Schooling That Works: Four Great Innovations

By: Richard Vedder

Readers of my rants about higher education know that I generally believe that higher education in America is highly inefficient, overpriced, and produces dubious outcomes, including many graduates who end up in relatively low end jobs. But not all of higher education is like that. I would like to discuss four examples of schools or ideas that work –that lead to either a higher quality or lower cost educational experience –or both. This list is hardly exhaustive, but it is indicative of how higher education could transform itself into being more effective.

Acton School of Business

No doubt the most unusual M.B.A. program in the country is run by the Acton School of Business in Texas. It is built on the premise that incentives matter and that higher education’s failures are usually attributable to a lack of proper incentives. The school is the brainchild of Jeff Sandefer, a Texas business professor and entrepreneur who started the institution. As I understand it, new entering students pay a relatively high private school tuition to attend their first semester. They work like dogs –sort of a boot camp for entrepreneurs, working typically more than 12 hour days at least six days weekly –no 30 hour work weeks as is common in academia. Students successfully completing the first semester are given the second semester free of charge. If they complete the second (and last) semester, they get a rebate on the tuition for the first semester. They are expected, however, to pledge eventually make donations to the school at least equal to the value of the tuition if they feel they benefited materially from it (this is more of a moral than legal obligation, I understand).

Not only are students incentivized to work hard, so are faculty members.Salaries are modest –$5,000 or so per course. But huge bonuses are given for superior teaching performance ($20,000 or more per course). And each year, the lowest performing professor, based on student evaluations, is dropped from the faculty –no tenure here. Princeton Review considers it one of the nation’s top MBA programs, and my guess is its reputation among employers, etc., will grow over time. Obviously, a lot of private funds are needed to make this program work, and its advantage is less the cost savings per student (which are nonetheless real) than the high quality of the finished product.

Berea College

In many regards, Berea is a fairly typical liberal arts college, with a pretty good reputation for quality. What makes it different is that its leaders take extremely seriously the notion that college should be affordable. Most students are from relatively low income backgrounds in the surrounding Appalachian region. They pay no tuition fees beyond which are covered by external grants (e.g., Pell Grants). All students work at the college to reduce non-academic personnel costs. The college’s great commitment to access and affordability has led to loyal alums and others giving the school a lot of money, so it has a huge endowment that covers tuition charges rather than spending on costly administrators, fancy buildings, etc. Located in one of the nation’s poorest regions, the school offers affordable high quality (but low frill) college to poor students. Berea is not alone in pursuing this type of mission –College of the Ozarks in Missouri and Coopers Union in New York City have similar commitments, but this focused concern for the customer as opposed to the wishes of others (faculty, administrative staff, etc.) is relatively rare and refreshing.

Olin School of Engineering

In just eight years, the Olin School of Engineering has become one of the best undergraduate schools of engineering in the U.S. It is small (a bit over 300 students), extremely selective and unique in several ways. Until recently, there were no tuition charges, a policy dropped because of the 2008 financial crisis, but the school hopes to revert to 100 percent scholarships for all students. It is a teaching not a research institution. Most engineering schools load the students up on a heavy dose of theory and basics early in the career, and have only modest amounts of hands-on training with real engineering problems. Olin gets students into hands-on real-world like experiences early, although the standard basic cources in math, etc., are still taught, and rigorously. (Like many good engineering schools, students work very hard, but largely because they want to — these kids seem to love the place).

The school is focused on one narrow mission. It does not pretend to be a research powerhouse. Teachers are hired because they are bright, innovative, but above all good in the classroom. The school emphasizes the real-world a good bit, and realizes that many engineers end up as corporate managers and even entrepreneurs –hence some emphasis also on entrepreneurship and the liberal arts. I have talked to several very successful business executives who are high on this school, and hope others are learning lessons from this new venture.

StraighterLine

One of the most innovative entrepreneurs in higher education is Burck Smith, who founded and runs StraighterLine and a companion company called SmartThinking. A Williams College and Harvard graduate, Smith has strayed far from his traditional elitist educational background, offering cheap courses on line in many subjects that can then be transferred to accredited colleges and universities with which he has developed a working relationship. Many of these schools are for profit institutions like Kaplan, Capella, or Ashford University, but some are more traditional state schools, like Fort Hays State in Kansas (run for over 23 years by the estimable Edward Hammond, himself one of the greatest public sector entrepreneurs in America), or Western Governors University, a non-profit private on-line university with relatively high standards (and run by another visionary leader, Bob Mendenhall).

StraighterLine claims a person can take a year’s worth of college courses for a thousand bucks. Even if you buy á la carte off their menu (catalogue) of courses, the cost of a year’s education is far less than most four year schools. Yet StraighterLine offers no degrees itself, and is not accredited, although it apparently has a good relationship with the premier trade organization for higher education, the American Council of Education.

Most courses use McGraw-Hill text materials. The economics course uses the iconic McConnell and Brue textbook. Campbell McConnell decades ago wrote a slightly watered down but still sound version of the flagship text by Paul Samuelson. It has been updated forever. I used the book to teach principles of economics over 40 years ago. Although some would say it is a little light with the latest theoretical fads in economics, it still remains a good rendition of basic economic principles. Students taking the course have some use of on-line tutoring services, of no doubt varying quality and accessibility. While not perfect, I think StraigherLine is a neat concept and one worth emulating —and a great argument for expanding the ease of credit transferability.

Note: all of these innovations are in the private sector. There are some good examples of new innovations at public schools such as Fort Hays State, but I think a disproportionate part of positive change in higher education will come from private sector innovators, many incentivized by the same profit motive that gave us such innovations as the personal computer, iPhone and iPad, and, for that matter, Scotch tape and probably sliced bread.

This post originally appeared on CCAP's "Higher Education and the Economy" blog at Forbes.com on December 28, 2010.

A Modest Proposal: Searching for an Academic Bottom Line

By Richard Vedder

Does much learning occur at the University of Michigan, Colorado College, or the University of Texas at San Antonio? Do students at Duke University fare better in the job market than their counterparts at Northwestern or Cornell? There are so many important questions like these regarding higher education for which we do not have answers, and colleges have generally resisted providing that information in a uniform matter that would allow comparisons of performance at colleges and universities by consumers, funders, and taxpayers generally.

I have a modest proposal of three ways that we could get immensely important information that would make for more informed customers and donors, stimulate healthy competition between schools, and promote greater concern for undergraduate education by the schools themselves, particularly the national research universities. Moreover, these proposals are not inordinately expensive, nor would proceeding with them impede in any major way institutional autonomy.

Proposal One:

Require all schools receiving federal funds to require newly entering students to take one of the following tests: ACT, SAT, Critical Learning Assessment, or the National Assessment of Educational Progress Test administered at age 17 in English and Mathematics. Require those schools to administer the same test to those student shortly before receiving the bachelor's degree. Provide information on the test results to the federal government or a private not-for-profit agency so that changes in test scores can be disseminated to the public. Did student performance on these academic measures improve during the college years? Finally, require graduating students to take the Graduate Record Examination in the major subject, if such an exam exists, and to report the tests scores to the federal government or the private agency. Average "value added" on the tests of basic skills/general education (as well as the raw data) would be reported to the public as well as student performance on subject exams.

Proposal Two:

Require each year that every college or university provide to the Internal Revenue Service the Social Security numbers of students receiving bachelor's degrees in the preceding 12 months. Require the IRS to publish, by school of graduation, average and median employment earnings data for graduates 1 year, 5 years, and 10 years after graduation, based on federal income tax returns. Since employability in good paying jobs is a major goal of many college students, this would be very useful information.

Proposal Three:

When I served on the Spellings Commission on the Future of Higher Education, Boeing executive Rick Stephens told us about a fascinating thing his company did: categorize employees by college attended and do some assessment of those schools based on the job performance of the workers. Rick knew that some schools rather consistently provided workers that met or exceeded expectations, while others did not. Why should we not expand the survey to hundreds of employers and make the results available to the public (on average performances, of course, not individual workers)? Why should not companies receiving more than $5 million in federal contracts annually and employing 1,000 or more workers be required to fill out a very simple standardized form on all employees assessing job performance, classified by colleges attended? And why should not the Department of Labor, Department of Education, Census Bureau or some agency provided summary data from this information on any school for which there are at least 25 employees? This would be a good way of gathering some good data on which schools seem to turn out young adults that are useful and productive.

There are all sorts of objections to these ideas, and some of them are quite legitimate. Obviously some laws would have to change to allow these proposals to be fully operative. Statistical methods exist to mesh together schools using, say, the ACT test with those using the CLA. Schools that argue, for example, that the SAT is not really a good instrument to measure learning or understanding in core disciplines can opt for another test, say the CLA that purportedly measures critical thinking. The gains of disseminating this information are potentially so great, that we should try to minimize the problems and move in the direction of doing at least one, if not all three, of the ideas above. This would allow us to rely less upon published magazine rankings (full disclosure: I direct the computation of the rankings used by Forbes), force schools to emphasize important outcomes rather than inputs (thereby reducing the academic arms race), perhaps increase price competition, etc.

Consolidation of College Bureaucracy: Effecting Change and Innovation

by Daniel L. Bennett

Every now and then we hear some positive news that is near and dear to us, something that we in some way had an indirect effect in making happen. Today is one of those days for me at CCAP. I read today (HT: Tim Ranzetta) that the University of Akron and Lorain County Community College are launching a

pilot project that the two schools hope will lay the foundation to create a standalone administrative services center that could provide back-office functions to more schools and possibly other organizations as well.

Given that the majority of students attend a public institution of higher education, it makes economic sense for these schools to consolidate, or even outsource, many of their back office functions. A report that I authored earlier this year, as well as an article that I wrote for Forbes, have helped raise awareness of the serious problem of administrative bloat on our nation's college campuses that has contributed to continual tuition hikes.

Now it seems that the public's awareness of this issue is leading campus officials to seek new strategies, along with the help of the Lumina Foundation's Productivity Grant Program, which provided the seed capital to launch the UA-LCCC pilot project. According to UA President Luis M. Proenza:

The UA/LCCC model of shared services defines how administrative services will be delivered in the future. Our institutions of higher education must work closely together to attain academic and operational successes that align with the goals of excellence, effectiveness and efficiency identified in the University System of Ohio’s 10-year Strategic Plan. The shared services initiative is an innovative approach that will help to meet those goals

The goal of the project is to promote shared administrative services among Ohio's public colleges via a central office. Generally, I get spooked by the term "centralization", but it has helped many organizations improve their operational efficiency through a consolidation of processes. According to James L. Sage, U of Akron's CIO:

Providing these required services centrally will eliminate the need for each institution to operate many of their own administrative services units, and improve the breadth and quality of services while significantly reducing administrative costs. Money saved on administrative services can be redirected to our core mission, which is teaching. This centralized shared services approach is used extensively in private industry and is being adopted by the federal government

This is a good start for what will hopefully become a trend to reduce the size of the campus bureaucracy.