Speech

Improving Productivity in Higher Education WebsterUniversity St.Louis,Missouri April7,2005 The subject of productivity in higher andadministrationaboutopportunitiesforpro- educationisonethathaslonginterested ductivityenhancementsatthisuniversity.Infact, me. I do not pretend to be an educa- Ibelievethatintoday’sworldeveryfirmneedsa tion productivity expert, but rather an culturethatincludesacontinuingsearchforbetter observer of the scene who cannot help applying andmoreefficientwaystoconductbusiness,and the economist’s view of the world to the provi- thatthecultureshouldinvolveeveryemployee. sion of education services. Beforeproceeding,Iwanttoemphasizethat I’llstartwithastoryreflectinganearlyexpe- theviewsIexpressherearemineanddonot rienceafterfinishingmygraduateworkatChicago. necessarilyreflectofficialpositionsoftheFederal WhenIarrivedatmyfirstregularteachingposi- ReserveSystem.Ithankmycolleaguesatthe tion,Iputtogetherreadinglistsformycourses FederalReserveBankofSt.Louisfortheircom- andsentthemtothelibrarysothatbooksand ments.TomGarrett,senioreconomistinthe articlescouldbeplacedonlibraryreservefor ResearchDivision,providedspecialassistance. studentstoread.Afteracoupleofclasses,my However,Iretainfullresponsibilityforerrors. studentscomplainedthatthereserveitemswere notavailable.Icheckedwiththelibraryandwas informedthatfacultymembershadtogointothe RECENT TRENDS IN HIGHER stacksandpulltheitemstobeplacedonreserve, EDUCATION COSTS somethingIhadnotbeentold.Icomplained:why shouldfacultymembers,evenlowlynewassistant Collegetuitionhasincreaseddramatically professors,dosuchworkwhenstudentspaidsub- overthepastdecade.1Between1990and2000, stantiallylesscoulddothework?Diditmake tuitionincreasesaveraged5.9percentperyearat sensetouseemployeeswithPh.D.stopullbooks publicinstitutionsand5.5percentatprivate offlibraryshelves? institutions.Theseincreasesmaybecompared OvertheyearsI’veobservedmanyotherexam- totheaverageannualrateofCPIinflationof2.7 plesofinefficientuseoffacultytime.Historically, percent.Tuitionincreasesaredrivenlargelyby universitieshavesimplynotpaidmuchattention increasesinlaborcosts.Totaleducationemploy- toproductivity.Infact,Iknowofnootherlarge ment—educationatalllevels—hasrisenfrom U.S.industrywhereproductivityenhancementis about8½percentoftotalnationalemployment suchalowpriority.Thatsaid,oneofmydelights in1990toover10percenttoday.Theincreasein fromservingontheWebsterboardisthatthis tuitionandfeeshasoutpacedthegrowthofdis- universityissowellstructuredtodelivereduca- posablepersonalincome.Tuitionincreasesare tionservicesefficiently.Mylectureisnotpri- strainingfamilybudgets,atrendthatcertainly marilyaboutWebster,althoughperhapsIcan cannotcontinueindefinitely.Formanyfamilies, encourageanactivediscussionamongfaculty theoutlayforchildren’seducationisthesecond 1 TuitiondataarefromtheNationalCenterforEducationStatistics,variousyears. 1 ECONOMICEDUCATION largestfamilyexpense,exceededonlybyhousing Anotherreasonfortuitionincreasesisthe expense. recentrecessionandensuingstatebudgetcrises. Economistsandeducatorshavecitedseveral Fourteenstatesreducedstateappropriationsfor reasonsfortherapidincreaseincollegetuition highereducationbetweenfiscalyears2002and seenacrossthecountry.2Onereasonisanincrease 2003.4Missouriexperiencedthesecondlargest inuniversitycosts.Totalinflation-adjusted decreaseinthenationwitha10percentcutin expensesatpublicuniversitiesincreased28per- highereducationfunding.Inresponsetostate centbetween1990and2000,whereasfull-time budgetcutsforhighereducation,collegesand enrollmentatpublicinstitutionsincreased9.4 universitiesincreasedtuitionbyanaverageof10 percentnationallybetween2002and2003.This percentoverthissameperiod. average2002-2003tuitionincreasewasnearly Thelackofcost-savingincentivesfacedby doubletheaverageannualincreaseoverthepast publicuniversitiescomparedtoprivatesector decade.WebsterUniversityfaredrelativelybetter, enterprisesmayexplaintheriseintuitions.Weak increasingtuitiononly6.4percentin2003.5The incentivestoimproveefficiencycanresultinthe averagetuitionincreasesinMissouri,Iowa,and continuedexistenceofexcessivestaffandunder- Texaswerethesecondhighestinthenationat utilizedacademicprogramsorresearchcenters, 20percent,behindonlyMassachusettswhere allpossiblycomingattheexpenseofstudent tuitionincreasednearly24percent.Some,but instruction.DatafromtheNationalCenterfor onlysome,oftheseincreaseshavebeenoffsetby EducationStatisticssupportthisview. increasesinfinancialaid. Instructionalexpendituresasapercentoftotal Perhapsparadoxically,theavailabilityof expendituresatpublicinstitutionshavedecreased financialaidmaybeareasonfortuitionincreases. from39percentin1977to34percentin2001.In Discussionoftheaffordabilityofhighereducation addition,administrationexpendituresincreased hasfocusedattentionofbothgovernmentsand from30percentofinstructionalexpendituresin donorsontheneedforfinancialaidtothealmost 1976to50percentin2001.Morealarmingisthe completeexclusionofattentiononproductivity factthattotalinstructionalexpendituresperstu- enhancementsthatmightconstraintuition dentdropped14percentbetween1990and2001 increases. whileadministrativeexpendituresperstudent Thepercentageofstudentsatfour-yearuniver- increased14percentoverthesameperiod.3 sitieswhoreceivedsomefinancialaidincreased Someoftheincreaseinadministrative from60percentin1990to74percentin2000.At expensearisesfromgrowingfederalandstate WebsterUniversity,thenumberofundergraduates requirements.Publicuniversities,especially, receivingsomeformoffinancialaidincreased shoulddocumentthecostoftheserequirements 18percentbetween1999and2003.6Nationwide, sothatstatelegislaturescandecidewhetherthe financialaidisnowcoveringalargerpercentage benefitsareworththecosts.Ifnot,statemandates oftuitionexpenses.Forexample,financialaid shouldbescaledback.Moregenerally,weneed covered47percentoftuitionatfour-yearuniver- abetterunderstandingofthecostsandbenefits sitiesin1990comparedwith54percentin2000. ofregulatoryprovisionsthathavepropelled Theincreaseintheuseoffinancialaidreflects growthinadministrativeexpenses. thegreatimportancesocietyplacesoneducation 2 Vedder(1999,2004a). 3 ExpendituredataarefromtheNationalCenterforEducationStatistics,variousyears. 4 Trombley(2003). 5 WebsterUniversity(2004,p.89). 6 WebsterUniversity(2004,p.90). 2 ImprovingProductivityinHigherEducation anditsgeneralbeliefthateducationshouldbe PRODUCTIVITY IN HIGHER availabletoall.Iamcertainlynotopposedto EDUCATION financialaidbutbelievethatconstraininggross tuitionlevelsdeservesequalemphasis. Economistsdefineproductivity,inthesim- plestterms,asameasureofoutputperunitof Anotherwaytoviewfinancialaidisthatit input.Productivityineducationcanbemeasured reflectswhateconomistscall“pricediscrimina- intermsofunits,suchasaverageclasssize,orit tion.”Pricediscriminationsimplymeansthat canbemeasuredintermsofdollars,suchasthe firmschargedifferentpricesforthesameproduct qualityorvaluetostudentsrelativetothecostof orservice.Manyfirmsengageinpricediscrimi- educatingstudents.Thesedefinitionsallowone nation,suchasthemovietheaterthatgivesa toevaluatehowachangeincosts,quality,or discounttoseniorcitizens.Fortheeconomist, quantitiesinfluencesproductivity.Productivity theword“discrimination”inthiscontextdoes willincreaseifstudentqualityincreasesmore notcarrynegativeconnotations;thepracticeis thanthecostofeducatingstudents.By“student sensiblyrelatedtoprofitorrevenuemaximization quality”Imeantheskillsagraduatingstudent inmanycontexts.Universitiesincreasinglycharge has.Similarly,areductionincostswhilestudent differenttuitiontodifferentstudents,depending qualityremainsthesameorriseswillalsoincrease onabilitytopayanduniversityeffortstorecruit productivity.Thislatterpossibilityreflectsthe studentswithspecialacademicorathleticskills. basicideaofdoingmorewithless.Highereduca- Thegrowthoffinancialaidsuggeststhatuniver- tion,unfortunately,hasseenadecreaseinpro- sitiesareincreasinglyusingsophisticatedpricing ductivityoverthepastdecade.Totalinflation- policies. adjustedoperatingcostsperstudentofcolleges Nevertheless,evennetoffinancialaidtuition anduniversitieshaveincreasedwhiletherehas increaseshavebeensubstantial.Thus,inan beenlittleornoincreaseinstudentquality.7 increasinglyglobalandtechnology-drivenmarket- Howcanuniversitiesreducecostsand place,enhancingproductivityinhighereducation increasestudentqualityinanefforttoincrease shouldbeofgreatconcerntoparents,students, productivityinhighereducation?BeforeIcan educators,andthecitizenry.Inthewakeofrising addressthisquestion,itisimportantthatIdiscuss costsandincreasingcompetitionfromgrowingfor- severalissuesthatmustfirstbeconsideredbefore profitandon-lineeducationsuchastheUniversity anycost-savingorqualityenhancingpoliciescan ofPhoenix,universitiesmustdevelopstrategies beimplemented.Theseissuesare1.definingthe toreversethedownwardtrendinproductivity. objectivesofthecollegeoruniversity,2.defining NotethatIhavesaid“downwardtrendin productivityinputsandoutputs,3.measuring productivity.”Weareusingmorerealresources— productivity,and4.demonstratingproductivity especially,moreuniversityemployees—toeducate improvements.8Oncetheseissuesareaddressed, eachgraduatingstudentanditishardtoclaim strategiestoenhanceproductivitycanbeanalyzed. thatthequalityofthegraduateisimprovingcom- mensuratelywiththeincreaseineducational Defining Objectives resourcesexpended.Thus,productivityinhigher Definingtheuniversity’sobjectiveorobjec- educationisfalling—moreinputsperunitof tivesisthecrucialfirststepinevaluatingproduc- output.Decliningproductivityinhighereduca- tivity.Objectivesoftheuniversitymayinclude tionisadistressingstateofaffairs. increasingstudentquality,increasingaccessand 7 Vedder(2004a). 8 GatesandStone(1997). 3 ECONOMICEDUCATION diversity,greatercost-efficiency,abettercontri- Measuring Productivity butiontotheneedsofthecommunityandbasic Productivitymeasurementisdifficultinmost research.9Theremaybedivergentviewsamong serviceindustries,andeducationiscertainlyno universityofficialsandstatelegislatorsregarding exception.Ineducation,weneedtobewaryof thetopobjectivesofauniversity,butimproving simplemeasuressuchasthenumberofstudents studentqualityistypicallythemostimportant perfacultymember.Someobserversseemto highereducationobjectiveclaimedbyuniversi- assumethatquality“must”behigherwhenthe tiesandstatelegislators.10 student-facultyratioislower.Althoughone-on- oneteachinghasitsplace,myownexperienceis Defining Productivity thataclassof25isoftenbetterthanaclassof5 Whiletheeconomist’sgeneraldefinitionof becauseofstudentinteraction.Inanyevent,when productivity,namelyoutputsrelativetoinputs, westudyproductivityitisimportanttodothe isstraightforward,itistoosimpleadefinitionto bestwecaninmeasuringoutputdirectlyandnot guidemanagementstrategiesaimedatincreasing makeassumptionsaboutwhat“must”bethecase. productivity.Amorethoroughdefinitionofpro- Beforeanymeasurementofproductivitycan ductivityrecognizesthatproductivitycanbe occur,administratorsneedtodecideonwhat dividedintotwoparts:efficiencyandeffective- ness.Efficiencyreferstothelevelandqualityof levelorlevelsoftheorganization’sproductivity servicethatcanbeobtainedgivenanorganiza- shouldbemeasured.Forexample,istheconcern tion’sfixedresources.Thus,anorganizationis theproductivityofanindividual,sayaprofessor consideredmoreefficientifitcanincreasethe oranadministrativeassistant,oristheconcern levelorqualityofservicewithoutincreasingthe theproductivityofanacademicdepartmentor amountofinputsused.Effectiveness,ontheother theuniversityasawhole?Allarerelevantand hand,referstohowwellanorganizationmeets shouldbemeasured.Animportantpointinmeas- thedemandsofitscustomers.Thecustomersin uringproductivityisthatmeasuresshouldnot highereducationarestudents,parents,andstate beconstructedpriortosettinggoalsandobjec- legislatures.Customerdemandsmayinclude tives—doingsowillleadadministratorstovalue suchoutcomesasaspecializationofknowledge somethingthatismeasurableratherthanmeas- inaspecificarea,careerassistanceandjobplace- uringsomethingwithvalue. ment,andprobablymostimportantly,graduating Measuringproductivityinhighereducation well-educatedandproductivestudents. requiresameasureofbothefficiencyandeffec- Improvingproductivityinhighereducation tiveness.Efficiencyisoftenmeasuredusingratios, thusrequiresundertakingmeasuresthatincrease suchasphysicaloutputrelativetoaninputor efficiencyandeffectiveness.Measurestocut dollarcostofaninputrelativetoanoutput.The costs,asuniversitiesacrossthecountryhave exactefficiencymeasureuseddependsuponthe doneinthewakeoftherecentrecessionandstate objectivesetbytheadministration.11Efficiency budgetcrises,onlyaddressthecost-efficiency dimensionofproductivity.Soundmanagement ratiossuchasenrollmentpersectionorcontact practicestoimproveproductivityinhigheredu- hoursperfacultymemberarereasonableanduse- cationmustalsolookattheeffectivenessofthe ful.Anobjectiveofimprovingstudents’progress organization,beitanacademicdepartment,col- towardadegreewouldrequiremeasuressuchas lege,ortheentireuniversity. awithdrawalrateandaveragecourseloadtaken. 9 GatesandStone(1997)andRuppert(1995). 10GatesandStone(1997). 11GatesandStone(1997)andBottrillandBorden(1994). 4 ImprovingProductivityinHigherEducation Examplesofcost-efficiencymeasuresinclude STRATEGIES TO INCREASE instructionalcostsperstudent,libraryexpendi- PRODUCTIVITY turesperstudent,andadministrativecostsper Thereisanabundantliteratureonpossible student. strategiesforincreasingproductivityinhigher Measuringeffectivenesscanbedifficult, education,whichcanhelpuniversitiestounder- thoughnotimpossible.Severalideashavebeen standhowtheycanreducecostsandincrease suggestedintheliterature.12Onewaytomeasure studentquality.Manyofthesestrategiesrequire effectivenessistoassesscommunityorclient changesintheadministrativecultureandthe conditionsandbenchmarkthemtocommunity mindsetoffacultyandadministrators.Attempts standardsorthosestandardsofotherinstitutions toimplementthesestrategiesmaybemetwith ofhigherlearning.Anexamplecouldbethe resistanceorevenlegalchallengesfromthevari- numberofgraduateswhofindajobwithinthree ousprofessionalorganizationsandassociations monthsofgraduation.Anotheroptionistomeas- thatsupportfacultyandadministrators. ureaccomplishments,suchasthenumberof Strategiesforincreasingproductivityfocus graduatesorthepercentageofstudentstakinga onimprovingthetwokeycomponentsofproduc- classthatrequiresrelativelyadvancedwork,such tivitythatweredefinedearlier—effectivenessand astechnicalresearchpaper.Thenumberofgrad- efficiency.Thesestrategiesincludeprivatization, uatesgoingontoreceiveadvanceddegreesis decentralization,improvingstudentquality,and anothersuchmeasure.Finally,clientsatisfaction increasingtheflexibilityoffaculty. isathirdavenuetomeasureeffectiveness.Clients canincludealumniorbusinessesthatfrequently Privatization hireauniversity’sgraduates.Assessingthesatis- Onewayofincreasingthecost-efficiencyof factionoftheseclientscanbedoneviasurveys, highereducationisthroughtheprivatizationof focusgroups,orpersonalcontactswithtop certainservices.14Mostuniversitiesarevertically administrators. integrated,meaningtheynotonlyprovideedu- cationbutalsoprovidefoodservice,studentand Showing Productivity Improvements facultyhousing,cleaningandmaintenance,and Aftersettingproductivityobjectives,defining recordsmanagement.Whiletheseservicescon- productivity,andmeasuringproductivity,the tributetostudentlearning,thereisnoreasonwhy nextstepistodemonstrateproductivityimprove- theseservicescannotbeperformedbyprivate ments,whichcanbedoneinseveralways.13One contractors. istoshowanincreaseinrevenueorparticipation Whenverticalintegrationexists,thefull thatresultsfromeffortsthatdidnotrequirean costsofinsidestaff,suchaswagesandbenefits, increaseintuition,fees,ortaxes.Anotheristo maybeaccountedforinotherbudgetorservice showasignificantincreaseineffectiveness,such categories,thusmakingitdifficulttoassessthe astheemploymentratesofrecentgraduates, fullcostsofacertainservice.Thefeeschargedby withoutincreasingcostsorusingadditional outsidecontractors,however,willmoreclearly resources.Numerousmeasuresarepossible,and representthefullcostofprovidingaparticular eachuniversityshouldconcentrateefforton service.Inaddition,competitivepressureswill thosethatbestfititsowncircumstances. increasethelikelihoodthatprivatecontractors 12GatesandStone(1997)andEpstein(1992). 13Epstein(1992). 14SeeHackett(1992). 5 ECONOMICEDUCATION willprovideanefficientquantityandqualityof intimesofbudgetstringency.Creatingastruc- laborforeachservice. turethatgetstheincentivesrightisnoteasy,but Anissuethatarisesregardingtheprivatiza- willbeanessentialfeatureoflongerrunreforms tionofvariousuniversityservicesisstudent toimproveefficiency. employment.Currently,manystudentsworkfor Acase-studyofsuccessfuladministrative universitiesaslibraryassistants,foodpreparers, decentralizationatAntiochUniversityprovides andcustodiansaspartofafinancialaidarrange- someinsightsintothechallengesofdecentraliza- ment.Privatizationmayresultinareductionof tion.16Onesuchchallengewasthatacentralized staff,forcingsomestudentstofindalternative administrationhadtoreachadecisiontodecen- financialaidpackages.However,evenwhencon- tralizetheadministrationitself.Whileparadoxical, tractorsfindthathiringstudentsisnotcosteffec- theadministrationrealizedthatdecentralization tive,concernoverstudentemploymentoughtto was,inAntioch’scase,theonlyrealwaytocon- beminimalrelativetoconcernoverthegrowing trolcosts.Anotherchallengewastorealizeand costsofuniversities. acceptthatsomeimportantseniorandmiddle managerswouldbeletgo,andthattheseindivid- Decentralization ualswouldresistanychangeinadministrative Privatizationispartofalargerstrategyaimed structure.Antiochcutitscentralizedadministra- atincreasingproductivityinhighereducation— tionby14people,areductionof60percent,and thedecentralizationofthecurrentadministra- realizeda25percentreductionincentraladmin- tivestructure.Whiledecentralizationfrequently istrationcosts.17Resistancebylowermanagement, occursintheprivatesector,universitieshave faculty,andstafftoanychangeintheadminis- generallynotfollowedsuit.Centralizedadmin- trativestructurerequiredevermorevigilantlead- istrativestructuresinuniversitieshavebeen ershipbyuppermanagement.Allemployees criticizedforseveralreasons.15Forone,adminis- wereinvolvedindecisions,ensuringthatthe tratorscangenerallyaddstafftomeettheirneeds processtodecentralizeremainedacollaborative withouthavingtojustifytheadditionstoanyone onebetweenallranksofadministratorsandfac- exceptotheradministrators. ulty,andensuringacontinuingcommitmentto Decentralizationcanresultinseveralbenefits thedecisiontodecentralizedespiteopposition. foruniversities.First,academicdepartmentswill havemorecontrolovertheircostsandstaffing Improving Student Quality needs.Departmentswillhavemoreflexibilityin aligningtheirresourcestomeetchangesinstu- Thequalityofstudents—theknowledgeand dentdemands.Myownexperienceisthatuni- skillstheygainfromauniversityeducation— versitiesprovidetoolittleinthewayofsupport shouldbetheprimarygoalofanyinstitutionof staffforfaculty,thusforcingfacultytoperform higherlearning.Justhowtoincreasestudent clericalduties.Ifindividualacademicdepart- quality,however,remainsuncleartomanyfaculty. mentshadmorecontrolovertheirownbudgets, Onereasonforthislackofclarityisthatmany theymightdecidetoreplaceafacultyposition faculty,especiallythoseatresearchinstitutions, withseveralsupportstafftoimproveefficiency. seeteachingasasecondaryjobresponsibility Atthesametime,universityadministratorswould behindpublishinginacademicjournalsand havetoresistthetemptationtocutsupportstaff acquiringresearchgrants.Anotherreasonisthat 15SeeGuskin(1996). 16Guskin(1996,pp.12-16). 17Guskin(1996,p.14). 6 ImprovingProductivityinHigherEducation mostfacultymembersdonothavetrainingin Theimportantissueofhowbesttobalance goodteachingstrategies.18 researchandteachingwouldtakemetoofarafield, ArthurChickeringandZeldaGamsonsum- butIdowanttocommentontheissueofhow marizegoodteachingpracticesintheirarticle, besttoallocatefacultyteachingtime.Muchof “SevenPrinciplesforGoodPracticesinUnder- thediscussionrelatingtotheroleoffacultyin graduateTeaching.”19Thesepracticesinclude contributingtoproductivityinhighereducation encouragingstudent/facultycontact,encourag- involvesincreasingthetimethatfacultyspend ingactivelearning,encouragingcooperation intheclassroom,enhancingthequalityofinstruc- amongstudents,givingpromptfeedback,com- tion,andincreasedflexibilityoffacultystaffing. municatinghighexpectations,encouragingmore Giventheexpenseofinstructionrelativetoover- timeoneachtask,andrespectingdiversetalents alluniversityexpenditures,animportantcost- andwaysoflearning.Animportantpointisthat savingandquality-enhancingstrategyistobetter alignfacultywithstudentneeds.22Currently,in thecurrentpassivelectureformatinmostuniver- manyuniversities,asstudentdemandsforcertain sitiesdoesnotaccountformostofthepractices majorsorclassesebbandflowovertimethereis justdiscussed.Eveninsmallerteaching-oriented littlechangeinthenumberoffacultyineach collegesmanyofthesepracticesarelikelytobe department.Afailuretomatchteachingcapacity absent.And,therearehugenewopportunitiesto withstudentdemandiscompletelyoppositethe employnewtechnologiessuchastheInternetto privatesector,wherechangesinbusinesscondi- improveefficiency.Forexample,thereisnorea- tionsdirectlyinfluencestaffinglevels. sonforlibrariestosubscribetostatisticalpubli- Toreinincosts,universitiesmusthavethe cationswhenthesamedataarereadilyavailable flexibilitytohiremorefacultyorincreaseteaching throughtheInternet. loadsofcurrentfacultywhendemandforamajor increasesand,conversely,universitiesmusthave Increased Flexibility of Faculty Staffing theflexibilitytoreducethenumberoffaculty Instructionalexpenditureshavehistorically whendemandforamajordecreases.Everyone accountedfornearly35percentoftotaluniver- understandsthatanautoproducermustbeable sityexpendituresnationwide.20Althoughuni- toshiftproductionfromlargeSUVstosmallcars versitiesspendroughlyone-thirdofeverydollar whenenergypricessoar;whyareuniversitiesso oninstruction,differentproductivityconcepts resistanttomakingsimilaradjustmentswhen areappropriateforresearchandteachingfunc- studentinterestinSubjectXsoarsandinterest tions.Withrespecttoresearch,itisappropriate inSubjectYsags? tomeasureproductivityintermsofthequantity Severalpoliciescanincreasetheflexibility andqualityofacademicresearchandtheamount offaculty.23But,arguably,thegreatestobstacle ofexternalfundingacquired.Withrespectto toincreasedflexibilityoffacultyistenure.24An teaching,itisappropriatetomeasureproductivity economicargumentfortenureisthatitsavesini- byteachingloadsandacademicadvising.21 tialexpenseonthepartoftheuniversity.Thesav- 18Guskin(1996). 19ChickeringandGamson(1991). 20FromtheNationalCenterofEducationStatistics,variousyears. 21BrownandGamber(2002). 22Waggaman(1991). 23Mortimer,etal.(1985)andWaggaman(1991). 24ThefollowingdiscussionoftenureisfromMcGeeandBlock(1991). 7 ECONOMICEDUCATION ingarisesbecausefacultywithtenure,orthose slackdemand.Thatiswhatautoproducersdo hiredwiththepossibilityoftenure,willworkat whenthedemandforSUVsfallsandforsmall alowersalaryinreturnfortheguaranteeoflife- carsrises. timeemployment.However,whiletheremaybe Iknowthatmanywilldismisssuchanidea initialcostsavingsfromtenure,theresulting outofhand,andthatispartofthereasonuniver- inflexibilityimposedbytenurehasgreatercosts sitieshaveaproductivityproblem.Yes,education intermsofbothdollarsandstudentquality.25 isdifferentbutitisnotallthatdifferent.Toofew Tenurepreventssignificantstaffingchangesin administratorsandfacultyarewillingtoeven responsetochangesinstudentdemands,and considerinnovationsthatcouldmakearealdif- alsomaypreventlowerqualityfacultyfrombeing ference.Weneedthinkingonalllevelsabout replacedbyhigherqualityfaculty. innovativewaystodelivereducationalservices. Administratorsandmanagementprofessionals Noteveryideawillturnouttobeagoodidea, havesuggestedstrategiesthatcanincreasefaculty buteveryideaneedsahearing.Greatuniversities flexibilityinthepresenceoftenure,although haveacultureofscholarlyexcellence,ofnurtur- eachofthesestrategiesisnotwithoutproblems.26 ingstudents,andofopenandfreeinquiry.They Someofthesestrategiesmaybemetwithoppo- needtoaddtothatcultureaspiritofproductivity sitionfromfacultyorevenlegalchallenges.One enhancementsothattuitionresourcesraisedfrom strategyistoimposetenurequotasonthenum- families,andfundsfromstatelegislaturesand berorpercentageofthefacultywhomayhold donorsareusedwisely.Tomyknowledge,at tenureatanyonetime. mostuniversitiesthereisnocultureofproduc- Hereisanexampleofwheredecentralization tivityenhancementnorareuniversitytrustees couldpaydividends.Ifadepartmentfeelsstrongly muchinterestedintheissue. thatitwantstotenureabrilliantscholar,who Universitiesthatcandeliverhighquality promisestogreatlyenhancetheprestigeofthe educationatanattractivepricewillmakeadiffer- department,theuniversitycouldpermitthe ence—anenormousdifference—tooursociety.I departmenttoexceedthetenurequotaprovided mustsaythatmyexperienceasaWebsterboard thatitagreesonsomeothermechanismtoreduce memberconvincesmethatWebsterissuchan futureoutlaysshouldstudentenrollmentsdrop. institution.Itsgrowthisevidencethateduca- Departmentmembersmightagreetoacceptpro- tionalinnovationworks,andIamproudthatI portionalpaycuts,orthatoneormorewouldgo havebeenabletomakeasmallcontributionasa onunpaidleaveinthefutureifnecessary.Strong Websterboardmember. departmentleadershipwouldbewillingtotake suchrisks,asistypicalofstrongleadershipin thebusinessworld. REFERENCES Bottrill,K.andBorden,V.“Appendix:Examples CONCLUDING NOTE fromtheLiterature,”inV.BordenandT.Banta, eds.,UsingPerformanceIndicatorstoGuide Whendiscussingthedifficultycreatedby StrategicDecisionMaking.SanFrancisco,CA: tenureofreallocatingfacultyresources,Isug- Jossey-Bass,1994. gestedseveralpossibleapproaches.Hereis another:Auniversitymightevenconsiderusing Brown,WalterandCayo,Gamber.CostContainment thepricesystem,byraisingtuitionforcoursesin inHigherEducation.SanFrancisco,CA:Jossey highdemandandcuttingtuitionforcoursesin Bass,2002. 25McGeeandBlock(1991,p.545). 26Mortimeretal.(1985) 8 ImprovingProductivityinHigherEducation Chickering,ArthurandGamson,Zelda.“Seven NationalCommissionontheCostofHigher PrinciplesforGoodPracticesinUndergraduate Education.StraightTalkAboutCollegeCostsand Teaching,”inNewDirectionsinTeachingand Prices.Phoenix,AZ:OryxPress,1998. Learningno.47.SanFrancisco,CA:JosseyBass, 1991. Norman,Donald.ThingsThatMakeUsSmart: DefendingHumanAttributesintheAgeofthe Epstein,Paul.“MeasuringthePerformanceofPublic Machine.Reading,MA:Addison-Wesley,1993. Services,”inMarcHolzer,ed.,PublicProductivity Handbook.NewYork:MarcelDekkerInc.,1992. Ruppert,Sandra.“RootsandRealitiesofState-Level PerformanceIndicatorSystems,”inG.Gaither,ed., Gates,SusanandStone,Ann.“Understanding AssessingPerformanceinanAgeofAccountability: ProductivityinEducation.”InstituteonEducation CaseStudies.SanFrancisco,CA:Jossey-Bass,1995. andTraining,RAND,January1997. Trombley,William.“TheRisingPriceofHigher Guskin,AlanE.“ReducingStudentCostsand Education.”SanJose,CA:NationalCenterfor EnhancingStudentLearning:TheUniversity PublicPolicyandHigherEducation,Winter2003. Challengesofthe1990s.”OccasionalPaperNo.27, AssociationofGoverningBoardsofUniversities Vedder,Richard.“TheTuitionPuzzle:Puttingthe andColleges,Washington,DC,1996. PiecesTogether.”Washington,DC:TheInstitutefor HigherEducationPolicy,February1999. Hackett,JohnT.“ProductivityThroughPrivatization,” inRichardAndersonandJoelMeyersoneds., Vedder,Richard.GoingBrokebyDegree:WhyCollege ProductivityandHigherEducation.Princeton,NJ: CostsTooMuch.Washington,DC:American Peterson’sGuides,1992. EnterpriseInstitutePressforPublicPolicy Research,2004. McGee,RobertW.andBlock,WalterE.“Academic Tenure:AnEconomicCritique.”Harvard Journal Vedder,Richard.“UglyTruthsAboutRunaway of LawandPublicPolicy,Spring1991,14(2),pp. CollegeTuition.”TheAmericanEnterpriseInstitute 545-72. TheEducationEconomist,December2004. Mortimer,Kenneth;Bagshaw,MarqueandMasland, Waggaman,J.StrategiesandConsequences: Andrew.FlexibilityinAcademicStaffing.ASHE- ManagingtheCostsinHigherEducation.ASHE- ERICHigherEducationReportno.1.Washington, ERICHigherEducationReportno.8.Washington, DC:TheGeorgeWashingtonUniversityAssociation DC:TheGeorgeWashingtonUniversitySchoolof fortheStudyofHigherEducation,1985. EducationandHumanDevelopment,1991. 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William Poole (2005, April 6). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_20050407_poole

@misc{wtfs_speech_20050407_poole,
  author = {William Poole},
  title = {Speech},
  year = {2005},
  month = {Apr},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_20050407_poole},
  note = {Retrieved via When the Fed Speaks corpus}
}