The Battle for Control Is the Key to Lowering Costs

By Richard Vedder

I vaguely recall that Julius Caesar started his Commentaries by noting that Gaul (roughly, modern day France) was divided into three parts (I wonder if some students today think Caesar leads a rock band or is a You Tube singing sensation). Is this true of universities?

The Public Agenda, with funding from the Lumina Foundation's massive Making Opportunity Affordable project (with which CCAP is also receiving generous funding), talked to three parts that are vital to all universities: presidents and senior academic administrators, budget and financial officers, and faculty, and asked them for their reactions to financial strains confronting higher education.

As I noted myself looking at the study (a preview of which I got at a meeting at Lumina a couple of weeks ago), and from Doug Lederman's excellent summary in INSIDE HIGHER ED, college presidents believe, roughly, "we already are efficient and cannot do much more to improve productivity." That is what I observe --college presidents think they are the most efficient, coolest people on the planet Earth and are doing everything right.

Chief budget officers take a view similar to ours (CCAP's): there are tons of ways to cut costs --make faculty teach more, use technology to save labor costs, use buildings more efficiently, make more use of dual (high school/college) enrollments, etc. etc. Secretly, they believe their bosses (presidents) are not aggressive enough in cutting costs. Using the lingo of corporate America, I find myself more in sync with CFOs of colleges than CEOs.

The faculty believe, if the Public Agenda has it right (and I think they do) that "efficiency gains" are a code word for reducing quality, which has already eroded over time as the impact of reduced demands on students, grade inflation, etc. have taken their toll. Also, most of them that I talk to say "get rid of administrators to cut costs and actually improve efficiency." The data on staffing growth suggest they have a point.

In terms of resistance to change, I would rank faculty first, presidents second, and budget officers last. In terms of power, though, the rankings are similar, at some schools presidents have more clout than faculty, at others the reverse. But the financial officers are relatively powerless as a general rule (there are exceptions).

This gets to the question of university governance. Who owns the university? Who makes decisions? I do believe universities are different than, say, steel manufacturers, and the persons on the factory floor are different from faculty members, just as physicians in hospitals are not the same as assembly line workers. Professionals expect some deference, and their skill level is such that treating them like hired hands will lead to rapid defections --they have occupational mobility. Moreover, faculty have a better appreciation for the outcomes of universities -- knowledge and how it is created-- than do others, simply because they are the ones doing it. But they also are incredibly insular, non-innovative, rent-seeking, and indifferent to inefficiency. Presidents usually are a bit more open to change, knowing the "big picture" with respect to the economics of higher education, but feel constrained by the fact that at the really good schools, the faculty have a lot of clout.

Yet markets are showing that the old governance model is breaking down somewhat. For-profit schools pay faculty reasonably well, but sharply circumscribe their authority. And these are the schools that are gaining market share rapidly. Moreover, even at the traditional universities, tenured faculty are doing less and less of the teaching --by choice, as they prefer to do research (much of it of inconsequential value) and let lowly graduate students and starving adjuncts do the heavy lifting. But more and more, schools are going to say: we can operate without the tenured faculty, at least in the short run,and much of the insularity of the faculty is prompted by the effects of lifetime employment contracts. I think tenure is undergoing a very slow but real death in America. But the process is slow, and the need for faster change will probably lead to greater governance tensions as financial constraints increase in coming years.