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California Association of Private Postsecondary Schools

Laureate Looks Forward

05/21/2014

Inside Higher Ed. May 20, 2014.

In the 15 years since its creation, Laureate Education has become one of the biggest global players in higher education. While the privately held for-profit has faced a few regulatory setbacks in recent months, Laureate’s leaders plan to keep growing its international footprint.

Douglas Becker, Laureate’s chairman and CEO, conducted a rare, exclusive interview with Inside Higher Ed to reflect on the company’s expansion and what comes next. He also discussed where Laureate fits in debates over accreditation and for-profit education.

Below are highlights from the conversation, which can be heard in its entirety in this accompanying podcast.

Q. How are your arrangements with other colleges typically structured?

A. The first [goal] for Laureate was finding partnerships with entrepreneurs around the world, who had founded universities in many countries that needed more capacity for higher education. But in many cases these entrepreneurs realized they had taken their institution as far as they knew how. And they needed resources, financial capital, management and technology to help them expand and better meet the needs of their country.

So for many years, in the early years of Laureate, that was what we did: to go around the world to identify countries that we felt were experiencing the most severe imbalance of supply and demand -- who would really benefit from our assistance and support -- and find a partner in each country. And we would typically invest directly in the university as a financial partner and an operating partner with the local entrepreneur.

Q. You operate in 30 countries now, is that correct?

A. Yes, 30 countries, approximately 80 different higher-education institutions, over 200 physical campuses -- plus lots of students online -- and over 800,000 students currently enrolled in degree programs in accredited institutions around the world.

Q. Are your university partnerships about offering scale and resources rather than taking over control?

A. It has covered a wide range. In many cases the most valuable service they need is management, in which case we really do come in and take over and operate, if that’s what our partner wants from us. One of the things that we’ve found is when we talk to policy makers all over the world, there are many that feel that universities themselves could be managed better. And this is something we’ve found was a resource set that we could bring to the table.

But over time we’ve also now partnered with nonprofit institutions that don’t feel the need to be managed by us but want to avail themselves of services from us. We’ve partnered with public universities, including highly ranked institutions that want, again, not to have us operate them but provide services to them. And we’ve even partnered directly with government.

Q. Given that spectrum of partnerships, how does the Laureate brand work? Is it dominant? Or do the institutions retain much of their flavor?

A. That’s really essential to what we do. We have a lot of core beliefs and commonalities across all of the institutions. But they are fundamentally intended to be local in nature, and to be completely conscious of what the customer preferences are -- and the cultural differences and the regulatory requirements -- in their own country. And we think that’s best expressed by having their own identity. So each Laureate University has its own brand and identity. And in some cases the Laureate brand is added to that as an identifier -- a little bit like if you fly on United Airlines, you see that they’re part of the Star Alliance, and that conveys a sense of benefits of membership, but you’re still on United Airlines.

Q. Laureate has run into some controversy of late, most notably with a U.S. accreditor’s rejection of a proposed arrangement with the Thunderbird School of Management. Where do the challenges arise for you with regulators and accreditors?

A. The range of partnerships, and our flexibility in being able to pick the type of partnership that works best for the partner, has allowed us to really be successful in most cases around the world. And we’ve had partnerships with independent, highly ranked universities, like the University of Liverpool -- we’ve been partners with them for more than a dozen years now. So these can be very successful, scalable and where there’s a lot of respect for the differences between us and our partner. And it can work really well.

But Thunderbird would be an example of one where we just couldn’t bring it to fruition. And the accreditor expressed some concerns. I would just summarize that by saying everyone seems to agree that there’s an enormous need for innovation in higher education. But there’s no innovation without cost and risk. And we’re willing to incur costs and to take risks in order to do good things for institutions, for students, for societies. And we believe if we do that it allows us to advance our cause and success as a company.

But the regulators have to bear some cost and some risk as well. To the extent that they’re unwilling to do so, of course they hold the cards. They can stop it. But they can’t send both messages -- that there’s a need for innovation and that they have no willingness to bear costs or risk associated with those innovations.

Thunderbird’s accreditor -- the Higher Learning Commission (HLC) -- instructed them to address the financial challenges that the school had after years of declining enrollments. And they brought forward a bold and thoughtful plan that included a partnership with us. And then the accreditor says no -- or, "We have a lot of questions that will take such a long time to answer that Thunderbird won’t have the time to ever respond." So I think it’s inconsistent for those two messages to be sent.

Q. Critics of the Thunderbird deal lumped Laureate in with the rest of American for-profits. Is it helpful for Laureate to stand apart at times from more domestically focused companies?

A. HLC was right to raise standards and crack down on certain aspects of for-profit education. That was not just HLC -- but of course also federal policy, Congressional inquiries and discussions, and the Department of Education, all focused on remedying what they felt were very serious issues that needed to be addressed, in quality, in financial responsibility and in consumer protection. And I believe that all of those were needed. I believe that the industry as a whole, generally, really cleaned up its act, with the focus and attention that it’s received.

But from our perspective, we’ve always stood apart. Most of our work has been outside of the United States. Most of our work has been building universities that are more aspirational – that are higher-end. We have medical schools, and engineering and business and law, and levels of accreditation outside of the United States that are very, very difficult to attain. So I think we’ve been very different from the typically U.S. for-profit institution that typically focuses on the vocational education segment. And that’s why they’ve ended up with more vulnerable customers, higher default rates and a lot of the issues that needed to be corrected. But they also were serving a very important population that might not otherwise have been served.

So it’s a delicate balance. The for-profit sector has done a lot for ensuring access, especially for minority students in the United States. But I also think that there were plenty of errors made that needed to be corrected. And I encouraged at the time, and encourage today, regulators to continue to focus on that. However, I do think that the dialogue needs to move on now from what for-profit education can do better to what higher education can do better as a whole. And I really hope that the next round of efforts to lift standards will be a little bit more evenhanded in applying new high standards to everyone in higher education, and not just those that pay taxes.

Q. Would for-profits benefit from talking more about stratification in their sector?

A. It really depends on who are you speaking to. There are some people who are so fixed on the idea that there’s something inappropriate or bad about business getting engaged with education that you may never be able to change their mind. The thing that I don’t really understand about that is that almost all of the graduates of higher education are going to go on to work for business, in some form or fashion. And so to be organized as a for-profit company allows us to so well understand the needs of employers around the world. I think that’s become a huge advantage for us. But we do also have to recognize that that forces us to deliver at a higher level, in terms of outcomes. And to prove that what we’re doing isn’t just to make a profit. That’s why we’ve been very focused on outcomes.

We’ve been able to show very, very strong evidence that our students all over the world graduate at a higher rate than at most universities, get a job at a higher rate and end up with a higher level of pay for their work than other students who would graduate from a typical university in each of those countries. That ends up being a very powerful way of illustrating our value add, and maybe takes that moral debate out of the discussion and focusing more on outcomes and what’s best for students.

Q. Some of what you offer your partners is technology and scale. But there is competition out there, like Pearson and Academic Partnerships. How do you fit into this shifting landscape?

A. The range of services that we can provide is broader. First, we have the reach into the 30 countries where we operate. So our ability to understand students and what they need and how to reach them and how to give them what they want is very strong. So that would allow us to be potentially a great marketing partner to any institution in the world. Our ability to actually build and operate institutions -- physical institutions as well as online -- is a huge advantage.

Saudi Arabia would be a great example. We now have eight colleges that we’ve built and operated under a new model called the Colleges of Excellence in Saudi Arabia, with the government as our customer. And they’ve awarded more contracts to us than anyone else because of that track record and capabilities of the company.

Q. Do you see Laureate’s global reach expanding or pulling back in coming years?

A. I don’t think there’s so much pulling back. One thing that does happen from time to time is that we realize there may be some institutions where the support we need from the regulators, if it’s not sufficient, then we may have to pull back. But that’s pretty rare. What’s more likely is that we’ll continue expanding.