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К содержанию номера журнала: Вестник КАСУ №4 - 2006

Автор: Новицкая Ю.В.

Much of the heated public debate in higher education seems to reflect a perception among some observers that postsecondary institutions would be greatly improved if only they operated more in the style of successful American businesses (e.g., Coca Cola, Microsoft, etc.). This paper presents two logical arguments: one supporting and one opposing the proposition that colleges and universities should model their planning and decision making on successful for-profit organizations.

Life does not stand still. Neither do we. All organizations change and evolve. Some do rapidly, others at a barely perceptible pace. During the past decades we have witnessed technological advances, major demographic changes, changes in the family structure, a greatly heightened social consciousness, and an increased emphasis on access to higher education for the economically and educationally disadvantaged.

An institution such as higher education could not survive in a society undergoing such radical changes unless it succeeds in adapting to those changes (Ehrle & Bennet, 1987).

There is an opinion that post-secondary institutions would be greatly improved if only they operated in the style of successful American businesses. The answer to the question whether academic world organizations should follow the steps of business corporations lies in the similarities and differences between academic and business institutions.

This paper presents an attempt of comparing business and academic worlds, the way they are governed and administered, finding features that make these worlds similar or different. So let us consider two statements:

1) Colleges and universities should not model their planning and decision making on successful for-profit organizations because they greatly differ in nature and the way they are governed and administered.

2) Colleges and universities should model their planning and decision making on successful for-profit organizations because they are similar to business organizations, operate in the same environment and obey the same organization development laws.

Let us first compare two management theories – business management theory and collegial management theory, taking for a definition of a theory Herbert Feigl’s statement that a theory is a set of assumptions from which a larger set of empirical laws can be derived.

The first point in business management theory is that the business is conducted for the primary benefit of its owners, either immediate owners as of a small store, or stockholders as in large corporations. There are certainly secondary beneficiaries – those who purchase the goods. The main procedure of business includes doing everything that will allow maximum profit on a product, which is able to maintain its place in competition with similar products. If a product is priced too high that it looses its positions, either the price might be reduced, which may require more proficient methods of production, or the quality might be made superior to competitors’ product quality, which also requires more efficient procedures.

A second point is that those who work in business better fit into McGregor’s theory X. and so management involves seeing to it that they are supposed to do “to the maximum”. There are two methods to achieve this – coercion and incentives: you either force people to do what they are supposed to do by using different sanctions, or persuade them by offering benefits or extra money.

Governance in business involves setting policies regarding the nature and quality of the product, production procedures, setting levels of incentives and determining sanctions. Administration involves applying set policies (Westmeyer, 1990).

An ideal collegial theory implies that all the scholars are involved in a situation discussing all points of view until they reach consensus on what should be done. This is far from possible, so a modification of collegial theory is the inclusion of democratic decision making. So the first basic key is the open forum discussion, where everyone who has a viewpoint to be expressed has a chance to present his case, and if it is not possible to reach consensus, there is an opportunity to vote.

A second key of collegial theory is professional authority. A university is nothing else but a collection of experts, each is a specialist in a field of study. The expert in a given field is a person in the best position to make decisions related to that field. A professional in a university is expected to continue research and add to the knowledge in his field, so should not be burdened with organizational restrains on this productivity. Thus, the argument for a collegial system in higher education institutions says that all represented professional point of view must be heard before the decision is made.

In this situation, deans and provosts, vice presidents and other officials must realize that their authority stems not from the position but from the delegation of the power to make certain limited choices based on the governance of the faculty, the policies set by the faculty discussion and consensus (Westmeyer, 1990).

1. Colleges and universities should not model their planning and decision making on successful for-profit organizations because they greatly differ in nature and the way they are governed and administered.

There are two different cultures – one favoring competition, strategy and outcomes, and the other prizing independence, reflection, and process.

The concept that best reflects the ways in which institutions of higher education differ from other organizations is governance. The times when Boards of Trustees exercised full authority are gone. Decision making is now spread among trustees, presidents, and faculty, and there is a great deal of ambiguity as to who has more power.

Faculty and trustees have different backgrounds and values. About 40 % of board members are business people (College Governing Boards, 1986), who are very likely to see their institutions as business organizations and support the idea of top-down management. On the other hand trustees do not fully understand and support the idea of academic freedom, and believe that certain decisions do not require involvement of the faculty in decision making process (Birnbaum, 1988).

As universities became larger and more complex, faculty do not any more assume administrative positions and then return to the classroom as they used to do earlier. Now they do not deal with federal regulations or student financial aid procedures. Faculty and administrators fill different roles, they deal with different aspects of the environment, and have different backgrounds, and it is not uncommon that their goals contradict.

Cohen and March describe the university, only partially in caricature, as follows: “Teachers decide if, when, and what to teach. Students decide if, when, and what to learn. Legislators and donors decide if, when, and what to support.” Decisions, made within the university, are the consequence of the system “but [are] intended by no one and decisively controlled by no one” (Karol and Ginsburg, 1980).

Dualism of control is another problem of academic institutions. There simultaneously exist two structures within the universities: the conventional administrative hierarchy and the structure through which faculty make decisions regarding those aspects of the institution over which they have jurisdiction (Birnbaum, 1988).

In most business organizations, major goal activities are directed and coordinated by a hierarchy of administrators who decide critical operational questions. This authority derives from their position in the organizational structure that implies directing the activities of others.

There are two lines of authority in organizations – administrative and professional. Administrative officers direct the primary goals of organization activities, and professionals provide secondary support activities and knowledge. If a conflict arises, it is resolved by recognizing the supremacy of administrative authority.

This is not the case with professional organizations like colleges and universities. University’s professionals are not only responsible for producing, applying, preserving and communicating knowledge, but also for setting organizational goals and maintaining standards of performance.

Universities have to consider several major areas while setting its policies: structures for governance/administration, budgeting, procedures related to construction of buildings, academic programs, promotion, tenure and salary increments, athletic programs, student matters, research, public relations, parking, security and other services (Westmeyer, 1996). Some of the areas above are academic and some are not. It seems hardly possible to implement business management approach to all of these areas.

2. Colleges and universities should model their planning and decision making on successful for-profit organizations because they are similar to business organizations, operate in the same environment and obey the same organization development laws.

Elements of business theory are present in institutions of higher education today: competition for clients (purchasers), the need for cost-effectiveness, sanctions and incentives (less in the form of money, but more likely in the form of rank and prestige increases or denials), and the departments are structures in terms of the nature of the service or product (department of students life, special education department, or department of leadership, policy and organizations) (Westmeyer, 1990).

Higher education is a multi-billion dollar enterprise and as any other enterprise it is governed by the financial realities of income and outlay, and by the market realities of supply and demand.

The resources of higher education are exactly the same as the resources of any business entity: personnel, physical plant, and capital. When higher education learns how to manage its resources, it will be able to maintain costs, improve productivity, and enhance non-student related issues (Lenington, 1996).

As we entered the twenty first century, the major forces of a larger societal environment are reshaping the nature of postsecondary education. Competition, which is primarily an element of business world, has become one of the major issues to consider while governing institutions of higher education. The major forces that shape the competition within postsecondary education industry are similar to those that influence competition in a business world and as follows: the threat of entry into industry by new organizations, the bargaining power of suppliers (students clientele), the bargaining power of customers (employers, funding sources), and the threat of substitute services (Peterson & Dill, 1997).

Shared governance has become increasingly complex as more and more external constituencies demand that higher education respond to their interests.

Pressured by rapidly changing legal, social, economic and technological environments, boards increasingly are turning to business leaders and government officials, who they believe know something about navigating conflict and who share their sense of the urgent need to respond to changing conditions (Ferren, 2001).

Between 1950 and 1990, business scholars proposed two dozen management innovations, some of which were adopted by institutions of higher education. The management innovations considered were Planning, Programming and Budgeting System, Zero-Based Budgeting, Management by Objectives, Strategic Planning, Total Control Management, Business Process Reengineering, and Benchmarking (Birnbaum, 2000). Some of them, or their elements, have proved to be useful in higher education environment and are still considered by university authorities.

The development and advocacy of new management approaches in academic world continues, and at an increasing pace. The fact that academic and business organizations have a lot of common features and that they are influenced by the same external environment forces and the experience of the past show that business theories might be successfully implemented in the academic setting. Peculiarities of academic institutions that make them different form for-profit organizations suggest that business management innovations should be tailored to the nature and needs of postsecondary education industry and not be used as universally applicable quick-fix solutions.


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К содержанию номера журнала: Вестник КАСУ №4 - 2006

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