NONPROFIT QUARTERLY: Blurred Lines: Universities Experiment with For-profit, Nonprofit, and Other Hybrids

Career College Central Summary:

  • Most people who know of Alliant International University (AIU) would regard it as a small, primarily graduate and professional studies university serving approximately 4000 students in several campuses throughout California and one site in Mexico. If asked about AIU’s corporate status, students or those otherwise knowledgeable might not know, or would guess the traditional answer of “nonprofit,” the legal status that has predominated most universities’ structures since the start of higher education in the United States. Until recently, that would have been true. Then, AIU decided it needed to switch from a nonprofit to a “public benefit corporation” (PBC), a growing legal designation designed for for-profit entities that have missions that serve the public good.
  • How AIU came to the strategic decision to switch its legal status may reveal how seriously other universities are considering a similar move. AIU is the result of a merger of two other universities in 2001 and, like other universities, has seen some volatility over the last several years. An article in Inside Higher Ed describes AIU as having “no endowment to speak of” and, according to President Geoffrey Cox, the university, like most tuition-dependent colleges and universities, has a business model that is “‘pretty well broken’ for the long term.”
  • To address this brokenness, Cox stated that AIU “did what it could to expand its programs, and it tried some other creative strategies, like selling and leasing back one of its buildings. But those were all short-term approaches, not structural changes that might let Alliant raise enough money to ‘keep tuition prices as reasonable as possible, invest in innovation and make our programs available to more and more people.’”
  • The strategy of switching to a PBC to alleviate its previous issues came about less by a strategy from AIU and more by being acquired by a private firm—Arist Education System, a new firm created by the University Ventures Fund and financed by the German media company, Bertelsmann. According to the article, Arist’s mission is to “fill the need for a new generation of health professionals who can work effectively in the integrative teams (of doctors, nurses, pharmacists, social workers, etc.) that many hospitals and health systems are now embracing.”
  • In leading efforts like AIU and thinking of PBCs, Arist believes that universities should “focus intensely on student outcomes—and…that is likeliest to happen if the universities’ social mission is ‘enshrined and protected’ in their structure and organization,” according to Arist’s strategy head, Douglas Keiller. By choosing the PBC route, Alliant “can take in the private funding it needs to improve its student services, pedagogical technology and international reach while committing publicly to keeping its mission and public purpose foremost.”

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