultures.

The authors apply the interesting concept of "disruptive innovation" to their analysis of the for-profit sector. They note that FPCUs use a different overall approach-different decision-making models, different ways to deliver instruction, and different ways to measure success. FPCU innovations include serving new markets; achieving lower unit production costs (not price) through small size, simplicity, and convenience; and initially offering a narrowly defined, underperforming product that has since improved in quality, leading to competition over more products.

Tierney and Hentschke contrast the major ways in which FPCUs differ from traditional public and not-for-profit colleges and universities (TCUs) in chapters on finance and governance; faculty roles; defining success for students, programs, and employers; and overall meeting of student needs. They address the differences between the sectors regarding decision making and incentives for major actors in the pursuit of generating revenues and containing costs. However, the  authors note that it is difficult to make broad financial comparisons because of increasing price convergence between the sectors, increased differentiation within the sectors, and development of some direct competition between the sectors. In terms of competition, Tierney and Hentschke join other recent observers in noting that FPCUs have evolved from their role as niche providers (in those fields and serving those students that TCUs have neglected) to providing an alternative or complement to certain TCU offerings. In some instances, as Kevin Kinser (2006) has observed, they are in direct competition in key "cash cow" fields.

In Chapter 5, "Faculty Roles," Tierney and Hentschke elaborate on the contrast between individual faculty discretion regarding what is taught and how it is taught at TCUs and the FPCU emphasis on instructional effectiveness. Faculty at most FPCUs simply deliver a centrally developed curriculum and measure student performance, which facilitates full documentation of instructional effectiveness. In Chapter 6, "Defining Success at the For-Profits," the authors describe the tight focus on and linkages between students, programs, instruction, placement, and employment. In Chapter 7, "Students and Other Priorities," they analyze student data from all sectors and for all subgroups of students. Their analysis shows that while FPCUs frequently reach older constituencies, there is a significant overlap in the demographics of the two sectors.

Tierney and Hentschke suggest that more information is needed regarding how to produce conditions that lead to quality both within and across sectors. Higher education institutions in both sectors, they assert, need to better serve public policy concerns regarding student needs. All institutions should have benchmark data on retention, graduation, and individual and societal benefits; in particular, there is an absence of comprehensive data in both sectors about the types of jobs students get following graduation. Even less is known about the return that society gets from graduates-citizenship skills.

Tierney and Hentschke's next-to-last chapter, "Clashes of Cultures, Sectors, and Purposes," addresses the federal financial aid issues (for both students and institutions) being fought out in the U.S. Congress. They analyze the differences between the societal and individual benefits of higher education, fundamental differences which have often been neglected in recent public policy discussions.

In their conclusion, the authors identify five critical issues regarding developmental patterns across higher education sectors: (1) the changing environment, (2) innovation in a maturing industry, (3) delivery methods, particularly online, (4) the partial amalgamation of cultures across sectors, and (5) mission/brand. The authors note that

* FPCUs are responding to a changing environment that includes growth for much of higher education, a generally positive regulatory environment and student financial aid funding situation, and a number of mergers and acquisitions.

* Because they have few fixed assets, a major strength of FPCUs is their flexibility to change and innovate, even in a maturing industry. These organizations seek out emerging degree instruction possibilities, primarily use contingent faculty and flexible rental facilities, and more readily get in and out of various educational and degree products.

* FPCUs are growing more rapidly than TCUs overall because of the strength of their delivery methods, especially in the area of online enrollment. (After Tierney and Hentschke completed this book, news accounts reported major online initiatives from public flagship institutions that may significantly affect online growth patterns (Foster and Carnevale 2007).)

* Boundaries between FPCUs and TCUs have begun to blur for a variety of reasons, including the increase in public money to FPCUs through student financial aid and the more stagnant public funding environment of TCUs. This situation leads the authors to ask interesting questions about the possibility of the partial amalgamation of cultures for the potential benefit of all. They seek to identify how each sector might benefit from the strengths of the other in determining how to better serve students. The authors are especially interested in whether FPCUs will begin to consider the educational research they have generally ignored to date on cooperative learning, student engagement, retention and attrition, and service learning. Although FPCUs will not want to merely copy TCUs, ignoring current research places them at some risk of initially underproductive activity that spends time reinventing the wheel.

* Perceiving that demand conditions in most geographic areas provide room for multiple providers, the authors note that it is important for institutions to recruit students consistent with their mission (TCUs) or brand (FPCUs). Some TCUs have yet to understand their difficulty with articulating their missions in concrete items.

Now for the caveats: The authors provide a portrait that shows a high level of diversity within both sectors of higher education. They sometimes leave the reader confused, however, about whether they are discussing FPCUs in general or are focusing on some subsegment thereof. Some of what they write seems to apply most heavily to colleges offering two-year degrees, certificates, or shorter credentials, and less to the segment that offers a significant number of baccalaureate or higher degrees.

New Players, Different Game is a significant contribution to the literature on the for-profit sector. This book should definitely interest the planner wishing to become more knowledgeable about the operating principles and practices of the for-profit sector and their implications for all of higher education. The distinction of this volume is its strategic perspective on how developmental patterns in each sector relate to similar factors in the overall environment and about what that might suggest for higher education as a whole.

References

Foster, A., and D. Carnevale. 2007 Distance Education Goes Public. Chronicle of Higher Education 53 (34): A49.

Kinser, K. 2006. From Main Street to Wall Street: The Transformation of For-profit Higher Education. ASHE Higher Education Report Series 31 (5): 62. San Francisco: Jossey-Bass.