For-profit? Charity? In the market, they'll act the same

Competition for 'share' will dissolve institutional difference, Deloitte claims. David Matthews writes

November 24, 2011

Distinctions between charitable and for-profit universities will disappear as all converge in the pursuit of "gaining or retaining market share", the head of education at consultancy firm Deloitte has claimed.

Julie Mercer said that private investment in universities and for-profit entrants to the sector were not a threat to the academy's mission because institutions would see a "convergence of behaviour, whether they are charitable or for-profit".

"I don't think it matters what kind of institution you are: you need to know your market and...target your marketing and your offer appropriately," she said. "What drives all of them is gaining or retaining market share."

She added: "The reality is that every single one of these institutions will be competing for students...so I think you will start to see some different behaviour from universities.

"Let's not kid ourselves that universities don't see themselves as commercial organisations: they do."

Sally Hunt, general secretary of the University and College Union, said that Deloitte should know that there was "a fundamental difference between a higher education institution whose primary goal is to provide education and a company whose first allegiance is to its shareholders".

"The only colleges being sued for fraud by students and the government in the US are those run for a profit because education can't safely be run to make a fast buck without degrading the product," she added.

Universities UK said in a 2010 report, The Growth of Private and For-Profit Higher Education Providers in the UK, that public institutions "have to operate in a businesslike manner and make 'profits', but their key motive is to promote the public good".

The "key distinction" was that while both types of institution make surpluses, those of the for-profits "flow into the private hands of shareholders" rather than being invested in capital funding and expansion.

Ms Mercer said that private equity companies saw UK higher education as a "beautiful swimming pool that everyone wants to jump into", but no one wants to go first.

She said that investors were looking to fund the expansion of postgraduate and international student numbers because they were not limited by number controls.

This might occur "if, for example, a university had a great brand around postgraduate qualifications, and an investment enabled [it] to grow and attract more students".

Ms Mercer argued that investment had to go to areas "that are not in the regulated system", which could also include areas such as innovation and intellectual property.

With private equity, "what you're starting to see is not [investment] in whole institutions but an aspect of that institution", she said.

Investors were keen to put money into the sector because "the political door is open; the ambition is clearly there".

david.matthews@tsleducation.com.

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