I hope you have been reading the 10-part series of articles “The Tuition is Too Damn High” about the cost of higher education in The Washington Post. The author, Dylan Matthews, dissects the prices and costs at the various types of higher education institutions.
In the concluding comments section of Part III, the author says: “If tuition increases are going to stop, most public schools need to figure out a way to get the money they were once getting from state government without jacking up prices.”
This is typical of conventional way of looking at things. If $100 is cut by the state, then the university needs to raise $100 elsewhere. That’s ridiculous. There is no discussion in these articles thus far of the desperate need to improve administrative and academic processes as a means of reducing costs (and simultaneously improving quality, etc.).
Cost are subordinate to processes. Processes are not subordinate to costs. In other words, processes create costs, costs do not create processes. Yet the discussion always remains at the budget (cost) level, and never gets down to the process level.
Part V of the series correctly debunks “Baumol’s cost disease as the driver of higher tuition in higher education. I’ve blogged previously about that; you can read it here.
Part X concludes as follows:
“For public colleges offering master’s and bachelor’s degrees and for community colleges, the problem is simple. Spending has not increased much at all, but tuition has. There’s been a straightforward shift from financing based on state spending to financing based on student tuition. To get tuition down again, some other entity is going to have to fill the gap left by state cuts.”
Yet, there exists a more general problem related to leaders and cost reduction, and not just in higher education. That is, leaders are not good at cost reduction, as The Washington Post articles illustrate. Their first response to cost problems is the “hat trick” or some variation: lay people off, close facilities, and squeeze suppliers, and invest in expensive new technology to improve labor productivity. “Any idiot can do that,” as one of my kaizen sensei’s told me long ago.
In my graduate course on Lean leadership, students are assigned the critical thinking task of determining the root cause of the question, “Why are leaders not good at cost reduction?”, using the 5 Whys method. Why don’t you give it a try, and see what you come up with. I’ll get you started:
Why #1: Why are leaders not good at cost reduction?
– They do not know about waste, unevenness, and unreasonableness
Why #2: Why don’t leaders know about waste, unevenness, and unreasonableness?
– (you take it from here)