Over the years, state appropriations to public institutions have been reduced (Cheslock & Gianneschi, 2008). Institutions struggling to fill the gaps caused by a reduction in state appropriations may look for external sources of revenue to meet budgetary needs. Entering into commercialization agreements with for profit corporations can provide needed sources of income to higher education institutions. Commercialization includes outsourcing services in exchange for a commission paid to the institutions for services such as bookstores, dining services, vending machines, copy services, hotel services, and athletic sponsorships such as naming rights, media rights, etc. However, commercialization of the campus can be problematic. As more external funds are generated the demand for those funds increases causing cost disease (Archibald and Feldman, 2011). For example, additional faculty may be hired with those funds, new programs developed, scholarships granted, etc.
Additionally, commercialization of a campus may damage an institution’s reputation (Bok, 2003). Institutions concerned about their image may find that the commercial providers of services can enhance or detract from the image the institution wishes to portray. Potential issues include the reputation of the company that provides the service and/or the quality of the service delivered to the institution. Further, ethical concerns may arise. For example, at the University of Central Arkansas the contract with its food service provider included a $700,000 donation in its contract for use as renovations to the University President’s home. It is reported that in September 2011, the Board of Trustees decided to buy out the rest of the President’s contract because it felt the donation was misrepresented as a gift (Arkansas News Bureau, 2011).
Corporate entities are in business to provide services but they also are in business to maximize profits. There may be tension between meeting the service levels demanded by the institution and efficiently providing service at levels preferred by the corporate entity. Policies can be established that allow the institution to regulate services levels of the outside provider. Although these issues exist, institutions facing reductions in state appropriations cannot afford to overlook the potential of revenue that can be generated by outsourcing auxiliary services if they are appropriately managed.
To reduce the need to commercialize functions to generate additional revenue, institutions should work to reduce the need for additional income by focusing on improving internal processes, reduce inefficiencies, and improve quality (Martin, 2011). Finally, focusing on recruiting and retaining students, and/or returning outsourced services back to the institution may serve to close the gap in the needed funding and thus reduce the need for corporations to provide external funding to the institution.
References
Archibald, R. B. and Feldman, D. H. (2011). Why does college cost so much? New York, NY: Oxford University Press.
Arkansas News Bureau (2011). State police asked to probe Aramark contract with UCA. Retrieved from http://arkansasnews.com/2011/09/22/state-police-asked-to-probe-aramark-contract-with-uca/.
Bok, D. (2003). Universities in the Marketplace: The Commercialization of Higher Education. Princeton, NJ: Princeton University Press.
Cheslock, J.J. and Gianneschi, M. (2008). Replacing State Appropriations with Alternative Revenue Sources: The Case of Voluntary Support. The Journal of Higher Education, 79 (2), 208-229.
Martin, R. (2011). Commercialization is not the problem. Retrieved from http://www.insidehighered.com/views/2010/11/19/martin.
The President takes the fall for the image of the institution because the board wanted to act as if they were unaware of a $700,000 kickback.....Wow!!!
ReplyDeleteBeyond the idea of image is everything, it is more important to understand that colleges are in the business of education, not in the business of being food service vendors, bookstores and quick-stop markets. Let's let Chic-Fila make the chicken sandwiches and let's focus more on educating the students in class.