Cracking the Toughest Business Model of All: Higher Education

Becoming a college president today is a high-risk entrepreneurial venture that demands an unusual form of grit. Ivy walls and lecture halls may be charming, but keeping them standing requires business savvy infused with a genuine concern for the public good. 

Len Schlesinger has the perfect credentials. Currently the Baker Foundation Professor at Harvard Business School, he recently completed an impressive five-year run as the president of Babson College in Massachusetts, where he managed a major rebranding effort that he says left the school materially better “on every fundamental outcome measure.” 

Schlesinger came to the position as an academic with administrative experience and a businessman with a set of metrics that backed up his entrepreneurial teaching qualifications. But he says there were times when walking the line between the two sectors was tricky: “On a good day, I was a business person whose background was in academics. On a bad day, I was an academic whose background was in business.”

But Schlesinger says that higher education and business “are more similar than they are different.” In turning Babson around, he started with the revenue side of the puzzle, which he says was “easy to solve”:  Get enrollment up, build a better aggregate base of applicants, maximize use of the campus itself.   

The bigger success he helped marshal in, he says, was “highlighting the essential Babson difference” by focusing on the school’s entrepreneurial mission. That meant not trying to be great at everything, a mistake made by many struggling colleges that cannot seem to find their focus. 

“A vast majority of my peers in higher education have a very difficult time telling their story,” he says. “We spent a lot of time at Babson working on the positioning of the school from the mission statement on down.”

Another big challenge for colleges like Babson is justifying the cost of a residential-based education. For many parents, the hefty price tag is an investment second only to the purchase of a home. According to Schlesinger, Babson has helped parents to “engage in feeling good about the quality of this transaction” by showing them how entrepreneurial learning is allocated over a 160-hour week, not just in the classroom.

While some classic business strategies work in higher education, Schlesinger notes that it is still an archaic system that is highly resistant to change. The culture of shared governance among faculty, administrators, and trustees makes the process of transformation particularly complex.

In reality, Schlesinger says, not every aspect of running a college benefits from shared governance. He suggests that all parties pool their ideas at the beginning of an initiative, but at the execution stage, someone specific must take the reins.

“There’s lots of stuff that we do together, and that’s the stuff that’s very messy,” he says. “Every academic worth their weight has opinions about everything, and I want the opinions.  However, there has to be some place where things get integrated and decided. I get very nervous when people, by their very nature, trash hierarchy on ideological grounds.”

Egalitarian workplace theories that reject hierarchy demonstrate a “fundamental lack of logic,” he says.  “In all of these new organizational forms, I am strikingly confused about who calls the question and how.”

Having leaders and a process to support innovation is essential, according to Schlesinger, especially when survival challenges vary with institution type: universities with healthy endowments worry about loss of federal research funding, state universities contend with dramatic legislative budget cuts, and smaller, tuition-dependent colleges struggle every day to figure out “how to make it in this world.” 

For-profit institutions are an unfortunate anomaly in this mix, he says, because they turn a college education from a public good into a consumer transaction. 

At the same time, Schlesinger is not interested in romanticizing the liberal arts degree, especially when doing so denigrates the teaching of practical skills that students will need in the workplace. “The discussion about professional training versus liberal arts is a ridiculous question,” he says.

Worse, the question detracts from the positive evolution of a system that continues to deliver enormous benefit, according to Schlesinger, because on the broader landscape of higher education, “There’s lots to celebrate.”