Paul T. Hill

Entrepreneurship in K-12 Public Education

The thesis of Dr. Hill's paper is that American public education is sorely hurt by the lack of entrepreneurship, and that greater openness to entrepreneurship could make public education more adaptable and efficient. Dr. Hill asserts that education is plagued with uncertainty. As a matter of fact, he claims that the only two things which are certain in education are 1) not every child will learn best from the same form of instruction, and 2) when today's children are adults they will need to know things that few, if any, members of their parents' generation know. Dr. Hill argues that the best mechanism for coping with such uncertainty is entrepreneurship. He utilizes Schumpeter's definition of entrepreneurship as the implementation of change via the introduction of new or better quality goods; new methods of production; new sources of supply; or reorganization of an industry.

In the first section of the paper, Dr. Hill describes the areas in which public education is weakened by being closed to entrepreneurship. Public education has little incentive or capacity to invest in new ideas. Consequently, public education is hurt by: 1) not being able to adapt to changes in student demography and needs and 2) seldom being able to take advantage of ideas and resources available in the broader society. Therefore, important functions are not performed as well by the public school system as by most other American institutions such as: quality control, creation of new products, reaction to competition, staff recruitment, career development, and financial control. Dr. Hill argues that within the public education system, no one has significant discretion over who is hired, where they are assigned, or how money is spent. As a result, potential entrepreneurs are regularly thwarted by the fact that the system is bound up in rules and customs.

In the second section of the paper, Dr. Hill speculates on how public education could be opened up to entrepreneurship. He argues that the key to entrepreneurship is discretion. If entrepreneurs are to change public education, people within the system must become capable of making real choices and reallocating real money. Dr. Hill recommends that this be done at the policy level by eliminating any routine funding for central administrative units, and putting all the money in schools, based on enrollment. Vouchers, charters and school contracting movements all make the flow of funds to schools transparent, allowing schools the freedom to buy what they need from a competitive marketplace of vendors. This would in turn encourage school leaders and teachers to become entrepreneurs with the incentive to constantly promote student learning. Dr. Hill suggests that a less radical-sounding proposal is standards-based reform which would similarly allow schools to control their funding, spending, hiring, use of time and selection of instructional methods, as long as they meet their performance expectations.

In the final section of the paper, Dr. Hill explains what would be, in his opinion, the greatest opportunities for education entrepreneurs, once the laws governing public education are changed to allow money to follow children and individual schools to make spending decisions. The four major areas for entrepreneurial innovation would be 1) providing support services, 2) managing human resources, 3) delivering complete courses and 4) operating whole schools. Dr. Hill provides specific examples for each of these categories.

Dr. Hill concludes that entrepreneurship is needed in every aspect of school and system operations to free our public education system which is currently frozen by laws, regulations and labor contracts.

Summary of Questions & Answers and Suggestions for Modifications/Enhancements

Ms. Smith asked what Dr. Hill perceived to be the "holes" in research on educational entrepreneurship. Dr. Hill suggested that an area in need of further research is organizations that are running networks of schools successfully, including how they have developed their principles and how they have maintained and transmitted them effectively over time. For example, the Quakers and the Jesuits have been operating schools successfully for such a long time that their former students are now becoming teachers.

Dr. Tucker challenged the notion that simply increasing money in schools will encourage entrepreneurship. He pointed to the example of inner city schools which have large amounts of categorical money which can be used fairly flexibly, yet they have been unsuccessful at encouraging entrepreneurship. Dr. Hill agreed that simply providing money without any other interventions would most likely not increase entrepreneurship. But money is a necessary precondition, without which there would be no incentive for schools to be innovative so that they may operate more efficiently.

Dr. Dees asked if there are any risks inherent in opening the educational system up to more entrepreneurship. Dr. Hill commented that there are a lot of risks. For one, if schools are more entrepreneurial, they have a large incentive to rid themselves of students who are harder to educate. They will also be motivated to make claims that are attractive, but false and hard to verify. To minimize these risks, entrepreneurship should be introduced as part of a conscientious social market. Terry Moe has just written a chapter in the book "Choice with Equity" in which he presents a school choice system which would face the evils of entrepreneurship and handle them in a reasonable way. Something like the Securities and Exchange Commission is necessary.

Ms. Hernandez asked, how can an incubator system focused on creating excellent schools be developed and who should be involved? Dr. Hill recommended the work of Robin Lake which describes successful school incubators. One of the most important lessons that has been learned is that being frustrated with your current school is not a sufficient basis for starting a good school. Similarly, catchy jingles and the belief that all children can learn are not enough to ensure success. To start a successful school, one must have a concept of what is meant by "good instruction." One must also deal with difficult issues such as: When children do not learn with your method what do you do? - and - When children do not behave the way you think they will, what happens to your "no harshness" philosophy? An incubator should help people who want to start a school, think through these issues and others so that they anticipate problems and have answers for them before they arise. Dr. Hill mentioned that many of these issues are on his center's website: www.crpe.org.

Dr. Kent asked Dr. Hill how he could dislike the national standards movement and be in favor of accountability at the same time. He further asked how Dr. Hill recommended establishing accountability. Dr. Hill clarified that he meant to criticize the national goals movement and not national standards. As a matter of fact, he believes the latter is a valid enterprise. In his opinion, the main problem with the standards movement though is that it does not have the necessary factual basis. Standards should be about what students need to know in certain subject areas by certain grades to be successful later, rather than what teachers think would be "cool" for students to know.

Ms. Kim asked why there has been an increase in educational entrepreneurship in the last decade (e.g. the charter school movement and vouchers) when there has not really been a change in the school environment. For example, school funding is still a highly centralized process. Dr. Hill responded that as the standards and accountability movements have gained momentum, the system has had to find ways to give schools more freedom about whom they hire, how they use their time and what methods they use. The deal has become: "If you hold me accountable for performance, you better let me make my judgments about what will work." Furthermore, as people have begun to understand how inequitably and inefficiently money is being used within the current school system, there has been more support for the decentralization of decision-making.

Dr. Burke asked, what kind of performance indicators do consumers and funders need to ensure that schools operate efficiently? Dr. Hill agreed that we need some kind of common definitions on which to assess schools, which is what state standards should be but currently are not. Dr. Hill added that schools should also develop indicators, beyond the standards, for which they would like to be held accountable, and then subject themselves to being independently monitored. There should also be a common accounting standard for schools, such as the one Chester Finn suggests in his book entitled "Common Accounting Practices for Schools."

Ms. Holman asked Dr. Hill to describe the business model Paul Allen and his partners are using for the AP courses they are offering. Dr. Hill explained that they plan on selling courses on the Internet on a per-hour basis, with the hope that charter schools and school districts will buy them and make them available to their students. They also hope that there will be a private market of parents who buy them for their children to supplement their regular school courses. Ms. Smith added that the organization has been operating for about three years and most of their customers are rural school districts and schools which have a lot of teaching resources. The Mainschooling market and the parent market are evolving more slowly because of the cost of marketing.

Dr. Kent asked how Dr. Hill's privately managed, portable retirement fund system would work, particularly in light of the inevitable resistance they will receive from the current system. Dr. Hill explained that he had in mind something similar to TIAA and CREF. It might even be a portable benefits package that a teacher could bring with them if they moved from teaching to private employment, such as being a lawyer or stockbroker, and back to teaching again. The main problem is the divestiture from state funds. In many states, employees of the state have the choice between state funds and TIAA. Dr. Kent commented that the problem with the current retirement system in most states is that it encourages teachers to not be mobile - teachers are rewarded for remaining in the same school district for thirty years. This in turn discourages entrepreneurship.

Ms. Kim asked what the role was for business leaders who wanted to encourage more educational entrepreneurship. For example, business leaders have historically played a significant role in the charter school and voucher movements through political action. Dr. Hill responded that there are some business leaders who are willing to advocate for changes politically, but there are more who think that the current centralized system would be fine if there was just better management. Therefore, business leaders could support change through political action as well as advising people who want to start schools on what is necessary for an organization to be successful. For example, when Chicago decided to convert some of their high schools to charter schools, they connected with the business community and the Illinois Facility Fund to teach them how to make these charter schools financially competent.