Blog: University of Phoenix Layoffs Set a Cold Projection for For-profit Education

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By Kevin Kuzma, Editor

Without apology, these changes occur in corporate America. Layoffs come, sometimes, before Christmas. They are announced informally on conference calls by publicly traded companies. Investors and the media react accordingly with a focus on the numbers, not necessarily with a mind for the individuals who will be looking for work in a sluggish economy.

The investors are concerned mostly with how a massive layoff affects their portfolio. They make their analysis -- or pay someone who can make it for them -- and shift their money so they can make a profit elsewhere, and then they're done with the matter. The journalist is concerned about getting the number of layoffs correct or close to the same ballpark. If the number is substantial enough, then it’s rounded off and makes its way into the headline. The larger the number, the greater the readership and, so it’s thought, the greater the importance of the story.

Everyone has their own interests in what transpires. We process it through our own lens, and move on. My interests here are not of the sentimental kind. As I write this, it’s not yet December. While there is a dusting of snow falling pointlessly from the clouds, my mind isn’t grounded in the holidays. I am actually looking further ahead. I’m more concerned about yesterday’s announcement of 700 layoffs at the University of Phoenix (UOP) and what that implies for the coming year and the Department of Education’s looming gainful employment rule.

The UOP layoffs, which were system-wide, are tied to Apollo Group’s expectations for 2011. Those expectations are based on recent performance. The company anticipates new-student enrollment to drop about 40 percent during its most recent quarter, which came to a close yesterday. Earlier this year, UOP began dramatically overhauling its recruiting practices in a move that was at least partially related to Senate hearings and a related secret shopper sting that shined a light on aggressive recruitment practices. As part of its new approach to recruitment, UOP introduced a free, mandatory three-week orientation program into its enrollment process to benefit students with minimal (if any) college experience.

The Department of Education also introduced 13 new rules that altered the way for-profit colleges were allowed to pay recruiters. In this round of rule changes, admissions counselors were prevented from receiving compensation based on enrollments.

Remember, in June 2009, UOP boasted its highest enrollment numbers ever and set a new revenue record with its first billion dollar quarter. With new oversight in place from the government, a little more than a year later, UOP is cutting jobs and a dark tone is being set for what’s to come in 2011 among the larger school groups in the for-profit sector.

This is definitely “change” as our president touted in his campaigning for oval office. What I don’t see is the “hope” he touted or the job creation that he promised through the government’s multi-billion dollar investments in the economy. Given the results of the Government Accountability Office’s (GAO) sting, it’s obvious UOP needs to bring about its own change. But shifting students away from UOP or any other for-profit school isn’t going to take the focus off the bottom line in education or somehow better education delivery. Where’s the upside to sending the potential students impacted by the 40 percent drop in enrollments to more “traditional” colleges and universities – if those students are in fact enrolling in other institutions?

Those numbers will likely come in another board meeting, more than likely a private one with university presidents and other administrators who answer to their own boards. You see, education is a bottom-line business just like any other. As much as you hear it, as much as public schools would have you believe otherwise, we’re seeing the changes in for-profit education because the traditional college budgets weren’t showing any profit. That’s the reason for the Senate investigations. That’s the reason for the Department of Education’s gainful employment push.

We’ve seen, in recent months, signs of the Department of Education working with and even possibly favoring short sellers in the release of rule-related information. Republican senators Richard Burr and Tom Coburn are looking into the matter with their own investigation based on public records. If you’ve wondered what the impact from a coordinated attack against a single sector of higher education might look like, it’s lost jobs and students being directed elsewhere.

This many employees aren’t let go without a look toward the future. Apollo is envisioning a sector overcome with significant change. A negative precedent has been set. The Department’s new rules are working according to plan. UOP is realigning itself for a new philosophy. The economy isn’t showing any sign of improvement, nor have the elected powers-that-be proposed any reasonable means for bringing positive change.

The Department of Education is delivering on the Obama administration’s promise for change. They are advancing an agenda according to their own perceptions. You might feel the job cuts at UOP were warranted given the GAO’s investigation. How much the smaller schools stand to be affected remains to be seen. The department’s gainful employment rule will hurt them if the rule is passed without substantial revision by eliminating much-needed programs. They aren’t underestimating the department’s power. Not now. We’ll know in January if the Department is indifferent to whom it blows over. What worries me is that the cold always turns more vicious as winter advances.

Sources: 
Kevin Kuzma

As someone recently impacted

As someone recently impacted by these layoffs (along with our entire department) and promoted less than 6months ago, I appreciate this candid yet non-hysterical review of what occurred with Apollo Group recently. To be fair, and as you touched on, is still occurring with Apollo and I suspect will likely continue to happen with the current business map.
I do believe some of the educational standards that are now required are definitely steps in the right direction, but it is important [for our government] to take a hard look at whether the more drastic elements are in fact going to have any long term, lasting benefits as certainly the short term has not been particularly pretty. My sincere hope is that there will be some revisions and reconsideration for all educational institutions not necessarily segregated to for-profit alone and with realistic measurements for the current economy as well as quality of students being produced by our high schools.