For-Profit Reinvents Itself By Taking Lead on K-12 Education Reform

Earlier this summer, we predicted that the governmental and media scrutiny that for-profit institutions have faced for much of the year would be relatively short-lived. We wrote that the for-profits exercised significant political influence and it was doubtful that Gainful Employment would be implemented as initially proposed if at all. We also predicted that the largest for-profits had the market power, expertise, and resources to “reinvent” themselves just as other large corporations have done throughout contemporary American history.
Well, light is beginning to appear at the end of the tunnel for these schools, although, it is happening much faster than we ever expected.

Last week, in the wake of receiving over 90,000 comments, the United States Department of Education (DOE), decided to postpone issuing final rules on Gainful Employment. This will delay enactment by at least a year and that is assuming the political environment in November will sustain continued effort at all by the Department. If the DOE does enact new rules on the issue, we will be very surprised if they are not much tamer than the proposed regulations that have been introduced.

Now that media scrutiny on for-profit schools has started to subside and the public’s attention is beginning to focus on the November elections and challenges of our public K-12 education system, the University of Phoenix has led the way in the effort to “reinvent” for-profit education. Some of its efforts have been subtle and others fairly bold.
The nation’s largest for-profit school and second largest university system, has been including significantly more testimonials of successful student outcomes in its advertising. These messages have been present in Phoenix advertising for a while, however, they seem much more present as of late. Ads are also trying to deliver the message that Phoenix is similar to a traditional university with individual schools. By way of example, ads touting Phoenix education degree programs now prominently include “College of Education” or “School of Business” for Phoenix’ MBA program.

In our view, the most significant move in the “reinvention” process came this week with University of Phoenix’ sponsorship of NBC’s Education Nation initiative. Not only is Phoenix’ name being prominently promoted by NBC but the school’s ads are actively promoting how Phoenix and its programs are playing an active role in improving student achievement.
No matter how one feels about the University of Phoenix or for-profit institutions, it is easy to acknowledge that these ads make viewers “feel good” and create a perception that the University of Phoenix is at the “forefront of education.” If we were one of the 30 Million adult learners who make up the non-traditional marketplace, we would see these ads and probably be tempted to strongly consider Phoenix. Even if we had heard the University of Phoenix was a for-profit, we would probably view the school as one of the “good” guys, simply based on messaging.

This is just one for-profit. In the coming weeks and months, we suspect we will see similar types of “reinvention” initiatives from many other for-profit schools especially the very large players. There are opportunities here for both for-profits and non-profits.

While the potential troubles for for-profits are far from over and certain changes are on the way no matter what occurs with Gainful Employment, there is a window of opportunity here for the for-profits. Rebranding and reinvention (hopefully more than just superficial) can strengthen their position and the public perception. For-profits can ride the coattails of Phoenix’ initiatives and position themselves in similar ways. For those for-profit schools that are niche providers, there is a great opportunity to not only take advantage of the subsiding negative attention and begin getting unique, positive messaging out to prospective markets/students.

Non-profit institutions perhaps still have the best opportunity in our view. We have heard a collective sigh of relief from many non-profits over the past several months. Many think that all the media and governmental scrutiny have permanently damaged the for-profits beyond repair and that there is no need to view for-profits as competitors any longer. Rightfully or not, many non-profit leaders feel vindicated – that all the scrutiny has “proven the point.” This is the farthest thing from the truth. In our view, for-profits will be stronger than ever in the next year or two. As the scrutiny concludes and many for-profits work on recasting themselves, there is a unique opportunity for many for non-profits to innovate and expand their presence, however, the clock is ticking to get ahead. The bear may be hibernating now but once the bear wakes up, it will be refreshed and ready to fight.

Higher Education Can Help Address Huge Risk in National Security

I was recently discussing the state of education with the President of a major urban university. Specifically, we were talking about America’s changing demographics and the significant disparity in college going (and completion) as it relates to students of color. The university president suggested that our nation’s failure to provide effective post-secondary education opportunities is a significant national security risk. I agree.

As our economy becomes more globalized and dependent on highly skilled labor, failure to educate large growing segments of our population, will relegate many to a permanent underclass. Further, the lack of a large qualified workforce will prevent us from generating the economic output and innovation that is necessary to keep the United States relevant globally. Both scenarios threaten the social order as well as our ability to maintain our superpower status.

A recent report by Ed Week found an over 26-point percentage gap between high school graduation rates of Latino and White Students. The divide for African-Americans is even greater. Unfortunately, these disturbing gaps do not end with high school completion. Huge disparities also exist between the college completion rates of White students compared to African American and Latino students. These gaps are a social travesty but they are much more than that.

In 2007, Latinos and African Americans accounted for nearly 40% of all births in the United States. If we fail to educate a significant portion of this many Americans over the next two (2) decades, what will our nation become? As our population ages, who will our future scientists, doctors, educators, leaders, and business innovators be? Who will grow our economy so we can afford our government or meet our obligations to our retirees? Who will keep us safe and free? Who will come to America to pursue the “American Dream?” Who will ensure that our nation continues to grow and prosper just as it has for much of its 234 year history?

We have a choice to make. We can take steps to address these gaps not incrementally but powerfully and with urgency, or we can do nothing and put our nation at risk. If we make the right decision, we can put ourselves on an unprecedented trajectory for the greatest success America has ever enjoyed.

Many of us in post-secondary education might believe that most of the challenges and solutions are inherent in the nation’s K-12 public education system. To be clear, our K-12 system has tremendous issues to overcome. On the other hand, America’s higher education system certainly has its own challenges as it relates to the achievement gap and delivering outcomes that prepare students to be competitive in today’s workforce. I would also argue that post-secondary institutions also have a responsibility and opportunity to help our K-12 system in educating our youth.

Both non-profit and for-profit schools of higher education have a responsibility to help address this most serious national security priority. Our non-profits have missions focused on providing educational opportunities and the historical expertise in educating so many of our nation’s leaders and innovators. I would argue our for-profit institutions have an even greater obligation (and opportunity). Our largest for-profits have resources that many of our non-profit schools do not. They can make impacts in terms of funding, innovation, and business expertise. For-profit schools also have unique experience attracting and serving our non-traditional students as well as individuals who otherwise might be ignored by traditional higher education.

Here are 10 ways our over 6,700 post-secondary institutions can take bold steps in both the K-12 system and their own schools to address this potential national security crisis:

1. Adopt a local secondary school for the long-term. Beautification, clean-up and used computers are nice but what are truly needed are resources, technology, expertise, specialists, and an on-going commitment. A miniscule fraction of what many for-profit schools spend on recruitment can outfit a high school with high-speed WIFI service while instructors and professors with specialized knowledge can provide lower-achieving students with intense reading or math instruction.

2. Set-up mentoring teams of students and faculty that counsel high school students on post-secondary options, applying to school, and obtaining financial aid.

3. Help provide tutoring, extended instruction, and other types of after school program support for secondary students.

4. Provide students in Grades 7-12 with opportunities to experience higher education and earn college credit.

5. Introduce secondary students to hands-on experiences with careers and professions.

6. Provide high school students with summertime internships and jobs.

7. Work with key industries, large local/regional employers, economic development officials, chambers of commerce, and labor officials to develop program offerings (and curriculums) that best meet the demands of business while incorporating industries into the educational delivery process.

8. Utilize available assessment systems to pinpoint post-secondary students who are at most-risk, focusing scarce academic advising and other support services on these students.

9. Reallocate resources to make proactive career advising services that start at matriculation and last through graduation – a significant institutional priority.

10. Update curriculum so it is more interactive, engaging, and adaptive to different learning styles. Instruction also needs to be flexible as it relates to delivery and the utilization of technology including mobile devices.

There are many examples of many post-secondary institutions working to address this crisis. If all our post-secondary schools begin taking bold steps, we could be well on our way to overcoming this national security risk and guaranteeing America a future of unprecedented success and prosperity. Taking action now provides all our institutions, specifically our for-profit schools with the opportunity to demonstrate that substantially increasing access for all, enhancing outcomes, and strengthening the fabric of our education system – are truly priorities.

Off-Shoring of Higher Education – Can It Happen?

A few weeks ago I was enjoying a long car ride with a prominent education consultant. We were discussing sustainability as it relates to the cost of higher education in the United States. He made a thought-provoking suggestion predicting that higher education could become subject to the same type of global competition that has made its mark on many other sectors over the past decade. I thought this was a rather extreme notion. I said to myself that there was absolutely no way that the delivery of higher education could be off-shored. Americans would never accept such a concept, the quality would not be the same, and that higher education was way too complex a thing. After all, delivering an education is not the same as call center or manufacturing work that is now routinely off-shored!

The more I pondered my associate’s radical hypothesis, the more I realized that he might be right. The conditions are set for what would have been an unthinkable scenario just a few years ago. First, with the explosion and relative acceptance of online learning as an acceptable alternative to classroom instruction, education can be delivered from anywhere in the world.

Next, the infrastructure to support the delivery of education from places including India and China is growing with each passing day.  While both of these countries do not have the type of education system that we enjoy in America yet, their growing economies are in need of a scalable system – especially one that can enable their populations to compete strongly in emerging fields (typically technology and engineering). Governments, businesses, and educational institutions in these countries have been responding to the demand in concert– and have made impressive gains over the past several years. It is only a matter of time before these systems have the capability to scale not only to meet the needs of their local populations but also expand to meet the needs of new markets such as the United States. Like many American schools and colleges that have expanded into new markets thanks to online and distance learning, it is conceivable that overseas schools will look at the American marketplace as one they can charge a premium in (compared to what they can charge in their own countries) and as one that will help subsidize their local operations. European MBA programs are already setting up shop here in the United States.

Then there is the issue of capability. Over the past 15 years, there has been debate after debate whether this or that can be off-shored. When we think of off-shoring, we typically think of the call center representative we may talk to when we call United Airlines, manufacturing, or software development. You may be surprised, however, to learn about what else is off-shored these days. Law firms are off-shoring work traditionally done by paralegals or junior attorneys, major corporations are off-shoring accounting and finance departments, and medical reports are not only transcribed overseas but in some cases analyzed.  If you do not have health insurance, you can even now go to have a quality open-heart surgery for a fraction of what it may cost in the states. If all of these functions can be performed overseas at a significantly lower cost and in many cases with similar quality, why not higher education?

Still sound too far-fetched?  At one point so was the idea that the world was round. Using education as an example, who would have imagined 15 years ago that you would be able to earn a Master of Science degree from Stanford University entirely online or 30 years ago that a for-profit institution would be virtually tied with SUNY to be the largest university system in the United States!

There was an article in Friday’s Washington Post that essentially asked the question whether higher education is still worth the investment? This issue coupled with the fact that student loan debt has now eclipsed credit card debt is prompting a painful national conversation about the sustainability and effectiveness of the current K-16 education model in the United States. If our domestic providers are unable or unwilling to provide education products that are cost efficient and value-driven, consumers are not going to simply think they can be like Bill Gates, not earn a degree, and expect to be successful. They are going to look for alternatives – options that are less expensive, provide a higher yield, and provide relevant education that can be utilized in practice.

As alternatives become available, the regulatory and perception walls that may currently prevent mass off-shoring of higher education will be forced to crumble. In addition to students, there are other consumers of education that will influence this debate. These include employers that are in need of highly-skilled workers, the federal government that has a significant financial stake as a result of Title IV and is under enormous pressure to reduce the national debt, and many parents who can no longer afford the cost of a traditional college education. To these consumers that are “footing the bill” and need skilled employees to compete in a global economy, offshore providers might be viewed as an economic necessity.

No matter what happens, there will always be a market for American based higher education. The strong demand to attend an elite university is not in danger of subsiding anytime soon. Instead, off-shoring will be most attractive to non-traditional students and even traditional students that are looking for more flexibility, are focused on learning applicable career-skills, and those students/families that may not have the financial means to afford the traditional college experience. The aforementioned student populations are significant especially for small, tuition dependent schools that are on the brink as it is. They also represent much of the market currently served by American for-profit schools.

Personally, the possibility of any part of our education delivery system being off-shored is disturbing. Our education system still remains the envy of the world and an offshore marketplace threatens that position. K-16 education employs some of the most creative, intelligent, dedicated, and hard-working individuals – just as America’s once-burgeoning manufacturing system did. Most importantly, the American education system has not only been a tool of social and economic opportunity but also a conduit to instill American values and civic responsibility. Will the latter be possible under a more globalized system? Will the off-shoring of K-12 education be next?

No matter what we personally think about the off-shoring of education, in the words of Thomas Friedman, the “world is flat.” The foundations that make such a crazy notion possible are in place.  Whether we like it or not, offshore alternatives will play more of a role in education. It may be two years or two decades from now. The great news is that we have an opportunity to make our system stronger in the wake of possible overseas competition! We can improve our system, change the financial model, and make it significantly more competitive and responsive to consumer needs. Or, we can resist as many other now off-shored industries have done in the past and see a sizeable portion of our education market addressed offshore.

The Near Death Experience of a College

The Story of a Visionary President Who Overcame Today’s Challenges to Become the Model for 2020

Many tuition dependent colleges and universities are being forced to deal with the potential of at least one of what we have termed the Three C’s – change, closure, or consolidation. Fortunately, most are only dealing with the reality they must change to avoid the possibility of academic or financial insolvency. The good news is that those institutions that are serious about change and execute well have an amazing opportunity to reinvent and revitalize themselves – ensuring their relevancy for years to come.

Imagine you are the President of a private, liberal arts institution in the Midwest.  Your school was founded over a century ago and is about as traditional as they come. Over the past decade, your college enjoyed solid growth and healthy revenues. You were able to expand program offerings, add faculty, and build a state-of-the-art academic building. Then in 2008, you experienced the highlight of your tenure – your school appeared in US News & World Report rankings for the first time and your endowment that was literally pennies when you took office now exceeded $ 25 Million. If all the above was not enough, you were on track to have a record-setting freshman class enrollment! All your work had finally paid off and your momentum seemed unstoppable.

Fast forward to one year later. The Great Recession has significantly cut into your parents’ ability to pay the school’s $25,000 annual tuition. Not only is your freshman enrollment down but your continuing enrollments are being impacted as well. Your staff advises you that total enrollment may decline by over 10% and that your overall revenue may decline as much as 15% with the discounting that will be necessary to keep the students you have. What’s worse is that your endowment has lost 33% of its value. Despite all of the bad news, there is more. Your bondholders and regional accreditation agency are both becoming increasingly concerned about your school’s financial stability. While you argue that the financial setbacks are temporary and induced by the recession, your bondholders do not feel you have a sustainable financial future.  Your Board of Trustees is demanding action and has suggested you begin looking into the normal exit strategies for the school– partnering with a for-profit firm or merging with a larger, sister-school.

You soon realize that selling or merging will not be feasible and even if it was, either of these moves would be the effective death of your institution. As bleak as things are, you refuse to give up. You have worked too hard to build your institution. You also have a deeper stake. As a life-long educator, you are extremely concerned about what you are witnessing beginning to take shape in higher ed and what it means for providing all students with access to quality educational opportunities. You are beginning to observe more selective institutions (including higher quality for-profits) only being available to students who have a higher academic pedigree or family income. Most everyone else is being relegated to attend overcrowded or lower quality institutions whether they are non-profit or for-profit. You feel strongly that schools such as yours offer a quality education to a wider range of students. Today it is your school but who is to say that many more schools like yours will not have to fold or compromise themselves?

At an AGB conference, you meet a president of a small liberal arts college who took a different path several years ago. He explains that like you, he leads a school that is in an area of a country that is expecting significant declines in the traditional college-age population over the next decade not to mention the impact of sweeping demographic changes. To your complete surprise, the President also shares that he was able to increase total student enrollment by 225% over the past 2 years alone by taking the school’s niche business, sports-management, and nursing programs online. The online enrollments have bolstered the school’s traditional operations and effectively shielded it from financial challenges. In fact, the President shares with you that he has been able to increase traditional enrollments by simply changing the way his institution does business and utilizing revenues from his online enrollment to lure students from outside of the school’s traditional recruitment focus area.

You recall looking at offering online degree programs a couple of years ago but your faculty was not supportive at all. Additionally, being in a rural area, you did not feel you had a market of distance-learning students you could attract. Things are different now though. You need to do something fast or you will lose the faith of your Board and possibly your accreditation.  By putting in place significant cuts and other austerity measures, you create a 2 year window that you feel you can use to maintain the institution while you implement a bold turnaround strategy.

After a little persuasion, you are now able to convince your stakeholders that it is time to launch online programs.  Unlike other schools that are stepping into online with MBA programs that have already saturated the marketplace, your first online programs will be graduate degrees in Social Work, Finance, Accounting, and Taxation. Your data-driven research has shown that these programs are high in demand instead of other degrees you were encouraged to offer. You also rightfully realize that the undergraduate market is an even larger opportunity so you take your highly regarded social work, early childhood development, accounting, and psychology programs online. Perhaps your boldest step was to launch Associates degree programs. Your extensive research, however, identifies that marketplace as a large one and as underserved. You are particularly surprised to learn that 90% of a major for-profit institution’s enrollment growth over the past 5 years has been with associates’ degree seeking students.

You realize you have one shot to do this right and that means you must proceed at full steam. Failure is not an option! Your first step is to hire firms that can a) assist you with market research, marketing, student recruitment, and retention and b) who can convert your curriculum online.  While the investment required will require a substantial portion of your remaining endowment funds, you feel confident that the return on investment will make it worth it. Your Board supports your plan provided that you agree to stay on for the next 5 years to see this important and risky initiative through. After the Board’s unanimous stamp of approval for your plan, the Chairwoman of the Board says that you will be “personally accountable” for the success or failure of your plans. The pressure is on!

Fast forward a few years, your plan is working. You have increased your overall enrollment by over 400 more heads than you had in the Fall 2009. That may not sound like much to your colleagues that run larger institutions but for you it means everything. You have turned around the school’s financial position in just a couple of years. Your compelling programs and investments in student recruitment brought in students from down state and regionally – students you would have otherwise never had the opportunity to serve.

The success is encouraging and is being viewed positively by all stakeholders within your institution, however, due to changes in population and your high cost, your traditional enrollment numbers have yet to recover from their peak highs. You have invested more to recruit traditional students but with minimal results. Your Board is demanding progress in this area, yet you are not sure how you can compete for students that are being courted aggressively by more selective institutions. You are also finding that changing demographics are making it more difficult to recruit college-aged students in general.  The large schools in your state’s urban areas that you used to be able to rely on for recruitment purposes are now heavily Latino with many prospective first generation college students. While many of these students are enrolling in your institution just as Anglo and African-American students did years before, your recruiters are telling you that some of these students are wanting to stay closer to home – to be close to family or to help support their families. As a result, many of these students who are otherwise highly qualified to enter your institution are instead choosing community college and/or 4-year public schools that are closer to home and offer online learning options for traditional-age students. Convenience, value, and technology are very important to many of these students – even over institutional reputation.

As another year goes by, your revenue situation and surplus continue to improve. Now it is time to invest in a strategy to attract more traditional learners. After all, a few years from now will be 2015, and you are hoping to retire by then. While you can retire with a sound legacy for saving your school, you want to also be able to retire knowing that you have set your up your successor for real growth in traditional learner enrollments. But, how do you begin attracting a generation that has been exposed to the Internet since birth and looks at email as something as outdated as we might consider a telecopier?

Then it comes to you!  You develop an innovative plan called “The 2020 Plan.” The name is inspired by a study you read back in 2009 that suggested that potentially a majority of high school students in 2020 will be online or virtual students. First, you launch innovative and career-oriented online hybrid programs that allow your traditional students to live at home and work while enjoying a handful of traditional face-to-face opportunities. What makes this initiative particularly exciting is that you have developed partnerships with relevant urban employers, providing your students both employment and practical learning opportunities as part of the overall education experience!

Next, you launch an online high school. With all the content, for-profit providers, and charter schools out there now, it is not that difficult to do so. The plan is to recruit high school students from within your state. Your virtual high school students will not only be able to enjoy a dynamic college-prep curriculum online but also be able to attend your campus or those of partner high schools to play sports, attend prom, or involve themselves in required exercises that encourage socialization and face-to-face interaction. The early experience with your institution will also develop loyal students who will want to earn future degrees at your school.

What excites you even more about your virtual high school is that about 50% of your capacity will be reserved for students at high risk of dropping out of a traditional high school placement. You will partner with several urban schools with high drop-out rates to provide a collaborative learning program that will include specialized online instruction, access to advanced placement courses that are typically only available in higher performing suburban schools, and intensive instruction at the student’s local school site. The concept not only enables you to make a difference with the unacceptably high dropout rate in your state but also creates yet another base of traditional students to mold and eventually matriculate into your traditional program.

It is now 2015 and it is finally time to retire!  You end your tenure with 1,500 online non-traditional students, Although this was the year that you projected your adult population would overtake your traditional population, you are excited to learn that for the first time since the 2008-09 school year, your traditional population has experienced double-digit growth and now exceeds 1,650 students!  You have not only begun to again grow your traditional population but you have done so by adding your first 60 students from your college high school! On top of that, your outreach to students and families in urban areas – offering a truly hybrid online/traditional educational experience has paid off! There is more demand than supply!

As your presidency comes to an end, you look back at the past 6 years specifically. What an experience it has been!  You are a modest leader but it is difficult for you to not take enormous pride in the fact that you took your institution from a truly Near Death Experience to where it is today!  You are especially proud that your institution has survived and thrived through the past several years. You are humbled by the fact that many others did not survive or are no longer what they once were. Yes, it is a different time and you have changed but your institution is alive and well. You are educating more students, delivering better outcomes than you did even in the good ole days, and you have expanded your faculty! Best of all, you never had to sacrifice your values-based mission although you have expanded it!

This is a hypothetical situation based on emerging trends and taking advantage of real-life leadership challenges/responses of dynamic college and university presidents.