The blog Confessions of a Community College Dean had a post on Monday entitled Cash Cows that talks candidly about the financial operations of a community college.
It’s a commonplace of for-profit management that units can be characterized in one of three ways: rising stars, cash cows, and dogs. The savvy manager is supposed to feed the stars, milk the cows, and shoot the dogs. … We milk the cows precisely so we don’t have to shoot the dogs.
The “cows” are the profitable courses and the “dogs” are the unprofitable courses. Popular belief has it that English classes are cash cows because they require fewer resources than, say, chemistry classes. However, this blog says that English classes only break even because they also have smaller classes. The real cash cows are the social sciences. The biggest dog is nursing. The profit from teaching history, for example, makes it possible to train nurses.
Check out this blog …kid actually makes a lot of sense, IMO
You can do some probabilistic analysis to demonstrate that it is a bad idea to shot the dogs given that the system is non-stationary.
Consider the problem as follows. Suppose you want to maximize profitability. Then you could just close all programs, except for the most profitable one. What happens in ten years when your sole program is a psychology degree and students no longer care for psychology?
For example, right now, Computer Science has seriously declined. Closing down the Computer Science departments might appear like a smart move. But what happens if, in ten years, there is a surge of interest for Computer Science? You can’t just improvise a good Computer Science department.
Because no University can predict the future, it is best to even out the odds and cover as many different programs as possible. Even business schools tend to have several different programs, some of them far less popular than others. MIT, as another example, has grown various programs outside hard-core engineering.
Also, whereas it may appear like Nursing is a burden, it is probably a lot more complicated in practice. What about the statistics and psychology courses taught to the Nursing students?… It could be that if you get rid of the Nursing students, there will be fewer students in your statistics classes, and thus, they will be less profitable as well.
@Joe: Thanks for the link. Interesting article.
@Daniel: As the author points out, community colleges are chartered not to make a profit but to support the community. I’m glad they train nurses. But you bring up an interesting question: how would you run a community college if you did want to make a profit? It makes sense to diversify your portfolio. And if you’re too brazen about optimizing profits, you might irritate some people and hurt your profits. So maybe there are incentives to act like you don’t care about money even if you do.
Universities work in a similar way, except that usually departments don’t cross-subsidise but only within a department. So for a statistics department we make money out of first year service courses, which we can then use to subsidise our later year courses for stats students.