The Use Business Principles In

Stephanine Martin Rodgers University of Minnesota

of Higher Education

The purpose of this manuscript is to investigate the borrowing and use of three business principles, benchmarking, merit pay, and students as customers in higher education. This is accomplished by first looking into the borrowing of educational models. After which, the purpose of higher education and for profit business is defined using a systems perspective. The infusion of business principles in higher education is directly linked to each institution!s purpose and mission. Key Words: Strategic Human Resource Development, Organization Development, Change

Problem Statement The premise o this paper is that higher education and or!pro it "usiness are independent rom one another# With this in mind, $hen is it prudent or $ise to use "usiness principles in higher education% &or 'r# (ouis DeThomasis, )resident o Saint *ary+s ,niversity o *innesota, -Higher education is not a "usiness "ut you have to apply "usiness principles to educational institutions and its processes. /personal communication, 0pril 12, 34456# The -7eorge *ason &aculty Senate issued this statement, -education is a uni8ue activity 9that di ers mar:edly rom "oth "usiness and government# ,niversities are centers o ree in8uiry, ree e;pression, open discovery, and dissent. /as cited in Denning, 3443, p# 16# There ore, higher education is deemed separate rom or pro it "usiness $ith its o$n traditions and assumptions< yet there is support or the use o "usiness principles in the in rastructure o higher education# This paper see:s to e;plore the use o "usiness principles in higher education environments in three $ays: 16 through a presentation o the concept o ="orro$ing+ among education systems< 36 "y de ining the purpose and activity o higher education and "usiness using a systems perspective< and 56 through analyzing the use o "enchmar:ing, merit pay and students as customers as via"le "usiness practices in education# "orrowing in #ducation The de inition o educational "orro$ing is the practice o ta:ing o an e;isting educational model and importing it into another educational system# 0n early e;ample o "orro$ing $as the 0merican Hampton! Tus:egee industrial education model that $as "orro$ed "y the 'ritish in the early 1>44+s# The 'ritish implemented the model at 0chimota College in colonial 7hana /Steiner!Khamsi ? @uist, 34446# (oo:ing or a system to educate the indigenous peoples in 0 rica, the 'ritish loo:ed to the model used to educate 0 ricans in the southern ,nited States# This intra!system "orro$ing o an educational model $as not completely success ul# Aven though researchers have "een e;plicit in their concerns a"out educating 0 ricans e;clusively in vocational education and the politics o "orro$ing international systems, "orro$ing has occurred# 'orro$ing and the su"se8uent educational trans er process are riddled $ith many comple;ities< one o $hich is adapting the "orro$ed model to the local culture and indigenous peoples# 0n illustration o "orro$ing is provided in &igure 1# The irst t$o shapes o the model are standard lo$chart sym"ols and have "een selected to represent the irst t$o steps in "orro$ing# To "egin, -'orro$. sits $ithin the shape that represents data# Be;t, -Trans er. is ound $ithin the process sign# &inally, the result, $hich is to

-0dapt. is sym"olized "y a he;agon# &or this paper, "orro$ing "egins $ith the ta:ing o data, a ter $hich the process o trans er occurs and adaptation is the result# 0dapt

'orro$ Trans er

&igure 1# Alements o "orro$ing an educational model# $opyright % &''( Stephanine Martin Rodgers &or education, intra!system "orro$ing is the "orro$ing o an education model and using it in another educational system# There are many potential dilemmas in the practice o "orro$ing and adapting an educational model# Key ingredients are em"edded $ithin each education model# Key ingredients that are implicit $ithin the model are a sense o localized conte;t, institutionalized culture, values and goals# Ho$ever, the most important component in the education model is the core mission or purpose it supports# Cnter!system "orro$ing is an um"rella concept that encompasses all types o "orro$ing systems, processes, or practices rom one arena to another# 'asically, inter!system "orro$ing is de ined as the "orro$ing o a model developed or use in one system and adapted or use in a di erent system# 7eneral Systems Theory /7ST6, developed "y (ud$ig von 'ertalan y and pu"lished in1>D>, $as the irst systematic analysis o ho$ large systems "orro$ rom other systems /among other nota"le contri"utions6# 7ST $as originally developed or use in the "iological sciences# Aventually, 'ertalan y postulated - the concepts o organization, non!summative $holeness, control, sel !regulation, e8ui inality, and sel ! organization, 9 are as valid in the social and "ehavioral sciences as they are in the "iological. /)rovost, 1>E36# Conse8uently, 7ST has "een adopted into many ields and practices# There are intrinsic challenges $hen models and practices are used inter!systemically< especially $hen a model $as intended or a speci ic situation and distinct purpose# There ore, the e;ploration o "orro$ing models and practices "et$een t$o distinct systems provides an opportunity to re lect and contemplate "ene its and challenges# Within the 7ST rame$or:, this manuscript loo:s at three "usiness practices that are o ten "orro$ed "y higher education# These three practices are "enchmar:ing, merit pay and students as customers# The manuscript uses systems theory concepts to rame the issue o inter!system "orro$ing# The ne;t section descri"es a systems perspective and illustrates the particularities o higher education and or! pro it "usiness systems#

Theoretical Framework 0 $orldvie$ that implements a systems theory perspective em"races the notion o inter!relatedness, interdependence and synergism o the many component parts o a system or organization# Kau man contends, -a system is a collection o parts $hich interacts $ith each other to unction as a $hole. /1>E4, p# 16# 0n element o the systems approach is the input!trans ormation!output! eed"ac: model# Cn &igure 3, the systems rame$or: is illustrated#
ABFCROB*ABT

TR0BS&OR*0TCOB )ROCASS

G)urpose GRe$ards GRelationships G(eadership GStructure GHelp ul *echanisms

O,T),TS )roducts and Services CB),TS Human, physical, inancial and in ormation resources

&eed"ac:

Higher Aducation and 'usiness Cnput H Trans ormation H Output H &eed"ac: (oop &igure 3# 7eneral systems input!trans ormation!output model# 0dapted rom Hellriegel, Iac:son ? Slocum /34436 ? Weis"ord /1>JE6# The systems approach is used as a guide to present a "road vie$ o higher education and a or!pro it "usiness organization in Ta"le 1# The uni8ue 8ualities and similarities o each comple; system are o ered#

Ta"le 1# Components o Higher Aducation and &or!)ro it 'usiness Cnput Higher Aducation Cnstitution Human, physical, and in ormation resources Trans ormation (ecture Tests Discussions 0ssignments (a" A;periments Term )apers Discussion Output 7raduating Students Kno$ledge &eed"ac: Io" )lacement 7raduate School 0dmission 0lumni 7iving

&or!)ro it 'usiness Organization

Human, physical, and Cn ormation resources

)roduction Training Research and Development @uality Control

@uality product or service produced at a minimum cost and sold at a ma;imized pro it#

Repeat Customers Customer Surveys SalesKFolume *ar:eting Survey &inancial Reports )roduction Records )er ormance 0ppraisals

While the inputs or higher education and "usiness appear similar, the use o those inputs or trans ormation is 8uite di erent or each system# Ho$ever, it is the output and eed"ac: aspects that are the most uni8ue or each system# )aramount to the analysis and understanding o each system is the core purpose o each system# Cn the ollo$ing, the purpose o higher education and "usiness is clari ied# 0ccording to the literature, the purpose o education in the ,nited States has "een to improve society /'ro$n, 1>E46 and li e or others /De$ey, 1>12K1>DD6# Washington purported the purpose $as to develop moral character /as cited in (azerson ? 7ru"", 1>JD6# Others have alleged education $as to promote change /'ro$n, 1>E4< 7regson, 1>>26 and trans orm industry /De$ey, 1>12K1>DD6# Snedden contended education $as to e iciently train individuals or $or: in trade and "usiness /as cited in Wirth, 1>E46# )rosser advocated or education to prepare individuals or gain ul employment /as cited in Wirth, 1>E46 and Ross sa$ social control as education+s purpose /as cited in Wirth, 1>E46# Cn1>54, W# K# Kellogg stated -education o ers the greatest opportunity or really improving one generation over another. /as cited in Richardson, 1>>26# Ct has also "een said the purpose o education is to promote democratic ideals /S# Roerich, personal communications, 0ugust 1D, 34436 $hich -9is the cornerstone o our democracy and the glo"al partnerships that "ind us to the uture. /Richardson, 1>>2, p# 56# Others "elieve, $isdom, enlightenment o the mind, and learning or the sa:e o increasing one+s understanding is the purpose o higher education# 0s $ell, -maintaining and enhancing learning and en8uiry. is seen as the heart o education /,niversity o Adin"urgh, n# d#, p# 16# Over the last t$o decades, changing economic conditions, lagging pu"lic con idence, and legislation that ocuses on school district and educator accounta"ility has had an impact on the perceptions o the purpose o higher education# Assentially, -people $ant to :no$ that higher education is preparing students to lead productive lives a ter college including the a"ility to deal e ectively $ith such maLor societal challenges as poverty, illiteracy, crime, and environmental e;ploitation. /0merican College )ersonnel 0ssociation, 1>>D6# The purpose o "usiness is presented rom a variety o perspectives as $ell# 0ccording to Kline /34456, the purpose o "usiness is trade# Coase /1>5J6 maintains that it is to minimize transaction costs in order to ma;imize pro its, $hile Stanley /34436 contends its purpose is to earn a pro it through serving people# 0ccording to )eter Druc:er, the purpose o "usiness is to create and :eep a customer# Similarly, Haughton /34416 states the purpose o "usiness is -to ind, :eep and gro$ the right customers. /p# 16# &or &ield /34436, the purpose o "usiness is -t o provide goods and services to the population, to add value9to ma:e the community "etter /p# 36# Fincent /34436 remar:s, -the primary purpose o "usiness is to ma:e money or itMsN o$ners. /p# 16# Simply stated, the purpose o higher education is teaching and learning $hile the purpose o "usiness is to meet customer demands pro ita"ly# While there are t$o traLectories regarding the purpose o education, "oth agree education is a"out teaching and learning# )urpose provides the vision that guides the philosophy and practice in each system# Clari ying and understanding the purpose o higher education and "usiness is undamental to comprehending the impact o "orro$ing models or practices and discerning the ollo$ing te;t#

Findings

Benchmarking and Higher Education 'enchmar:ing is a process "y $hich the "est practices or standards in a given industry are used "y an organization to assess the 8uality o $or: processes and outcomes# Simpson, Kondouli, ? Wai /1>>>6 state -"enchmar:ing is a systematic and continuous process o measuring and comparing an organization+s goods, services, and practices against industry leaders any$here in the $orld to gain in ormation that $ill help the organization improve per ormance. /as cited in Hellriegel, Iac:son, ? Slocum, 34436# 0ccording to The 'enchmar:ing A;change /34456, -'enchmar:ing is a highly respected practice in the "usiness $orld# Ct is an activity that loo:s out$ard to ind "est practice and high per ormance and then measures actual "usiness operations against those goals#O Typically, practices in an organization are "enchmar:ed against "est practices in an organization $ithin the same industry# Ho$ever, some organizations loo: to "est practices outside o their industry# The 'enchmar:ing A;change /34456 contends any "usiness process can "e "enchmar:ed#. &or this paper the ocus on "enchmar:ing turns to -can "enchmar:ing "e "orro$ed and adopted into higher education%. 0 loo: at the meaning o a "usiness process and vie$ing an e;ample o a higher education institution using "enchmar:ing may assist in ans$ering this 8uestion# -0 "usiness process is "est de ined as any unction $ithin an organization that ena"les the organization to success ully deliver its products and services. states The 'enchmar:ing A;change /34456# 0t the ,niversity o Wisconsin, Stout "enchmar:ing has "een implemented into its processes# 0 ter a thorough revie$ o Stout+s 3441 *alcolm 'aldrige Bational @uality )rogram 0pplication, it appears the ,niversity has em"raced a total 8uality management philosophy and approach in all o its "usiness and $or: processes# Cn 1>>3, 8uality management practices $ere introduced and e;tensive training ollo$ed# 0 primary aspect o 8uality management is "enchmar:ing# The per ormance improvement system, $hich is undamental to the overall implementation o 8uality practices at Stout includes -analyze current processK"est practices#. 0n endo$ment to study the culture o high per ormance organizations and apply the learning to the university and its curriculum $as received in 1>>J and assisted in ormulating the improvement process /*alcolm 'aldrige Bational @uality )rogram 0pplication, ,niversity o Wisconsin H Stout, 34416# Cn addition, -Committees or teams $ithin or across colleges implement improvement action using "enchmar:s and "est practices to identi y and implement improvement actions. /*alcolm 'aldrige Bational @uality )rogram 0pplication, ,niversity o Wisconsin H Stout, 3441, p# v6# 0nother use o "enchmar:ing $as in the development o a comprehensive morale survey completed through -"enchmar:ing a num"er o higher education morale surveys. /*alcolm 'aldrige Bational @uality )rogram 0pplication, ,niversity o Wisconsin H Stout, 3441, p# 3D6# 0s a result o the 1>>> morale survey that indicated aculty $or:load and salary $ere pro"lematic, "enchmar:ing goals $ere determined# Overall, the report indicated a commitment to continuous improvement at Stout# Ct appears "enchmar:ing has "een used to set per ormance standards and re$ards or teaching at Stout# Cndicators have "een aligned $ith strategic o"Lectives so that per ormance can "e measured# &or students, an assessment plan that includes ormative and summative assessment techni8ues to determine intended learning outcomes $as developed "y )rogram Directors# The directors meet $ith Department Chairs and Deans to ensure continuity throughout the ,niversity# 0s a result o this compelling report, it appears 8uality management practices can "e "orro$ed and adopted into education# The primary reason or the success o this practice in higher education is the commitment, con idence and "uy!in rom the numerous sta:eholders in the system# Merit )ay in *igher #ducation *erit pay is a "usiness practice designed to motivate an employee e;trinsically "y paying or per ormance# )iece$or:, a orm o pay or per ormance $as seen in the nineteenth century in the 'ritish te;tile industry# )ay "ased on per ormance $as ushered into the ,nited States during the Cndustrial Revolution# &redric: Taylor+s Scienti ic *anagement theory $as one o the greatest proponents o the piece rate system# )iece rate re$ards production in employees# Scienti ic *anagement assumed e;trinsic re$ards motivate employees to produce at higher levels# Cs the same true or the pro essoriate% Will aculty "e more productive i merit pay is instituted as a re$ard system% Cn order to determine a response, a loo: into motivation actors and re$ards or aculty in higher education is necessary#

One dominant thought is higher education aculty is motivated internally rather than e;ternally# 0ccording to *cDermott /1>>>6, -most aculty do $hat they do or the intrinsic Loy o it!!!"eing a scholar turns them on or the teaching!learning process :eeps then stimulated. /p# D6# &or some, the sheer Loy o sharing the :no$ledge o a particular discipline or ield is re$arding# &or others -they value academic reedom, 9and have made pursuit o e;cellence their mission# The source o their motivation may "e sel ! determined goals, peer appreciation, pu"lishing articles in Lournals o repute, invitations or sharing their research $or:9. /*ahesh$ari, n# d#, p# 56# The Lust and air re$ard system o good per ormance is the result o hard $or:# On the contrary, there are pro essors $ho -do eel it is not air to productive aculty i non! productive aculty are given e8ual pay increases. /Allis, 1>>>, p# 16# There"y, a sense o de!motivation occurs or some aculty under a non!merit pay system# Therein lies the undamental challenge "et$een and among aculty ! e8uity# 0ccording to Hellriegel, Iac:son, and Slocum /34436, motivation is a psychological state that is said to e;ist $henever internal andKor e;ternal orces trigger, direct, or maintain goal!directed "ehaviors. /p# 5J26# There ore, $hat constitutes as motivating or re$arding $ill li:ely "e di erent among aculty# The most concerning aspect o merit pay is determining a relia"le means or measuring a teacher+s classroom per ormance /*alanaga, 34416 and dealing $ith actors "eyond the teacher+s control /Rothstein, 34436# Test scores, 7)0 and student evaluations o teachers attri"ute numeric values to activity# Ho$ever, do these methods actually measure teaching and learning% The system may covertly encourage a teacher to teach to the test or to participate in grade in lation "y using a test or 7)0 as a measure# Cn addition, the production o scholarly research and pu"lications, $riting o te;t"oo:s and other materials may "e included in determining productivity# 0 loo: into current practices in higher education inds tenure# 0 traditional re$ard system in higher education is tenure# Tenure is -a rigorous three!to!seven year pro"ationary periodPthe longest and most complicated o any pro ession. /0merican &ederation o Teachers, n# d#6# Responsi"ilities to students, academic committees, research and pu"lications increase $ith tenure# 0lso, tenure is seen as - a :ey ingredient in maintaining education 8uality and academic reedom. /0merican &ederation o Teachers, n# d#6# Tenure is seen as a higher education merit system# Currently, only a"out 5EQ o the pro essorate are tenured /0merican &ederation o Teachers, n# d#6# This modest percentage o tenured aculty can "e seen as a current higher education practice that re$ards productivity#

Students as Customers in Higher Education The macro!environment in a capitalistic economy includes various real and arti icial actors that impact supply and demand o goods and services# 0ccording to economic theory, the supply o goods and services and consumer demand is undamental to the sustaina"ility o any "usiness# 0s a result, customers are :ey players in the supply and demand cycle# With this in mind, the creation o student as customer is pondered# Cn order to discern i the student is a customer, it is necessary to clari y the meaning o student and customer# 0 student has "een de ined as -a person $ho is studying at a school college. /Be$ O; ord 0merican Dictionary, 3441, p# 12>46 $hereas a customer is -a person or organization that "uys goods or services rom a store or "usiness. /Be$ O; ord 0merican Dictionary, 3441, p# D316# &rom these de initions, the 8uestion arises, -Cs education a "usiness%. 'orro$ing the notion o customer and vie$ing a student as a customer has many implications or students, teachers and institutions o higher education# One aspect that the notion o customer "rings is -the customer is al$ays right#. 0nother perspective, used "y Henry &ord in his creation o the automo"ile is that customer demand drives production# Customer satis action, consumer pressures, selling, "uying, production and purchasing po$er are $ords that typically connote thoughts common to "usiness and are 8uite di erent rom teaching and learning# Ho$ever, or Craig S$enson, Fice )resident o the ,niversity o )hoeni;, seeing the student, as customer does not -mean the customer is al$ays right# Ct means "alancing the goals o a li"eral education $ith those o a practical education $ithout diminishing the $orth o either. /1>>E, p# R6# The concept o "uying or paying or an education is another characteristic that must "e addressed $hen considering the student as customer# 'rother (ouis De Thomasis, )resident o St# *ary+s ,niversity o *innesota has elo8uently stated, -0n education can not "e "ought, "ut it must "e paid or. /personal communication, 0pril 12, 34456# Ct is the transaction o paying tuition and ees that implies to some individuals that education is similar to "usiness# Cndeed, higher education must pay or resources and

numerous la$s and regulations similar to "usiness "ind the in rastructure o higher education, ho$ever, the primary purpose o higher education is teaching and learning# Ct is not on the per unctory tas:s completed in human resources, maintenance or the "usiness o ice# *ost importantly, goods and services can "e repossessed, lost, stolen, thro$n a$ay or disregarded# The same is not true or :no$ledge# Once :no$ledge is o"tained, it is typically em"odied#

Conclusions The notion o "orro$ing "usiness practices or use in higher education has "een revie$ed# Speci ically, the practices o "enchmar:ing, merit pay and student as customer have "een e;amined# The distinct purpose o education on teaching and learning and "usiness to meet customer demands pro ita"ly guide the ollo$ing conclusions# While an educational institution may choose to impart a total 8uality management philosophy and utilize "enchmar:ing in its $or: processes, it $ill "e most e ective i the chosen mission and purpose o the particular institution supports such activity# Higher Aducation in Borth Da:ota provides such an e;ample# Cn 1>>4 $ith the restructuring o higher education looming, the higher education "oard in Borth Da:ota -retained (a$rence Sherr o the ,niversity o Kansas to coach mem"ers and sta on the principles o total 8uality. /Tread$ay, 1>>2, p# R26# Aventually the -Seven Sear )lan. $as devised using a total 8uality philosophy -and "ecame the cornerstone or the leadership priorities or the irst ull!time chancellor9. /Tread$ay, 1>>2, p# R26# *erit pay or pay or per ormance as originally developed "y Taylor has the potential to improve teaching or the pro essoriate that is e;trinsically motivated or uses merit pay as a method o e8uity# Ho$ever, the last scenario is unli:ely since many orces dominate higher education# *ar:et orces and trends determine salary scales and enrollments $ithin higher education departments# 0n e;ample o such a situation $as the creation and gro$th o computer science programs# The mar:et drove the enormous in lu; o students in computer science in the 1>E4+s# &inally, a air merit pay system must support the -"ottom! line. in education or teaching and learning# Allis /1>ED6 states, -the success o merit pay depends on care ul, cooperative planning involving all constituencies $ho $ill "e a ected. /p# 16 $ith a resulting plan that is a orda"le, accepta"le, adapted to needs, re lects program goals and is applied airly and consistently# *easuring teaching and learning is di icult# While the "ehaviors o a high per orming teacher or student may "e seen, the em"odiment o an education may not "e realized until the distant uture# The consumer metaphor places students in a passive role o "uying an education# When in act, an education cannot "e "oughtPit must "e earned# ,lreich /n# d#6, a pro essor at the ,niversity o 0rizona "elieves $hen students "ecome customers they are -deprived o any authentic relation to the process o their o$n education. and lac: authority to "ecome agents -o their o$n intellectual gro$th. /p# 36# Aven $ith a rapidly changing economy and technology, adopting "usiness practices in the classroom are not seen as via"le# &inally, it is possi"le students may "e seen as customers outside the classroom "ut they are not customers inside the classroom# 'ased on the three a orementioned "usiness practices, the success or not o "orro$ing and in using "usiness principles in higher education is directly lin:ed to each institution+s purpose and mission, mar:et conditions, and motivation o the pro essoriate# C higher education chooses to "orro$ practices rom other industries, it must "e done $ith utmost care and deli"erate consideration and contemplation o potential conse8uences# This analysis has illustrated each system has a distinctive unction# 0s $ell, each system has a distinct history and philosophy# &or e;ample, the e;istence o higher education pre!dates or!pro it organizations, and national legislatures "y hundreds o years /0lt"ach, 'erdahl, ? 7umport, 1>>>6# 7overnment, "usiness, and education systems in the ,nited States support the citizenry o a democratic nation and capitalistic economy# ,ltimately, society is the greatest "ene actor o education# 0ll individuals educated on a variety o levels contri"ute to society# There are a num"er o roles and positions that re8uire educated individuals# Society needs educated mem"ers to unctionally operate, meet the challenges, and o er solutions# Aducation is primary to the prosperity o a capitalistic society# Cn addition, pu"lic and private organizations and institutions are customers o education# 0ll re8uire a speci ic level o education in Lo" speci ications# Aducation should "e protected, honored and li ted up as a critical component to the prosperity in the ,nited States and the $orld#

Implications for HRD Ct has "een said higher education is no$ at a crossroads and students have no con idence in higher education+s a"ility to prepare them or the $orld o $or: /*ahesh$ari, n# d#, p#16# The purpose o higher education is "eing scrutinized# Some are calling or the redesign o curriculum and development o interdisciplinary programs /*ahesh$ari, n# d#6# Ct is "ecoming clear that there is a need or a ne$ model o higher education# Ct has "een said, -necessity is indeed the mother o continuous invention. /Tread$ay, 1>>2, p# J56# Human Resource Development pro essionals possess the s:ills and tools to assist higher education to orge ahead# 0s change agents, using a systems approach and Weis"ord+s Si; 'o; *odel /1>JE6, HRD pro essionals can support higher education in the process o change# When acilitating change or ma:ing recommendations, the HRD pro essional must e;ercise caution and mind ully consider the conse8uences o adopting "usiness practices in the re orm process# The HRD pro essional must "e engaged in a process that e;plicates the dominant political ideologies promoting re orm /Halpin ? Troyna, 1>>R6# Cn conclusion, the necessity or higher education to maintain and develop traditions, assumptions and practices is em"edded in the purpose o higher education and the varying epistemological perspectives o the citizenry#

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