Commandment #12: Restructure and Clarify University Governance

Commandment #12: Restructure and clarify university governance by clarifying "ownership" and "property right" arrangements, in the process reducing the prominence of very long term employment contracts for faculty and administrators.

By Richard Vedder

On the first day of a beginning principles of economics class, I note that scarcity forces every society to face certain fundamental questions: What Do We Produce? How Do We Produce It? For Whom Do We Produce our limited number of goods and services?

Economic units are organized to deal with these questions. Some of these units are colleges and universities. They have to decide --what do we produce --engineers or philosophers? Advanced students of those subjects or less advanced ones? They have to decide how to produce these services --traditional residential education, commuter style education emphasizing part-time attendance, or on-line education? And admissions and financial aid offices deal with the issue of for whom we produce --large numbers or small, and how do we decide who gets the services?

All of these decisions --and more -- have to be made by human beings. They can be made by a powerful dictator, a strong willed CEO. They can be made by committees of employees or other "stakeholders" (a term, by the way, that I despise). In most American private enterprise, a rather powerful chief executive officer, sometimes working closely with a small executive team, makes most key decisions, some of which have to be ratified by a board of directors independent of the chief executive but generally supportive of that leader.

The for-profit higher education model generally conforms to the approach of the previous paragraph. When I think of CEOs of private for-profit higher education providers such as Randy Best of Higher Education Holdings (and more), and Andrew Clark of Bridgepoint Education, I am thinking of strong leaders not afraid to make decisions and to take risks. This approach seems to be working well, as the market share of the for profits by one measure has grown from less than one percent to about seven percent of the market over the past generation.

But what about the other 93 percent? Lines of authority are often blurred. The president often is strongly constrained by his own employees, especially tenured faculty. She or he receives only very modest rewards or punishment for unusually good or bad performance, in no small part because performance itself is not well measured, partly by design. There is no clear "bottom line" for most of higher education, in large part because of its non profit nature.

Suppose the president wants to create a new nursing degree. The faculty in other health science fields might argue that it is for them, not the president, to make a recommendation, as they are in fields close to that of nursing. The faculty in the physical and biological sciences might disagree, arguing that a huge chunk of a good nursing program must involve them. The physics department, wanting to upgrade its Ph.D. program, might say the University is spreading resources too thin, and that nursing is a relatively low level vocational activity that will bring less prestige than a high brow nationally recognized physics graduate program.

To deal with all of this, committees will be formed. A Curriculum Council, New Programs Committee, Faculty Senate, or other such groups will demand that they must approve the program. Some may try to block the program unless their own demands are met. Decision-making takes a long time, and is often timid, the result of several dubious but politically necessary compromises.

If higher education is going to become more efficient, affordable, and responsive to student needs as tastes and technologies change, higher education is going to have to move more away from the traditional approach mentioned in the previous two paragraphs. To be sure, at the top research universities, the faculty in many ways ARE the university, raising a good bit of institutional resources through their grant activities. In such an environment, the faculty can legitimately want to play a major role in determining the academic direction of the institution. But that is far less true at the typical mid-quality state university, at liberal arts colleges, and at community colleges.

In all of this reformation of governance, efforts should be made to reduce the proportion of resources that are fixed in nature ---particularly those reflecting lifetime employment contracts. Tenure has its value, and I am opposed to, say, a national law making tenure illegal. But the awarding of tenure should be limited, and more quasi-tenure arrangements, such as five year employment contracts, would increase the flexibility of administrators to reallocate resources, make the faculty less inflexible and arrogant, and increase the ability of top university officials to make decisions. At the same time, increasing CEO power must be accompanied by reforming boards of trustees, making them less patsies for the administration, and more true outside evaluators of performance and groups that hold university presidents truly accountable in a rigorous fashion.