Op-Ed: ‘The Business Model’ and Schools

In the state of Texas, if a school district wants to raise operating funds by raising the local tax rate, they have to go to the voters. Public schools in Texas are the only taxing entity that have to ask for voter approval any time they wish to raise taxes.

Of course, in lean times and even good times, most people do not want to have their taxes raised, so school districts must either live within their ever shrinking budgets that will not increase (even if costs do), cut programs or personnel, or figure out some way to convince voters that a tax increase is in their best interest.

Increasing taxes is easier in cities that are property rich –  where the “hit” to the pocketbook is not as pronounced, or where the local population values education. Unfortunately, the two go hand in hand, so it is easier to convince areas of better socio-economic status to raise taxes than distressed areas because they are more likely to have more people that have advanced education degrees and see the value of education. In this case, the rich get richer, the poor, well, they just stay that way.

When an education tax increase fails in Texas, the hew and cry from the local population sounds something like this:

“Districts need to live within their budgets.”

“Schools need to cut back, we had to, so should they.”

Or my particular favorite: “Schools need to adopt the business model.”

“Adopting the business model,” means that public schools districts should try and emulate what businesses do. “Live within their means” is often used by anti-tax advocates, which of course, is NOT a business model at all. (If businesses wish to raise funding, they sell more shares, or raise the price of their products.)

“They have to be frugal.” the person will say. “We are taxed enough!”

A business has to make sure that income covers outgo and of course, and a business must compete for customers.

Fair enough. I sort of see that, and on a simplistic sound-bite kind of way, it makes sense. But that made me wonder, exactly how successful IS that “business model” that we are so proud of, that many tout as the “way to run schools?”

Let’s look first at some statistics from Australia: According to the Australian Bureau of Statistics in all of Australia, beginning in 2013, there were 2,079,666 businesses operating.

Of that group 1,322,342 survived to 2017, or a failure rate of just about 36%, more than 1 in 3. The survival rate for business actually starting in 2013 was even worse, with close to 50% not making it until 2017. I don’t suppose the “business model” for Australia is much different than it is anywhere else.

So, you say, that’s Australia. What about the good old U S of A? We are the seat of capitalism, the heart of democracy, the center of all things consumer oriented. Surely things are different here!

According to the US Bureau of Labor Statistics, about 50% of businesses with employees survive the first five years. Did you get that? 50% failure rate. One of two businesses close within five years. Within ten years? Only 30% of those original businesses still are open.

The failure rate of US businesses over 10 years is 70%. And that is consistent over decades, good times and bad, recessions and booms. The business “model”, the one that many want educational institutions to follow is one of failure.

As an example, the US Department of Commerce reported that in 2008, 627,200 businesses opened in the US. In that same year 595,600 closed. Statistically speaking, that is almost very close to every business that opens, one closes. That is the “business model” at work. I wonder what would happen if one out of every two schools in the US had to close because we couldn’t “attract customers?”

Yes, there are a few businesses that survive over the course of decades, but they are outliers, not the norm. For every Ford Motor Company, there were thousands and thousand of businesses that could not last, despite the use of the “business model.”

What about titans of industry? Those businesses that are were icons of their times, too big to fail?

Pan Am–Closed–Couldn’t attract customers

Kodak – Closed – Could not change with new technology

Bethlehem Steel –Closed –Couldn’t keep customers or adapt

Polaroid –Closed –Couldn’t attract customers, victim of new technology

Just last week, Toy-R-Us announced they’d be shuttering all of its stores. Once the go to place to get toys in the US, it died a slow painful death. We are watching the once mighty SEARS in a slow-motion death spiral as well, pulling down K-Mart with it.

The once invincible shopping mall is headed towards the dustbin of history as well, and with it, all the stores that relied on that model.

The above list goes on and on. Think how many non-franchised restaurants and bars in your town have lasted more than ten years? Not many.

Yet, this is the model that many people want education to follow.
“Education needs to follow the “business model.” they say.
“Education needs to compete for customers.”
“The income needs to match the outflow.”
“We should run schools like a business.”
“They should hire a business person to run that place!”

Perhaps we can follow the Enron Business Model which caused the near collapse of the energy industry and gouged consumers and investors of billions of dollars. Or the British Petroleum Model which was unable to deal with a giant ecological disaster of their own doing costing them tens of billions of dollars to partially clean up, leaving the lasting effects to fester in the Gulf of Mexico for decades to come that still affects fisherman.

The “Business Model has given the world the “Great Depression,” the Great Recession, numerous other recessions, stagflation, inflation, mini recessions, reverse inflation, and numerous other fun economic troubles.

What other “business model” should we follow? Maybe we should let education follow the business model of the banking industry and the real estate industry, both of which caused a near economic collapse of economies around the world in the last decade. Lehman Bros? AIG? All too big to fail businesses. How about Fannie Mae, Freddie Mac? Even General Motors and Chrysler needed bailouts in order to survive their “business model.”

People even voted for a President because he had a “Business background.” Never mind that most of his businesses declared bankruptcy and he had a history of not paying contractors.

This is the model that many people want public education to follow.

How many businesses in your city are still around that you know of after 5 years? 10? 15? 30? 40? Hard to think of a business in the US that has lasted more than 100 years. Every single one of them that are no longer there were following the “business model.”

All were competing.  All were trying to stay within their means.

And, at the end of the day, for whatever reason, EVERY business goes out of business. EVERY SINGLE ONE. It may take a year, it may take a decade, it may take a century. But in the end, EVERY SINGLE business goes out of business.

That is the business model.

Let the business model in schools adoption begin.

Or better yet, maybe those grumpy Fox News watchers that are all for the adoption of schools-as-business should think a little bit more deeply about what they really are wanting.

Because you need to be careful what you wish for. You might just get it.


Author: Tim Holt is an educator and writer, with over 33 years experience in education and opines on education-related topics here and on his own award-winning blog: HoltThink. He values your feedback. Feel free to leave a comment.  Read his previous columns here.