The real issue with the Congressional hearings on for-profit schools is not the particulars of possible legislation or regulations, but how did career colleges sector end up as a focus of the US Congress? Why are legislators singling out career colleges for special scrutiny? Why are they even thinking about new rules for them? How did we get to this point? And what can be learned to try to keep this from becoming an on-going activity that will encompass all sectors of higher education.
The answers actually come from two areas. The first is where we always look – the operational side, being for-profit and what that entails and causes. Sixty Minutes anyone? But that is actually the lesser of the two core issues. The really significant source of the current situation is the human element, or for some schools and companies, the inhumane element. It is in the way we treat the people who work in the schools and the way we do not treat our customers – students – that is the real problem that brings all else into the public. Furthermore, it is the human aspects that are actually at the source of most all the concerns including the operational ones.
We begin with the lesser of the evils – operational concerns; how the schools operate. First, being for-profit in a not-for-profit world makes the schools stand out since they must operate differently than public and private not-for-profits. Selling stock to support expansion or operations is an obvious difference that causes some significant operational issues. Career colleges that are publicly held must be answerable to their stock holders though for the most part the stockholders are passive investors who just want a good return on their investment. There have been few cases of public shareholder/ company issues going public. I can only recall one. But that aside, being beholden to actual shareholders and thus needing to try to maximize profits does change operations causing some of the issues Congress is looking at.
Schools need to focus on bringing in new sales to “grow the business”. This means ever-increasing pressures to expand population, increase tuition and fees, reduce operational costs, and maximize revenue. This calls for marketing aggressively, focusing on initial enrollments (sales), introducing new programs that could sell, maximizing Pell and Stafford federal money, firing employees to reduce costs, cutting programs to cut costs, reducing the number of sections to cut costs, and so on. All to show a good set of numbers and talking points for quarterly calls. Even if a school is not publicly traded, they tend to operate as if they were perhaps hoping to go public at a later date.
Yes, much of what is above is similar to any college or school, for or not for-profit i.e. marketing, initial enrollments, offering popular programs and major, cutting costs and people, etc. In fact, the major difference between a good not-for-profit is an accounting system – fund balance versus cash accrual. But there are differences in four significant areas – the people who run the schools and who carry out the operations, the way people are compensated the intensity of the efforts, and how the operations are accomplished.
For the most part, the people who run the companies and the individual schools are drawn from the “school business” not from education. There is a difference. Yes, career colleges focus on learning and training and some do it exceedingly well and have done so for quite a while, others, if we are honest about it, do not do a very good job. They do not understand the larger $470 billion sector of higher education and do things that call attention to how career colleges are different and even some questionable. In my personal history as a chancellor and consultant to career colleges, I have observed some leaders of companies, schools and departments doing things to make numbers that were to be polite, questionable yet rewarded for doing so. I, and some of you, know of “shaving the edges” of the rules to hit financial goals with little regard to how this would affect student learning or the industry at large should the “shaving” draw public blood. Granted, this is not the behavior of everyone in career colleges. Not at all but because the leaders of companies, schools and departments do not see their function as furthering the education of students and their success, some do things that put finances over learning and that’s when trouble, the media and politicians strike.
If the people acted to better the education and success of students that would be a powerful reason for doing what they did and would be lauded by others rather than written about in newspapers, for radio and TV and by Congressional staffers. So why do they do that? Simple. If they succeed, they will hit numbers and get their bonuses. Further, they may have a vested interest to see share value rise if they are also stockholders. Those in not-for-profit education generally cannot get money bonuses for doing their jobs and they certainly cannot have a financial interest in the success of the school’s stock. They get a promotion or a raise for doing a good job but not a separate check and admissions people certainly cannot get a cash bonus. That would be getting awfully close if not on top of the federal regulations on bonusing admissions people.
The cash bonus creates an incentive for people whose base salary is often not all that high in comparison to that of parallel positions in not-for-profit to hit their numbers. That is why there are bonuses after all but the bonus thus also becomes something that must be obtained and some people will do almost anything to make sure they hit their bonuses. They are almost always the ones who cause companies and schools major problems when they are uncovered. They are the ones who Congressional critics use as examples that paint all career colleges with the latest color of blame and shame.
Yes, when uncovered, one of two things happens to these people. In the many well run, ethical schools and colleges the person is either let go for violating procedures or policy or more often, if the violation is not major, corrected and trained to do things correctly, Too often they are congratulated for coming up with a new way to shave the rules and their approach is quietly conveyed to many others as a way to go. But when they shave a bit too much, cut into the skin and the school bleeds in the media and into Congress’ attention, they are fired.
The author Dr. Neal Raisman is the leading presenter, researcher and consultant on customer service for retention in colleges, universities, community and career colleges in the US, Canada and Europe. He and his associates have provided retention solutions for over 300 schools and businesses that want to work with higher education. Dr. Raisman is the author of over 400 articles and four books including his latest bestseller The Power of Retention; More Customer Service for Higher Education available from The Administrators' Bookshelf in hard copy and digital editions.
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