NCPA - National Center for Policy Analysis

Between Efficiency and Effectiveness

May 2, 2012

As the education policy landscape shifts toward a system of outcomes-based accountability, evaluation and research have grown increasingly vital.  This is especially true for for-profit education firms, which must overcome skepticism, scrutiny, or even outright hostility in a field that has long been suspicious of the profit motive and where the bottom line is directly influenced by public perceptions of effectiveness, says Matthew Riggan, a senior researcher at the Consortium for Policy Research in Education.

The primary differences between for-profit and non-profit institutions in their respective approaches to evaluation and assessment stem from the fundamentals of their models for education.

  • Whereas many nonprofits and public agencies operate on a fixed revenue model, for-profits do not, relying instead on engaging and retaining customers.
  • Many customers of for-profit education services do not rely on third-party research when making purchasing decisions, leaving these firms with little incentive to commission independent evaluations of their effectiveness.
  • Because for-profit institutions are largely competing with non-profit options for clients, they often view evaluation processes as attempts to subvert their effectiveness, making them less likely to fully participate.

Regardless of these differences, which undermine attempts to evaluate for-profit schools, these institutions do emphasize two areas of analysis that have proven invaluable:

  • First, for-profits focus on the customer experience and satisfaction, resulting in an evaluation approach that emphasizes ongoing user or customer feedback to drive product improvements or management decisions.
  • Second, they emphasize measures that capture academic performance in relation to operational efficiency; they use evaluation to identify how they can get better results for their students but also consider whether they could get the same results with fewer resources.

To help non-profit public schools attain and maximize these two areas of evaluation, policymakers should adopt a number of careful approaches to state schools:

  • Grant increased flexibility to schools and systems for managing resources.
  • Establish policies that more closely align incentives for educational and financial performance, perhaps by granting funds based on performance instead of enrollment.
  • Develop policies to encourage states and school districts to weigh rigorous evidence more heavily in decisions about resource allocation and contracting.

Source: Matthew Riggan, "Between Efficiency and Effectiveness," American Enterprise Institute, April 2012.

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