Administrative Bloat at Universities:

The latest edition of Minding the Campus has an entry by Mark Bauerlein, “Why So Many Administrators?”  The entry discusses a new report from the Goldwater Institute by Jay Greene on the astonishing rise in administrative employment and expenses in higher education.  From 1993-2007, expenditures and employment of university bureaucrats rose twice as fast as for teaching faculty.  Any professor who has been in the business for more than a few years will recognize the trends.

One intriguing element of this issue is that perceptions have yet to notice it.  Many observers believe that the problem with higher education is that universities are basically run by its employees–the faculty–and that the faculty’s interests are not aligned with those of the students who they serve.  But what Greene’s report hints at is a larger trend at work–more and more universities are run by their bureaucrats, not the faculty, and the incentives of bureaucrats are even more poorly aligned with student interests than the faculty.  University organization is so screwy these days, that even though faculty incentives are so poor, governance would probably be improved (at least in the short run) by empowering the faculty against administrators.

University administration has taken on a life of its own in higher education.  I actually published a piece a little while back in a symposium organized by Jim Lindgren which models university administration using the models of bureaucratic behavior that have been used to study political bureaucracies.  The article is “Institutional Review Boards as Academic Bureaucracies: An Economic and Experiential Analysis.”

Jay focuses on the role of government subsidies in feeding the bloat of academic bureaucracy.  That seems plausible to me.  The other factor that strikes me as perhaps relevant is that during most of that period university endowments grew at record rates.  This essentially gave university presidents and their minions a huge slush fund to play with without actually having to raise new funds from alumni.  This created a growth in agency costs for senior university administrators.  Finally, this allowed universities to continue giving raises to faculty while expanding the bureaucracy even more.  Thus, the growth in bureaucratic spending was not coming out of a zero-sum pot, so that faculty were not monitoring the growth in the bureaucracy as much.

Finally, I suspect this might also reflect the developing model of university president as CEO.  As university presidents have come to be more like CEO’s of universities, their entourages have grown as well.  Universities have come to take the look of a top-heavy bloated corporation like General Motors, with Vice-Presidents layered one atop the other.  In a world of lax budget constraints owing to flush endowments, it is easier to fritter away resources on unproductive bureaucrats and internal empire-building.

The acid test, of course, will be whether the financial downturn will lead to the scaling back of these bureaucratic empires.  Ironically, it appears that one of the Obama Administration’s priorities is to funnel more money into higher education–which will reinforce exactly the sorts of pressures that Greene highlights.  Higher education almost perfectly converts subsidies (whether direct or aid to students) into higher prices.  With no real reason to expect that those subsidies will be used to promote better substantive outputs instead of internal agency costs.

More generally, I think that for some time academic reformers have focused on issues like tenure and other elements of faculty governance in thinking about reforming higher ed.  But this growth of administrative bloat is a whole new issue and one that might prove more difficult.