Why the Business Model is not the Education Model

October 21, 2012 — 1 Comment

Educational reform is on the minds of many business leaders and several have weighed in with their concerns:

“We know we are facing a transition, and we must take this opportunity to provide today’s students with the tools and the thinking that is required for the future” ( John Chambers, Cisco Systems).

“….our high schools – even when they’re working exactly as designed – cannot teach our kids what they need to know today,” (Bill Gates, Microsoft).

“The fact is, too many graduating seniors are unprepared for what will be required to succeed in college or in the workplace,” (William G. Jurgensen, CEO, Nationwide)

These business leaders have every right to express their interest in improving education for the nation. After all, their businesses will require an educated work force. However, too often business leaders speak about educational reform using a business model that is radically different from the public education model.

Funding-Private equity vs. Tax Dollar

A business is funded by an individual or a group of investors, and additional revenue for a business can be added through profits, loans, or the selling of additional shares. In contrast, public school education is funded by taxpayers at the local, state, and federal level; ultimately, politicians control the purse strings for school districts. This manner of funding can be grossly inequitable: On the blog CT news.com, in 2011, Ansonia, Connecticut, spent $10,520 per student while the nearby district Region 9 (Easton/Redding) spent $18,426 per student that same year. Funding can often be capricious as tax revenues depend on the general economy and political agendas; funding can change annually with revenue that cannot be transfered year to year or invested. There are always political promises to reduce taxes despite rising operating and capital costs in educating our nation’s youth to develop 21st Century skills for our future workforce.

Business Loss-Cutting Poor Performers?

Another problem with using the business model for education is the business loss. A clear definition of a business loss is on Investopedia.com:

A business practice that seeks to detect, identify, investigate and prevent events that cause a drop in value of any of an organization’s revenues, assets and services. Loss-management improvements may involve changes in a business’s operating policies and business model in order to limit instances of accidental and/or intentional loss.

A business with a business loss must be flexible. A business may change operating policies (hours, locations, retail policies, purchasing policies, etc).  In contrast, a public school system that deals with a loss in funding or facilities or student enrollment cannot change hours, locations, or policy arbitrarily or with the speed that business has to react to changes in the market.  Furthermore, a business is free to drop a product line or drop poor performing employees. In contrast, schools cannot drop specific programs (core subjects of math, language arts, science, social studies) or poor performing students. Dropping poor performing students would certainly help test score results but that is not the purpose of public education. In this nation we  educate every student.

Competition-Winners vs. Losers

Business is built on competition and products and services go head to head for the public’s dollar. Economists believe that the market will crowd out inferior products and services using this competitive model. However, employing this model of competition in education would result in a tiered system of inequity. Education reform efforts to introduce competition have included choice through charter schools, but the results of these competitive efforts have not been any more successful than the efforts expended by the public schools. In the inital pilot study (2003) The National Assessment of Educational Progress (NAEP), considered  population differences and reported that “the mathematics performance of White, Black, and Hispanic fourth-graders in charter schools was not measurably different from the performance of fourth-graders with similar racial/ethnic backgrounds in other public schools.” The study also reported that, “In reading, there was no measurable difference in performance between charter school students in the fourth grade and their public school counterparts as a whole.” What this means is that competition with other schools is not a factor in school success. Furthermore, the students cannot be part of a competitive market with winners and losers if the goal is to educate every student. Every student must be a winner.

The Single Metric Test

A business with a single product is limited, so many businesses diversify.  Businesses measure success on products or services with monthly, quarterly, and annually produced data through a variety of measurements. Education in contrast is being forced to measure student achievement through standardized tests. Each standardized test “snapshot” is taken one day during a school year, and the results establish a school as being a success or failure. Reform efforts fron No Child Left Behind and Race to the Top exploit this one test metric. Judging a school with this system of measurement is like measuring retail business’s success by one day of sales. Many states are using these single metric tests for teacher evaluations. Would a company’s CEO be judged by one day’s stock price or a salesman by one day of sales? Additionally, the calls listed above ask for “tools and the thinking” that our business leaders want for their future workforce; an increased focus on single metric tests is not a solution for 21st Century skill development and critical problem solving.

Business leaders should have a great deal to say about education since they will be hiring the product of the nation’s education system. But the tenets of business do not match the tenets of education, and business policy does not always have a comparative counterpart in education. Public education is a very specialized institution and the reform of education must come from those who have both the training and classroom experience, beyond the just “being in the classroom” experience of many successful business leaders.

One response to Why the Business Model is not the Education Model


    A very good comparison of business and education. It is good to see someone argue so clearly the reasons that schools cannot successfully be run like businesses.

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