Summarized by James T. P. Yao, 7/21/99

"Since World War II, American higher education has been governed by two contrary sensibilities. The first is a sense of sustaining mission, a belief that the academy at its core is fundamentally immutable – its costs largely fixed, its purpose well established, its educational and intellectual values well honed. … The second sensibility is the embracing and celebrating of change – change for its own sake, change in pursuit of altered national agendas, change as a consequence of evolving values and attitudes. …"

"… Concerned that a growing sense of rigidity is replacing higher education’s historical balance of constancy and change, we ask:

• What are the impediments to change – both real and imagined – that now make colleges and universities less adaptive, less willing or able to be experimental?
• Given the intensifying competition for students and research dollars, how can colleges and universities preserve themselves as institutions, …, they neither abandon their academic missions nor settle for a hollowed kind of collegiality?"

"… What is required is a different way of thinking about the specific tasks and functions performed by faculty and staff: what they entail, what they cost, and what, specifically, they are intended to accomplish. … This effort … requires the melding of economic modeling with an understanding of how institutions that simultaneously look backward and forward actually work."

"… Between 1985 and 1990 …, the general pattern is one of sustained real growth: 1.72 percent per year in state colleges and universities; 4.5 percent per year in private colleges and non-research universities; 3.57 percent per year in public research universities; and 5.53 percent per year in private research universities. Yet the 1980’s were also a time of lament, particularly by college and university presidents, about their impending impoverishment. … The numbers of regulations and law shits were growing exponentially, and the development of new programs and services was unchecked by any sense of what things cost. The president who best voiced the irony of the moment was Stanford’s Donald Kennedy, who … asked, ‘How can we look so rich and feel so poor?’ The answer he offered was an eloquent explanation of why and how universities grow … It was the nonlinear, not-quite-exponential increase in knowledge – not just in sciences, but in the humanities and social sciences, in engineering, and in the practical as well as the learned professions – that drove the cost of operating a university above and beyond the cost increases associated with raises for faculty and staff and mounting benefits costs."

"… Everywhere there were new ventures, new degree programs, new programs of continuing education, and new attempts to reach out to local communities. … In research universities, it lies in the growing importance of research institutes and centers that, for the most part, operate independently, though often in partnership with institutes and centers at other universities. …"

"This rapid expansion of institutional perimeters inherently stained the capacity of most institutions to keep focus on the enterprise as a whole – administratively as well as academically. … With faculty members turning ever outward in pursuit of their own agendas and … paying less attention to the operation of the institution itself, administrative and professional staff ended up holding the institution together … providing the technical support for the faculty members’ expanding research efforts."

"… Each year, or so it seemed, there was less money to support research and instruction … The element that best epitomizes the nature and allure of the academy’s core functions, however, is the central library: … , a resource that belongs to no one and hence to everyone. Indeed, it is hard to imagine the central library as having markets or even customers, just as it is difficult to calculate a library’s productivity or to measure its worth in other than its own terms."

"Inevitably, however, the core has come to rely on the one income stream over which it has principal control: undergraduate tuition. … Even public institutions – particularly those with access to out-of-state students who pay higher tuitions – discovered the value of tuition increases substantially in excess of the underlying rate of inflation."

"When confronted with the prospect of reduced revenues – whether from declining federal support, diminished state appropriations, or reduced net tuition income – most college and universities respond by tightening budgets, deferring non-recurring expenses, and postponing the hiring of new faculty and staff. … Reductions in force remain the option of last resort, leaving most institutions with an ever-greater proportion of their budgets committed to the salaries and benefits of permanent staff."

"Questions about the balance between teaching and research are taking on a sharper edge. Who decides just how much is to be spent on research? What criteria are used to determine individual faculty teaching loads? If undergraduates are the principal source of unrestricted revenue at most of the nation’s colleges and universities, including the most prestigious, why are so many being taught by adjunct, part-time, and graduate student faculty? Why is the curriculum so specialized and confined to the faculty’s research interests? When businesses, school systems – even governments – are being asked to reinvent themselves, why are colleges and universities not engaged on precisely the same challenge?"

"Much of the educational innovation of the last decade has occurred at the center of the institution: the making of the curriculum to be more inclusive and diverse, the introduction of programs like writing across the curriculum, and the movement to design more meaningful programs of general education. … Taken as a whole, the 1980’s and 1990’s can be seen as a time of growing perimeters and contracting institutional cores, in which institutions become more fragmented, more dominated by the growth of entrepreneurial activities along their frontiers. The research ethos triumphed – the workings of the academic ratchet had reduced the institutional responsibilities exercised by many if not most of the institution’s most productive faculty. … "

"The processes that produce teaching and research also are sticky because faculty – particularly in the core disciplines and specialties – are valued for who they are as for what they produce. In economic terms, this intrinsic valuation of faculty means that utility is attached to both the inputs (faculty) necessary for a particular production process and the outputs of that process (teaching and research). … More formally, absent such valuation, even a not-for-profit enterprise would minimize the cost of producing a given quantity of outputs of desired quality so long as inputs were not included in its objective function. But such costs are not minimized when inputs – in this case, faculty – are valued for their own sake …"

"… Our concern, however, is with the process of change and its facilitation. … Teaching loads, for example, have decreased: majors have become more specialized: there is less emphasis on introductory and general survey courses and less structure to the curriculum in the sense of linking courses to one another through prerequisites. We suspect that teaching is research may also be less closely related as intellectual products, except when faculty teach their own specialized fields. More importantly, the practice of allocating expenditure to departments according to rules of thumb and then using departmental averages to associate costs with educational outcomes does not provide a means for estimating what it might cost to do things differently – to make better use of technology, change the academic calendar, or adopt a new pedagogy. …"

"… What ought to be simple and direct becomes convoluted and complex. … Every function becomes divided into ever smaller, more specialized parts. Layers of internal bureaucracy abound. Paper transactions multiply, while a commitment to process at the expense of substance seems to render even the smallest, best-managed institution incapable of making an expedited decision."

"Out of this mix of examination, criticism, and exhortation emerge three perspectives with which colleges and universities will have to contend during the next decade of longer. The first is the instinct on the part of many to let the market for educational services extract the necessary changes from the core. … A second way to change colleges and universities would be to use the powers of government to regulate the functioning of the market. … The third perspective argues that colleges and universities will likely face increased competition from other suppliers of postsecondary education. … Proponent of this perspective argue that there are alternate ways of delivering the product – learning experiences and educational credentials – ways that use telecommunications and distributive learning systems that could equal and perhaps surpass what is accomplished through lecture courses, recitations run by graduate students, and specialized courses more reflective of faculty interests than student needs. The development of high-speed, interactive video and computer networks will provide these non-academic entrepreneurs sufficient opportunity to test their ideas in the marketplace. … In such a future, functions would be more specialized, matching more closely the contours of particular markets that the core or perimeter may serve. This would be a future of greater fragmentation, in which value would less likely be attributed to the institution as a whole. …"

"Our alternative is for colleges and universities to remain both institutions and enterprises, capable of shaping as well as responding to the market for teaching and research. What we have in mind are institutions that, in responding to the market, learn to use … values that faculty as scholars bring to the enterprise as a whole. For such a partnership to work, however, three conditions would have to be met:

• an analytic framework that allows costs to be associated with functions, …;
• an effective tax system that allows the core of the institution to share the financial success of its entrepreneurial perimeter;
• a functional reduction in the costs of core functions by the purposeful substitution of activities and by the recombining and re-engineering of basic processes.

"To survive the prosper in an age of enterprise, colleges and universities will have to be more responsive to the changing market for research and learning, more willing to make service their mark of quality, and more successful in differentiating among separate functions like teaching and research. That said, the advantage the core always has is its ownership of the ideal of the academy – the fact that it alone can confer legitimacy and standing in the scholarly community. …"

[The purpose of these summary notes is to encourage you to read the original paper, if you become interested in this topic. The paper has more details than that can be summarized herein. For other summary notes, see http://lohman.tamu.edu under the heading "Summaries of Papers on Faculty Reward Systems."]

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