By Richard Vedder
I have long admired Jeff Sanderfer, the highly successful Texas entrepreneur who is fed up with the poor quality of business schools in the U.S. He has tried to get me to help him study some higher ed issues in the past, but lamentably other commitments have forced me to decline, and I feel somewhat sad about that. However, I heard him give a great speech a couple of days ago to a group of academics (the Association for Private Enterprise Education) in that great citadel of learning, Cancun, Mexico (us marginalized academics sometimes engage in rent-seeking behavior about which the public knows little).
After teaching at the University of Texas at Austin for a number of years, Jeff started his own business school, the Acton School of Business, offering a one year M.B.A. program. It is innovative in many ways.
The students work intensely, putting in 100 hour weeks (6 a.m. to midnight is a typical week day schedule) for a full year, condensing a two year M.B.A. into one. Each student must pay the first semester tuition of $17,500 up front, and they lose it all if they drop out early. If, however, they get through the first semester okay, they get the second semester's tuition paid for by Jeff or one of his friends (e.g., Charles Koch, T. Boone Pickens). If the student completes the second semester (and the degree), she gets the original $17,500 back --an incentive system to work hard and complete the degree. It sounds like most of the learning revolves around case studies, mostly ones prepared at Harvard Business School.
The students and the faculty all sign contracts, not only with the institution but with one another, outlining what they agree to do. Professors are mostly entrepreneurs, not academics, and are paid $5,000 a course --but up to a $30,000 bonus if they do well on student evaluations. The professor with the worst evaluations annually is dropped from the faculty --no tenure here. Instructors cannot game student evaluations by giving high grades --there are limits placed on "A"s, and all students are also ranked relative to other students (e.g., 10 out of 31, etc.). That is an idea that needs expanding, and I plan on using it in my classes this fall. If I could find a way to have myself ranked relative to others, I would do that too. When I become a below average teacher in the eyes of the students, I should either quit (the humane solution) or be shot (the inhumane one).
Jeff believes accreditation is merely a cost-rising barrier to entry that has nothing to do with the quality of education, and he has apparently no interest in securing AACSB (the business school accrediting agency) accreditation. Good for him. Students have a financial objective, but Jeff says his school also stresses moral and ethical implications of business behavior, which, to put it mildly, is much needed in a society that reeks of moral relativism.
The higher education world needs more Jeff Sanderfers--people who passionately want to improve the quality of higher education at an affordable price, introducing stronger incentives for excellence on the part of students and faculty alike. Jeff is expanding his model to other cooperating schools, and much of what he is doing has applications for other disciplines, including the traditional liberal arts. Adam Smith said professors were much better when they were directly paid by students, and the Sanderfer faculty pay plan is a step back to improving teaching and putting students front and center again in American higher education. To be sure, there may be flaws in the plan -- but my guess is the finished product at the Acton school compares favorably with most conventional, and more expensive, MBA programs.