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Business Officer Magazine

What Price Profit?

A conversation with former Harvard University president Derek Bok about evaluating entrepreneurial ideas in light of their impact on academic values.

By Mark Olson

Bok’s observations are rooted in more than 50 years of experience in the higher education field. He served as president of Harvard University from 1971 to 1991 and has been the dean of Harvard’s law school and a professor of law. He has written five books on higher education, the most recent of which is Universities in the Marketplace: The Commercialization of Higher Education (Princeton University Press, 2003). Bok will address this topic in his keynote presentation at NACUBO’s 2004 Annual Meeting in Milwaukee next month, an event that has as its theme “Igniting the Entrepreneurial Spirit.”

In a conversation with NACUBO Executive Vice President and Chief Operating Officer Mark Olson, Bok reflected on several issues that campus leaders face, including accountability, partnerships, and profit making.

You’re asked to speak to lots of groups—why speak to business officers?

Because I do turn down outside speaking engagements almost uniformly, I began by declining this one. Then I began to think about it and realized that if there ever was an audience at the center of what I was writing about, it would be NACUBO. [Your members’] responsibilities intersect on many points with the kinds of pressures for commercialization and for finding new sources of revenue that I talk about in the book.

People who haven’t read your work may not fully appreciate the depth of your analysis surrounding the commercialization of higher education. Some people reduce what you’ve elaborated on to a simple thought: “He’s against any entrepreneurial or innovative activities.” Clearly this is not the case, but could you talk about general guidelines you might offer business officers as they contemplate potential projects?

I think the place to start is to be very clear about what the fundamental academic values are that universities need to protect, because there are a lot of profit-making or commercial activities that are innocuous and even beneficial. It’s when they begin to result in compromises of basic academic values that you get into trouble. For example, if you think about whether you want to join Division One in your athletic program, the place to start is not in how much the stadium costs, but asking, what kinds of compromises are we going to have to make with our admissions standards to put a competitive team on the field? You can usually answer that question pretty clearly by looking at comparable schools that are already in that position. Or you might ask, what kinds of burdens are we going to put on students’ academic performance if we do this and we schedule lots of games in the middle of the week and on an out-of-town basis or tournaments that interfere with exams? When you look carefully at it, you ought to come to the conclusion that this is probably not a game you want to get into if you’re not trapped in it already. If you look at other things like getting a royalty on the sales of T-shirts with your university logo, it’s hard to see much danger to any significant academic value.

Hear More From Bok in Milwaukee
As his provocative new book illustrates, Derek Bok offers a different perspective on the current higher education environment. Hear him speak about the commercialization of higher education at NACUBO’s annual meeting in Milwaukee, July 17–20. Bok’s pre-sentation will be the final general session on Tuesday, July 20, from 3:15 to 4:30 p.m.

We’ve watched the role of the business officer grow and change to become increasingly more complex and to assume broader responsibilities. How do you see the role of the business officer as a member of the president's cabinet?

Certainly vastly more important than it used to be. I happened to become a university president in 1971, which was a moment when a number of institutions like mine suddenly discovered that their administration was totally unsuited to the kinds of challenges we faced. We had all these good years since 1950 with federal research budgets going up steadily, with financial aid from the government coming in, and good economic times, and so somehow you could balance the budget even with pretty primitive administrative practices. But in the late 1960s, a number of things began to happen and we all felt that we had to rethink the whole way we went about administration. When I came in, Harvard had one vice president who did everything and not terribly well. So we had to remake our administration. I sort of grew up watching the importance and the complexity of the business officer’s tasks grow in front of my eyes. I think we would have been crippled by the financial difficulties that we went through if we hadn’t had a very good administrative structure to deal with it.

There are parallels with the situation we face today…

Yes. I think the difference between those days and today, however, is that most universities have developed a much stronger administrative staff and much more capable business officers. Even though there are difficult economic times today as there were then, universities are much better staffed to meet them in a competent, professional way.

One of the most helpful things that happened in that period is that you began to find business schools graduating a substantial and increasing number of women. We found that many women who graduated from leading business schools preferred the campus environment to a corporation. We were able to hire some really outstanding people who were willing to work despite the fact that they could have earned a great deal more in private corporations. That pool of talent went a long way toward enabling us to vastly upgrade the quality of our administration.

In your book, you touch on a critical issue that NACUBO members deal with: the emergence of performance measurements and state-mandated metrics to evaluate outcomes. What thoughts can you share on how we might best deal with federal, state, and local calls for transparency?

I must say that I’m not very supportive of those efforts. I’ve looked at them fairly carefully, and I think there are several problems. It’s so difficult to develop measures that really get at what is important. So many of the measures that are applied are either things that the college has no control over, such as how many of your graduates remain in state, or are better measures of how smart your students were when they came as freshmen than they are measures of how much value you added for their years on your campus. Some measures are actually harmful in the sense that they create the wrong kinds of incentives.

On the other hand, I do think that accountability is terribly important and we need to find some adequate way of capturing it. If I were challenged to choose an approach—and I’m speaking now not of accountability and business methods, which I think are probably easier to measure, but accountability for the quality of education—I would not try to measure outcomes. What I think you can do is evaluate campuses in terms of how effectively they are monitoring and improving the quality of their own education. What kinds of procedures do they have for rewarding and promoting effective teachers and overcoming the imbalance in favor of research that exists on so many campuses? How much writing do students do during their four years? Does the university bother to find out whether students are writing any better when they graduate than they did when they were beginning? The irony is that universities that are dedicated to research spend so little time doing research about their own affairs. They are quite unlike many companies that are always evaluating their products and using the results to try to make their products better. At universities, we keep on teaching pretty much the same way year after year. We don’t have a constant process of experimentation and evaluation so that you can improve through trial and error. You can evaluate how much of an effort universities are making along those lines and try to find ways of encouraging and rewarding the ones that are seriously trying to improve themselves.

Some of the states say, “We’re going to make budgets depend on how well universities perform according to the state’s measures.” But that’s not a very effective way of making things better because the amounts are not that great, and if you come up against a campus that is weak, it’s not really effective to respond by taking money away from them. If you have universities that are doing very well, the money goes to the administration and may never operate as an incentive for the professors whose cooperation is necessary to make further improvements. So it’s a clumsy way of trying to make universities accountable in any meaningful sense.

We all know how the University of Phoenix and other proprietary institutions are aggressively entering the distance learning space. What advice can you give NACUBO members as they develop institutional strategies for competing in the distance learning arena with the for-profit companies?

There are all kinds of ways in which the Internet can improve the quality of instruction. The danger that I see to academic values is if you start doing this to try to make it a big profit center. The highest quality of education capitalizes on the ability of the Internet to provide lots of feedback, interactivity, and discussion among students and faculty, and that tends to be quite expensive. The way to make money is really different: nice visuals and a flashy presentation, and you put a lot of money in up front to create your product, but you really try to hold down your variable costs, especially efforts to give feedback and personal attention to students. So you try to get this flashy product you’ve spent a good deal of money on, and then you try to market it to as many people as possible. That just doesn’t happen to be the best quality of education, and therefore profits could really lead you into something that is less than what universities ought to provide their students.

I’d particularly worry if universities began to market the Internet product to more gullible audiences. There are lots of people around the world who’d love to get some kind of a certificate that says “MBA” from a well-known American university. It would be tempting to provide business school courses that have nice lectures in color with graphs and slides and so forth but little interactivity and little genuine learning going on. If you market that to vast numbers of people around the world who think they are going to become skilled businessmen as a result, that would be quite a shabby thing for universities to do, but tempting if you want to use this new technology to make money.

We have seen several instances of higher education institutions developing collaborative programs and consortia initiatives. What are your thoughts on these cooperative activities, and what should we be mindful of when structuring joint ventures?

It would be a terrible thing if we allow the kind of instinctive anti-business sentiments that exist in some parts of our faculties to cause us to shy away from opportunities to make our operations more efficient. One such opportunity, of course, is to collaborate in ways that reduce costs in instances where you don’t have enough students to sustain something by yourself but there is a legitimate demand. There are many other ways consortia can be helpful, and my sense is those are all not only legitimate but laudable.

I do think they’re often difficult to achieve, especially if you get into areas that involve faculty collaboration. I found that the sheer difficulty of meshing two very different administrations made it cumbersome to develop joint programs with MIT, even though the president, Jerry Wiesner, was a close friend. What really worked were all kinds of informal collaborations from like-minded professors doing research on different things. One shouldn’t underestimate the difficulty, but in principle, joint ventures are a good thing. We should all be alert for opportunities to try to reduce costs, achieve services, or reach groups of students through collaborative means that would be difficult for us to do on our own.

Author Bio Mark Olson is executive vice president and chief operating officer of NACUBO.