Challenges Facing Formerly For-Profit Private Universities, Capstone Project Example

Chapter 1: Introduction

Background

According to research several for-profit universities had been under pressure from the federal government since prior to the last quarter of 2010. Undercover investigations found that a number of such universities used high-pressure marketing tactics to gain student enrollment for federal student aid funding. As the Department of Education began revamping rules to limit such behavior, the Florida Attorney General Wiggins launched her own investigation into the trend toward misrepresentation of retention and job placement rates (Keller, 2010, internet).

Although a number of institutions have been implicated, two are the most notorious offenders with respect to the number of complaints: Everest University and Kaplan University. Most of the complaints center around non-transferrable credits, billing problems, and deceptive sales practice. Nevertheless, to keep the problem in perspective, such complaints constitute less than 5% of the student body. Although it is better business practice to keep consumers happy, it is simply not always possible to achieve. Invariable, every business is going to have at least some dissatisfied customers (Scott, 2011, internet).

Problem Statement

The problem from a business standpoint is threefold. It is incumbent upon university administrators to demonstrate a profit to stakeholders, to maintain a transparent operation within federal and state guidelines as well as demonstrate an ethically sufficient business paradigm. The antecedent organizational imperative appears to be at the level of management and leadership (Ewell, 1999, p. 43). In order to address proficiently these functional requirements, management must implement certain changes. To delineate what these changes should be, the facts are analyzed and specific questions with respect to operational procedures are proposed.

Research Questions

The average universities retention rate from first year freshmen to sophomore in the United States is about 70% with variation between states. For four year private for-profit colleges it was less than 50%. Overall graduation rates for bachelor degrees in the United States are only 55% (The National Center for Education, 2012, internet). The for-profit private universities are not even meeting the national average with freshmen retention. The range of reported data is highly variable between institutions. Everest’s institution overall returning student body is reported at about 36%. Kaplan is at 70% (OEDb, 2012, internet). The following queries represent the core questions this research is intended to address.

1. What customer service challenges are interfering with student retention in for profit private universities?
2. What are some of the business practices of for profit private universities associated with the student dissatisfaction trend?
3. By improving for profit private universities brand around a change effort to build institutional loyalty, will the institutional image radically improve over a period of time?

Research Hypothesis

This research presents a hypothetical response to these questions. As previously stated, the business imperative is at the center of the controversies. In essence, the allegations are for the most part the result of poor quality management processes at the level of marketing and sales as well as accounting and billing. Typically, when a business starts to take shortcuts to such an extent one or a combination of a few things must be happening. It could be the customer service personnel are not properly trained, management is leading by poor example, accounting, finance and collections are adhering to unethical business practices, operational personnel are underperforming, or you have a client who is unsatisfied by due diligence (Ewell, 1999, p. 53). It is probably a combination of these factors, but with for-profit institutions, the imperative usually boils down to a problem with the bottom line.

Certainly, the facts may be that is not just about how well managed is a business; ROI simply cannot justify proper operations. What this really means is that wherever these universities started, these institutions have adapted (even though not in accordance) to the fiscal reality. Part of this fiscal reality is depending on drop-out rates for profit. After a certain point in every semester, tuition is non-refundable at any institution of higher learning (Ewell, 1999, p. 59). So, if a depending on the number who drop after that time, marginal profit increase with respect to resources required to complete the semester. Furthermore, it appears as if these institutions have become overly dependent on federal student funding. What these universities need to do is restructure the organization such that it can remain profitable without these dependencies.

Significance of the Study

While education is one of the central industries that operate in the world today, it could be analyzed that there are different elements that make it one of the weakest links to development especially when it comes to the assumptions of for-profit educational companies that are aiming to both serve the aspects of educational development while also responding to business options that the organization has in mind (Green, 1998, p. 43). The establishment of business desires in connection with the social responsibilities of the organization often clash.

In this regard, this study would better put a definition on how much such elements could actually work for the development of such for-profit businesses while still retaining their identity and their reputation in the society as organizations that are dedicated towards educating the people and aiding them with the development options that they are in need of to become sources of social progress. Separating the conditions of responsibilities that the organizations hope to respond to is the primary aim of this research. This further makes it a significant source of information that could be used towards reestablishing the competency of the private educational entities and private universities.

This research is also considered to increase the possibility by which private universities are able to make considerable dedications towards completing their mission to the community while also defining their personal desires to get ample profit for the sake of maintaining their business competency in line with the operations that they are aiming to reach.

Purpose of Investigation

Balancing the elements of focus for organizations is an impeccable source of competence and established reputation in the market. The same is true when it comes to dealing with the desires of educational entities that have become for-profit. For educational organizations, it could be recognized that they are designed to provide attention to the point of serving the needs of the public especially in relation to getting the knowledge they need to establish progress.

True, it is first and foremost important for schools and universities to uphold that particular responsibility they promise to comprehend with in line with equipping the society with knowledge (Finn, 1998, p. 39). Managing their operations towards such conditions provide a great impact on how they are recognized by the society. However, when it comes to responding to new conditions of gaining profit as a form of business entity, for-profit universities face difficulties of realigning their concerns.

Balancing the different options of utilizing available resources to provide for the needs of the universities to respond to student needs while also considering how much they would get as profit from such operations often contradict the value of such elements directly. In this investigative research, the focus is on seeing how for-profit universities are actually able to find a conditional prospective in seeing how they are to provide attention to both ends of their operations, for their students and for their business all at the same time.

It is deemed that with proper management of assets and focal operations, business-designed universities are expected to make a great impact on how they provide for their clients and how they provide for their administration with a balanced view of their responsibilities for both sectors. This investigation then hopes to make a constructive presentation on how for-profit universities tend to create massive definition regarding their reputation as business entities and as social organizations. What makes it hard for most of these companies to find a way to make these two separate ends need and what could be done to help in the process of creating a great impact on how the same organizations tend to make indicative development on how they operate as an entity? These questions and the research problems presented in the previous sections of this chapter shall be the primary focal point of the investigation that is to be held as the central point of discussion in this study.

Research Design and Methodology

The design of this study is grounded on the desire to define the problem, identify the sources of it and create a reflective dependence of solution for the issues involved in the situation. Given that the organizations to be scrutinized or investigated upon are entities that have public responsibilities and private goals, the description of their characterization and operations shall be held as an important aspect of the presentation. Relatively the research is designed to make specific indications as it tries to create a dependable source of information that would explain the roots of the problem that for-profit universities are undergoing at present.

Following the principles of a qualitative study, the findings in this research shall be considered alongside the implications of other studies that have already been completed in line with the course of development that modern universities are taking. Focusing on the problems of operation and profit-defined goals of the companies involved, the studies that are to be chosen as resources for this research shall stand to be a source of data that would describe how the entities of operational education in private universities actually affect the reputation they are aiming to protect while also convening a specific control on how they administer the courses of profit earning in line with their desires to make comprehensive condition on reaching the standards of business and education they have to respond to.

From such investigative studies, this research shall create a balanced indication on how problems arise and how they could be relatively solved through reshaping the management operations of the organization. With this in mind, it is expected that this study would provide a great source of an eye-opener to how for-profit educational entities should operate in line with their desire to improve their ways of serving the public as part of their central existence in the industry and their corporal responsibility while not neglecting their desire to earn profit.

Summary

Several for-profit universities had been under scrutiny from federal sources for years now. Operational defects on part of such organization prompted the Department of Education to begin implementing stricter regulations. Florida Attorney General Wiggins launched an investigation triggered by a trend of complains about misrepresentation of retention and job placement rates (Keller, 2010). Two of the most notorious offenders with respect to the number of complaints are Everest University and Kaplan University. Most of the complaints about these organizations are centered on non-transferrable credits, billing problems, and deceptive sales practice. Invariable, every business is going to have at least some dissatisfied customers (Scott, 2011), but the problems associated with these organizations point to an issue of fiscal responsibility as well as moral thinking about appropriate business strategies. It is incumbent upon business leaders in these institutions to implement changes that bring their organization more into line with publicly acceptable business practices and more fiscally responsible measures.

Chapter 2: Literature Review

Background

Education, they say, is an evidently important element of social progress; one matter that would be considered as a constant source of confidence especially when it comes to education is that it would always be “good for business”. However, not all organizations or companies entering this particular arena of profiting industry are able to get the best benefits they hope to get from the operations they tend to accomplish. Due to the change in market perception towards the need to incur quality education compared to simply gaining education as it is, private-run educational entities have become a great course of transformation for public schools that used to be plainly for public operations. It should be realized that running a public school or university itself already has its particular challenges that makes it harder for such entities to operate well especially without government-based funding. Retaining the quality of education in such facilities that are presented to the public then becomes harder to contend with. Giving up these entities to private owners seems to improve the quality of education that is being provided under such administrations (Finn, 1998, p.38). While the picture might seem that easy to look at, it is not that easy to create. Unlike public universities, funding private educational institutions is hard enough to contend with.

Knowing that not the majority of the population of the society actually opt to go to private schools because of the expensive fees that are needed to be paid in exchange for the supposed “good service” and high-quality education, private universities need to make sure that in relation with their operations, they are able to provide their target clients with what they actually expect them to offer without losing control over their resources and assets. True, maintaining high quality education often requires private entities to retain high consideration over operational qualities. Along with that is the consideration over providing fees for educators [better educators mean higher salary provisions], expanding facility utilization through improving the way that they function and many others that are relatively connected to providing satisfaction that is necessary for being recognized as center of educational excellence (Forest, et al, 2002, p.66). All these aspects of development and quality maintenance involve funding.

Where do private universities get such funding? Basically, since they are privately administered and managed, such funding comes from their actual operations. This means that the amount of such provisions is then passed on to the shoulders of the clients. Question is, with much quality maintenance operations involved, is it possible that too much consideration on retaining the reputation of the organizations affect the acceptance of their clients with regards the services that they are willing to offer?

Examination of Actual Organizations

As mentioned in the introduction chapter of this research, Kaplan and Everest University are among the primary educational entities that are to be investigated herein as primary samples of the greater group of companies that undergo the same operation as do the two universities. The main problems that were distinguished as part of the operational downsides of the said universities include non-transferrable credits, billing issues and other deceptive points of sales. Considering the first issue on non-transferable credits, it is has been realized that certain private universities embrace this practice so as to make sure that they can retain students in their facilities until they graduate or at least until they receive their desired merits. Is this deceptive or is it just right for such organizations to impose such rules and policies so as to secure their future sales and profit earnings? Notably, coined as a form of marketing and customer-retention strategy, it is rather considered evidently distinct that private schools embrace such practice to provide a great impact on the satisfaction of the students enrolled in such educational institutions (Finn, 1998, p.37).

While every organization is given the chance to convince their clients to return for the services they offer, no organization is given the right to control the decisions of their clients in a manner of making a definitive course of assuring that they would stay in the organization through giving the clients no choice but to do so. This has become one of the bases of definition that researchers found out to be the reason behind the lowering number of enrollees in private entities that offer non-transferable credits to their students.

Considering the Need to Balance Attention on Serving the Public and Gaining Profit

Why do private entities of education institutions prefer to embrace such forms of operation? It could be realized that the desire to earn more and retain a relatively balanced entry of cash flow into the business for at least a full year makes it possible for administrators to embrace such form of operation (Finn, 1998, p.34). Compensating for the fees they ask for with the services they are willing to offer is observed to be the covering factor that private universities use to at least make sure that their clients are satisfied with what they offer (Ewell, 1999, p.67). However, when it comes to assuring satisfaction of students, it goes more than just providing them good education and extensive attention that counts. Giving the clients a choice to transfer is important to at least 56% of students studying in both private and open universities at present. Having a wider chance of getting their own choices and managing their own desires of learning is an important factor for modern students at present, something that privately administered universities should give ample attention to. Functioning for the educational excellence of their students compel them with them with the need to provide better options of learning that would best create a definitive reputation that they could be recognized with in line with other competitors in the industry (Ewell, 1999, p.122).

How then could this be resolved? Studies have been undergone and so far one common solution is found to be helpful, recreation of the management operations that the administrators are specifically depending upon. This means that the management of assets, resources and capital of such organizations need to be set in balance with the relative desired values to be received by the clients they are aiming to serve. Knowing their market and responding to the public responsibility of their organization is an important aspect of the process. With this in mind, it could be realized that running an educational institution, whether or not it is private, should be referenced upon the actual desire of providing ample education to the people without having them compromise their freedom of choice towards the education they are to get (Forest, 2002, 54); and this could only be incurred through the assumptions of proper management and allocation of resources and business-operation focus.

What could be learned from Successful Institutions?

Notably, while there are impending problems with the administrational approaches utilized by the other universities, other institutions are also able to contend with the challenge of gaining a reputable stance in serving the society in connection with remaining privately owned while serving the public with their social responsibilities. One university that has been noted for this reputation is that of Phoenix. The University of Phoenix is noted for the quality of education that it basically offers its clients with. The idea behind the administrational success that the university currently experiences is based upon the adjustments that they have incurred. Like other profit-designed universities, Phoenix also faces a great deal of challenge in retaining the balance by which it utilizes its resources and assets to provide for the needs of its clients (Snyder, 1999, p.45). Nevertheless, the administrators made effective use of what modern technology offers hence making a great deal out of what they already have and extending their sense of operation towards developing a more refined way of educating their hopeful students and also providing what their stakeholders specifically expect from them, proper monetary compensation as members of the organization.

How do they incur such form of success? As it could be realized the Phoenix University operates both online and off line [meaning in-campus]. Considering that distant learning has become a trend that most modern students tend to engage it at present, Phoenix realizes the potential it has in retaining students who may be coming from distant areas or may have problems attending regular classes in campus (Finn, 1998, p. 39). This way, they get the chance to receive minimal payment for the services and assistance they are willing to offer without the need to support a growing number of in-class enrollees. True, Kaplan University also has its online-based learning programs; however, it is the assertive utilization of technology and its application to service and operation that makes the two universities’ operations different from each other (Snyder, 1999, p. 76).

Continuing the trend of providing high quality education, Phoenix sees to it that the standard of their distant learning programs is in par with the actual reputable stand that they are making in relation to the courses that they also offer in-class. Relatively, retaining quality in the service they provide creates a relative response from their clients identifying the satisfaction that they have with regards the service that the organization provides them with. Learning in Phoenix through online learning is both rigid and requiring even though it does provide extensive convenience to the students enrolled in it. This aspect of the process of learning that the institution imposes in line with all of its operations [regardless of what type it is] makes it easier for the students to realize that they are getting the rightful value of the money that they have paid for to be served by the institution. This is one thing that makes Phoenix university separate from other learning institutions that opt to take the chance to operate both in-class and online.

Another aspect of success that Phoenix embraces is the capacity they have to balance out their assets and their resources so as to compensate for all the expenses that they are incurring each year. Relatively, such capacity makes it easier for them to make sure that the right amount of profit comes in every fiscal year amidst all the cash-outs that they incur at the same time. Adapting an effective system of financial control and auditing system, Phoenix University finance managers are able to provide real time updates that are necessary to make sure that their operations are paying off as expected. These updates also have a great impact on how the stakeholders [the investors] are able to see how much their money is growing within a specific span of time. With their trust reestablished in every point of business development that the institution incurs, the more confident they become in investing their money into the operations of the institution (Finn, 1998, p. 76). This approach makes it possible for the administrators to have an ample source of capital which they could use to maintain their operations, pay their personnel thus creating a more conducive environment that would provide high quality service to their students.

In turn, the students they serve become fully satisfied with the service. From such satisfaction comes “free” mouth-based marketing that need not be paid by the institution. Satisfied clients often refer more students to the university hence allowing the chance for the institution to accept more enrollees at the same time. This approach is most often than not more effective in relation to their online operations. In a way, keeping the clients satisfied is what the university invests so much on. With more students graduating with good remarks for what they have experienced from the university, the more recognition that institution gets hence establishing their competence in teaching and attesting to the proof that they are able to deliver what they promise to their clients (Forest, 2002, p. 56). In this case, the success of the institution could be acknowledged to come from client-centered approach that further allows for the indication of considerations that the institution makes in relation to establishing camaraderie with their investors who are also benefited by the conditions of standards that the administrators set for themselves to fulfill.

Summary of Review

Proofs of operational failures and successes between institutions of education serving in relation to the private scale of goals have been presented in this review. Notably, it could be analyzed that such operations differ based on what the administrators mostly focus on. Relatively, comparing three particular universities that are currently operating in the society, it could be realized that the success of operating a privately defined university that is designed to gain profit is based upon the condition of the institution’s motivation to serve the public’s concern. With education viewed as a relatively common ground of desire for most and rather a necessity that is considered in the society as a basic need for the modern world, it is inevitable that every institution enjoined in the industry is expected to provide what the public needs and demands for. It does not matter whether or not the institution is publicly or privately owned, the deciding factor that defines their competence to operate is their determination to put the demands of their clients in priority instead of simply disregarding the said factors while feeding their desire to earn in a business-centered consideration of operation. Overall, it could be pointed out the that literary researches used to present these data are reliable enough to provide a futile backbone for this research in relation to how it reflects the real problems facing for-profit universities and how they could resolve the said issues.

References

Ewell, P.T. (1999). Assessment of higher education and quality: Promise and politics. In S.J. Messick (Ed.), Assessment in higher education: Issues of access, quality, student development, and public policy. Mahwah, NJ: Erlbaum.

Finn, C. E. (1998, Jul.-Aug.). Judgment time for higher education: In the court of public opinion. Change, 20(4), 34-39.

Forest, J. and Kevin K. (2002). Higher Education in the United States: An Encyclopedia. Santa Barbara: ABC-CLIO.

Green, M, F., ed. (1998). Leaders for a New Era: Strategies for Higher Education. New York: Macmillan.

Keller, J. (2010). Florida Attorney General Opens Investigations into 5 For-Profit Colleges. The Chronicle of Higher Education. Retrieved from http://chronicle.com/article/Florida-Attorney-General-Opens/125016/.

Snyder, B. R. (1999). The Hidden Curriculum. Cambridge, MA: MIT Press.

The National Center for Higher Education Management Systems. (2012). Graduation. NCHEMS Information Center for Higher Education Policy Making and Analysis. Retrieved from http://www.higheredinfo.org/dbrowser/index.php?submeasure=27&year=2009&level=nation&mode=graph&state=0

The National Center for Higher Education Management Systems. (2012). First Year Retention: Retention Rates – First Year College Freshmen Returning Their Second Year, Four Year Total. NCHEMS Information Center for Higher Education Policy Making and Analysis. Retrieved from http://www.higheredinfo.org/dbrowser/index.php?submeasure=227&year=2010&level=nation&mode=graph&state=0

The National Center for Higher Education Management Systems. (2012). First Year Retention: Retention Rates – First Year College Freshmen Returning Their Second Year, Four Year Private For-Profit. NCHEMS Information Center for Higher Education Policy Making and Analysis. Retrieved from http://www.higheredinfo.org/dbrowser/index.php?submeasure=223&year=2010&level=nation&mode=graph&state=0.

OEDb. (2012). Ranking by Retention. OEDb.org. Retrieved from http://oedb.org/rankings/retention-rate.

Travis, S. (2011). For-profit colleges: Everest, Kaplan have highest number of complaints before Florida attorney general. Sun Sentinel. Retrieved from http://www.tcpalm.com/news/2011/feb/10/-profit-colleges-everest-kaplan-have-highest-numbe/?print=1