At 27, after six years working on youth service-learning, literacy, and a variety of issues to strengthen community-based nonprofit organizations, I entered business school. In one way, it was an odd choice. I knew little about high finance and, growing up in the Gordon Gekko / Barbarians at the Gate / Bonfire of the Vanities culture of the late 1980s, harbored an almost instinctive distrust towards all things Wall Street. Yet, I’d also witnessed the sclerotic side of higher education and seen too many well-meaning persons and organizations that, at best, were ineffective stewards of public resources and at worst, terrible and exploitative employers. So, believing that our country’s social and educational challenges were too important and complex to solve with only good intentions, I decided that I wanted the widest set of managerial and leadership tools. But, in part, I also entered business school wanting to read from the other team’s “playbook,” because if I wanted things to change, then I needed to better understand how and why they were the way they were.
It was 1998 and sitting in Silicon Valley, Internet entrepreneurs everywhere were re-making the world (or at least we thought). Classmates, friends, and professors exposed me to the dramatic new ways that corporations, governments, and higher education were just beginning to use technology to overcome logistical, cost, and time barriers and make both training and education more accessible and timely for practice.
Seeing this, I immediately reflected on the thousands of nonprofit organizations across the country struggling to accomplish ambitious missions with little money or access to professional training and development. Along with a friend, we started SmarterOrg, an attempt to advance learning in the nonprofit sector by developing and providing cost-effective, high-impact online learning programs. After much internal debate, we chose to incorporate as a company rather than a nonprofit. It was our sense that this was the best structure to allow us to grow quickly and have wider impact. And, we were extremely concerned about false perceptions of nonprofits: that they were inherently poorly managed or unable to execute quickly. We wanted potential business and technology partners to look at our company as a business and market opportunity–rather than a charity case–and approach our work with high expectations and a level of urgency.
I wasn’t quite prepared for the .com behind our name to so define and color many of our conversations going forward. The immediate skepticism and guarded reactions from potential nonprofit and public sector clients and partners were remarkable–even from those that we knew. I only wish some of the misconceptions were true. We were hardly living the lux life — working in a hovel of a San Francisco Mission Street office that often smelled like the Filipino restaurant next door.
All of this helps explain why I recommend the new AEI white paper by Michael Horn, Beyond Good and Evil, which helps to get past some of the all too familiar characterizations of for-profit enterprises in education. Overall, it’s a good primer. And, even if you are a die-hard, anti-private sector person, it’s still valuable to understand the incentives behind corporate action–to, in essence, read the other team’s playbook!
The paper uses the continuing fight over for-profit education and “gainful employment” regulations as a case study on incentives and their interaction with the public sector marketplace:
For-profit universities have seized hold of online learning to capitalize on these incentives even more successfully—only now many in society are questioning whether the incentives focus on the wrong thing by ignoring graduation rates and the debt levels students face when they graduate. To say that for-profits—or any organization fulfilling this set of policies—are evil or poor quality misses the point. Quality is defined by what a customer is paying someone to do, and in this case, forprofits are doing a spectacular job of expanding access. The stories of low graduation rates and students facing high debt with limited prospects to repay it are predictable, as government policies do not go beyond expanded access in defining the job to be done and how the government will pay for it. This is not the fault of the for-profit institutions, however, but of the government and society, which has offered incentives for this behavior. Blaming for-profits for doing what we have asked and paid them to do from the outset makes little sense.
Yet, despite my recommendation of the paper and its helpful and critical exploration of incentives, the analysis is incomplete. Just as it is wrong to excuse cheating because of improper incentives, there’s no justification for the serious ethical (and in some cases, criminal) lapses by for-profit managers and salespersons who pressured and lied to prospective students. Nor can we allow incentives to excuse the neglect of students at many of our public colleges.
Yes, the incentives matter greatly–in all sectors. We need to be pragmatic and steely-eyed about this. But our expectations and standards for ethical conduct should also be high, regardless of whether an organization is public, private, or nonprofit.