In the rush to move courses online, the revenue-share model offered by online program management providers encourages a standard approach that often misaligns incentives in ways that put scale ahead of quality and revenues before outcomes.
Most OPM providers don't have the economic resources or expertise to tailor instructional design for a particular institution, program, or course.
Colleges and universities have opted into revenue-share agreements for reasons rooted in mythology more than reality, as the five myths in this article illustrate.
I have a confession to make. Over a period of five years, I helped dozens of presidents and provosts design, launch, and market online degree programs. Nearly all were funded through agreements that required the university to share in excess of 50 percent of their tuition revenue in order to develop, market, and enroll students in their online programs.
Over the years it became evident to me that in the rush to move courses online, the revenue-share model encouraged a cookie-cutter approach to online learning that, all too often, misaligned incentives in ways that put scale ahead of quality and revenues before outcomes. The dean of a top 20 business school once put it to me this way:
"I'm not giving you 50 percent of revenue and I don't need all of your services. It sounds like your primary value proposition is marketing support. Building high-quality offerings and providing thoughtful instructional design support to our faculty is what is most paramount to us, not scale. I need to be able to select the services I need on an a la carte basis and pay you a fee for that service."
It wasn't clear to me at the time that online program management (OPM) could be unbundled. And it wasn't obvious that, even if it could, there was a better way for colleges and universities to design and launch higher quality online courses. "Next generation" courseware wasn't a thing yet, and the pedagogical shifts it might enable were in their infancy.
In recent months, the OPM model has come under fire — in some cases, with good reason. Although educational technology company 2U reportedly invests upwards of $10 million in the development of new online programs, most providers don't have the economic resources or expertise to tailor instructional design for a particular institution, program, or course. And higher education institutions have opted into revenue-share agreements for reasons rooted in mythology more than reality, as the five myths that follow illustrate.
1. One Size Fits All
OPMs tell universities they need the whole package. But the outsourcing of program design, marketing, enrollment, retention, and operational support is only a good fit for a small portion of the market. Just 12 percent of higher education institutions actively partner with one of the nearly 35 OPMs in the market today. Some institutions have the instructional design capacity to design and launch high-quality online courses, but lack digital marketing capabilities to take them to scale. Others need back-office support to manage enrollment.
The OPM model works because higher margin parts of the bundle (like marketing and enrollment services) offset the cost of program design. But margins, in turn, put pressure on most OPMs to simplify and routinize the process of putting courses or programs online. Although not inherently at odds with quality, revenue-share agreements to fund online programs have not been tightly coupled with the sort of personalized approach to learning and instructional design that typifies the highest quality online courses.
2. Free Money?
Part of what makes revenue share agreements so tantalizing is the allure of enrollment growth without an increase in fixed costs. But higher education institutions often overlook the fiscal and administrative pressure that OPM arrangements put on human capital. Institutions typically absorb costs associated with new faculty hires, load reductions or overload pay, and course development stipends. Most colleges and universities also bring on operational capacity to lead the partnership implementation as well as provide additional back-office support.
Think also of the intangible costs. College and university administrators often expend massive political capital to push through OPM initiatives. If institutional buy-in falters throughout the ranks, administrators can lose faculty trust and damage working relationships, which can stymie the potential of other new initiatives.
3. All Programs Are Created Equal
For colleges and universities considering an online experiment, underperforming programs often seem the most appealing. They create the lowest risk of cannibalizing face-to-face enrollments and can expand an otherwise limited audience. OPMs are, in many cases, more than happy to reinforce those assumptions. Why? Only a few programs have proven lucrative for OPMs, such as nursing, master of education, or master of business administration. The latest darlings include the master of science in data science or data analytics. Masters of leadership or bachelors in interdisciplinary studies rarely scale online. But in today's hyper-competitive environment, providers take on low performers to gain access to the programs that scale — because just one high-demand program can recoup all their losses associated with the others.
Providers know that once an institution is locked into a long-term, binding contract (often at the expense of massive social and political capital), it becomes difficult for the college or university to back out of the arrangement if enrollments underperform expectations.
4. Instructional Design Is a Commodity
At most colleges and universities, technology is not yet a strategic priority. Lack of capacity and familiarity with technology create operational challenges that make outsourcing the development of online courses and programs appealing. But most OPMs maintain only tiny instructional design staffs and put the onus of the work on the institution's faculty.
Faculty suspicion of revenue-share deals stems, in part, from concerns about academic integrity or commercialization of their intellectual property. But faculty also know that building a course, even with instructional design support, can take 80 to 100 hours. Most providers don't invest in instructional design because the underlying economic arrangement doesn't reward them for tailoring their approach to a particular college or university. Enrollment, not instructional design, is the lifeblood of the arrangement for both the institution and the provider. As a result, most of their resources go into marketing as opposed to designing highly effective online programs.
5. Online Is the Only Way to Go
The OPM model depends on online enrollment to drive revenue growth, and yet institutional objectives might be better served by a blended or hybrid approach to online learning. Today, more colleges and universities are looking to blended and flipped classrooms to serve their "traditional" student body, who increasingly want a technology-infused educational experience. OPMs have always focused on the nontraditional students, who typically are more inclined to take fully online programs. Institutions would be crazy to share revenue for programs that support their existing student population.
Blended or hybrid programs don't fit well with the OPM models out there because of the geographic restrictions those requirements create. Online scales. Blended modalities that might complement existing initiatives or improve outcomes typically run counter to the revenue generation that OPMs hope to create.
So — now what?
Critical Questions and Vision
Partnering with an outside firm to design and launch online courses requires a high level of operational complexity in which both the institution and the provider become intricately interwoven into the fabric of each other's organizations. Despite the surface-level similarities, colleges and universities tend to have distinct cultures, goals, challenges, and opportunities. The variability among higher education priorities and approaches often creates friction in an OPM market where uniformity and consistency drive profitability.
College and university leaders would do well to engage campus stakeholders early on, ask critical questions, and articulate their unique vision and goals to the provider rather than wait for the provider to articulate that vision for them. Vision alignment is paramount. Trust and transparency are mission-critical. Is quality the primary objective for their online program? Or is it scale? Is it important to maintain a certain level of control? Do faculty have the comfort, appetite, readiness — or time — to transform a course into an online environment?
Independent financial modeling is critical. How — and when — can an institution expect a return on its investment? Does independent market research confirm demand for this program? Is the program set up from a pricing and flexibility standpoint that will make the program appealing to students? Is break-even enrollment clearly attainable?
Economic modeling should present institutional leaders with an apples-to-apples comparison that considers long-term economic returns on the short-term investment. Thoughtful planning has led some savvy chief financial officers to explore alternative sources of financing, including short-term debt or hybrid loan-grants from alumni to cover start-up costs but allow an institution to capture more value over the long term. The answers should inform your decision not just about which provider but also which business model is the best fit for your institution.
Student Centric, Faculty First
The sustainability of a program ultimately hinges on the quality of the learner experience provided and the associated student outcomes. Student-centered design is increasingly canonized in lists of effective program development practices with few, if any, dissenting voices. In short, the student should be treated like the end user, and considerations around the learner experience should influence course and program design. In theory, this makes intuitive sense, and dedicated educators agree on the concept.
In practice, a strong focus on the student can increase faculty trepidation around taking their courses online. Faculty might worry about the associated workload, the technologies involved, and the effectiveness of the underlying pedagogy. Do not increase that concern by making faculty feel they are locked in a zero-sum game, where students get better education only at the expense of increased faculty time. Instead, adopt a faculty-first design process, where faculty understand that moving online is a strategic imperative, feel that their concerns are being heard and their time valued, and appreciate that the institution is investing in support to help them create the best courses possible for their students. Putting faculty first in the process is about helping to demystify online education by airing questions and concerns early in the process. It is about reducing a vast set of overlapping options to a tractable list of sequential decisions over which faculty feel in control. It is about freeing your faculty to focus on their students.
Outside providers should bring instructional designers and academic resources to the table who speak the same language as your faculty and can play a helpful role in translating institutional vision and sharing feedback. They should tell you if they see a need to correct direction or build additional consensus (or, at least, an initial coalition of the willing). Though you might feel you needed successful online programs yesterday, find a partner who does not pressure you to move too quickly. Successful programs are developed, not "launched." It is crucial to establish proof of concept in a positive fashion so that the initial faculty members involved can engage effectively with their peers about their experience.
Investing in faculty and providing them with the highest level of support will help ensure a better design experience. Better yet, it also provides the space for thoughtful discussions about what will create the best experience for students and can establish a foundation for the success of your online and blended offerings over time.
© 2017 Paxton Riter. The text of this article is licensed under Creative Commons BY-NC-ND 4.0