Higher Education Changing Environment: Non-profit and for-profit comparison
Organizations who fail to change and adapt to their respective economic, political and social environments are predicted to fail or disappear (Morgan, 1998). In an article by Paul (2005), he illustrates how higher education institutions have evolved to adapt to market changes. He also highlights the complexity of the non-profit higher education institutions that are also businesses “with a range of intertwined functions and responsibilities that come together to create educational products and services” (Paul, 2005, p.107). The article shows the evolution of these institutions through the years and how they went from enjoying low-competition and protection from economic and political threats to an environment where they had to change their structure and approaches in order to stay competitive and relevant in a new marketplace. In his analysis of higher education and marketplace forces, he compares the for-profit and non-profit higher education institutions in an effort to provide “the theoretical underpinning for understanding organizational decline, crisis intervention, and turnaround. Finally, he shares examples of a few higher education institutions with successful turnaround models.
The traditional non-profit higher education organizational design resembled the “professional bureaucracy” structure highlighted by Morgan (1998). This structure made sense because it modified “centralized control to allow greater autonomy for staff and is appropriate for dealing with relatively stable conditions where tasks are relatively complicated” (Morgan, 1998, p. 51). This stable environment changed when some of “organization shapers” described by Galbraith (2002) emerged. Buyer power gave families a choice when selecting institutions and given the tuition increases in the 80s and 90s, they made decisions more rationally. With more institutions competing against each other, variety and solutions offered by other non-profit and for-profit institutions alike gave families a choice. Technology advances, primarily the Internet, opened the system for competition domestically and internationally thus increasing decentralization in these organizations. The final “organizational shaper” applicable to this example is speed since customers required new responses and efficiency in the delivery of services and this was an organizational design where for-profit institutions excelled.
For-profit or proprietary schools have existed for a long time, but their focus was primarily on vocational studies and short-term credential programs and did not interfere much with the non-profit sector. However, the recent changes in the market place have driven students, especially minority students, to attend for-profit institutions. Most of them appear to have a network structure where “flatter organizational structures with fewer levels and broader spans of control” (Lorsch, 1975 p.8) tend to yield profits and higher enrollment. In a competitive environment, where are not bound by the “shared governance” restrictions mentioned by Paul, for-profit institutions are able to responds to the needs of the market place in a timely manner.
According to Paul (2005), despite the reluctance by non-profit institutions in adopting strategies or organizational designs effective in the for-profit higher education sector, the hiring of “enrollment managers” to increase enrollment and revenue and the adoption of other cost-saving strategies is showing a movement in this direction. In the article, it is highlighted that given a non-profit’s focus on mission, it is hard to reconcile the need to thrive in the marketplace while still focusing on an idealistic mission which is prized primarily by faculty. However, in the for-profit situation, they can adapt and change without much resistance and implement some of the suggestions outlined by Worley & Lawler (2006) such as “managing talent” and “rewards system” that would be very controversial in a non-profit setting. For profit admission offices are part of what Worley & Lawler (2006) called “flexible and reconfigurable structures” (p.21) that allow them to be in touch with the consumer because their pay depends on their effectiveness in getting applicants and commits. This is a practice that would not be acceptable in non-profit admission offices.
Finally, it is worth noting that non-profits are still surviving in a competitive environment. Despite the fact that in 2011 “ Increases in college prices for the 2011-12 academic year reflect the influence of a weak economy and state funding that has not kept up with the growth in college enrollments” (The College Board, 2011 p. 3) students still continue to see the value in these non-profit and public institutions. On the other hand, the political environment over the past few years has been challenging for-profit institutions. As recently as June of 2011, a heated discussion in the halls of congress, led by Senator Harkin D-Iowa, continued over the high debt and low return for students at for-profit institutions (Harkin, 2011). This new political environment is forcing for-profits to adjust accordingly, but the debate about the viability of the non-profit and for-profit higher education institutions in ever changing and competitive environments is sure to continue as is the need for adjustments to organizational designs for these institutions to survive.
The traditional non-profit higher education organizational design resembled the “professional bureaucracy” structure highlighted by Morgan (1998). This structure made sense because it modified “centralized control to allow greater autonomy for staff and is appropriate for dealing with relatively stable conditions where tasks are relatively complicated” (Morgan, 1998, p. 51). This stable environment changed when some of “organization shapers” described by Galbraith (2002) emerged. Buyer power gave families a choice when selecting institutions and given the tuition increases in the 80s and 90s, they made decisions more rationally. With more institutions competing against each other, variety and solutions offered by other non-profit and for-profit institutions alike gave families a choice. Technology advances, primarily the Internet, opened the system for competition domestically and internationally thus increasing decentralization in these organizations. The final “organizational shaper” applicable to this example is speed since customers required new responses and efficiency in the delivery of services and this was an organizational design where for-profit institutions excelled.
For-profit or proprietary schools have existed for a long time, but their focus was primarily on vocational studies and short-term credential programs and did not interfere much with the non-profit sector. However, the recent changes in the market place have driven students, especially minority students, to attend for-profit institutions. Most of them appear to have a network structure where “flatter organizational structures with fewer levels and broader spans of control” (Lorsch, 1975 p.8) tend to yield profits and higher enrollment. In a competitive environment, where are not bound by the “shared governance” restrictions mentioned by Paul, for-profit institutions are able to responds to the needs of the market place in a timely manner.
According to Paul (2005), despite the reluctance by non-profit institutions in adopting strategies or organizational designs effective in the for-profit higher education sector, the hiring of “enrollment managers” to increase enrollment and revenue and the adoption of other cost-saving strategies is showing a movement in this direction. In the article, it is highlighted that given a non-profit’s focus on mission, it is hard to reconcile the need to thrive in the marketplace while still focusing on an idealistic mission which is prized primarily by faculty. However, in the for-profit situation, they can adapt and change without much resistance and implement some of the suggestions outlined by Worley & Lawler (2006) such as “managing talent” and “rewards system” that would be very controversial in a non-profit setting. For profit admission offices are part of what Worley & Lawler (2006) called “flexible and reconfigurable structures” (p.21) that allow them to be in touch with the consumer because their pay depends on their effectiveness in getting applicants and commits. This is a practice that would not be acceptable in non-profit admission offices.
Finally, it is worth noting that non-profits are still surviving in a competitive environment. Despite the fact that in 2011 “ Increases in college prices for the 2011-12 academic year reflect the influence of a weak economy and state funding that has not kept up with the growth in college enrollments” (The College Board, 2011 p. 3) students still continue to see the value in these non-profit and public institutions. On the other hand, the political environment over the past few years has been challenging for-profit institutions. As recently as June of 2011, a heated discussion in the halls of congress, led by Senator Harkin D-Iowa, continued over the high debt and low return for students at for-profit institutions (Harkin, 2011). This new political environment is forcing for-profits to adjust accordingly, but the debate about the viability of the non-profit and for-profit higher education institutions in ever changing and competitive environments is sure to continue as is the need for adjustments to organizational designs for these institutions to survive.
References
Galbraith., J.R.. (2002). Designing organizations: An executive guide to strategy, structure, and process. San Francisco, CA: Jossey-Bass, pp. 1-8
Harkin statement the health, education, labor and pensions committee hearing "drowning in debt: Financial outcomes of students at for-profit colleges". (2011). Lanham, United States, Lanham: Federal Information & News Dispatch, Inc. Retrieved from http://search.proquest.com/docview/870707979?accountid=14749
Lorsch, W. (1975). Note on Organizational Design. Harvard Educational Review, pp. 1-21.
Morgan, G. (1998). Images of organizations: Executive edition. Thousand Oaks, CA: Beret-Koehle Publishers, Inc and Sage Publications, Inc. pp. 35-68.
Paul, D.A. (2005). Higher education in competitive markets: Literature in organizational decline and turnaround. The Journal of General Education 54(2), pp. 106-138.
The College Board (2011). Trends in College Pricing 2011. Trends in Higher Education Series.
Worley, C. & Lawler, E. (2006). Designing organizations that are built for change, MIT Sloan Management Review, 48(1), pp. 18-23.
Interesting discussion, Adriana. The Morgan (1998) reading mentioned the idea of resource scarcity and finding an organizational "niche" (p. 57). Do you think that previously non-profit and for-profit higher educational organizations occupied different niches? Are they now migrating toward a similar niche? What would be the resources in this niche? Do you think there are enough resources so both organizational forms survive?
ReplyDeleteHi, Adriana – I really enjoyed your post about for-profit and non-profit educational institutions. Your mention of the difference in the institution’s missions caught my attention. In Galbraith’s discussion of the star model, he argues that decisions about an organization’s purpose and direction will be the determining factors in their choice of structure (2005, p. 2). It’s interesting to see how this is played out in the structural differences of these two types of educational institutions.
ReplyDeleteIt also makes me wonder about the connection between an organization’s “mission” and their strategy. Do you think these organizations are faced with having to sacrifice bits of one to satisfy the other? Or must they always be in harmony for an organization to function well?
Thanks for giving me food for thought!
Hi Courtney,
ReplyDeleteYes, I believe they occupied different niches, and in a way they still do, because a non-profit has more “inertial pressures” mostly rooted in “the force of tradition” (Morgan, 1998 p.59) instituted by the fact that it is mission driven and idealistic in nature. This is what I believe up to this point has allowed them to still have a competitive edge. If you went to USC and Stanford, what are the chances that your child will go to Devry? I am guessing a lot lower than those for a student coming from a household where one parent went to a for-profit institution.
It’s ironic that your questions are related to Darwin’s natural selection applied to the “population ecology”. I am not sure if this is the only household where Darwin day is celebrated (my husband is a big fan), but it’s the only one I know. I think that in this case both sectors are responding to the needs of the marketplace in an evermore consumer driven environment. Even for-profits adjusted their strategies to expand and survive by going head to head with traditional non-profit institutions when their niche market (vocational and credentials) saw an opportunity to increase revenues through the introduction of technology and flexible programs. In my field, it is not uncommon to hear of yet another college closing its doors (Antioch College’s interesting evolution), merging with another institution (HBCU Mississippi proposed merger) or exploring options beyond the traditional structure to stay one step ahead by offering online programs/degrees (USC, Northwestern). The forces of the market put pressure on both sectors to innovate, but I think that there are still enough students looking at higher education. The resources they need to survive are high enrollments, a revenue stream, and their ability to meet their respective missions or strategy (idealistic vs. maximizing shareholder revenue). In my opinion there will be room for both niches as long as traditional institutions continue to have a political edge (more alumni placed in the right positions of power) and their attraction to people (or paying parents) like me that value their mission focus. However, the University of Phoenix recently began running an ad campaign, which I think will be appealing to pragmatic people, where they highlight the mayor of the city of South Lake City Utah who is one of their graduates and the first female mayor in that city.
When the consumer is not able to differentiate the value/benefit then we will more than likely see a more prosperous and dominant “species” in town. However, at this point in my humble opinion, they are both still in the game.
Hi Marissa,
ReplyDeleteThanks for responding to my blog! Thanks for the Galbraith's reference, I did not highlight that one, but I really like it.
As for the other questions, from my experience in working with non-profit institutions, their mission is extremely important. However, there has been some tension with aggressive enrollment management strategies that are similar to those of for-profits. In order to be competitive they have to innovate and change their strategies, so I don't see a "harmonious" environment in the future.
Adriana