Reform higher education with capitalism? Doing good and making money at the for-profit universities

Reform higher education with capitalism? Doing good and making money at the for-profit universitiesFor a businessperson, the argument that making a profit leads to poor "product" quality would seem silly or worse, insulting. However, this is a common assumption in higher education. Similarly, increasing productivity (a typical business goal) has never been accepted as a worthy aspiration in higher education. In traditional universities, to evaluate academic programs in terms of costs versus benefits is to ignore the core values of the institution. Given this academic mind-set, it is no surprise that proprietary higher education has a bad reputation in academe.


But the controversial University of Phoenix and other for-profit educational institutions are expressions of American culture at the end of the 20th century and perhaps an indicator of things to come in higher education. Through this article I hope to spark a re-evaluation of for-profit universities and an examination of the lessons they might have to offer traditional institutions about how to be more cost effective without abandoning a commitment to social good and to student learning.

In many ways, for-profit universities have put a unique twist on the capitalist system. At first glance, it would seem that for-profits such as the University of Phoenix, DeVry University, and Argosy University are driven by a conservative, market-based ideology that focuses on the bottom line rather than on social good. But during my recently completed study of for-profit universities, I found among their leadership a number of now-established baby boomers with liberal or socially progressive values who claim that you can simultaneously make a profit and "do good," by which they mean providing increased access to higher education for historically underserved populations.

I will argue here that the for-profit solution to the access problem is accomplished through an organizational model that concentrates on meeting the needs of ethnic minority, adult, and first-generation college students. Although it may seem counter-intuitive that for-profits, with fees higher than public community colleges and four-year universities, can successfully address the needs of these populations, they do so primarily through a focus on customer service and by filling gaps in the higher education system. I will also argue that they try harder than they are often given credit for to balance the pursuit of revenue not just with student interests but with academic quality.

But before I make that argument, let me provide a brief description of the for-profit universities.


A large amount of misinformation exists about for-profit universities. One myth concerns their reach. The imagined "threat" to traditional higher education from for-profits is more symbolic than real. Only 2.5 percent of all postsecondary education students enroll in for-profits, and just 10 percent of the entire for-profit industry possesses the all-important regional accreditation that enables competition with traditional universities. That said, some individual for-profits are very big. The University of Phoenix--with over 130,000 students, a 30 percent annual growth rate, and an international target of 500,000 students--is the largest.

The for-profit universities differ from their traditional counterparts in a number of ways. First, the typical for-profit institution has a mission that is clearly focused on educating working adults and relies on a "practitioner" faculty model wherein work experience within a specific profession is seen as more desirable than experience in teaching or research. The faculty's status is lower than in traditional institutions because of their lack of tenure. Given the extensive use of part-time faculty, their training and evaluation are generally more systematic and extensive and their teaching methods more routinized in order to assure a baseline level of quality.

The curricular structure of the for-profits is also quite different from that of the typical nonprofit university. For-profits provide standardized courses in five-, six-, and/or eight-week single-course terms. They generally organize students into learning teams, incorporate work experience into their classes, and put heavy emphasis on learning objectives and the assessment of student learning.

For-profits are also organized differently than traditional universities, and their leaders think of themselves as managing rather than "administering" organizations that are often structured more like businesses than like their nonprofit counterparts. The for-profits tend to separate their academic from their management decisionmaking, which creates a tension, variously described by the for-profits as "creative" or "productive," between academic and business interests. But academic decisionmaking is not widely shared among the faculty, since these institutions generally have few full-time faculty.

Many for-profit institutions have widely distributed locations (although few are primarily distance learning universities. Only one-third of the University of Phoenix's courses are taken through the Internet, for example). Therefore they try to balance centralized and decentralized functions, although generally they are more centralized than traditional higher education. Often decisions regarding centralization are made for business reasons such as economies of scale and quality control. At the same time, for-profit universities encourage risk-taking and individual ownership of and accountability for tasks, and a flat hierarchy encourages communication and debate.

The use of assessment and feedback systems, a reliance on personal relationships, and a culture of investment (venture capital is available to respond quickly to initiatives) typically characterize for-profit decisionmaking. The way stakeholders are involved (in a more corporate than academic way) and the speed of implementation (compared to the notoriously slow rate of change in traditional higher education) differentiate decisionmaking at for-profit universities from governance in traditional higher education. The degree to which change is managed, encouraged, and anticipated also comprises a key element of their uniqueness.

For-profit universities face serious challenges, including poor academic reputations, competition from traditional universities, and managing extreme growth, especially in the case of the University of Phoenix. Many of the for-profits are now additionally under the scrutiny of business watchdogs as a result of publicly trading stock in their companies.

Most recently, for-profits have been under attack for overly aggressive student recruitment practices: Sixty Minutes ran a story on Career Education Corporation that was critical of its recruitment tactics, and the University of Phoenix has had problems linked to bonuses allegedly paid to recruiters. Finally, it is essential to note that for-profits depend on traditional higher education, benefiting greatly from traditional university investment in the development of faculty, curricula, and the domain (or market) as a whole.


Proprietary higher educational institutions such as the University of Phoenix are uniquely American inventions, with their colorful and fiery founders like John Sperling, their origin stories of beginnings as garage businesses, their populist beliefs in providing educational opportunities to first-generation college students, their Yankee innovation, and their pure bravado.

The counter-culture disposition of the University of Phoenix is more apparent than at other for-profits like DeVry University and Argosy University. While some of the leadership of the latter two is of the age to have been influenced by the 1960s, the organizations themselves are older than the University of Phoenix. However, I found that the top leadership at for-profits often come from nonprofit backgrounds and espouse values and beliefs consistent with such organizations.

The for-profits aren't just about making money. Although they have for-profit legal status, many of their faculty members and staff express commitment to a social agenda. In fact, the cultures of the University of Phoenix and other for-profit universities have an interesting mix of corporate and counter-culture characteristics. Their leaders' roots in the 1960s free speech and anti-war cultures inform their tendencies toward combativeness with traditional higher education, as well as affecting their willingness to debate mainstream assumptions about higher education.