Excerpt from Kirp's Shakespeare, Einstein and the Bottom Line

(Note: The editor of these webpages finds Kirp's analysis of the Law School's Dean Bice to be wildly off the mark.  His editor should have curtailed such blasphemy.)
 
 
Kafka Was An Optimist

Entrepreneurship is not the only idea that institutions of higher learning have imported from the business world.  Ever since the flow of public money began to slow in the 1970s, universities have been searching for ways to run more efficiently.   Managers looked to governments and business for better models.  All the budget nostrums of the 1970s and 1980s eventually found their way into higher education.  The administrators who implemented these schemes made grandiose claims.  The allure- the cult- of efficiency has been a staple of higher education.
In the search for managerial rationality, one voguish approach is “responsibility center management” or “revenue center management”- RCM for short.  RCM is the management speak version of Harvard’s hoary dictum “Each tub on its own bottom.”  Proponents contend that a university should be run like a firm, in which ever academic unit carries it weight financially.  In business terms, that means each unit is expected to be a profit center.  A school that runs a surplus gets to keep it, while a school with a deficit has to pay it back.

Things get tricky in practice, of course.  It is hard to calculate correctly the all-important income and expenses; hard to decide how to apportion the costs of the university’s “public goods,” what in business parlance would be called cost centers, like the library and the registrar’s office; hard as well to agree about what a fair “tax” to subsidize, say, the theater department, which can’t afford to pay its own way, or to nurture academic innovations that cross traditional academic boundaries.  These details matter greatly, of course, but however they are settled, the premise of RCM remains straightforward: campus units control their own destiny

Though this sounds arcane, the stakes are high.  The debate over the wisdom of running a university accord the principles of the corporate profit center is in essence a contest of worldviews.  It is an argument between those whose chief mission is to maximize dollar profits and those committed to the idea of the university as a community in which “gift relationships” are the norm.

USC: The Trojan Wars

     Imagine the scene: At the beginning of each semester, as students signed up for courses, campus units paraded their wares with fervor of discount merchandisers.  Full-page ads in the Daily Trojan touted courses such as the drama class that required no reading.  (“Tired of reading Shakespeare?  Kill off your (general education) requirement, sit back and east popcorn, and watch it being performed.”) The behind the scenes rivalries were even fiercer.  Schools that had never previously professed an interest in the liberal arts were suddenly claiming that their offerings- introduction to real estate, for example- should satisfy the university’s general education requirement.

     All this academically dubious behavior, and much more of the same, can be traced to a single innovation: the introduction of revenue centered management.

     There was no over opposition among the faculty to the new arrangements.  The release of information was meant to spur rational planning, with departments and schools- what the scheme calls “revenue centers”- taking responsibility for their own financial affairs.  To its advocates, RCM simply means sounds business practice. “It provides information on full program costs while encouraging attention to the quality and efficient production of those services … joining academic and fiscal conditions together in one place,” Strauss and Curry argue in a pamphlet that summarizes a quarter-century of experience with RCM.  But that’s a too tidy view of how universities work.  “Academic institutions are complex, nonlinear systems,” as Robert Brinbaum points out, “and their responses to changes in one part can have counterintuitive and surprising effects in another… introducing more subtle and insidious problems to replace acute ones.”  At USC, the introduction of revenue center management unleashed the academic equivalent of a Hobbesian war of all against all.  Gone was any commitment to supporting the common good.

     Deans demanded “instruction rights” over their own majors, as if students were chattel.  USC had long promoted undergraduate education that combined the liberal arts with the so-called practical arts.  Now the liberal arts college was being pillaged as aggressive professional school administrators pursued their “harvesting rights”, treating students like so many ears of corn.

     Meanwhile, many deans were eager to cut the budgets for campus-wide activities such as student counseling the library, the registrar’s office, and building maintenance, and they vetoed proposed initiatives such as a community outreach venture.  “It’s our money,” they insisted, fighting for low campus “taxes” with the ardor of George W. Bush.  The dean of the film school went so far as too seek a franchise fee from campus administration for his school, on the ground that it enhanced the university’s reputation.  When it came to determining these tax rates and subsidies, the trustees got into the act, lobbying for special treatment for their favorite schools.

     It was entirely rational from a revenue-maximizing perspective for the gerontology school to lure undergraduates with the promise that they could satisfy their science requirements without spending a single minute in the lab.  Similarly, it was fiscally smart for these professional schools to erect “trade barriers” that effectively kept engineering or business schools undergraduate majors from taking English classes in the liberal arts college.  For much the same reason, grades turning into recruiting tactics.  While the average undergraduate grade in the liberal arts college was 3.1, in professional schools the average was an astonishing 3.5, and undergraduates could do the math.  An enlightened campus policy that allowed faculty and staff to enroll in any course became a burlesque, as come deans coerced underlings to sign up for classes in which they had no interest in order to boost enrollment.  In one instance, an engineer started a scuba diving course to earn tuition for his school.

     By the early 1990s, USC had become an institution that, as the Oscar Wilde jibe goes, knew the price of everything and the value of nothing.  Some schools went so far as to alter their mission in order to generate revenues.  The School of Policy, Planning and Development started hiring professors who had little sense of the profession but could give bravura lectures that appealed to undergraduates.  Academic pursuits that cost more- notably graduate teaching and research, the raisons d’etre for the school- suffered as a consequence.

     Amid all the gamesmanship, there was no one at USC to speak for the academic commons.  This was Runnymede come to the campus, and the deans were effectively in charge.  They decided to tax themselves for what were tellingly called “peripherals”- including the central administration itself, which had to justify expenses.

     No one gamed the system better than longtime law school dean Scott Bice, who stepped down in 2001.  “It’s like running your own small college,” he says. “I can decide what to pay my faculty and how many students to admit without having to get anyone’s approval.”  Bice had buckets of money to spend as he pleased.  Law students’ tuition, which is set at market rates, generates substantial revenue; and Susan Estrich, who managed Michael Dukakis’s ill-fated 1988 presidential campaign, lectured annually to hundreds of tuition-paying undergraduates.  No one did better than Bice in the campus budget battles.  The matter of who pays to operate the library is a nice example.  The library is the prototype of a campus public good; but Bice successfully argued that because the law school has its own library, it shouldn’t be taxed to support another pile of books.

     The law school receives “most favored nation” treatment from the campus administration, says Bice, but the metaphor doesn’t withstand scrutiny.  The law school isn’t a nation, a stand-alone institution as it was until 1900, when Los Angeles Law School affiliated with the university.  It’s in a position to benefit from the reputation of the university as a whole; the name change says as much.  And the number of volumes in the campus library affects USC’s standing in the pecking order of higher education.  Not only is it bad citizenship to impoverish the library, it’s short-sighted as well.

     (Kirp then details the change to this system and the rise of USC) RCM-style markets didn’t get the university there.  Leadership, driven by academic values, did that.