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There are a lot of reasons for thinking that higher education has been on a wrong track for the last fifty years or so.   I have mentioned some of them here and here for example.  As I discuss in my book, current thinking about how to manage a university (particularly a large one) is driven by an industrial model.  It’s not an idea that I invented.  Fifty years ago, Frederick Rudolph, the great historian of universities, talked in pretty explicit terms about the “assembly line”:

On one assembly line the academicians, the scholars were at work; from time to time they left their assembly line long enough to oil and grease the student assembly line. . . . Above them . . . were the managers—the white- collared chief executive offi cers and their assistants. . . . The absentee stockholders sometimes called alumni, the board of directors . . . the untapped capital resources known as benefactors . . . the regulatory agencies and commissions in charge of standards.

You can understand how all of this got started at the turn of the last century.  The great benefactors of higher education were  industrial leaders like Andrew Carnegie and John D. Rockefeller.  They wanted the fairly chaotic system of schools, colleges and universities to establish ground rules.  What constituted credit?  How were students defined?  Where was their money going to go?  The only real models they had to rely on were the brand-new manufacturing models that valued high quality at low cost.  In these models, variance is the enemy.  These were the models that were imposed on American higher education.  We can still see their echoes in testing and accreditation bureaucracies.

But Carnegie-era industrial policy had no way of foreseeing the explosive growth that the last half of the twentieth century brought to American institutions.  I am not alone in thinking that 19th century industrial policies  are at a dead end in higher education.

The Prezi presentation at the start of this post, is an overview of how badly the factory model has led us astray over the last generation. Maria Andersen — a community college professor —  has been cannily accurate in her portrait of modern higher education practices, and I have become a fan of her analysis of the state of our systems.

There is no sound for this video clip unfortunately.  The clip below has sound but the video is pretty bad.  I don’t know what to tell you about how to watch these presentations.  If you have two computers you might consider using one for audio and the other for video.

In “Dancing with the Stars” I talked about what a classroom with 10,000 students might be like. The transformation of higher education has begun, and the pace of that change is accelerating.

Dick Lipton’s blog Godel’s Lost Letter has since attracted tens of thousands more.  It is a virtual seminar that, for example, coordinated a global effort to referee an important paper in the theory of algorithms.  At times, the number of viewers topped 100,000. Now Stanford’s Peter Norvig and Sebastian Thrun are offering an online course in artificial intelligence that will enroll 58,000 students.

On September 12, I will join with 60 or so colleagues to offer a MOOC for tens of thousands of students.  Georgia Tech  students will get credit, and others will get badges that could be convertible to credit if they ever enroll at Tech.  Other institutions will announce their approaches to certifying achievement in the course. A MOOC is a Massive Open Online Course, a style of college-level teaching that was pioneered by George Siemens and Stephen Downes. The first MOOC, offered in 2008 by George and Stephen was devoted to the subject of their research, a style of learning called connected connectivism. It attracted 10,000 students.

The 2011-12 MOOC is all about transforming university learning and the organizers hope it will attract a much wider global audience.  They are calling it the Mother of all MOOCS.

The course will also be a C21U experiment on self-certification, a concept I discussed in my book. Where will this all lead?  It’s far too soon to predict an outcome, but within the last year, the number of experiments in higher education has exploded.  If you believe like me that innovative change is just what traditional colleges and universities need, that’s a good thing. The way to innovate is to try out lots of ideas.

Crazy claims about faculty productivity are bouncing around like ping pong balls.  Public research universities in Texas are getting more than their fair share of attention from agenda-driven politicians because their professors are not spending enough time in class.  They’ve even invented a classification system based on this one-dimensional view of academic life:

  • dodgers
  • coasters
  • Sherpa
  • pioneers
  • stars

I don’t think I’d want to be a coaster, but to be honest, I wouldn’t want to be a Sherpa, either.

CCAP’s Richard Vedder has looked at the same data through a conservative economic lens and concluded that significant costs savings can be found by adjusting teaching loads — upwards, of course. Like CCAP I think there needs to be more emphasis on undergraduates, but just lopping off a part of an institutional mission is not the way to do it.  Unless, of course, you are of the opinion that everything outside the classroom is overrated in American universities.

Maybe I travel in different circles, but the faculty workday appears to me to be an already overstuffed suitcase.  Anyone who wants to cram in another sock needs to take a look at what’s already there. Mission creep, bureaucratic bloat, crushing compliance requirements, and the willful bliss with which research universities give away research time have filled every nook and cranny.

I talked a few weeks ago about how research is given away, and it’s a topic that always draws phone calls and email.  But let’s take a look at the same data that CCAP uses.  The John William Pope Center recently published a national analysis of teaching loads.  It should come as no surprise that they have gone down over the last twenty years, but more interesting is the trend.

The decreases virtually track the increased workload by program officers at Federal funding agencies. But since staff spending at agencies like NSF has been stagnant for twenty years, program officer workloads really just measure proposal submissions.

Why the decrease at Carnegie Research and Doctoral institutions?  According to an NSF study the tendency in most NSF program offices is to deliberately underfund project proposals.  Over half of the researchers surveyed reported that their budgets had been cut by 5% or more and that their grant duration had been slashed by 10% or more.  There is little room for padding an NSF budget, so these are real cuts in funds that are needed to successfully complete a research plan. One more sock stuffed into the productivity suitcase.

What does a winning proposal cost?  The same study reported:

…PIs’ estimate of the time it took for them and other people—for example,
graduate assistants, budget administrators, and secretaries (not including time spent by
institutional personnel)—to prepare their FY 2001 NSF grant submission was, on average, 157
hours, or about 19.5 days. It should be noted this is the time for just one proposal that was
successful.

Since the NSF success rate is currently around 25%, that’s about 80 days just to prepare a winning proposal.  Add to that the time needed to conduct the research that goes into every proposal submission, and you get a rough idea of what needs to be funded just to make research pay for itself.  This is lost productivity, and it shows up in reduced faculty teaching loads.

The trends at Comprehensive, Liberal Arts, and Community Colleges measure something slightly different: each of these institutions sees climbing the Carnegie hierarchy as important to their missions.  For example, NSF awarded $350M to community colleges last year.  The lions’ share of these funds went to worthy projects to train technicians, broaden participation in the sciences and support research experiences for returning veterans.  Individual awards for some of these programs start at $200,000 and solicitations for larger, center-scale proposals are encouraged. Like their research cousins, Community Colleges reduce classroom productivity to compete for federal research awards. An institution with an undergraduate research mission can easily get drawn into a system they cannot afford. And the data supports the claim.  For the period covered by the Pope Center report, proposal submissions from these institutions have increased almost in lockstep with lost classroom productivity.

Measuring technical productivity is not a job for the faint of heart. You have to take into account all uses of time, and outcomes that are often unpredictable events influenced by factors beyond an organization’s control. Modeling productivity is complex and frequently contentious, but I have yet to find anyone who seriously proposes measuring engineering productivity by the amount of time spent at a single activity.  Outside higher ed.

There is an easier explanation for the disturbing downward trend in teaching loads. It is mission creep.  There is really only one way out, and it has nothing to do with cramming more into a Texas-sized suitcase.  How about if everything from sponsored research to intercollegiate athletics had to pay its own way?  The academic suitcase is full of stuff already.  Let’s figure out where to put everything else one sock at a time.

Normally collegial discussions took a nasty turn after I suggested that most universities lose money on sponsored research.

Incredulous: “I don’t believe it. My department tacks a 50% surcharge to all my contracts; how can they lose money?”

Defensive: “Here are all the reasons that doing research is a good thing, so what’s your point?

Defensive with an edge: “Why are you attacking research?

Let’s be be clear about it:  if it’s your institution’s mission to conduct research, then spending money on research makes perfect sense.  In fact, it would be irresponsible to deliberately starve a critical institutional objective like research.

On the other hand, there are not all that many universities with an explicit research mission.  But there is an accelerating trend among  primarily bachelor’s and master’s universities to become — as I recently saw proclaimed in a paid ad — the next great research university. The university that paid for the ad has absolutely no chance to become the next great research university.  Taxpayers are not asking for it.  Faculty are not interested. Students and parents don’t get it either.

The administration and trustees think it’s a great idea.  Research universities  are wealthy.  Scientific research requires new facilities and more faculty members.  Research attracts better students. Best of all, federal dollars are used to underwrite new and ambitious goals. Goals that would be out of reach as state funding shrinks. As often as not, the desire to mount a major research program is driven by a mistaken belief that sponsored research income can make up for shrinking budgets. It’s a deliberate and unfair confounding of scholarship and sponsored research

If your university is pushing you to write grant proposals to generate operating funds, then alarm bells should be going off.  Scholarship does not require sponsored research. Chasing research grants is a money-losing proposition that can  rob funds from academic programs.  It’s an important part of the mission of a research university, but for almost everyone else, it’s a bad idea.  It’s a little like shopping on Rodeo Drive:  there’s nothing there that you need, and if you have to ask how much it costs, you can’t afford it.

How is it possible to lose money on sponsored research?  After all, professor salaries are already paid for.  The university recovers indirect costs. Graduate and undergraduate students work cheap.

A better question is how can anyone at all can possibly make money on sponsored research. Many companies try, but few succeed.  A company that makes its living chasing government contracts might charge its sponsors at a rate that is 2-3 times actual salaries. Even at those rates, it is a rare contractor that manages to make any money at all.

On the other hand, a typical university strains to charge twice direct labor costs.  Many fail at that, but the underlying cost structure — the real costs — of commercial and academic research organizations are basically identical.  There is a widespread  but absolutely false assumption that underlying academic research costs are lower  because universities have all those smart professors just waiting to charge their time to government contracts. The gap between what universities charge and what sponsors are willing to pay commercial outfits is the difference between making a profit and losing a lot of money. Just like intercollegiate athletics, sponsored research programs tend to lose money by the fistful.

Let me say up front that the data to support this conclusion are not easy to come by.  Accounting is opaque. Sponsors know a lot about what they spend, but relatively little about what their contractors spend.  It is in nobody’s interest to make the whole system transparent.  But my conversations with senior research officers at well-respected research universities, paint a remarkably consistent picture.  With very few exceptions, it takes $2.50 to bring in every dollar of research funding.

Fortunately, the arithmetic is easy to do.  If you know the right questions to ask, you can find out how much sponsored research is costing your institution. Here are ten sure-fire ways to lose money on sponsored research. You do not need all of them to get to a negative 2.5:1 margin.  If you are clever just a couple will get you there.

  1. Reduce senior personnel productivity by 50%: university budgets are by and large determined by teaching loads, a measure of productivity. It is common to adjust the teaching loads of research-active faculty. Sometimes normal teaching loads are reduced by 50% or more.  It is, some argue, table stakes, but a reduced teaching load is time donated to sponsored research because funding agencies rarely compensate universities for academic year support.
  2. Hire extra help to make up for lost productivity: Courses still have to be offered, so departments hire adjuncts and part-time faculty.
  3. Do not build Cost of Sales  into the contract price: The sales cycle for even routine proposals can be  months or years.  Time spent in proposal development converts to revenue at an extraordinarily small rate. In nontechnical fields and the humanities where research support is rare, the likelihood of a winning proposal is essentially zero.
  4. Engage in profligate spending to hire promising stars: Hiring packages for highly sought-after faculty members can easily reach many millions of dollars.  A sort of hiring bonus, there is little evidence that this kind of up-front investment is ever justified on financial grounds.
  5. Make unsolicited offers to share costs: Explicit cost-sharing requirements were eliminated years ago at most federal agencies.  Nevertheless, grant and contract proposals still offer to pay part of the cost of carrying out a project.
  6. Allow sponsors to opt-out of paying the indirect  cost of research: An increasingly common practice is to sponsor a research project with a “gift” to the university.  Gifts are not generally subject to overhead cost recovery, so a university that agrees to such an arrangement has implicitly decided to subsidize legal, management, utility, communication, and other expenses, and
  7. Accept the argument that indirect costs are too high: The  meme among federal and industrial sponsors is that indirect costs are gold-plating that must be limited. Rather than believe their own accounting of actual costs of conducting research, they argue that universities, should limit how much they charge back to the sponsor.
  8. Build a new laboratory to house a future project: Sponsors argue that it is the university’s responsibility to have competitive facilities.  But that new building is paid for with endowment funds or scarce state building allocations that might have gone toward new classrooms or upgraded teaching labs.
  9. Offer to charge what you think the sponsor will pay, not what the research will cost:  Money is so tight at some funding agencies that program managers are told to set a (small) limit on the size of grants and proposals independent of the work that will be actually be required.
  10. Defray some of the management costs of the sponsoring agency: It has become so common that it is hardly noticed.  University researchers troop into badly-lit conference rooms to help program officers “make the case” to their management.
The list goes on. It is so easy to turn a sponsored research contract into a long-term commitment to spend money for which there is no conceivable offsetting income stream that institutions routinely chop up the costs and distribute them to dozens of interlocking administrative units.  The explosion in the number of research institutions has all the elements of an economic bubble.
  • It is motivated by a gauzy notion that all colleges and universities are entitled to federal research funds..
  • It is fed in the early stages by accounting practices that make it easy to subsidize large expenditures.
  • It has the cooperation of funding agencies who know that the rate of growth is not sustainable.

Virtually everyone involved in university research knows that the bubble will burst.  A colleague just showed me an email from his program director at a large federal research agency.  It said that — regardless of what he proposed — the agency was going to impose a fixed dollar amount limit on the size of its grants. But in order to win a grant, he had to promise to do more.  His solution: promise to do the impossible in two years instead of three.  Just like the famous Sydney Harris cartoon,  a miracle is required after two years. At least there would be enough money to pay the bills while a new grant proposal was being written.

There was a stir a couple of months ago when I pointed out that university research is by and large a money-losing proposition.  There are some ways to fix that, but, in the end, it all boils down to an institution’s mission.  Most universities expect professors to engage in scholarly activities, but externally sponsored research is a different proposition.

The number of research universities–that is, universities whose missions explicitly incorporate research, knowledge creation and economic impact–is quite small.  Even among AAU schools–a club that styles itself as the premier  association of universities “distinguishing themselves by the breadth and depth of their research programs”–sponsored research is an afterthought for many.  The bottom line is that for most colleges and universities research is mission creep. Sponsored research is driven in part by a mistaken belief that research funds are an effective way of supplementing operating budgets.

But it is not the only upside-down belief system at work in American universities.  There is a persistent argument in higher education circles that intercollegiate athletics is somehow good for a university. Big-time college football and basketball are unquestionably great entertainment.  There is simply no other way to explain a jam-packed 100,000 seat football stadium in middle of an otherwise deserted prairie. It is spectacle that translates well to television, too.

So it is not surprising that there are millions of enthusiastic supporters of collegiate athletics–fans proudly flying the colors of the local team from the antennas of their SUVs–who know literally nothing else about the institutions on which they lavish so much praise and attention.  They may not be alumni, parents, or students, but they are nevertheless  invested in the fortunes of their teams. They may not be able to name a single academic program offered by their favorite school, but they know the pedigrees, strengths, and weaknesses of every assistant coach.  It is the main reason that most university presidents think that intercollegiate athletics is a positive force for the university. The common phrase among presidents is that it is a “front porch” that “only expands the potential donor base and does not compete with academic fund raising.”

If that were true, it would be great for all.  The public gets to invest in higher education. The schools get a new source of revenue and the opportunity to advertise their academic programs to a new and otherwise unreachable audience. Applications go up.  Scholarships pour in. Everyone wins.  The problem is that university presidents know differently. The president of a major research university once showed me an email message he had just received from an alumnus:

…I don’t care about academics at all. And I don’t want you spend any of my money on it. The ONLY thing I care about is winning football games. And if you can’t get that right, I am not going to give you another penny.

It was not an unusual letter, and it depressed him. But I don’t think he read the same significance into it that I did. College athletics and the business of running a university are not synergistic.  Failure in athletics has an enormous negative financial impact on the university, but then so does success.

On October 7, 1916, John Heisman coached Georgia Tech to a 222-0 route of Cumberland College. Neither team made a first down. Tech scored on every possession.  Cumberland gained a total of 22 yards. The Cumberland players were mainly ringers from local farms and factories who–because Cumberland had disbanded its football program– were recruited specifically to play this game. The pounding must have been fierce. Late in the game the Cumberland quarterback fumbled the ball, and it landed in front of a Cumberland lineman. The quarterback yelled, “Pick up the ball!” The lineman yelled back, “You dropped it. Pick it up yourself!”

There is cosmic significance to both the game and the panic-laced exchange between the doomed Cumberland players.  Intercollegiate athletics is set up to insure lop-sided outcomes.  Not necessarily on the playing field, but on university ledgers. College sports is also a financial game where there are lots of fumbles, but it is in no one’s best interests to pounce on them. If you are not on the winning team–and there are not many of those–you are going to take a financial shellacking. And even if you are on the winning team, it may not turn out so well for you.

It has been known for a long time that the financial model underpinning major college sports is crumbling. A 2009 report of the Knight Commission concluded that

It is clear that the question for many presidents…is not whether the current model is sustainable but given the forces at work, how long it can be sustained.

Some powerhouse programs do indeed make money. Georgia Tech runs one of the most profitable football programs in the country. Despite spending $1,250 per student, its football program turned a $9.35 million profit last year, but Tech is operating in rarefied atmosphere.  A recent report of the NCAA on revenues and expenses for Division I intercollegiate athletic programs shows why. Only about half of the 119 bowl-eligible football programs make any money at all. With so many media agreements with so many conferences, covering so many holiday bowl games, this seems impossible, but it is nevertheless true.

The major bowl games—the so-called Bowl Championship Series games– generate tons of money, and that money is spread around to the other schools in the conference.  So are the losses.  And there is a lot of red ink among the 34 post season bowl games. Bloomberg News recently reported on the “You pick it up!” outcome for the Big East Conference:

Rutgers University celebrated its 8-4 record last football season with a trip to the St. Petersburg Bowl in Florida. Big East Conference schools got stuck with a $740,000 bill.

The Big East revenue sharing agreement also spreads bowl losses from South Florida ($428,000) and Connecticut ($430,000) across the remaining schools according to a formula that conference does not make public.

But that still leaves 60-70 football programs that operate in the black, and those programs—like Georgia Tech’s—surely generate enough money to help cash-strapped university budgets,  don’t they?

They don’t even come close. Net income from major sports does not go toward engineering scholarships or new language labs. It helps to offset other athletics expenses. According to the NCAA, 88% of the programs at bowl-eligible schools lose money.  The median loss in 2009 was $10 million.  The NCAA also noted an alarming trend. The number of profitable programs shrank from 25 in 2008 to 14 in 2009 and the revenue gap between profitable and unprofitable programs grew.

The University of Florida operates one of the most successful intercollegiate athletics programs in the country.  Those programs collectively lost $5.4 million in 2008-2009. Where do those losses go? Universities hate to use the work “subsidy” but that is exactly what happens in big-time college sports. The losses are subsidized by other sources of revenue, and, as I pointed out in my last post, American institutions have no new sources of revenue.

Some of those subsidies are tied up in not very obvious ways with university balance sheets. Building costs, for example, tend to be lumped together in capital fund raising campaigns. It is a conceit that -–however convenient—has a big impact on academic programs and students. A professor interviewed by the Knight Commission asked the obvious question:

What’s the justification for a public university directing sixty percent of its capital expenditures over an entire decade toward a non-academic auxiliary unit whose annual budget is only eight percent of the entire university?

The financial reporting for athletics is as opaque as it is for research.  The NCAA is aware of this and had been pushing hard for standard accounting practices, but that would make life difficult for those institutions that want to spin the wheel, hoping for a jackpot.

I was browsing college basketball games last weekend, when I stumbled onto a public service announcement from one of those 119  FBS schools. It was an ad touting a new $50 million basketball complex bearing the name of a prominent local family. I sat up.  “I know that name!” The donor had been courted for a new academic building just a few years before.  Not only was there going to be another $50 million spin of the wheel, it had come at the expense of an academic program. Some front porch.

Awhile ago, I mentioned India’s plan to create 27,000 new colleges and universities over the next decade.  Well, guess what?  I was wrong.  The number is now 35,600. Here’s what I said a year ago about Education Minister Sibal’s plan to expand India’s capacity in higher education:

What does this have to do with American colleges and universities? Just as low-cost, high value service industries have migrated to India, the higher education market in the US will also start to buy more educational services there as well.

So I was immediately drawn to yesterday’s Business Week article about California’s intention to make a quick lunch of its seed corn by cutting university spending $1.4B and the likely effect that snack will have on job growth and tax revenue.

Particularly striking to me was VC Robert Ackerman’s reaction to the massive and rapid expansion of higher education in Asia:

Right now, if I were the Chinese university system, I’d be running ads showing up on UC websites, recruiting students to universities in Beijing and Shanghai.

Now I am not a big fan of the proposition that value in higher education can be measured in dollars spent–if American institutions made better use of their budgets, then the resulting efficiencies would actually increase capacity–but there is little doubt that wholesale dismantling of universities across the country is a very bad idea.

We are shrinking university capacity at a time when India, China, Singapore and many other countries are  increasing theirs. India  alone will create 600 new research universities. China is increasing its capacity in research universities while the  U.S. has created one new research university this century: UC Merced.  Since Merced is part of the California system, its prospects are dimmer by the moment. Only a handful of new universities of any kind have been created in the U.S. since 1960, a period in which college enrollments have quadrupled.

Why is falling capacity so important? Because the worldwide market is growing, and we are systematically reducing our share of that market when economic competitors are  moving in the opposite direction. I leave it as  a homework exercise to determine what happens when an enterprise loses market share in a growing market.

Buon appetito!

There has been a lot of discussion surrounding my post about Ephemeralization of American Universities.  One of the solutions I advocate is concentrating resources where they matter most — and for most universities that is not in the first two years when increasingly commoditized, high quality content is available to replace ineffective bricks and mortar in-person classroom experiences. Many of my colleagues have argued that the classroom experience is not only pedagogically superior, it is what students value. That was an argument that always rang hollow to me.  It did not match my experience and many of colleagues agreed.

But my anecdotal reporting of experiences has limitations.  A new book by Richard Arum and Josipa Roksa puts some weight behind the proposition that during the first two years of college students learn little.  That does not mean the first two years has no value, but as the Ephemeralization pill experiment suggests, the value is much more likely to be social than academic.

Here’s how Jacques Steinberg describes it in his New York Times blog:

This is going to be a topic that generates a lot of heat.  Behind it all is the question: why are we spending such a large part of the higher ed dollar on that part of the college experience that returns the least value?

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