Transforming incentives will unleash the power of entrepreneurship in the education sector
11 March 2014
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10 March 2014
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12 March 2014
Economic Theory
For entrepreneurs to succeed, they need space to innovate that is sufficiently free of regulatory constraints, buyers who are receptive to their breakthroughs and uninhibited in their procurement decision-making, and a competitive market environment in which efficacy and efficiency are the overriding priorities.
In the publicly funded education sector none of these conditions pertain to a sufficient degree for us to expect to see much entrepreneurial thinking. And because of these constraints, entrepreneurship in education occurs mainly at the margins. It fails to integrate with, let alone disrupt, mainstream practice and suffers as a consequence from an unusually high attrition rate – just consider education technology start-ups. All of which makes it difficult for new ventures to attract investment.
Over the past 25 years, through a series of reforms, schools in England have experienced a slow but steady increase in autonomy from local government and in the level of responsibility attached to their decisions. They have been given more and more direct control over their finances. The development of the inspectorate, and of attainment measures, has brought greater focus on the educational ‘bottom line’. We are now more than ever aware of the difference this makes to an individual’s earning potential, for a range of social outcomes and for the country’s economic growth.
And yet, even as parental demand is fuelling demand for private tuition, new learning technologies, alternative curricula and alternatives to mainstream schooling, those educators that teach in schools for the most part remain process focused, constrained by stifling inspection and national curriculum requirements from putting creative thought into better ways of serving pupils’ learning requirements. Education ought to be a dynamic space, bursting with creativity and aspiration, but for the most part it appears tired and has left its leaders frustrated.
There have, certainly, been some gains. As whole school performance has been subjected to greater parental scrutiny, and schools have sought to emphasise their achievements, the professional environment has also become more competitive. A new breed of entrepreneurial leaders has emerged in the academy context, motivated by the relatively greater freedoms and rewards on offer, and notably from among the cohorts of a clutch of big name brands in the teacher recruitment, professional, career and leadership development line. These leaders are beginning to rethink school around what works, and on the limited evidence available, they appear to be having a positive impact in the schools in which they work.
Unfortunately, however, there are not enough of them and the possibilities for expansion to scale the benefit of their breakthroughs are overly dependent on corporate social responsibility (CSR) funding and government support. Moreover, the success these initiatives have enjoyed has obscured the model’s limitations from the host of social enterprises they have inspired. CSR and philanthropically funded ventures rarely achieve scale precisely because investors/donors do not need it to signify their engagement with the issue and so achieve their objectives, and government priorities change.
To properly incentivise improvement in a sustainable way, at scale, the government must remove market entry and operational constraints on private education service providers. There is now a substantial body of evidence that overturns the idea that profit-making businesses have a poorer record on quality than their not-for-profit counterparts, and accommodating the profit-motive is the only way to achieve the competitive market dynamic that catalyses innovation and entrepreneurship.
At present, both government and inspectorate, and probably the majority of education professionals, are unduly wedded to the idea that ownership type and governance structure (and, for that matter the process of instruction) must be ‘right’ to secure the right outcomes. Despite the success of the local authority ‘privatisations’ of the early Blair years, we’ve yet to see serious piloting of either the outsourcing of human resource provision or of private education service delivery in the school context. Nor have we seen, for example, an English policy equivalent of the American ‘No Child Left Behind’ initiative which, in opening up failing schools to private tutors as school improvement partners (as well as not-for-profits), has made such a difference to student outcomes.
Accepting that a commitment to working for the social good may be characteristic of education ventures whether they are structured for profit or not, a first step towards overcoming scepticism might be to trial social impact bonds, whereby quality of service provision and investment yield are determined according to multiple and differently oriented criteria.
This issue of inadequate incentives is key and pervasive. In our system, teachers effectively get paid for showing up; managers, essentially, for ensuring that the school operates according to processes, and on resources, that are determined by government and regulators; while school leaders have only to perform satisfactorily to be deemed to be doing well. No one’s career is really on the line if children fail to make progress. Failing schools may lose pupils but are nevertheless buoyed by minimum income guarantees. The consequences of failure are not uncomfortable enough to spur schools to excellence and pay incentives for teachers for high achievement are lacking. Though many schools, now academies, have theoretical freedoms to experiment with performance-related pay and incentives, in practice head-teachers are constrained by the continuing influence of national pay scales and union pressure.
Education technology and learning resource providers are often heard talking about the challenges of penetrating schools and breaking the silo mentality, but it’s much more than this. Both government and inspectorate are overly involved in setting the standard in assessment, curriculum and pedagogy. As a consequence of the reams of best practice guidance that go along with this exercise, teachers are neither receptive to, nor in a position to show entrepreneurial initiative. Ofsted should inspect less, be less process-prescriptive and more focused on educational outcomes, so that it may inspect, informed by the data, strictly as necessary – at the pressure points, rather than on a cycle.
Together with lifting artificial constraints on private involvement in state education provision, and transformation of the incentive structure in education more generally, reform of the Ofsted accountability framework ought to be the government’s top priority for fostering the conditions necessary for a more entrepreneurial education system.
James Croft is Director of the Centre for Market Reform of Education (CMRE). This article forms part of An Entrepreneurs’ Manifesto – a new publication from The Entrepreneurs Network http://tenentrepreneurs.org.
In the publicly funded education sector none of these conditions pertain to a sufficient degree for us to expect to see much entrepreneurial thinking. And because of these constraints, entrepreneurship in education occurs mainly at the margins. It fails to integrate with, let alone disrupt, mainstream practice and suffers as a consequence from an unusually high attrition rate – just consider education technology start-ups. All of which makes it difficult for new ventures to attract investment.
Over the past 25 years, through a series of reforms, schools in England have experienced a slow but steady increase in autonomy from local government and in the level of responsibility attached to their decisions. They have been given more and more direct control over their finances. The development of the inspectorate, and of attainment measures, has brought greater focus on the educational ‘bottom line’. We are now more than ever aware of the difference this makes to an individual’s earning potential, for a range of social outcomes and for the country’s economic growth.
And yet, even as parental demand is fuelling demand for private tuition, new learning technologies, alternative curricula and alternatives to mainstream schooling, those educators that teach in schools for the most part remain process focused, constrained by stifling inspection and national curriculum requirements from putting creative thought into better ways of serving pupils’ learning requirements. Education ought to be a dynamic space, bursting with creativity and aspiration, but for the most part it appears tired and has left its leaders frustrated.
There have, certainly, been some gains. As whole school performance has been subjected to greater parental scrutiny, and schools have sought to emphasise their achievements, the professional environment has also become more competitive. A new breed of entrepreneurial leaders has emerged in the academy context, motivated by the relatively greater freedoms and rewards on offer, and notably from among the cohorts of a clutch of big name brands in the teacher recruitment, professional, career and leadership development line. These leaders are beginning to rethink school around what works, and on the limited evidence available, they appear to be having a positive impact in the schools in which they work.
Unfortunately, however, there are not enough of them and the possibilities for expansion to scale the benefit of their breakthroughs are overly dependent on corporate social responsibility (CSR) funding and government support. Moreover, the success these initiatives have enjoyed has obscured the model’s limitations from the host of social enterprises they have inspired. CSR and philanthropically funded ventures rarely achieve scale precisely because investors/donors do not need it to signify their engagement with the issue and so achieve their objectives, and government priorities change.
To properly incentivise improvement in a sustainable way, at scale, the government must remove market entry and operational constraints on private education service providers. There is now a substantial body of evidence that overturns the idea that profit-making businesses have a poorer record on quality than their not-for-profit counterparts, and accommodating the profit-motive is the only way to achieve the competitive market dynamic that catalyses innovation and entrepreneurship.
At present, both government and inspectorate, and probably the majority of education professionals, are unduly wedded to the idea that ownership type and governance structure (and, for that matter the process of instruction) must be ‘right’ to secure the right outcomes. Despite the success of the local authority ‘privatisations’ of the early Blair years, we’ve yet to see serious piloting of either the outsourcing of human resource provision or of private education service delivery in the school context. Nor have we seen, for example, an English policy equivalent of the American ‘No Child Left Behind’ initiative which, in opening up failing schools to private tutors as school improvement partners (as well as not-for-profits), has made such a difference to student outcomes.
Accepting that a commitment to working for the social good may be characteristic of education ventures whether they are structured for profit or not, a first step towards overcoming scepticism might be to trial social impact bonds, whereby quality of service provision and investment yield are determined according to multiple and differently oriented criteria.
This issue of inadequate incentives is key and pervasive. In our system, teachers effectively get paid for showing up; managers, essentially, for ensuring that the school operates according to processes, and on resources, that are determined by government and regulators; while school leaders have only to perform satisfactorily to be deemed to be doing well. No one’s career is really on the line if children fail to make progress. Failing schools may lose pupils but are nevertheless buoyed by minimum income guarantees. The consequences of failure are not uncomfortable enough to spur schools to excellence and pay incentives for teachers for high achievement are lacking. Though many schools, now academies, have theoretical freedoms to experiment with performance-related pay and incentives, in practice head-teachers are constrained by the continuing influence of national pay scales and union pressure.
Education technology and learning resource providers are often heard talking about the challenges of penetrating schools and breaking the silo mentality, but it’s much more than this. Both government and inspectorate are overly involved in setting the standard in assessment, curriculum and pedagogy. As a consequence of the reams of best practice guidance that go along with this exercise, teachers are neither receptive to, nor in a position to show entrepreneurial initiative. Ofsted should inspect less, be less process-prescriptive and more focused on educational outcomes, so that it may inspect, informed by the data, strictly as necessary – at the pressure points, rather than on a cycle.
Together with lifting artificial constraints on private involvement in state education provision, and transformation of the incentive structure in education more generally, reform of the Ofsted accountability framework ought to be the government’s top priority for fostering the conditions necessary for a more entrepreneurial education system.
James Croft is Director of the Centre for Market Reform of Education (CMRE). This article forms part of An Entrepreneurs’ Manifesto – a new publication from The Entrepreneurs Network http://tenentrepreneurs.org.
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