Profit-seeking universities: Boon or bane?
The recent issue of the Harvard Business Review (issue of January-February 2012) contains a List of Audacious Ideas to Solve the World’s Problems (https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=573&i=16657&cs =50854ad65a41a6baa708783 37db51616).
The article on this list entitled “Enroll the World in For-Profit Universities” grabbed my attention because of its apparent relevance to higher education in the Philippines. I have long argued that institutions of higher learning should be driven by loftier goals than financial gain, and I was anxious to find in the article a well-argued rationale for profit as a legitimate objective for colleges and universities. I guess I need a lot more convincing.
Nobody can question the validity of the article’s basic premise that education creates human capital which, in today’s knowledge-driven world, increases productivity and enables economic growth. However, I take issue with the authors’ contention that universities in emergent markets should produce only graduates with the skills and competencies that their industries require and are in short supply. Universities in developing economies, they argue, should be guided in their choice of course offerings by the perceived needs of their students and their prospective employers. The authors maintain that for-profit institutions are ideally suited for this role.
Existing policies
The Philippine Commission on Higher Education (CHED) and many educationists and economists in the country have long espoused the idea that educational institutions should be demand-driven. I recall that soon after Romulo Neri assumed his post as CHED chairman several years back, he described his role as one of “…making sure that college graduates are matched with the requirements of industry” and that “…we get the curriculum relevant to the needs of business.” Such a match, so the argument goes, ensures high levels of employment.
Higher education in the Philippines has long been dominated by private schools, which are either sectarian or non-sectarian. While not one would readily admit to being motivated by profit, without exception, all are profit-oriented in the sense that they seek to maximize the positive difference between revenue and cost (i.e., “profits”). In recent years, a number of well-known universities, such as the University of the East and the Mapua Institute of Technology, have been taken over by private investor groups. For good reason: College education offers enormous opportunities for investors because of their minimal working capital requirements, built-in barriers to entry, and high market demand.
In a very important sense, institutions of higher learning in the Philippines, be they public or private, and however their mission statements are worded, are largely geared towards turning out graduates with the specific skills and competencies that are currently in demand. While such a strategy enables the education system to meet existing labor demand, it is highly incapable of adapting labor supply to continually changing demand conditions. The resulting mismatch between supply and demand results in high levels of structural unemployment overall, and in specific types of skills and occupations. In highly dynamic settings, labor supply tends to lag further and further behind labor demand.
Profit-oriented universities are particularly handicapped for quick response to changing labor demand conditions because they tend to be heavily invested in terms of facilities and faculty in providing the specific skills and competencies that were previously in high demand. (Recall the difficulty faced by hundreds of nursing schools all over the country in adjusting to the sudden decline in the demand for nursing graduates.) For their part, displaced workers and those who just recently joined the labor market are unable to acquire new skills and competencies fast enough because of high switching costs in moving from one occupation to another. This is a major reason why high levels of unemployment prevail in most economies today—8.3 percent in the United States, 7 percent in the Philippines, a whopping 22.9 percent in Spain as of January 2012.
Achieving greater flexibility
Institutions of higher learning can achieve greater flexibility in responding to rapid and unpredictable shifts in labor demand by offering courses that are neither too specific to particular occupations or type of work, nor too broad and general as to have little practical applications in the workplace. Workers trained in specific skills and who are equipped with unique capabilities experience difficulty in moving from one type of work to another for lack of a broad knowledge base to serve as platform for acquiring new practical skills.
By contrast, those with exposure to broad areas of knowledge are more flexible in searching for new job opportunities because they have a wider range of specific applications to choose from. For example, one who has had extensive training and experience in cost accounting will find it difficult to move to, say, investment analysis or any other financial applications. By contrast, one who has a degree in general finance will find it easier to acquire the skills needed to be employed, say, as a credit investigator or a risk analyst.
What we are driving at is that instead of producing skills and competencies that are intended to meet specific needs of prospective employers, CHED and the educational institutions under its watch should instead pursue a strategy of offering courses in certain broad areas of study along with a sprinkling of subjects in specific applications in those fields. For example, students who are majoring in general management may be required to take subjects, such as sales management or management of financial institutions in order to prepare them for their first jobs. Training in specialized skills that are more firm- or task-specific can and should be provided by training institutions that are designed for that purpose (for example, those under the auspices of Tesda) or by the employing organizations themselves as part of their training and development activities.
The skills needed for performing specific tasks or activities are called tacit knowledge and are best learned from the work experience or by constant practice. This type of knowledge is contextual and difficult to transfer from one person to another. By comparison, explicit knowledge is codified and transmittable and can be learned by listening to lectures, participation at seminars, or through the proverbial “burning of the midnight candle.”
In keeping with long-standing tradition, we propose that institutions of higher learning should limit themselves to the transmission and creation of explicit knowledge and should not engage in the teaching of practical skills, which we believe are best left to vocational schools and HRM units of business organizations, and to the workers themselves.
We believe that the manner we propose for assigning teaching responsibilities is a more appropriate strategy for creating knowledge and developing the practical human skills that are necessary in meeting the ever-changing workforce requirements of developing economies.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a former professor of management in UP Mindanao. Feedback at [email protected]. For previous articles, visit <map.org.ph>.)
