In spite of a national economic slowdown, the for-profit sector of postsecondary education remains one of the brightest spots in the market. You would think that with so many positions being eliminated, for-profit education would be awash in management talent.
But you would be wrong. Because of its tremendous growth, the for-profit postsecondary industry continues to suffer from a lack of qualified management. Administrators from nonprofit colleges and universities have an extremely strong set of skills that they could bring to bear in these corporate jobs, but they need to demonstrate an understanding of business and the focus on profitability.
In a previous article on this site, "Executive Jobs in For-Profit Education: Risk or Opportunity?" one of us provided several guidelines that nonprofit administrators should consider when attempting a move to a for-profit education company. What we'd like to do here is focus more intently on one of the most crucial factors in achieving a successful transition: emphasizing your business experience and translating your nonprofit experience into the language of business. Boards and management teams place a premium on business experience and the ability to speak in the language of business.
But first let's review the tremendous growth and continued success of the industry. A driving force behind that growth has been the shift to a knowledge-based and technology-driven economy that pays a high income premium to those with appropriate training. In addition, as the economy cools and unemployment rises, many individuals choose to return to school in order to earn a degree and make themselves more marketable. Wall Street analysts following for-profit education companies believe that the postsecondary-education industry is essentially recession-proof, if not countercyclical.
And in fact, the number of publicly traded, degree-granting providers of postsecondary education in the United States has grown at a steady pace. After DeVry Inc., went public in 1991, and the Apollo Group Inc. (the parent company of the University of Phoenix) in 1994, 10 degree-granting providers of postsecondary education have gone public over the past five years. Moreover, these companies are continuing to grow rapidly despite the economic downturn. The Apollo Group recently announced third-quarter earnings of 29 cents a share, beating analysts' expectations by 6 cents, and has seen a corresponding increase in its stock price. Strayer University announced similar success, with a third-quarter earnings per share of 95 cents and a 17-percent increase in revenue over the same period last year. The growth in this sector is unquestionably an anomaly in the stock market today.
The tremendous growth helps explain why the sector continues to suffer from a dearth of management talent with experience running a similar business. While there are many administrators from the nonprofit sector who may be suitable for these positions, they may not be aware of what these jobs entail.
Nonprofit administrators who make the leap will find that investors place the highest premium on candidates with experience in driving revenues and increasing profitability. As an administrator of a for-profit postsecondary company, you will have to focus on profitability in four areas: sales and marketing, product development, customer service and retention, and costs.
Crucial to a company's fiscal health is its ability to sell and market its products, degrees, and courses, and to target the appropriate market. The old line of thinking, "If you build it, they will come," does not work in the highly competitive for-profit sector.
Companies have been, and must continue to be, experts at identifying unserved or underserved student markets. For-profit academe has increased enrollment at a much more rapid rate than traditional universities. While the growth rate in degrees awarded by public and private nonprofit institutions was about 20 percent from 1980 to 1995, baccalaureate degrees awarded by for-profits increased more than fourfold during that period.
Many for-profit educational institutions were born out of a desire to reach specific target markets, rather than trying to be all things to all students. Nonprofit administrators seeking a job in the for-profit sector should be ready to provide examples of how they have created or revised programs to serve the needs of nontraditional student groups, such as devising distance-learning or evening courses.
Closely linked to the focus on a target market is the necessity of for-profit management to develop the appropriate products for their target markets. Unlike many commodities that are well-defined, the benefits of a higher education may be difficult to measure with precision in the short term. "Higher education" is not single product but a range of educational products.
Management of for-profits must focus on developing the products that will produce the highest benefit for themselves and their customers. For instance, the University of Phoenix has leveraged its brick-and-mortar segments and created new products that serve a different clientele. In order to reach the customer base that cannot take courses in a traditional classroom, it has entered the Internet-based education market with the creation of UOP Online.
In delivering its products, for-profit education must continue to be focused on customer service. Several features of for-profit colleges help attract more students, such as convenient locations and times for courses. Many for-profit colleges provide year-round schedules that let students complete a four-year bachelor's degree in three years. These colleges often provide flexible schedules that do not require students to complete two years of general courses before taking classes in their major. In addition, for-profit institutions also focus on retention, graduation, placement, and referral rates, as evidenced by their attempts to ferret out what prospective employers want of their graduates.
The importance of customer service is illustrated by the statements made by David Moore, the chief executive officer of Corinthian Colleges, in connection with the recent announcement of its fourth-quarter results for the period ending June 31, 2001. "During the fiscal year," Mr. Moore said, "we added 13 campuses through acquisition and branching. In the second half of fiscal 2001, we acquired three campuses, opened three new branches, and integrated the campuses acquired."
He goes on to add that the colleges aggressively rolled out a new curriculum and increased the number of campuses offering online courses. Although these additions in products and services increase the level at which Corinthian can serve its customers, Mr. Moore refers to these achievements as investments that will reach their full earning potential in future quarters. Thus, for the for-profit sector, the focus on customer service is closely linked to driving revenue and increasing profitability.
While customer service is crucial, for-profit management also must focus on controlling costs in order to increase profitability. They cannot afford to be inefficient and spend money on activities, like research and scholarship, that will not bring in revenue. However, for-profit colleges have the benefit of competing with nonprofit institutions that do spend substantial sums on research, and therefore must raise the cost of tuition for the student. This allows for-profit colleges to charge less in tuition that nonprofit institutions, while still increasing the tuition at or above the rate of inflation.
In order for a nonprofit administrator to successfully transition to a for-profit college, he or she must have the experience to focus on the investors' primary concern: driving revenue and achieving profitability.
