In most industries, competition forces businesses to innovate,
control costs, and enhance productivity. Firms that are complacent are
likely to be left behind, or worse, by their competitors in a process
that early 20th-century Austrian economist Joseph Schumpeter brilliantly
described as “creative destructionism.”
Does the same process
work in higher education? The “industry” is certainly competitive. More
than 4,000 colleges and universities operate in the United States, in
all shapes, sizes, and flavors, and they compete for students, faculty,
resources, and recognition.
Yet this competition does not seem to
produce the same kind of pressure as in other industries to control
costs or increase productivity, especially among the most important
cohort of workers- faculty. Why?
The answer is that competitive
market pressures in some segments of the industry tend to reduce
productivity not enhance it. Students and their parents are looking for
smaller classes, not bigger ones. They want more student-faculty
contact, not less. They seek hands-on learning, not rote lessons
delivered in a lecture hall shared by 300 others.
The pressure
for smaller classes and more personal contact, from an economic
standpoint, reduces faculty productivity expressed as output per hours
worked. If the market were willing to accept larger classes and less
faculty contact, colleges and universities would respond. In fact, this
is precisely the strategy of some for-profit schools. But the
traditional institutions that are accused of being “unaccountable” are
in fact responding precisely to the market signals generated by the
purchasers of their services.
At some universities, it may appear
that greater attention to research comes at the expense of faculty
productivity. Time spent in the lab or writing a book is time not spent
teaching students. But this view of productivity ignores the economic
output of scholars—their scholarship—which ultimately may influence
students more than teaching yet another undergraduate section.
Competition
also leads institutions to invest in facilities and activities that may
make them more attractive to prospective students but do little to
enhance the quality of teaching or research. I have been fighting a
losing battle against those who want our entire campus to be wireless. I
have continually explained that we have invested in wireless in areas
where it makes sense. But I have yet to meet a student whose education
was inhibited by an inability to go online even more often than they
already do. However, our competitors are going wireless so we’ll need to
as well—at a cost of more than $2 million.
Similar pressure from
the market also causes institutions to invest in fancy dormitories,
expensive exercise facilities, and resort-like amenities.
Competition
also is influencing the distribution of financial aid in sometimes
unhealthy ways. Historically, financial aid went to the needy in order
to open doors to college. Now that institutions are competing to improve
their rankings, many have found it in their individual interest to
offer merit aid to academically high-achieving students. Doing so can
improve the overall academic profile of the entering class. While this
may advance the interests of individual institutions, merit aid may well
not be in the interests of society.
Should we really care
whether a few more students attend one school versus another if it means
that fewer kids go to college at all?
The good news is that
competition has stimulated curricular innovation. Institutions continue
to differentiate their programs to attract students domestically and
from abroad. Worldwide, U.S. institutions remain overrepresented among
the best in any survey. The challenge for boards in the future will be
to identify strategies that are sustainable in an environment where
competition will continue to drive costs and innovation alike.
