Monday, January 7, 2013

Higher Ed's Administrative Cost Problem

American higher ed continues to struggle with questions about what amount of administration is optimal. Obviously, this issue is front and center because headlines highlighting the problems of escalating tuition and poor job prospects continue to appear. Many faculty feel that administrative cost is to blame. Are they right?

Recently, the Chronicle published a little article discussing the scale of administration, relative to faculty and enrollment size:

Here are my stray thoughts on this matter. As usual, I tend to see this as a much bigger-picture issue than simply deciding what number of administrators is the right number.

Inevitably, the market for any product or service contracts and then expands and then contracts etc... and so the optimal administrative structure is elastic and adaptive. Outside of academia, excessive administrative burden is addressed quite directly and ruthlessly: management positions are consolidated, and redundant or outmoded positions go away. What if academia did that?

An adaptive administrative structure is apparently rather foreign to academic institutions that were configured around very long-term (~30 yr), ultra-stable, conservative investments. Academia wasn't designed to grow rapidly... in stark contrast to a typical American company that pursues several percent growth, year-over-year. So many of the problems we see in higher ed stem from this issue: we saw very large spike in enrollment beginning in the 90s, facilitated by artificially low loan rates, and higher ed simply wasn't built to accommodate the influx. Higher ed wasn't designed to scale rapidly nor to respond to the bubbles we've seen in the employment market e.g. in the tech sector. And various politicians have naively assumed that we can simply drop more and more students onto our campuses and assume that their tuition would pay for the needed infrastructure and all would be well. If only it were so simple!

There are very large burdens associated with growing our schools. To borrow some manufacturing lingo, we've had to do much more than simply expand: we've had to retool. Entire degree programs have vanished or been supplanted by entirely new fields of study. The academic mission has greatly expanded and (in the view of many) defocused. And the upfront infrastructure cost per added student is apparently much worse than it was, say, in the 60s. For every student that we add to the rolls today, we need to add a *lot* more infrastructure and administration. 

Today's academic hierarchies are the opposite of elastic and adaptive. Obviously, the hierarchy is now much more "I" shaped than "A" shaped: it has large steps of responsibility and salary as you go from adjuncts to junior TT faculty through all the ranks to senior leadership. E.g. at my institution, there are junior TT faculty hired in the ~$60k range, and then there are Deans making 5x that, and a President making more than 10x that. That's what I mean by "I" shaped. And this "I" structure isn't only about salary, of course; it is about the responsibility that these individuals carry. A typical $60k junior TT faculty member is probably expected to bring in ~$100k or so per year, if anything; meanwhile, the $400k administrative had better bring in many tens of millions or (s)he is out. And there is a vanishing in-between.

All of this has a very negative impact on academia's ability to adapt and reconfigure. In a flatter hierarchy, there is the possibility for the more adaptive people to migrate between adjacent ranks and thus help the whole organization adapt much more fluidly to market conditions. So, for example, if there is a decrease in demand for law degrees, then that part of the structure can contract and those individuals can go support other areas. I don't think we have nearly enough of that adaptive capability in academia at present... at least not in our administrative hierarchies.

The obvious paradox is that academia needs to figure out how to become more adaptive to short-term trends, while also preserving the long-term leadership and vision. This is a very difficult problem, but there are some good solutions, and perhaps academics could learn a lot from the millions of business models that have been explored by the markets over the years. 

I am *NOT* saying that we necessarily need to become Zynga and selling credits online, or start fracking in our campuses or something like that! We simply need to look at how to make the whole organization a more adaptive and versatile, while also protecting the most valuable aspects of the long-term academic investment. Perhaps that means outsourcing contract and finance management or such; or maybe we simply need to look at the most rapidly inflating expenses and address those with minor structural changes. In any case, it's time for academia to put *everything* on the table except quality of instruction. And if this isn't done from within academia, then it will be done by politicians. And then there is no guarantee that the result will be something that upholds the long-term value of a higher education.

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