Public universities must adapt to market

By Todd Cohen

Public universities face critical choices.

Like nonprofits, public universities are under severe financial strain from the economy’s collapse, forcing them to ask the same tough questions as nonprofits about how to do business in a sustainable way that advances the indispensable role they play in our society and economy.

And just as a growing number of nonprofits are working to remake themselves as social entrepreneurs, public universities are struggling to reinvent themselves as educational entrepreneurs.

To truly fulfill their combined mission of teaching, research and public service, universities must become self-sustaining incubators, hatching new ways of operating, serving multiple constituencies, and producing new revenue streams.

Their challenge is to develop innovative business models for their institutions that test and move into the marketplace the knowledge, competencies and innovation they value in the classroom, in their research and in the services they provide to their communities and states.

Public universities, like any large organizations, can be maddeningly slow to change because of their mind-numbing and innovation-crushing culture of institutional rules, policies, procedures and guidelines, and because of their entrenched and often-insulated workforce that has learned to survive by playing it safe and not taking risks.

Like nonprofits, public universities will survive the immediate financial crisis only if they learn to adapt their corporate culture and the way they do business to the fiercely competitive and continually changing economy and marketplace.

As The New York Times reported March 2, the decline in the share of funds that states provide for higher education has prompted many states and public universities to reassess their relationships and the basic model for supporting higher education.

New ideas that are gestating, the Times reports, include issuing bonds to raise money to build the endowment at a state university; “charter” universities that would get less financing but be free from some state mandates, such as those regulating construction projects; freeing a state university from many state regulations; and cutting a flagship campus loose from the rest of a state university system and making it a public authority.

And, like their nonprofit counterparts, a growing number of universities have started to take a hard look at reorganizing, consolidating or eliminating academic programs and administrative structures.

At issue are the fundamentals of running an organization, whether university or nonprofit.

Those fundamentals include how to identify and best serve a market; how to develop products and services that customers and funders value; how to deliver and market programs and services; and how to engage and communicate clearly and openly with clients, partners, investors and employees.

Employees of any institution often are taken for granted and treated like the hired help or human capital that is expendable.

Despite financial cuts and stress, however, public universities, like nonprofits, cannot afford not to engage their employees and invest in their continuing professional development.

Employees are human capital that is essential to the central nervous system of these organizations, just as public universities and nonprofits are essential to the central nervous system of our democracy.

And just as they increasingly are focusing on and engaging donors, universities and nonprofits need to start focusing on employees and engaging them in rebuilding their business model and delivering their products and services.

Public universities prepare students to think, to question the answers, to understand how our communities and our marketplace work, to become smart workers, effective leaders and engaged citizens, and to give back.

Universities and nonprofits alike face the enormous task of moving beyond their often in-bred culture of entitlement, the idea that they are owed financial support simply because their cause is worthy.

The good news is that a growing number of these organizations are learning through the crucible of the marketplace that they must earn their keep, every day and in new ways, and prove their worth by incubating and delivering programs and services that customers, investors and other stakeholders – including employees -- value.

Public support is critical for public universities.

But with politicians shrinking that support in the face of taxpayers’ quick-fix hysteria, public universities find themselves counting even more heavily on private donors while also targeting customers and partners willing to pay for their services.

And private donors want to see results, and want to be engaged.

Public universities, like nonprofits, cannot afford not to make it their job to become sustainable, entrepreneurial enterprises that make their own luck and pay their own way in an increasingly complex and challenging marketplace.