Former Career College Chief Opines on Sector Scrutiny

By Neil Raisman

Career-college officials should be asking themselves some hard questions right now, such as: How did the sector end up being the focus of the U.S. Congress? Why are legislators singling out career colleges for special scrutiny? And what can be learned to try to keep this from becoming an on-going activity?

In examining these questions, it is important to acknowledge that the examples given and the problems cited at the Senate hearings on for-profit higher education so far may not apply to every school and company but they do for too many. The sector needs to stop patting itself on the back all the time and do something to stop the worst offenders from harming and maybe even destroying the whole industry.

So far the Career College Association, its members, and even some of their accreditors have mostly responded to the criticism by trying to downplay the differences between their schools and traditional colleges and universities. But these differences are real. Career colleges that are publicly held must be answerable to their stock holders and thus need to maximize their profits– which causes many of the issues Congress is looking at.

In other words, schools need to focus on bringing in new sales to “grow the business.” This means ever-increasing pressures to expand population, increase tuition and fees, reduce operational costs, and maximize revenue. This calls for marketing aggressively, focusing on initial enrollments (sales), introducing new programs that could sell, maximizing Pell and Stafford federal money, firing employees to reduce costs, cutting programs to cut costs, reducing the number of sections to cut costs, and so on. This is ultimately all to show a good set of numbers and talking points for quarterly earnings calls. Even if a school is not publicly traded, they tend to operate as if they were perhaps hoping to go public at a later date.

Yes, much of what is above is similar to any college or school, no matter what its tax status — i.e. marketing, initial enrollments, offering popular programs and majors, cutting costs and people, etc. In fact, the major difference between a good non-profit and for-profit school is an accounting system — fund balance versus cash accrual. But there are also differences in four significant areas: the people who run the schools and who carry out the operations; the way people are compensated; the intensity of the efforts; and how the operations are accomplished.

For the most part, the people who run the companies and the individual schools are drawn from the “school business” not from education. There is a difference. Yes, career colleges focus on learning and training and some do it exceedingly well and have done so for quite a while.

Others, if we are honest about it, do not do a very good job. They do not understand the larger $470 billion sector of higher education and do things that call attention to how career colleges are different and even some questionable.

In my personal history as a chancellor and consultant to career colleges, I have observed some leaders of companies, schools, and departments doing things to make numbers that were to be polite, very questionable. And yet, they were rewarded for doing so. In the business, we all know of schools that are “shaving the edges” of the rules to hit financial goals with little regard to how these actions would affect student learning or the industry at large should the “shaving” draw public blood. Granted, this is not the behavior of everyone in career colleges. But because the leaders of companies, schools, and departments do not typically see their main function as furthering the education of students and their success, some do things that put finances over learning and that’s when trouble, the media, and politicians strike.

If the people acted to better the education and success of their students, they would be seen as leaders in the field and would be lauded by others rather than written about in newspapers, for radio and TV, and by Congressional staffers. So why do they do they engage in questionable practices? Simple. Their success depends on them hitting their numbers and get their bonuses

Further, they may have a vested interest in seeing share value rise if they are also stockholders. Those who work at not-for-profit colleges generally cannot get monetary bonuses for doing their jobs and are certainly not stockholders with a personal stake in the schools’ quarterly earnings. They get a promotion or a raise for doing a good job but not a separate check, and their admissions officers do not get cash bonuses.

At career colleges, the cash bonus creates an incentive for people whose base salary is often not all that high compared to that of parallel positions at non-profit schools to hit their numbers. That is why there are bonuses after all, but the bonus all too often becomes something that must be obtained and some people will do almost anything to make sure they hit their bonuses. These are the people who cause companies and schools major problems when their actions are uncovered.

After their activities come to light, one of two things happens to these people. At well run,ethical schools and colleges, these individuals are either let go for violating procedures or policy or more often, if the violation is not major, corrected and trained to do things correctly.

However, at all too many schools, they are congratulated for coming up with a new way to shave the rules, and their approach is quietly conveyed as an example for others to follow.

HIGHER ED WATCH