Between efficiency and effectiveness: evaluation in for-profit education organizations

Download PDF As the education policy landscape shifts toward a system of outcomes-based accountability, evaluation and research have grown increasingly vital. This is especially true for for-profit education firms, which must overcome skepticism, scrutiny, or even outright hostility in a field that has long been suspicious of the profit motive and where the bottom line is directly influenced by public perceptions of effectiveness.

This paper describes how these for-profit organizations view evaluation work, what they choose to focus on and why, the assets and capabilities they bring to the work, and the challenges they face. It also explores the question of how to encourage transparency and rigor in the evaluation practice of private enterprises while allowing them to do what they do best—innovate and attract investment.

How the Profit Motive Shapes Evaluation Practice. Though for-profits and nonprofits approach evaluation similarly, they differ in two important ways. First, whereas many nonprofits and public agencies operate on a fixed revenue model, for-profits do not. Second and related is that for-profits either earn more than they spend or go out of business. For-profits, then, face a unique set of challenges with evaluation. Questions of implementation and fidelity can cause these firms to hesitate to commit to independent evaluation; additionally, many customers of for-profit education services do not rely on third-party research when making purchasing decisions, leaving these firms with little incentive to commission independent evaluations of their effectiveness.

For-Profits, Nonprofits, and the Accountability Landscape. Changes in the education policy environment are raising the profile of evaluation work focused on the private sector. But when it comes to private-sector engagement in education, significant differences exist between types of companies. Supplemental service providers compete with one another and are decidedly not trying to put school districts out of business. By contrast, enterprises that actually seek to operate schools (whether in K–12 or higher education) directly compete with public school districts or state colleges and universities. These providers recognize that, appropriately or not, the public sector does not regard them as benign, and they see increased (and, in some cases, special) scrutiny at least in part as a response to this perception.

Using Evaluation to Promote Efficiency and Effectiveness. While for-profits’ approach to evaluation depends on which sector of the education market they occupy, most companies have two common characteristics. First, for-profits focus on the customer experience and satisfaction, resulting in an evaluation approach that emphasizes ongoing user or customer feedback to drive product improvements or management decisions. Second, they emphasize measures that capture academic performance in relation to operational efficiency; they use evaluation to identify how they can get better results for their students but also consider whether they could get the same results with fewer resources. In an era when schools, districts, state universities, and community colleges face relentless pressure to cut budgets and public disaffection with schools is high, we can learn something from these two areas of emphasis. On the other hand, the lack of rigorous, third-party evaluation of many for-profit operators raises concerns about how prospective consumers should make informed decisions about whether to purchase their products or services.

Policymakers can do four things to help promote evaluation that retains a focus on both efficiency and effectiveness: (1) grant increased flexibility to schools and systems for managing resources; (2) establish policies that more closely align incentives for educational and financial performance; (3) at the K–12 level, reward schools more for performance than enrollment; and (4) develop policies to encourage states and school districts to weigh rigorous evidence more heavily in decisions about resource allocation and contracting. Together, policies such as these would increase the quality and use of evaluation data both inside and outside education’s private sector.

Matthew Riggan (riggan@gse.upenn.edu) is a senior researcher at University of Pennsylvania's Consortium for Policy Research in Education.