Higher education in general, and business education in particular, face a barrage of demands for change. These include calls for greater accountability, greater access, more relevant research, enhanced global competitiveness, and more responsiveness to pressing societal concerns. Many educators and administrators perceive these demands as threats, and they have reacted with defensiveness to the possibility of outside intervention and oversight. But I believe they should see these demands as opportunities instead.
After spending 25 years at business schools and nearly six years as president of a public research university, I have a keen interest in both business education and higher education. Indeed, my time as president at Colorado State University has directly influenced the hopes and expectations I hold for business schools. And I believe that, during a time when all of higher education must undergo extraordinary change, business schools can become examples of outstanding leadership.
To do that, business educators not only must turn challenges into opportunities, they also must avoid making four typical mistakes that revolve around money, access, accountability, and the role of the university in society. Even when they make these mistakes with the best of intentions, educators weaken their own institutions—and all of higher education.
Mistake No. 1:
Looking for Money in the Wrong Places
I am not someone who believes sustainable funding is one of the threats facing higher education. In fact, I believe the first mistake educators make is whining about money. Frankly, when schools focus on substantially increasing tuition—and, if they’re public schools, on obtaining more funding from the state’s budget as well—they’re more likely to exacerbate the money problem than solve it.
The evidence doesn’t support the complaining. While schools have generally pessimistic expectations for higher education funding in the immediate future, the truth is that for the past 20 years, state-level funding in the U.S. has seen only three annual declines. The Center for the Study of Education Policy at Illinois State University puts together “Grapevine: An Annual Compilation of Data on State Tax Appropriations for the General Operation of Higher Education,” which can be found at www.grapevine.ilstu.edu/. The center recently catalogued that, last year in the U.S., the increase in state support for higher education was less than 1 percent. That’s small—but it’s still an increase.
Even if individual states supply somewhat less support, schools won’t raise revenue by bemoaning their lack of funding. Instead, they should partner with society by developing competitive programs that increase economic prosperity, raise quality of life, and address some of the greatest global challenges that exist today. When schools develop programs that society needs, they will reap additional revenue as students seek out their programs and citizens lend their support.
There are plenty of global challenges to address, including healthcare, nutrition, sustainable energy, and climate change. Many expect science and engineering schools to play a critical role in solving these problems. But I believe that—because of their long history and strong relationship with the business community—business schools can participate in those solutions as well, while creating tremendous opportunities for themselves.
Take climate change as an example. The Intergovernmental Panel on Climate Change recently documented the impact of global weather conditions. Since 1850, 11 of the 12 warmest years on Earth occurred between 1995 and 2006. The extent of snow cover and sea ice has declined substantially. The atmospheric concentration of carbon dioxide has increased from a pre-industrial value of about 280 parts per million (ppm) to 379 ppm. And the current level of atmospheric carbon dioxide far exceeds the natural range of 180 to 300 ppm that has been the norm for the last 650,000 years.
The Intergovernmental Panel makes it clear that the source of climate change is human dependence on fossil fuels and changes in land use. Business educators and business leaders will realize that the products of human commerce are very likely what have caused the increases in average global temperatures since the mid-20th century. Business educators can lead the way in addressing this great challenge.
And, in fact, business education has begun to respond. Warwick Business School in the U.K. recently announced a Global Energy MBA. Two years ago, Colorado State developed a business master’s degree in Global Social and Sustainable Enterprise. Colorado State also established a School of Global Environmental Sustainability to create multidisciplinary educational programs. Other schools also have added green-themed tracks to their programs.
Concerns about sustainability, global climate change, and the cost of energy are likely to make these types of programs very popular with students. Schools that offer such learning opportunities not only will reap more income, but they also will improve their communities by producing an expanded, educated, green labor force. When business schools stop whining about their loss of revenue and instead take advantage of real opportunities to address global challenges, they will deliver benefits both for society and for themselves.
Mistake No. 2:
Forgetting Education Is a Public Good
The second mistake educators make is threatening to privatize public higher education. They want the increased revenue, and they envy the higher tuitions private schools collect and the higher endowments these schools receive—at least prior to the recent financial crisis.
But threatening to privatize public education has serious consequences. Already, to a large extent, higher education is perceived as a private rather than a public good. Unfortunately, when business schools heavily promote MBA programs that result in high starting salaries for their graduates, they further make the case that higher education is a private good with more value to the individual graduate than to society at large.
If higher education is perceived as a private good, voters and politicians are less motivated to provide public subsidies for it. Worse, the public loses a sense of ownership of higher education and no longer considers it central to quality of life and economic prosperity. Therefore, higher education must be recast as a public good that deserves the public’s support for its integral role in creating wealth.
Relatively recent developments in economic growth theory make the case for higher education as a public good. In particular, Stanford economist Paul Romer has written about the topic in two 1990 articles that appeared in the Journal of Political Economy. He focuses on three areas: the essential nature of market forces, the treatment of ideas as economic goods, and the role of technological change in economic growth. The latter two are central to Romer’s arguments.
Society is not well-served by elitism in higher education. Society needs strategies that improve access to education for a larger proportion of its citizens.
Romer’s work shows how universities generate growth by creating new ideas and technologies, which then lead to other new products and services from researchers inspired to come up with variations on the original ideas. Romer’s model shows that higher education indeed helps promote economic prosperity and the public good because teaching and learning contribute to growth in human capital. Yet, he points out, the new technology that comes from research has an even greater long-term impact. This is powerful information for business educators trying to craft a value proposition for their research agenda.
Unfortunately, past university research also supported the financial tools that have been at the heart of the recent economic crisis, which might serve as an argument against the contribution business schools make to the public good. Yet society most likely will benefit from ongoing research in this field, as well as from the calls for the reform of accounting methods and financial markets.
Business educators should not merely consider it advantageous to position higher education as a public good; they should lead the endeavor by presenting a value proposition for research that is consistent with economic growth theory. As a result, all higher education could reap the rewards of increased funding and support.
Mistake No. 3:
Turning Universities into Elite Institutions
The third mistake universities make is basing their claims of quality on student inputs. It’s common for schools to assert that they “recruit the best and brightest” or to boast about their student grade point averages and test scores. But I submit that society is not well-served by elitism in higher education. Instead, society needs strategies that improve access to education for a larger proportion of its citizens.
Of course, improving access goes well beyond keeping tuition at a reasonable price and offering need-based financial aid. Improving access also means doing a better job of preparing the teachers we graduate and reaching down the pipeline to improve the education of K–12 students. It means increasing the proportion of people, young and old, who obtain education and re-education so that they can join the workforce and strengthen the economies of their countries.
Evidence has long shown the connection between education and a country’s global competitiveness. The knowledge economy places a premium on higher education, as Romer makes clear in his economic growth theory. While there is a need for an increasing number of college-educated citizens, it appears that—in the U.S., at least—fewer young people are choosing to attend colleges and universities. Among countries ranked by the Organization for Economic Cooperation and Development (OECD), the U.S. ranks first for percentage of college degree holders who are between the ages of 55 and 64. But when it comes to adults between 25 and 34 who have college degrees, the U.S. is ranked eighth among OECD countries.
While business schools cannot entirely resolve the mistakes that universities make by focusing only on the most qualified students, they can take action. They can still pursue the best and brightest. But they also can provide access for a broader group of students by developing policies that support need-based financial aid. And they can develop outreach initiatives, such as the Rodel Program created by Arizona State University’s W. P. Carey School, that focus on improving education at the high school level.
In addition, they can serve this broader student population through innovations in curriculum delivery. To overcome the limitations of brick-and-mortar campuses, they should rapidly adopt alternatives like storefront classroom locations and online education. Business schools can lead the way for all of higher education by demonstrating that these expanded delivery options can still maintain high quality.
Business educators also can be leaders in demonstrating how to achieve student success—i.e., higher levels of persistence and increased graduation rates. Because society needs more college-educated citizens, poor persistence and graduation rates are costly. Business schools, despite their incomplete control over the undergraduate’s experience, have shown they can intervene successfully in these areas. For instance, the Kelley School at Indiana University has developed a plan to improve the persistence and graduation of its students. Both the University of Maryland and the University of Washington have used sophisticated monitoring and analytical tools to improve the quality of the undergraduate experience—and the success rates of students.
Nontraditional providers of business education, such as the University of Phoenix and Devry University, already aggressively address the need for increased access, mainly through online programming, multiple locations, and flexible delivery. Thirty percent of the students at the University of Phoenix are minorities, and the school has started to make public reports about its success rate. Traditional business schools must find a way to provide access to quality educational opportunities with the same convenience—and levels of success—or risk losing students to these alternative models.
Mistake No. 4:
Resisting Calls for Accountability
The fourth mistake leaders of higher education make is to eschew calls for accountability. Universities have resisted measuring student learning beyond the classroom level because of the difficulty of setting up measuring tools. They have resisted making reports about learning outcomes and the quality of the learning environment because assembling these reports is challenging—and the public exposure is alarming.
Under the Spellings Commission, U.S. accrediting bodies faced considerable pressure; after all, they are the perceived guarantors of minimal levels of education quality. As a follow-up to the Spellings Commission, U.S. education organizations such as the American Association of State Colleges and Universities and the National Association of State Universities and Land-Grant Colleges urged members to adopt transparent accountability measures. The topic also has been under debate in Europe, as evidenced by the Bologna Declaration and the U.K.’s Quality Assurance Agency initiative. Despite all the talk, there has not been much action, at least on the university level.
Both larger schools and schools that are delivering education outside of the classroom face definite challenges in developing transparent accountability measures. The issue offers an opportunity for business schools to extend the leadership that AACSB International has already shown. Business schools at Seton Hall and Texas A&M already are demonstrating that AACSB’s direction is viable.
Management educators tend to be comfortable with strategies that promote accountability; after all, businesses in developed countries are subject to very public accountability via markets and regulation. Business educators also are familiar with the roles that markets, analysts, and customers play in creating accountability for a business. This understanding should lead them to expect similar comprehensive and public accountability in business schools—and lead the way toward accountability for higher education.
What Must Change,
What Must Stay the Same
Even if educators manage to avoid making these four mistakes, they will face challenges as the 21st century unfolds. In fact, some people believe that higher education will need to undergo radical change. They point out that the core university structure has only seen minor adjustments over a millennium, an observation that is also made by John Henry Cardinal Newman in his 19th-century discourses on The Idea of a University. Even though this structure has produced a high level of performance, these reformers think its fundamentals need to be revamped for a modern world.
I disagree. The university’s role always was—and always should be—knowledge creation. It accomplishes its mission by generating new ideas and educating individuals who become productive, highly skilled citizens.
But something, indeed, is different. We now live in an environment that is increasingly dependent on knowledge-based industries and, therefore, on university graduates with knowledge-based skills. What’s different is society’s dependence on higher education. This dependence has led more citizens to feel entitled to earn undergraduate degrees. And it has caused more regional governments to acknowledge that quality of life and economic prosperity improve when local colleges and universities are present.
What must change is not the fundamental role of the university, but the way it fulfills its role.
What must change, then, is not the fundamental role of the university, but the way it fulfills its role. Schools must offer broader access and new kinds of degree programs; they must embrace 21st-century methods that promote increased productivity. And they must support faculty who pursue research that contributes to economic prosperity.
Business education has already demonstrated its flexibility. In the 1960s and ’70s, business schools increased their academic credibility by grooming faculty schooled in research methods and theory. In the ’80s and ’90s, they distinguished their MBA programs from research-oriented graduate programs by clarifying the MBA’s distinctive status as a professional degree. Business educators can change again—but what they really need to do is engage change to create opportunity.
Fundamentally, change arises when prescient leadership sets a new direction. Sometimes people confuse what I call prescient leadership with what the first President Bush called the dreaded “vision thing.” In the book Who Says Elephants Can’t Dance?, Lou Gerstner describes a 1993 press conference where he made a statement that reverberated throughout journalism: “There’s been a lot of speculation as to when I’m going to deliver a vision of IBM and what I’d like to say to all of you is that the last thing IBM needs right now is a vision.”
I laughed along with the journalists as they lampooned Gerstner. In retrospect, he seems admirable, not amusing. IBM did survive—and succeed—as Gerstner helped a reorganized IBM find its niche in middleware and mainframes. Gerstner didn’t need to pronounce a vision; he needed to create a vision with a distinctive, competitive strategy.
The same is true for business educators. Stakeholders should not ask, “What’s your vision, Dean?” Their real question should be, “What competitive advantage are you striving for in an environment that is incompletely seen, but which can be partially anticipated with prescient leadership?” Simplistic goals—like moving a school into the top 20 of some ranking system—might signal a change in vision, but they don’t help the university set a coherent strategy redesign that anticipates environmental change.
My Personal Vision
As I think about the “vision thing,” I recall a conversation I had years ago with John Teets. At the time, he was the CEO of Dial Corporation, and I was a new dean of a business school. Faculty members were calling on me for a vision, and I was trying to determine how much change faculty, students, and staff could handle at once. I tried to keep in mind that there is only so much of the future that one dares introduce into the present.
John Teets affirmed that visions cannot be stated in completely cogent, absolute terms early on. Instead, they are revealed over a period of time through the actions deans and CEOs take as they create competitive advantage for their organizations. Leaders do not and cannot present a complete vision that announces the future in a concrete state. What leaders can do—with intelligence, complex perspectives, and pragmatism—is anticipate the future, articulate hope associated with it, and make that future visible step by step.
I believe that higher education administrators can hone reflective skills and work in collaboration with faculty and staff to anticipate the future and make it visible through linkages between strategy and structure. They can turn potential mistakes into constructive strategies in four ways: by addressing global challenges with competitive programs, supporting research that serves the public good, improving access to education, and actively promoting accountability and transparency in measuring student success.
I further believe that business schools are uniquely qualified to lead universities through the process of implementing these strategies. Because business schools have such close ties to society and the business community, they can play a special role in guiding higher education through the 21st century.
Larry Edward Penley spent 13 years as dean of the W. P. Carey School of Business at Arizona State University in Tempe and nearly six years as president of Colorado State University in Fort Collins. He currently lives in Chandler, Arizona, and works as a consultant with The Hayes Group International.