Why For-Profit Schools Must Stink

There are so many reasons to object to the privatization of public education, but it all comes down to the pie.

It's the financial pie, a pie that can only be cut into so many pieces. There's a reason that we associate top-notch private schools with rich folks-- every time a Philips Academy needs a bigger pie, they just pick up the phone to their rich parents and their rich alumni and before you can say "Summer at the Hamptons," the school is awash in newer, bigger pies.

Not so in public ed. The size of the pie is set by a combination of legislators and taxpayers, and that's all the pie there is. And that means that private operators, whether they're operating a voucher school or a private charter or one of those public-private hybrid charters (public when they want money, private when anybody wants to see what they do with it), your business model has to acknowledge one fundamental fact. (This includes "noon-profits" that are really for the profit of well-paid executives.)

Every piece of pie served to the students is a piece of pie that the operators don't get to eat themselves. Every cent they spend on students is a cent they don't get to pocket.

In privatized public schools, the interests of the operators are in direct conflict with the interests of the clients.

We already have examples in the marketplace of businesses with this same pie problem-- a human service industry where profit depends on providing the least service you can get away with.

Of course there was the health insurance industry. There's a reason that Tom Batiuk made a great joke out of calling an insurance provider "Denialcare." But the rules are in flux there now that ACA has come along to guarantee that every insurance executive will have a Lexus and a vacation home every American will have health care coverage.

So instead, let's consider the nursing home industry. Nursing homes have always faced a pie problem-- they have to provide service for human beings while trying to fund it with blood squeezed from stones.

This interactive map from 2010 shows ratings for US nursing homes. It doesn't look too bad at first, but if you use the features to knock it down by star ratings, it starts to look pretty awful. Of course there are some great nursing homes in the country, and not just the ones that graduates of Philips Academies go to when they get on in years. But a tremendous portion of that sector is 1, 2, or 3 stars.

Way back in 2001 the Kaiser Family Foundation conducted a survey about nursing homes. The breakdown of the info is pretty thorough, but some highlights include: For starters, 80% reported some knowledge of nursing homes. 80% believed the homes are understaffed.  65% believed the staff is undertrained, and 61% believed that there was a problem with waste and fraud in how homes were run.

Right now, polls about education routinely turn up the result, "American schools suck, but my neighborhood school is just fine." In the Kaiser poll, people who were directly familiar with nursing homes were MORE likely to believe some of the worst things about those homes.

But when you only have so much money to split up, your motive is to find ways to spend less. And if you are a service business, spending less means providing less for your clients. Cheaper service providers. Cheaper services. Fewer services. You are never asking, "What's the best possible service we could provide our clients." Instead, you are asking, "What's the cheapest possible service we can get away with? Where is there a corner we can cut?"

The problem with the profit motive in fixed-payment service industries is not JUST that those in charge can only make money by finding ways to spend less on their clients. The more toxic systemic effect is that those in charge are pushed to inevitably see their clients as their biggest obstacle rather than their primary purpose. We know that attitude is lurking just over the horizon anyway-- how many of us deal with a business manager in our district whose attitude is that it would be easy to balance the budget if we didn't have to spend money on all those damn teachers and students.

For-profit schools are powerfully inclined to stink because they must foster an adversarial relationship between the owner-operators, the clients, and the employees. All of that takes place in an atmosphere of scarcity, of "having to do without." Add merit-based pay in which teachers must compete for their piece of the pie, and you get a school "community" that is anything but supportive and collegial.

Can it be done? Sure. The map tells us the nursing home industry here and there is doing it. But entering the business is fighting a powerful tide. If you entered the business because providing the service is powerfully important to you, you will have to fight the tide, but at least you're motivated. But if you entered the business to make a buck or get good ROI, you are already swimming with a tide that is going to sweep away everything good about the schools you are running.