HESA

Higher Education Strategy Associates

Tag Archives: Private Universities

October 03

The Real Competition is Closer Than You Think

I’ve recently been dismissive of the notion that Canada is “falling behind” in higher education since everyone seems to insist on making ludicrous comparisons with places like China, Switzerland and Singapore.  But upon a little bit of further digging, it turns out there is one of our very close competitors which is doing rather well these days, one we probably should be worried about despite the fact that we’ve mostly been ignoring it since the Financial Crisis of ’08.

It’s our neighbour to the south, the United States.

Now, back in the 1990s and early 2000s, when our dollar was worth diddly-squat and the Americans were spending seriously on higher education, the USA dominated Canadian discussion about foreign competitors.  It was all “brain drain” this and “impossible to keep our talent” that.  We were getting creamed.

Since 2008 it’s been a different story.  Everybody remembers 2009-2010, when top American talent was streaming across the border due to a combination of a strong Canadian dollar and savage cut-backs in the US.  And then the Obama stimulus expired in 2011 and everyone knew that was going to put paid for research dollars.  And the states were mostly bankrupt (look at what happened in Illinois!). And then Trump.  Trump!  Disaster, etc.  The story we’ve been telling ourselves is that the American higher ed policy for last decade or so has been one long exercise in Making Canada Great Again.

The problem is, this story isn’t quite true.

Let’s start by taking a look at what’s been going on in Canada, both at our top research universities (for the purpose of this exercise, the 8 universities that made this year’s Shanghai top 200 (Toronto, UBC, McMaster, McGill, Alberta, Montreal, Calgary and Ottawa) and at the rest of the higher education system.  Figure 1 shows the change in real average total institutional per-student expenditures, indexed to 2006.  What it shows is that – with some small differences in timing – both research-intensive and non-research-intensive institutions did well late last decade and worse this one, with both ending off with per-student expenditures about 3% lower than they were a decade earlier.

Figure 1: Change in Real Per-student Expenditures by sector, Shanghai top-200 ranked universities vs. rest of sector, Canadian Universities 2005-06 to 2015-16 (indexed to 2005-06)

Source: Statscan FIUC, Statscan PSIS

Now let’s look at similar data for private 4-year colleges in the United States. Same drill: the blue line represents the average of the 33 private universities which make the Shanghai top-200, and the orange line represented the average for the rest of the sector (about 1700 institutions in total.  For both, what we see is an unbroken increase in expenditures.  For many years it seemed like the big research heavyweights were leaving the rest of the sector behind, but in the last couple of years both sectors have seen a steady expansion of buying power.  For the decade, the research heavyweights are up 16%, and everyone else up 10%.

Figure 2: Change in Real Per-student Expenditures by sector, Shanghai top-200 ranked universities vs. rest of sector, US Private 4-year colleges 2004-05 to 2014-15 (indexed to 2004-05)

Source: IPEDS

(if you’re wondering why my ten-year span starts and ends a year later in Canada than in the US, the answer is that it turns out – miraculously – there is one piece of data reporting that Stascan does faster and better than the Americans, and that’s reporting on financials.  The 15-16 numbers just aren’t out yet in the US – sorry)

Ah, you say.  But that’s the private 4-year sector – not really a fair comparison.  Everyone knows those guys have loadsadough.  Compare us with the public sector instead – everyone knows those guys are in deep trouble, right?  Right?

Well….not exactly.  Across the big public research universities – the 37 that make the top 200 in the Shanghai rankings – expenditures are up 15% in real dollars on a decade ago, same as their counterparts in the private 4-year sector.  And the rest of the sector, the poor unloved disrespected non-research-intensive universities, they are up 8% on the decade.

Figure 3: Change in Real Per-student Expenditures by sector, Shanghai top-200 ranked universities vs. rest of sector, US Public 4-year colleges 2004-05 to 2014-15 (indexed to 2004-05)

Source: IPEDS

A reasonable question here is; how did the Canadian post-secondary community just miss this?  And miss it they did, because if they had this data they wouldn’t be making ludicrous claims about places like Switzerland.

The answer, I suspect, is that American universities are, from the perspective of our university leaders, are growing in the “wrong way”.  This growth isn’t happening because American governments – federal and state – are plunking down vast amounts of new money.  It’s because institutions are generating more money on their own – either through tuition, or self-generated income.  Now it’s not that Canadian institutions aren’t doing the same (albeit on a smaller scale) – as I’ve shown elsewhere, what growth there has been in real revenues in Canadian universities over the last five years has mostly come from new fee income.  But when our university lobbyists go to ask for money, it’s simpler to make the case for “investment” (i.e. spending) if the outside competition is mostly government-funded too.  It’s harder to walk in and say: “we need more money so we can compete with American universities who are really good at generating their own funds through fees” because our politicians are currently allergic to that solution.

Still, the fact of the matter is, American universities are very definitely on an up-swing at a time when even most countries – including vaunted China and Switzerland – are flat or even down somewhat.  This deserves more attention.

October 25

What could a new private university in Canada look like?

Yesterday I outlined why a major private university has never emerged in Canada.  But I also suggested that it wasn’t impossible one might pop up in the future if it were backed by someone with sufficiently deep pockets and an eye for strategy.  Here is what I mean by this:

For a private university to be a success, it needs to be getting thousands of students.  Say 4,000 or so.  It’s not impossible to operate below that level, but it’s precarious.  Ask Bishop’s.

And that’s tough.  Getting people to commit to a university before it has any visible sign of success (such as well-employed graduates) is extremely difficult when there are quite prestigious institutions available nearby, as is the case nearly everywhere in Canada.  Ask Quest.

Any new university is likely to take a few years to catch on; and yet it must be able to put out a quality product during that time.  Hence the need for deep pockets.  But there also needs to be a real value proposition for a new institution: a reason to go there rather than a regular university.  England’s Buckingham University and Australia’s Bond University (both private universities which have managed to clear the 4,000 student mark) did this by offering accelerated degrees that allowed a student to graduate more quickly.  That might also work here, but let me suggest a couple of other ways that might work too.

The first possibility is to create a university which can compete with big public universities on price.  There are a couple of ways of doing this, but basically it means re-thinking the structure of an institution.  One popular route these days is to do away with departments (which are an utter cost sink and the source of pretty much any cost-inflating idea a university can come up with) and leave faculties as the only level of administration.  Combine this structure with a human-resource strategy which combines a few well-rewarded big names with a mostly casual staff, and there’s the possibility of creating an institution which is cost-effective while still carrying enough prestige to attract students.  In the United States, two new universities have been built along more or less this model in the past decade (Harrisburg University of Science and Technology and University of Minnesota Rochester), although neither has gone quite as far as Professor Vance Fried and his prescriptions in a well-known 2008 paper which purported to offer “Ivy-like” education for below $7,500 per student.  In Ontario, back a few years ago when for some reason the government thought it was going to build three new universities, a similar idea was proposed by Centennial College plus Maureen Mancuso and Alastair Summerlee of Guelph University.  The proposal was technically ineligible and the competition for new campuses never happened anyway because (whoops) the number of 18 year-olds started declining in 2013 (and who could possibly have foreseen that at any time since 1995?).  But nevertheless I think it shows there’s at least some appetite to head down this route, and that it would be possible to go down this route for at least Arts, Sciences and Business.

The second possibility would take the opposite route.  If Canada has an available niche, it’s in luxurious, prestigious liberal arts colleges (yes, there is the U4 League, but none of them could be described as luxurious – indeed provincial funding models leave these kinds of universities pretty stretched).  So why not try to charge top dollar for a Liberal Arts school with big names?  This has been the approach of AC Grayling’s New College of the Humanities (NCH) in London for the past four years and – regulatory niggles aside – it seems to be doing reasonably well.   Now I know what you’re thinking: who wants to pay for Liberal Arts degrees, unemployment, baristas, etc.  But the fact is, as institutions like Middlebury, Bryn Mawr and indeed NCH show, provided the level of instruction is good and the student-teacher ratio small, there are lots of people prepared to pay for that kind of education.  Maybe not 4,000 people for year, but if the fees are high enough, a university can survive at somewhat smaller numbers.

So yes, the potential for a private university is there.  What’s missing so far is ambition and money.  One day, someone will fill that gap.  It’s just a question of when.

October 24

Why don’t we have private universities in Canada?

Every once in awhile I get asked a question like “why doesn’t Canada have private higher education”?  The answer is complicated, in part because the question isn’t as precise as it seems.

To start, we have a lot of private higher education in Canada, but it’s at the sub-degree level.  Stats on private higher education in Canada aren’t good but the best estimates suggest that there’s something on the order of 150,000 students attending somewhere in the region of 1800 institutions.  Something like a third of these students are in programs of under 3 months in length; most of the rest are in programs between 3-12 months in length.  Close to 2/3 of enrollments are either in health fields (medical assistants and technologists, for the most part) or in some form of IT/media (systems analysts, animation, etc.).  Though the quality of these institutions varies, these programs survive and thrive because they fill a perceived need for employment-oriented courses of less than 12 months in length.  Universities and colleges don’t fill that need, so the market does.  Simple.

Now, the answer to why we don’t have something more like American private, non-profit universities is a bit trickier.  We actually did, once.  A good chunk of the universities in the Maritimes, Quebec and Ontario started life exactly the way American private universities did: as private, often religiously-focussed institutions making efforts to ensure that local communities would have access to a supply of education teachers and clergymen.  While governments began supporting universities in the 19th century, the assistance was spasmodic, in many places support was not regularized until after the second world war.  Technically, universities like McGill are still private, in the sense that they choose their own Boards of Governors with no interference from government.  They are “public” because they take public money in return for accepting conditions on how the money is spent (observing rules about tuition fees for instance), but there’s nothing to say they couldn’t at some point change their mind about this.

Actually, Canada still has a private system of universities, but they are (with one exception) religious in nature: Trinity Western in BC, King’s, Concordia and St. Mary’s in Alberta, Canadian Mennonite in Manitoba, Redeemer in Ontario, the Atlantic School of Theology – you get the idea.  Quest University in British Columbia, set up a little over a decade ago, is the only secular private institution out there.

And this brings us to the heart of the question: when people ask “why no private higher ed in Canada”, what they really mean is “why aren’t there more Quest Universities out there”?  And it’s a fair question: all over the world,private universities are a major part of national systems of higher education.  Even in free-tuition Germany, over 10% of students choose to study in private fee-charging institutions.  So why not here?

It’s not, for the most part, a legal issue.  Most provinces have legislation which permits private organizations to offer degrees provided they can demonstrate quality of provision (use of the term “university” is a little trickier and usually requires an act of the legislature, but in principle there’s nothing stopping a government from bestowing that term on a private institution).  And yet, despite this we still see few examples of private degree-granting institutions.

To understand why, we need to go back to our observation about why private colleges thrive in Canada at the sub-degree level: because they offer something no one else does.  The way to think about private higher education is that it will thrive where there is a niche that public universities cannot or will not fill.  In most developing countries (as well as in countries like Japan, Korea and Taiwan), private higher education thrives because governments cannot or will not supply higher education in sufficient quantity to meet demand.  In Eastern Europe, private higher education thrived in social sciences in the wake of communism because these faculties in public universities were utterly discredited and/or couldn’t provide education in high-demand subjects like business and commerce.  And as higher education gets more stretched in other countries in Europe one might start to see more private higher education providers (particularly in the UK)

But in Canada, there simply aren’t so many niches.  Our universities are well-funded, cover pretty much the entire spectrum of studies, and compared to most university systems around the world, quite open to covering new and emerging areas of study even if they aren’t “traditional”.  With few niches to fill, there isn’t a lot of room for private providers.  Quest University does its thing by staking out a unique value proposition around pedagogy (the block learning system) and outdoor activities – probably not a niche that could sustain competitors, but enough of one to sustain itself.

Could this change?  Could a new successful university appear in Canada on the scale of Quest, only larger?  Yes.  But it would take someone with deep pockets and a particular eye for strategy.  More on this tomorrow.