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Rethinking the business of college education

How a data-driven model can help universities improve learning assessment and costs
William Massy, an expert microeconomist, shows how administrators and faculty can improve education, research and affordability in his book Reengineering the University.
William Massy, an expert microeconomist, shows how administrators and faculty can improve education, research and affordability in his book Reengineering the University.

As an expert microeconomist, William Massy approaches the challenge of reform by applying rigorous economic principles—informed by financial data and other evidence—to explain the forces at work on universities and the flaws in the academic business model.

In his book Reengineering the University: How to Be Mission Centered, Market Smart, and Margin Conscious (Johns Hopkins University Press, 2016), Massy shows how administrators and faculty can improve education, research and affordability by keeping an eye on academic values and the bottom line.

The problem is poorly understood metrics and—sometimes—administrators and faculty who are too often unwilling or unable to change.

“Understanding these problems and the business model itself poses the problem faced by the blind man and the elephant,” Massy says. “Each person understands a piece but no one has a firm grasp on the whole.”

Your book addresses what you call a number of “flaws” in the system that are very much interconnected. You can’t really address one without addressing the next. It’s almost like a house of cards.

Yeah. Remember the old game of pick-up sticks? You try to move the stick and the whole thing may come crashing down. Until you begin to get a really good view of the “teaching production function,” as economists call it, you really don’t have a basis for unraveling this thing.

The dilemma, of course, is that only the faculty can fix what needs fixing. But faculty often don’t have enough motivation, data or basic information to really grasp the issues that have to be grappled with.

I believe you can get faculty involvement and begin to make some progress by giving them that teaching production function information that includes course-based cost and revenue, activity-based costing, analytics and so on.

The central administration can build a model that describes the teaching production function to help get faculty on board. They don’t need to have the permission of the faculty—it isn’t the kind of thing that requires a vote of the faculty senate to do.

All the information you need is already available in the university’s data system, the general ledger, the timetable that exists at student registration, HR, facilities and so on.

You can build this model and begin to work with one or two departments, showing them their actual data in the context of this. As you do that, you’ll see the dean and the department chairs get very interested. They say, “I had no idea. I’ve got problems to deal with and this helps me deal with them.”

You can begin to get the faculty engaged in a process of change.

Despite the importance of learning in the academic business model, you say that after two decades we’re still not really sure what we’re looking for.

I spent about 10 years in quality measurement before I got into costing and reengineering. I’ve visited probably 20 campuses and talked with them about quality and quality measures, and quality improvement in teaching.

I am very clear in the book that I don’t think that we’re even on the threshold of broad-gauge normed tests that would be detailed enough to be useful for decision-making within universities.

However, I have rarely been in a department where the faculty members—if they were motivated and maybe pressed a bit—could not figure out how to do a lot better than they are now in terms of measuring learning. If there is a reason to determine how well the teaching is going, faculty can find a way.

Anybody who has taught knows that you really do desperately want to have some idea of what your students are learning. There are a lot of different things that people are trying in order to do that. The trouble is, it’s all individual effort. It doesn’t go anywhere, it doesn’t build on itself, it’s not cumulative.

What’s the solution?

If you’re really going to make radical changes—and that’s what course redesign is all about—you’ve got to have some kind of measure.

One thing that Carol Twigg and her group at the National Center for Academic Transformation have insisted on from the beginning when they work with schools on course redesign is that you don’t change the structure of a course without first having decided what your learning objectives are and then writing them down.

Then you find some kind of metric to measure the degree to which you are succeeding in achieving those objectives, and you create a baseline measure of what you’re getting from your present configuration.

If you can do that in one department, you can do it more broadly and you can then take the results of those measures and put them into your academic business model. Now you’ve got info on cost, revenue and margin as well as the learning measure. That’s the way to proceed on this. It’s feasible, and I’ve found faculties tend to like it once they get into it.

You also discuss market forces. Markets typically determine price as well as quality but that doesn’t happen in education. Institutions don’t communicate why things cost so much.

There are several reasons that universities don’t do it.

First the administration, the people who handle the communications to the public, don’t know themselves. It’s hard to communicate what you don’t know yourself.

Second, I suspect that some have an idea that while they may be at the top of the rankings based on research, reputation and selection ratios, if there were really good measures of learning they probably wouldn’t be that much better than the second-tier institutions.

I have a pretty strong personal feeling that’s true—although, as they say, nobody can prove it. What I would like to see—and maybe it’s utopian—is for the market to know what the universities themselves are doing to assure their quality.

Do they have systems in place? Do they do the things that people who study quality know very well they need to do? Do they have teams working on it? Are they trying to develop qualitative measures?

If an institution isn’t putting time and effort into these tasks they probably aren’t doing nearly as good a job as they could do. There needs to be some kind of measure of the effort that an institution is putting toward improving its quality.

Very few institutions now have much of an organized effort to either systemically improve quality or systemically try to control or reduce costs. The single bit of marketplace information I would like to see would be the degree to which an institution does those things. The chances are, if they’re working on it seriously, they are making some progress.

Where does reengineering start?

It could start anywhere but I think the best place is with the senior administration of the university: the president, the provost, and the executive vice president or chief financial officer. That triumvirate is really best positioned to make it happen. You really have to get those three people on board in order to make a serious difference.

If the senior management of the institution and its governance structure put their backs behind it, there are all sorts of things they can organize. But they must be prepared to do it over a period of years—this is not something that gets done in six months.

Reengineering the university is not an edict from on high, it’s more of an ongoing conversation, right?

Very much so. It’s a series of sustained and ever-deepening conversation about this stuff, about quality, cost, measurement and improvement. That usually doesn’t exist to the degree that is necessary to begin reengineering.

For example, take the amount of time and effort that the senior administration devotes to the matter of how we can improve our teaching and learning and cost structures, and compare that with the amount of time that is spent on, say, athletics or research, faculty scholarships, or faculty research and other topics of the day such as diversity, gender issues and so on.

I’m not saying any of those are not important—they are—but the problem is that all that stuff tends to crowd out even an intent to worry about modernizing the teaching and learning systems—and it shouldn’t. That’s the core business for most institutions, the business of the business.


Tim Goral is senior editor of UB.

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