SEPTEMBER 2007: COVER STORY
COLLEGE INC.
As public universities in Oregon are forced to be more like
businesses to keep open their doors, it could change what it
means to be a college graduate.
By Abraham Hyatt
In May, a tiny nonprofit in downtown Portland sent a one-page
letter to every liberal arts college in the United States
offering a simple, but formidable challenge: Boycott the U.S. News & World
Report’s influential annual ranking of
colleges.
It’s perhaps the most popular ranking of colleges in the
nation. But according to the Education Conservancy, which sent
the letter, it’s a popularity contest that skews
educational priorities by placing an overly large emphasis on
easily quantifiable attributes — graduation rates,
assessments by other colleges — while omitting a
school’s true educational quality.
The letter was a small act of defiance, but one that quickly
became a tipping point in the discussion over the changing
nature of higher education. Two months after its release, 61
universities had either signed or had committed to do so. The
letter, and its impact, made national headlines and sparked
fierce debate in newspapers, magazines and online.
On the surface, it’s a disagreement about the
effectiveness, or harm, of a ranking system. But it’s
also an argument over a larger systemic shift that’s
occurred in higher education over the past two decades, a
change spurred by many catalysts: a precipitous drop in state
funding, education seen as a product and public academic
institutions turning to an entrepreneurial business model to
find desperately needed funding.
“There’s no question that the landscape has
changed. It’s been a profound shock and it’s going
to be a continuing one,” says University of Oregon
president Dave Frohnmayer. Diversifying where funding comes
from, he continues, has been essential to survival.
“There’s no question that the landscape
has changed. It’s been a profound
shock.”
DAVE FROHNMAYER,
PRESIDENT, UNIVERSITY OF OREGON
Photo by Stu Mullenberg
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With the loss of state money, public universities have been
forced to think and act like businesses as a way to remain
affordable. Today, new buildings (funded with private dollars
or bonds) often have a retail component in them. Collaborations
with companies help fund research programs. Universities charge
more for some degrees than others. Presidents are viewed as
CEOs. Technology transfer programs commercialize work created
on campus.
Frohnmayer and other officials at Oregon’s top
universities sing the praises of this business-minded approach
to the old world of academia. They talk about how students
would have been required to bear a larger financial burden
without a new model. But critics wonder if the world of higher
education is sometimes confusing business success with
educational success.
The “businessification” of universities and
developing quality education are not mutually exclusive.
It’s finding the balance that’s the question
— finding a path in a world where private-sector methods
might not only shape universities, but actually change what it
means to be a college graduate.
THIS NEW FACE OF HIGHER ED can be traced in part to a
much-publicized drop in state funding —
“disinvestment by the state” is how Kirby Dyess,
vice president of the state board of higher education,
describes it.
The change slowly has been taking place over the last two
decades, but it’s been most significant in the past 10
years: In 1999, state funds made up 26% of the Oregon
University System’s budget; in 2007-2009, they will make
up 17%.
To a large degree, students have been asked to fill the gap.
In 1999, tuition and fees made up 16% of all
universities’ budgets. Today, that number has jumped to
25%.
To put it into perspective, over the last eight years the
Oregon university system budget grew by nearly $1.6 billion,
which includes state and all other funding sources. Students
— who once bore 41% of the load — are now
responsible for 57% of that total. Unsurprisingly,
there’s unanimous agreement — even among critics
— that the quest to diversify revenue sources is
essential for students.
But keeping tuition low isn’t the only reason
universities are becoming entrepreneurial — they
need to if they want to stay competitive. Well-funded research
programs attract top-notch faculty. Prospective students
looking for a competitive edge in the workforce want to
participate in private sector-funded research, Dyess says.
“It’s like private industry,” she continues.
“When you hire the best, you attract the best.”
And the fact that those who rank colleges, such as U.S. News & World
Report, score details like faculty resources, a
school’s financial health, and giving by alumni, puts
even more pressure on universities.
UNIVERSITIES AREN’T THE FIRST ENTERPRISE to shift to a
more entrepreneurial mode, says Illinois-based businesses
consultant Phyllis Ezop. Newly deregulated industries and
companies with a declining core business are two other
examples. But schools wouldn’t have as many options if in
1980 Congress hadn’t passed the Bayh-Dole Act, which gave
colleges the ability to commercialize work created with federal
and state funds.
In Oregon, it wasn’t until a few years ago that the
amount of income from licensed work reached a noticeable point.
In 2006-2007, Oregon State University brought in about $2.5
million. The University of Oregon’s total in 2005-2006
was about $3.4 million. Portland State University, which trails
far behind the other universities in research expenditures,
brought in no money.
“Life gets more complicated and there are
more ways for things to get inappropriate.”
ED RAY, PRESIDENT,
OREGON STATE UNIVERSITY
Photo by Stu
Mullenberg
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While tech transfer gets a lot of attention, it actually brings
in comparatively little money; OSU’s 2005 total is a
speck in the school’s $580 million budget. However, as
OSU president Ed Ray says, “We don’t expect to get
rich on tech transfer. That money comes back to generate more
intellectual capital.”
They may not expect to get rich, but universities certainly
hope that a major discovery will do for them what Gatorade ($80
million in licensing revenue) did for the University of
Florida. Or what two cancer-related patents ($200-plus million
by the time the patents expired in 2004) did for Michigan
State. Those massive payouts are rare. But schools don’t
think they can afford to miss out on the opportunity to
commercialize the research and discoveries of faculty.
And it’s in research where the big money lies. The
sources of funding haven’t changed: foundations, the
private sector, the federal government. But the emphasis on
increasing research dollars, say Ray, Frohnmayer and others,
has become a major component of growing more
entrepreneurial.
In 2006, universities in Oregon pulled in $317 million in
federal and private research dollars, up from $203 million six
years before. Last year’s total translates to $147,000
for each faculty member at the three major schools. And it
makes Oregon seventh in the nation for the amount of federal
research dollars per faculty member.
Who helps drum up that money? University presidents. As the
shift toward a private sector way of operating continues, the
role of president has become a balancing act between
administrator and CEO. (In fact, some presidents are taking
that one step further: Former PSU president Daniel Bernstine
stepped down in June this year to take a job as CEO and
president of the Law School Admission Council. PSU is currently
looking for a replacement.)
The amount of time presidents say they spend outside of school
on business-related activities — like cultivating
philanthropy, chasing down federal grants and building
partnerships with the business community — has increased
radically. Frohnmayer estimates he now spends 60% of his time
working to find state and federal funding and research dollars,
or talking with potential donors or financial partners. The job
is to sell higher ed to the world, he says, and it’s like
“giving a speech to a parade.”
“It’s not your father’s or your
grandfather’s university president,” Ray says.
There are more examples: Colleges source student recruitment
and retaining work to outside companies; schools offer
investment asset plans to philanthropic donors. Scott Dawson,
Portland State University’s dean of the school of
business administration, points to how the university rents
portions of its buildings — whether to students or retail
businesses — and to the upswing in online classes (no
classroom equals cheaper overhead), which have attracted
attention from as far way as China and Saudi Arabia.
Whatever solutions or ideas universities borrow from the
private sector, the end goals are the same: a diversified
source of revenue, a way to replace lost state funds, a
competitive edge. But good business doesn’t always mean
good education.
IN 1907, A CHEMISTRY PROFESSOR at the University Of
California, Berkeley patented an invention that controlled air
pollution — a device that’s still in use. But the
professor, Frederick Cottrell, was cautious about the
college’s involvement in the commercialization of
technology.
He founded the Research Corporation, which was akin to an
off-campus tech-transfer and eventually became one of the
leading organizations to bridge university inventions and the
private sector. Decades later Cottrell still firmly believed in
keeping those two sides separate. In 1932 he warned of
“the possibility of growing commercialism and competition
between institutions and an accompanying tendency for secrecy
in scientific work.”
Today, secrecy is still a threat, argues Rita Gunther McGrath,
co-author of The
Entrepreneurial Mindset and an associate professor at
the Columbia Business School. She describes it as knowledge
hoarding — when financial interests trump collaborative
efforts. And that’s not the only ethical hurdle for
universities. Joshua Powers, an associate professor at Indiana
State University and a contributor to the book Privatization and Public
Universities, has a list of other potential pitfalls:
Financial interests can cloud institutional or faculty
judgment; universities can allow businesses that support
research to control their publication; there’s a greater
risk of undisclosed financial conflicts of interest among
faculty.
Ray readily acknowledges these dangers. As universities shift
funding models, he says, “life gets more complicated and
there are more ways for things to get inappropriate.” His
solution is one that he recognizes requires constant vigilance:
work within the school to develop and enforce strong ethics
policies.
“Education is not just a pragmatic issue. If
so, vocational training would be sufficient.”
MARVIN KAISER,
LIBERAL ARTS AND SCIENCES DEAN, PORTLAND STATE
UNIVERSITY
Photo by Stu
Mullenberg
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A lot of business practices can be good for universities, says
David Harpool, a provost at the New York Institute of
Technology and the author of Survival College: The Best Practices of
Traditional and For-Profit Colleges. They can help
manage costs or develop capital for new programs. But the
business-world mentality that every section of an institution
must generate revenue is dangerous, he explains. Writing,
critical thinking and other basics will never be profitable in
a purely business sense.
The American Association of University Professors recently
found that while the number of faculty at the nation’s
colleges grew between 1995 and 2003, the number of tenured
faculty — professors guaranteed permanent employment
— dropped, and the number of part-time faculty grew more
than 40%. Schools like part-timers for private-sector reasons,
says director Jonathan Knight: no benefits, lower wages and the
perception that they allow an institution greater flexibility
in terms of the classes they offer.
“If faculty are viewed as employees instead of
participants in the decision-making process of the
institution’s future, something terribly important is
lost,” he says. “To put it crudely, an institution
of higher learning is not an industry.”
As their school’s biggest booster, the presidents of UO
and OSU put a bright face on the risks associated with
businessification. But Frohnmayer also offers what might be the
most concise argument as to why universities understand the
deep implications in not addressing those dangers. Students are
the final arbiters, he says. If students see the caliber of
education fall because a university favors business over
education, they won’t enroll.
“We can’t have any perception of a loss in quality
with our students,” he says. “If you’re not
perceived as quality, that’s what will kill you faster
than anything.”
WHAT DOES QUALITY MEAN? Good research programs? New buildings?
Lots of patents?
Marvin Kaiser, PSU’s dean of the college of liberal arts
and sciences, says the future of higher education must be about
more than giving students marketable skills. It’s about
teaching critical thinking, culture, communication —
different components of an education that fit the mandates of
the job market but also spark creativity and innovation in
students after they graduate.
The elements of a broad education aren’t always found in
revenue-generating programs. Dyess, with the university system,
points to basic creativity-based research, some of which she
says has led to bigger breakthroughs but much of which has
simply fueled the learning process.
“Education is not just a pragmatic issue,” Kaiser
says. “If so, vocational training would be
sufficient.”
Numerous studies and reports support Kaiser’s point that
the next wave of innovation in technology, business or the arts
will come from students who’ve earned a multi-dimensional
education. And he’s optimistic that the people behind
higher education in Oregon see the need to balance that kind of
rich education with business needs.
But what actually comprises that education, and how it will be
taught is in a state of flux. The present obviously hold clues
to the future.
McGrath, with the Columbia Business School, describes what
some of the current indicators portend: fewer tenured faculty,
deans and administrators who serve shorter terms, more
in-classroom collaborative projects with businesses, more
interaction between universities and the outside world —
all changes based on the private sector tenets that an
institution be able to demonstrate fiscal accountability and
quantifiable value.
In the end, the final word on how businessification has
affected higher education will come from one place: students.
Their answer will come five, 10, 15 years from now when this
next wave of would-be innovators and leaders either steps
forward or stumbles as they begin shaping Oregon’s
future.
Have an opinion? E-mail feedback@oregonbusiness.com
