Tough Choices

May 1, 2002
Whether your college or university manages services in-house or hires outside firms, the goal should be improving operations.

At every college and university in the United States, students need to eat and buy books, buildings must be cleaned, and records must be kept. But who should be doing those things? Should a school provide those services with its staff because it knows its clientele best and has the greatest incentive to offer the best? Or should administrators seek outside specialists who have more expertise in specific fields and can provide services more efficiently?

There is no pat answer that will fit the needs of every higher-education institution. The decision to outsource or self-operate depends on scores of factors — the history and tradition at a school, the management philosophy of top administrators, the specific talents and experience of people working for a college, a university's financial condition, the availability of workers, or the aggressive marketing efforts of contractors.

Some schools may decide to outsource services so administrators can focus more attention on their academic mission instead of areas in which they have less interest and knowledge. Some may seek to privatize a few services; others may seek outsourcing for as many services as they can. Whatever path a college or university takes, it should pursue the option that offers the most efficient and effective services.

“There are no two campuses exactly alike,” says Diane Hardy, director of dining services at the University of Richmond (Va.) and president of the National Association of College & University Food Services. “There is no formula. It really boils down to the particular needs of an individual school.”

In or out?

Outsourcing services is commonplace on college campuses. American School & University's 7th Privatization/Contract Services survey, published in September 2001, indicated that 94 percent of colleges and universities outsource at least one service. But the survey also showed that schools might be loosening their embrace of contracted services. The percentage of colleges and universities that outsource five or more services dropped from 44 percent in 1999 to 34 percent in 2001.

Colleges and universities can cite numerous reasons for outsourcing or sticking with self-operation, but in most cases schools that choose to outsource believe outside management will provide better services more efficiently. In a 2001 survey conducted by the American Association of Collegiate Registrars and Admissions Officers (AACRAO), at least 70 percent of schools responding identified these issues as reasons to outsource: enhanced service, staffing constraints, budget constraints, response to student demand and access to technology.

But the National Education Association argues that whatever a school gains through more efficient operations is not worth what it takes away from a college campus. In a paper, “Privatization and Education Support Services,” the NEA argues that outsourcing harms education at both the K-12 and college levels.

“Privatization is a risky venture that endangers the quality of services and weakens the link between…higher-education institutions and the communities they serve,” the paper says. “We can ill afford to weaken the educational community by contracting out vital services to the lowest bidder.”

The AACRAO survey identifies other potential downsides of outsourcing: loss of employee morale, exposure to additional risks, higher costs because of poorly written contracts and inability to respond to changing needs.

Contract termination became an issue last year at many campuses when Wallace's Bookstores, which had operated as many as 90 bookstores, declared bankruptcy. Other vendors, such as Barnes & Noble, stepped in and took over many stores, while some schools indicated to the bankruptcy judge that they would self-operate their bookstores.

Also last year, Western Kentucky University in Bowling Green had to resume direct management of its health center last year after the company that had run the center for more than a year went out of business.

Specialized needs

Most schools are aware of the risk of contracted services, but as the services that colleges offer become more varied and complicated, a school might not have employees with the needed expertise to manage certain operations.

For instance, the University of Richmond self-operates its dining services, but outsources management of a campus coffee shop.

“I don't have the expertise to run the coffee shop, so this arrangement is best for us,” says Hardy. “At some point, we may be in a position to self-operate, but so far this has been very successful.”

Or sometimes, outsourcing is primarily a financial decision. Private contractors can entice schools short on cash with upfront money for facilities improvements.

In other cases the demands of students in a technological age have outstripped the ability of schools to keep up.

“The primary reason to outsource is to provide improved services,” says Kenneth Servis, dean of academic records and registrar at the University of Southern California. “Most schools aren't able to provide services 24 hours a day, seven days a week.”

Many schools have been reluctant to pursue privatization in the area of student records because of concerns about privacy. A university would be responsible if a vendor failed to ensure the confidentiality of student records.

“There was concern about whether outsourcing vendors would be able to follow the Family Education Rights and Privacy Act [FERPA],” says Servis.

The reluctance has begun to fade as more schools have gained experience with outsourcing certain student information. Servis says after several years of success using the National Student Loan Clearinghouse, “schools have become more comfortable with outsourcing as a possibility.”

Southern Cal uses outsourcing for transcript ordering, enrollment and degree verification, and diploma production.

Personal choice

What other factors make a college or university decide to test the waters of outsourcing? One of the most common reasons is change in personnel at a school, says Martha Love, information analyst with the National Association of College Stores. A new administrator at a school often arrives with a predisposition to seek out contracted services.

“A vice president of finance or a dean may come to a school from another institution where outsourcing was in place,” says Love. “That's what they're used to. That's what they know.”

In other cases, a school may lose a manager of a particular service area to resignation, retirement or death and the administration is left in the lurch.

“They may not have a designated number two to step up to the plate,” says Hardy. “Outsourcing may be able to provide the expertise they don't have on staff.

SIDEBAR: Pros and cons

The American Association of Collegiate Registrars and Admissions Officers has formed a task force to study outsourcing in higher education. Here are some positives and negatives the panel identified about outsourcing:

Reasons to outsource
  • Anticipation of cost reduction.
  • Increase in the flexibility to meet service demands.
  • Reduction of investment in capital assets.
  • Need to facilitate organizational change.
  • Reduction in the ability to attract highly skilled staff.
  • Benefits of economies of scale.
  • Access to new technologies, skills and expertise.
  • Management of periodic service demands.
  • Provision of specialized services.
Reasons not to outsource
  • Concern over data security.
  • Desire to maintain ownership and control of a process.
  • Intent to provide development opportunities for staff.
  • Desire to maintain personal relationships.
  • Concern about protecting and projecting the correct institutional image.
  • Desire to maintain currency in new technology and skills.
  • Concern about privacy issues.
  • Concern about cost.

Kennedy is staff writer for AS&U. 

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