University as a Business

Long debated and rarely resolved, university officials continue to wrestle with the concept of administrating a university by using the principles of running a business. As with any business, a university needs to have more revenue than expenses to keep running and revenue needs to come from the sale of a product to its customers. This is true for all businesses, institutions of all types, regardless of size, scope, or mission. A non-profit institution, for example, should be fulfilling a public good as required but it cannot fulfill its mission without enough revenue to cover its expenses.

For a university, reducing liabilities is always good and acquiring assets can help the balance sheet. Having an endowment adds to revenue as do grants, donations, sales of various types, and increased customers. But who are the customers? Who pays for the service or product? Obviously, the service being provided is education and the product being sold is the knowledge leading to the certified completion of that knowledge. Argument could be made that students are the customers regardless of who pays for the expense of receiving an education. Some might say that parents or guardians are the customers or others might quibble about various governmental entities supporting the education through loans and grants.

A radical but perhaps more profound argument could be made that employers are the customers in that they employ certified completed graduates with particular skill sets for their business. While there is some truth in this statement, it cannot be substantiated due to employers not paying for the service. But it should be kept in the forefront of discussions in that employers represent the market trends for education. More on market trends later.

Because a business is dependent on customers, universities must design degrees and programs that meet customer needs. But there are principles, traditions, and philosophies that push against the market trend idea. This brings us to why a university cannot be treated as a business, at least not in the normal business sense. The purpose of a for profit business is to make a profit whereas the purpose of a non-profit business is to fulfill a public good. Both must have greater or equal revenue to expenses in order to remain in business. A university, however, in its mission to fulfill a public good, embraces the educational ideal known as the liberal arts and the personnel protection called tenure. These two practices are antithetical to normal business operations in the for profit world.

Take the local pizza place serving pizza to customers who pay for the food. The chef and the management hope to make something that is tasty and desirable in order to attract customers and encourage them to return. If the pizza were healthy and tasty, then all is well. If the pizza were tasty but unhealthy, then we might not get customers concerned with good health. If the pizza were healthy but tasted terrible, then we would have no customers.

If we rethought our purpose of the pizza and encouraged the chef to design the ingredients that are to the best interest of the customers and then told the chef that he or she would have a job forever, regardless of the quality of the pizza or the number of customers or the profit or lack thereof, then we would have a product that may or may not serve the public good but the chef might feel good about himself or herself. Therein lies the problem of running a university exactly like a business. The "chefs" at the university are highly skilled, well-educated, and generally dedicated to improving humanity by imparting education to students.

Running a university like a business and viewing students as customers relegates higher education to a commodity dependent on market trends and market forces to keep it afloat. For those recognizing a changing world and live in a pragmatic utilitarian environment, the market is that which changes regardless of any efforts to prevent or manipulate it. For others who subscribe to philosophical forces that dominate and shift thinking and practice, the university is the place to set a philosophical foundation for future employees to make a difference in the world.

Should a university be a technical training institution dedicated to giving students hands-on skills they can use professionally and technically in the workforce? Or should a higher education give students a solid foundation upon which they can draw, develop, and forge their own future, a future wrought full of challenges and opportunities?

Professional and technical models of education risk creating young automatons able to complete tasks but not able to lift society to new heights of cultural refinement. Yet liberal arts models devoid of professional training risk creating young thinkers wishing to change the world but lacking in skills applicable to the workforce. Obviously a balance is needed and, although greatly flawed, the university as a conceptual institution for higher education has continued to provide the skills and knowledge needed for most professions.

Unfortunately, this makes running a university like a business almost impossible and the tensions that exist within the institution for revenues to exceed expenses are palpable and difficult to navigate. One could argue, however, that the tensions themselves lie at the core of what a university means and how it will progress in the future.