Disruption in Public Higher Education

Historically, public higher education has existed to serve the broad-based social, economic, and political needs of society. In the future, its purpose will likely be expanded to serve the specific needs of individual students at various points in their lives, on-demand and independent of campus location. That’s a huge change. It is a new teaching process for faculty and a new learning process for students.

Online courses, hybrid courses, global competition for students, unbundling of degrees, division of teaching labor, declining state subsidy and increased user pay, accelerated degree programs, partnerships between non-profits and for-profits, slow growth, etc. The fundamental nature of higher education is on a path towards major change, perhaps rapidly so due to the new opportunities that various stakeholders wish to seize. The value proposition is changing for students and payers. How did this happen, and will it result in change for the better?

Lean thinkers would take a step back and ask: “What is the problem that we are trying to solve? Is the real problems the same as the apparent problem? What is the root cause of the problem?”

The apparent problem is the high cost of higher education, which, in turn, drives access. The growth of administrative positions, salaries of the leadership team, and student amenities have driven costs dramatically upwards. Yet the fact is that the wages and salaries of tuition payers have not increased along with productivity gains over the last three decades. The real problem is that families and individuals have experienced flat or declining income for many years. Employers are responsible for that outcome, as a result of not sharing the gains with employees in favor of distribution of gains to shareholders (and aided by globalized labor pools that depressed wages and salaries in the U.S. since the 1990s).

Despite the real problem being what it is, the value proposition is changing. It would have eventually changed anyway, but perhaps for different reasons. Will this change be for the better? Yes, for many students and selected other stakeholders, to some extent now and to a greater extent in the future as we re-examine the needs of students, figure out how to deliver online deliver education to students and improve learning outcomes, and deliver education closer to the time when it is actually needed.

Public higher education will likely go down the same path many other businesses have gone as courses and programs move online: increased outsourcing; greater numbers of professional (non-teaching) and management positions; and fewer workers in (service) operations (faculty and staff). Labor cost for instruction will decline as fewer professors are needed. Fixed costs will decrease as the need for dormitories and other buildings decline. These lower costs will offset the higher costs associated with delivering high quality online courses.

College and University leaders would be wise to learn from the mistakes made by leaders of businesses in other industries that have preceded them down this path (aided by expensive consultants), particularly as it relates to the affordability and access problems:

  • Outsourcing is not simple to do. It requires a lot of interaction with suppliers and close supervision to assure that the product or service meets requirements and is improved over time (e.g. quality up, cost down, and lead-times down). Underestimate the challenge and resources required and you may have to insource some or all of the work, usually at significant expense.
  • Focusing on price will lead to zero-sum price beating and innumerable problems. The focus when purchasing goods and services must instead be quality and value (to satisfy the need).
  • Increasing the number of professional (non-teaching) and management positions will increase overhead costs, which often leads to squeezing supplier’s profit margins in order to lower costs, or charge students new fees as the airlines have done to their passengers. This will degrade working relationships with suppliers and can lead to quality and lead-time problems. And it will annoy students who may have the ability to easily switch their source of educational supply.
  • Fewer workers in (service) operations (faculty and staff) mean there will be less in-house capability to do the work or to evaluate the quality of suppliers’ work. Devaluing the knowledge of experienced workers to save money in the short-term often results in the need to hire more people to regain lost capabilities and improve service.

In general, cost problems drive leaders to make many penny-wise, pound-foolish decisions. Knowing this, leaders should make special efforts to avoid such outcomes.

Ultimately, the lesson that higher ed leaders need to learn is that disruption has occurred due to chronically poor administrative and academic processes. The disruptive nature of online learning changes the process, but the risk is that administrative and academic processes remain as bad as they were before. All processes have to be improved, and the ability to drive cost down and quality up – without making zero-sum trade-offs – can only be achieved through Lean management.

Students and payers will someday expect much more than just convenience, flexibility, and lower prices. They will want outstanding quality and zero hassles in dealing with their higher education supplier. I don’t think anybody in public higher education is ready for the kind of student-centered experience that students will soon want.

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