Environmental Forces and Market-Oriented Governance: A Review of the Literature

Running head: ENVIRONMENTAL FORCES & MARKET-ORIENTED GOVERNANCE

Environmental Forces and Market-Oriented Governance: A Review of

the Literature

Sean Gallagher

August 2012

ENVIRONMENTAL FORCES & MARKET-ORIENTED GOVERNANCE

Abstract

This paper interrogates and synthesizes the literature on higher

education governance, to identify the environmental/external

forces that scholars suggest are the most influential. The

implications of these forces – and the types of models that the

literature suggests might be the most “market-oriented” or

adaptive to the changing environment and demands for business-

like operation – are also analyzed. The analysis consists of a

literature review of nearly 35 articles from peer-reviewed

journals, covering a forty-year period from 1971 to the present –

and including scholarship that stretches across multiple

institutional settings and countries, with a primary focus on the

United States and Europe. The literature review established that

many scholars writing on governance contend that increasingly

dynamic environmental forces are among the most important

challenges impacting higher education – and that the prominent

categories are “market” forces such as globalization and new

types of competition, and the forces of changing government

demands and accountability. Further, the literature illustrates

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that business-like governance models are a solution often

deployed by policymakers and stakeholders worldwide to the need

for adaptation: however, these models are not without their

challenges, which are also discussed. Overall, the findings offer

stakeholders in higher education governance a roadmap for

understanding the forces that may exert influence on the

structure, management, and strategies of their institutions,

including the benefits and challenges of deploying a market-

oriented approach to governance within higher education’s unique

cultural construct.

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Environmental Forces and Market-Oriented Governance: A Review of

the Literature

It is the rare president, trustee, administrator, or faculty

member in the United States or elsewhere who would suggest that

universities today operate purely within an isolated “ivory

tower.” Where colleges and universities were once characterized

by stability, deliberative and collegial decision-making, and a

slower pace of change (Corson, 1971), today they operate as

complex enterprises serving a very diverse array of stakeholders

in extremely turbulent and competitive environments (Kezar and

Eckel, 2004). As a result, many universities strive be more

“market-oriented,” or able to dynamically respond to the changing

external environment in a business-like fashion (Ma and

Todorovic, 2011). However, such approaches can be difficult for

practitioners to situate, understand, and implement in an

effective way that balances academic values and culture with the

imperatives of the marketplace.

The analysis that follows seeks to identify what

environmental forces are most influential and why; what the

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implications of these forces and common responses to them are;

and what considerations and recommendations the literature

suggests for institutions that might adapt their governance

models to operate in a more market-oriented fashion. The intended

audience is institutional leaders who have a stake in university

governance such as senior administrators, faculty, and board

members, as well as policymakers.

This analysis is particularly significant due to the fact

that leading scholars contend that environmental forces (and

particularly market forces) present some of the most pressing

challenges for higher education institutions, and that the future

of higher education hinges on appropriate adaptations or

responses (Kezar and Eckel, 2004; Kezar, 2005; Kezar, 2006).

Additionally, the deployment of market-oriented, business-

inspired corporate management approaches to governance is

increasingly common worldwide (Lapworth, 2004; Engwall, 2007;

Trakman, 2008). To the extent that this analysis provides a

unique cataloging of the impacts of external forces – and does so

in a comparative way, with a practice-oriented discussion of

implications and a focus on the challenges and benefits of

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market-oriented approaches – it will be of great value to the

higher education community.

The text that follows first establishes the importance of

environmental forces and situates these influences within

historically evolving notions of university governance. “Market

forces” such as globalization, competition, and the rise of the

knowledge economy, as well as the forces of government and

accountability are discussed, analyzed, and established as

especially prominent and challenging. The emergence of “market

orientation” as a response to external pressures, increasingly

diversified revenue streams, and organizational complexity is

then presented, followed by an analysis of the ensuing growth of

corporate-style governance and business approaches. The

literature is then synthesized to outline challenges,

considerations, and best practices in applying market-oriented

governance approaches in a culturally appropriate way – with an

emphasis, supported by the literature, on an “open systems”

approach and meshing the values of shared governance with those

of the market.

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The Growing Influence of External Forces on University Governance

There is near universal agreement among scholars that

external/environmental forces are among the principal dynamics

shaping higher education governance in the present day, compared

to higher education’s relatively more stable, insular, or

internally focused past. As this literature review will

demonstrate, this contention spans multiple nations, systems, and

environmental and institutional contexts. Writing with Peter

Eckel, prominent higher education scholar Adrianna Kezar (Kezar

and Eckel, 2004) contends that the largely externally driven

challenges facing higher education governance are unprecedented

compared to any other point in United States history. Kezar and

Eckel also argue that the need to respond to changes in the

environment is one of the most significant changes in governance

over the preceding decade. The traditional notions of university

governance are under scrutiny due to their lack of responsiveness

(Kezar, 2005), and Kezar suggests that common university

governance approaches are not prepared to handle the complexities

of the new environment. Similarly, Middlehurst (2004) – writing

from across the Atlantic, in the United Kingdom – articulates

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that shifting environmental trends “will have a profound effect

on the core business of universities and colleges… the heart of

universities’ power-based is being challenged from different

directions” (Middlehurst, 2004, p. 268-269).

The notion of “modernizing” governance and making it more

adaptive and responsive to external trends is not new. In fact,

it is interesting to see this meme as permeating much of

historical literature on governance: while the forces,

influences, and issues of the day change, the feeling that

governance must evolve and be more responsive appears perennial.

Writing on this topic forty years ago in 1971, Corson (1971),

cites an 1825 letter from a Harvard professor to Thomas

Jefferson, lamenting that the models of universities in New

England – models that were at that time 150 years old – were not

well-suited to the challenges of the day.

Corson (1971) points out a substantial shift in the 1960s

toward a more active student voice in higher education: prior to

the Vietnam war era and the civil rights movement, students were,

according to Corson, more passive participants in higher

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education. After this era – which was filled with protests, sit-

ins, and riots – a form of student governance emerged anew. This

is one early example of how deep and large-scale changes in

society at-large specifically impacted university governance.

Similarly, also writing in 1971, Mortimer (1971) framed his

analysis of governance challenges as relating to dynamic external

forces: government decisions, legal rulings, and so on. Mortimer

also highlighted faculty and student demands to become more

involved in institutional governance. At the time of Mortimer’s

writing, faculty senates and councils were newly formed at many

institutions, and external pressures were challenging the

autonomy and authority of many universities and pressuring the

delicate balance between the faculty and the administration

(Mortimer, 1971). Similarly, Kezar (2005) also proposes that the

political conflict of the 1960s made this period the most radical

era of change in university governance, with greater roles in

governance for both students and faculty emerging, a trend also

explored by Hubbell (2012).

Market Forces: Globalization, Competition and the Knowledge

Economy

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If the pressing need to adapt governance to respond to

external forces and environmental shifts dates back many decades,

there is the key question of what scholars believe are the most

significant forces posing challenges to university governance in

the 2000s. Kezar (2005) for example names technology,

demographics, competition, globalization, and financial

challenges as some of the key forces – and there is general

agreement on these themes across years, geographies, and

differing perspectives. Similarly, Middlehurst (2004) also cites

the rise of globalization, the knowledge economy and competition

as key aspects of the changing external environment – while

adding in transnational education, which could be considered an

element of globalization. Eckel (2000), a scholar focused on the

United States and who frequently collaborates with Kezar, frames

the start of his widely-cited analysis of shared governance in

terms of the environmental forces that are challenging

universities – and includes technology, competition, and

consumerization pressures. In Eckel’s view, these forces had

resulted in restructuring of institutions and their operations

throughout the 1990s.

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In addition to the more common passing mentions of it as an

important influence on higher education, globalization is a

particularly core theme and focus among a number of scholars

writing on governance. De Wit (2010), writing from a pan-European

perspective, characterizes universities’ environment as turbulent

and global, and includes a historical frame of reference. De Wit

notes that universities were historically more parochial in their

focus and aligned tightly with their local, regional and national

environments – as a function of the geographically limited scope

of markets and economies dating back to the Middle Ages. Today,

universities are networked into a global marketplace: therefore,

according to De Wit (2010), international forces beyond

universities’ traditional borders increasingly influence their

focus and management. The theoretical framework that De Wit uses

is that of a network: an expanding web of connections between

consumers, employers, and institutions. In the case of Europe,

the rise of the economically integrated European Union has been

one of the key globalizing forces. Engwall (2007), also focused

on Europe, provides a novel take on how the forces of

globalization impact university governance. He asserts that

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increasing interaction between policymakers of different nations

and the growing popularity of international comparisons and

standards development is a driver of comparison and

standardization: the European Bologna Process, which inevitably

pushes universities toward similarity in structures, is a

prominent example (Engwall, 2007).

Competition – especially in terms of new types of

competitors outside of or adjacent to the institutional

environment – is another prominent theme in scholars’ cataloging

of the environmental forces exerting the greatest impact on

governance. Gumport (2000) highlights the increased prevalence of

non-traditional competitors (such as in distance learning) as a

force that has driven colleges to act in a more responsive

fashion. This is perhaps best evident in the community college

sector, where institutions both face greater competition from

for-profit and online service providers and are more directly

impacted by globalization due to their workforce focus (Amey,

Jessup-Anger, Jessup-Anger, 2008) – elements that are

increasingly affecting four-year universities as well. In Hong

Kong, Chan and Lo (2007) found that discrete new forms of

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competition – e.g., the creation of Hong Kong’s first private

universities, which ended public institutions’ “monopoly” on

higher education – were drivers of new, more environmentally

responsive governance models.

Generally, the rise of the knowledge economy – and the

increasing complexity of professional work – is also cited as a

paramount force by a number of authors. Brown (2011) highlights

the explosion of knowledge in today’s economy and its increased

complexity as posing a challenge to governance models, while also

noting an internal challenge related to this. According to Brown,

institutions have become larger and more complex and knowledge

has become more specialized, creating tension between the

expertise of staff, faculty, and board members. Salter and Tapper

(2002) also characterize the knowledge economy – and the mandate

for universities to focus on knowledge-oriented economic

development – as particularly influential. Similarly, Chan and Lo

(2007), who studied universities in Hong Kong, found that the

need to create new and more entrepreneurial governance structures

emerged principally from the growth of Hong Kong’s and China’s

knowledge economy – in addition to government regulation that

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focused on this dynamic. This last example brings a discussion of

government into the mix, as government regulation and market

forces are often intrinsically linked. In Toma’s (2007) analysis

of the growing influences of external forces on all types of

higher education institutions, he in essence simply categorizes

external forces into two categories: market forces (e.g.,

globalization, competition, the knowledge economy) and those of

accountability and the government/state.

The Long Arm of Government and Accountability

Given the public nature of the majority of colleges and

universities around the world (and the impact that government

policy and funding have on private institutions as well), it is

perhaps not surprising that government shifts – and the

government-led drive for “accountability” –

represents one of the most important challenges to governance

according to many scholars. Governments have of course influenced

as well as directly shaped and administered higher education

institutions for centuries. What is most notable is the rapidly

increasing involvement and control of government in recent

decades, and the new, accountability-based, return-on-investment-

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focused framework for their involvement that is so often the

focus of the literature. Because it is extremely rare that an

institution is not impacted by shifts in government financing or

economic influences, government is also often the driving force

behind the economic/financial pressures on governance and

management that are often cited by scholars (Eckel, 2000; Kezar,

2005; Toma, 2007).

Both Brown (2011) and Engwall (2007) establish government’s

growing involvement in higher education as being a result of

higher education’s increasing value to society – a situation that

has developed worldwide. Interestingly, Brown highlights that

this stronger influence has been enabled by growth in the power

and size of the government itself in most nations over recent

decades. The growing influence of government regulators (relative

to the World War II era) was clear as early as the 1960s in

United States, as documented by Corson (1971) and Mortimer (1971)

– and it was certainly a prominent trend through the 1990s as

well, as documented by Gumport (2000) and Dill (2003). In the

United States, Amey, Jessup-Anger, and Jessup-Anger (2008)

highlight the increased involvement of the federal government in

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recent years – in addition to state and regional governments –

pointing to the 2006 U.S. Department of Education Commission on

the Future of Higher Education, convened by Secretary of

Education Margaret Spellings. In this case, the federal

commission’s ultimate recommendations – which for instance,

concerned access and affordability and impacted various college

processes and policies – exert a strong influence over

legislation and political direction that may conflict with the

priority set by college leaders themselves. Amey, Jessup-Anger,

and Jessup-Anger also point out that these types of influential

“blue-ribbon” commissions are also common at the state level in

the United States. Interestingly, in addition to the growth in

federal investment implying greater federal oversight, focusing

on the post-2002 period, Toma (2007) documents a substantial

decline in state funding along with increased regulation: even

while states are disinvesting in higher education, they are

demanding more accountability.

In the United Kingdom, Salter and Tapper (2002) trace the

tipping point of government influence and “new public management”

to the Thatcher administration economic ideology of the 1980s.

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According to Salter and Tapper, this fueled the growth of

managerialism and business-like approaches in higher education,

challenging the historical ideals of academic governance:

Shattock (2002) chronicles this history as well.

According to Lapworth (2004), increased government influence

on university governance is a natural outgrowth of the movement

from universities as a service for the elite to serving the mass-

market (often referred to as “massification”): as a result,

governance is shifting from the “craft,” guild-like model of

internally focused, faculty-driven governance from the elite era,

to a more massification-appropriate external bureaucracy.

Interestingly, despite the growing influence of government over

higher education, Pusser (2003) points out that research on

higher education has traditionally considered government as

apart from higher education – that is, the domain of political

and public administration theorists.

As national governments have substantially upped their

investment in higher education (or reduced it in a time of

scarce resources and demanded clearer documentation of their

“return on investment” in others), they have often implemented

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new reporting requirements and intensified the focus on outcomes

(Chan & Lo, 2007; Brown, 2011). This is the “accountability”

movement. Gumport (2000) notes that the drive by governments to

implement accountability measures has led to intense scrutiny of

academic operations, and interestingly, scholars such as Toma

(2007) discuss the data-reporting demands of accountability,

arguing that accountability presents a compliance exercise of

limited relation to institutional improvement. Institutional

effectiveness is the domain of accrediting agencies, which are,

strictly speaking, not governmental, but certainly represent a

quasi-regulatory force – and accreditation is another common

theme in the literature. Welsh and Metcalf (2003), for instance,

assert that accrediting agencies, just like universities, are

often pressured to respond to external demands in their role as

policymakers. Engwall (2007) also highlights accreditation as a

powerful external force on governance – and notes that it is

growing in its impact in Europe, a relatively new phenomenon

compared to the long existence of accreditation in the United

States. To the extent that accreditation is fundamentally about

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common standards, the peers who visit institutions force changes

in governance structures and practices (Engwall, 2007).

Market Orientation as a Response to Environmental Shifts and the

Rise of

Managerialism and Corporate-Style Governance

The preceding section focused on the environmental influences on

governance evident in the literature – and established through

synthesis that a range of scholars believe that a host of market

forces (e.g., globalization, competition) and government

influences are among the significant forces shaping and

challenging traditional university governance models. If “market”

forces are increasingly prominent, it logically follows that

universities should structure and manage themselves to operate in

more market-responsive ways; likewise, government calls for

universities to be accountable and operate more like businesses

also suggests a more business-like or entrepreneurial approach to

governance. Therefore, these twin categories of forces have come

together to fuel the rise of “market orientation” and

“managerialism” (or a business mindset) in approaches to

university governance. Both Engwall (2007) and Dill (2003)

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foresee this trend only continuing as universities increasingly

diversify their revenue streams and become more market-oriented

and tuition-driven. Engwall (2007) concludes that universities

worldwide are increasingly coming to resemble corporations, with

the business world (market forces) and the state (government)

exerting more governance power than academic values. Similarly,

Toma (2007) notes that more market-oriented approaches have been

increasingly important in recent years and are evident across a

wide range of institution types, from small religious colleges to

public universities and elite research universities.

Market Orientation: A Response to Revenue Diversification in

Addition to External Pressures

Ma and Todorovic (2011) define “market orientation” as “a

culture that helps to nurture dynamic capability… to react to the

changing external environment” (p. 4). Ma and Todorovic review

the management literature on “market orientation” and establish

that market-oriented entities are continuously scanning,

analyzing, and adapting to the environment, particularly in

relation to external factors including competition, government

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regulation, and so on. These are precisely the types of factors

covered earlier and cited by as increasingly demanding change in

university governance (Eckel, 2000; Middlehurst, 2004; Kezar,

2005; Toma, 2007).

Many scholars link the rise of market orientation in

governance to the diversification of university revenue streams.

Corson (1971) – like later authors including Chan and Lo (2007),

Toma (2007), and Christensen (2011) – asserts that the

diversification of university functions into areas such as

commercial research, healthcare provision, and workforce training

was changing the character of institutions and therefore

demanding new approaches to governance as early as the 1960s.

Toma (2007), focusing more recently on the 2000s, chronicles the

rise of once “peripheral” activities in American universities –

including auxiliary activities, partnerships, and continuing

education programs – and concludes that because these activities

are more likely to be managed by administrators, they pose a

threat to faculty influence in governance. Without making a

judgment about governance models, Chan and Lo (2007) also

highlight how units once at the periphery of the university

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(e.g., technology transfer, advancement) have become more

central, and how these new revenue activities increase

universities’ exposure to market forces. According to Chan and

Lo, this, in turn, has led to the need for more corporate-like

governance: essentially, the business model and mission of

universities has become much more complex. Similarly, Dill (2003)

sees an expansion in revenue streams as a driving factor behind

increased market orientation. Writing for audiences in other

nations, Dill offers the United States as the world’s most

market-oriented system – owing to a combination of decentralized,

state-level management of public institutions; a large number of

private institutions; and the fact that federal financing follows

students rather than going directly to institutions. Like Dill

(2003), Gumport (2000) also connects the “student as consumer”

model to increased market orientation.

In one view, such as that of Christensen (2011), new funding

sources and customer bases come with responsibility to new

stakeholders – and thus reduce university autonomy. Lapworth

(2004), as well, asserts that marketization, by exposing

universities to external forces, has reduced the independence and

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autonomy of institutions classically run by academics. However,

in an alternative view, Gumport (2000) and Middlehurst (2004)

suggest that a reliance on new revenue streams and an orientation

to the marketplace increases institutions’ autonomy by empowering

them financially. According to Gumport, revenue diversification

enables institutions to raise funds through alumni giving,

research funding, reaching new student markets, and so on.

Finally, “market orientation” is not just about reaction to

the environment, but a faster pace of reaction. According to

Kezar & Eckel (2004), shrinking public funding leads to the need

to make quicker decisions. According to Eckel (2000), the dynamic

environment’s demands on shared governance, specifically, raise

the stakes for effectiveness – as well as the potential for

conflict. Likewise, analyzing the United Kingdom’s traditionally

slow-paced and deliberative faculty senate governance models,

Lapworth (2004) comments that traditional models based on

consensus-driven decision-making often hinder institutions’

ability to quickly respond to the external environment.

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The Rise of Managerialism – Corporate and Business-Driven

Approaches

As Ma and Todorovic (2011) demonstrate, “market orientation”

– itself a response to changing environmental demands and revenue

shifts – is intrinsically linked to management-driven approaches

to administration: it is a business concept. Therefore, to

implement a market-oriented culture or governance system in

higher education means to adopt business management principles

and structures, or a more “corporate” governance model – and as

documented in the literature, this has often been the approach

around the world.

According to both Engwall (2007) and Trakman (2008), the

“corporate governance model” is increasingly prevalent worldwide,

as universities are pressured to perform more like businesses.

Lapworth (2004) defines this application of for-profit business

and managerial techniques as “new managerialism.” In addition to

market and government forces, Engwall (2007) also suggests that

the increased size, complexity, and professional nature of

universities have also driven this shift: universities today are

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more like large corporations than they are the guilds or

communities of scholars of an earlier era. Similarly, Kezar and

Eckel (2004) discuss the rise of a “professional bureaucracy” as

necessary to manage larger-scale institutions operating in more

complex environments. Interestingly, drawing on examples from

both the United States and the United Kingdom, Trakman (2008)

documents that even skeptics of corporate-inspired governance

models recognize that major universities are increasingly

complex, business-like operations with profit centers, demanding

sets of customers, and a particular need for high quality

financial management and controls in today’s era.

Gumport (2000) links the rise of managerialism or corporate

governance in American higher education to the post-World War II

era when universities began to be seen as quasi-corporate

entities and higher education as an industry. According to

Gumport (2000), “academic management” – or the adoption of

business-like practices and the rise of a professional

administrative class – is a natural result of the need for

organizations to adapt to their environment. As the strength of

environmental forces has grown, it has been more important to

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have managers that are charged with monitoring and managing the

institution’s response to the environment (Gumport, 2000).

Harkening back to government, Gumport also links the rise of

managerialism to increased regulation, given the resources and

skills needed to simply comply with reporting requirements

related to learning outcomes and faculty and financial

productivity. Further, according to Pusser, Slaughter, and Thomas

(2006), a defining element of the more corporate-inspired,

managerial and entrepreneurial approach to higher education

governance is the presence of board members/trustees from

industry, and “interlocks” between universities and major

corporations. In this way, trustees from business share

information and approaches that shape university management and

policy. Pusser, Slaughter, and Thomas theorize that it is this

board composition – particularly common among private

universities – that can provide the expertise to make an

institution more market-oriented.

As in the United States, business-oriented approaches to

governance are evident across Europe, and the addition of

business leaders to boards has been a popular means of infusing

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institutional management with market-oriented expertise. Boer,

Huisman, & Meister-Scheytt (2010) analyze the situation in the

United Kingdom, the Netherlands, and Austria, and in each

country’s case, find that recent reforms of university board

structure and composition have been driven by a desire to make

boards more business-like and responsive to external forces. This

push has been particularly strong in the United Kingdom following

the Thatcher administration reforms highlighted by Salter and

Tapper (2002), and is a major theme in the United Kingdom-based

literature on governance, as it is also explored by scholars such

as Shattock (2002) and Bennett (2002). Much like Boer, Huisman, &

Meister-Scheytt’s (2010) cross-country comparative analysis,

Bennett (2002) reviews the United Kingdom’s experience of

creating more independent, business-like boards specifically to

make institutions of higher education more innovative and

responsive to economic needs and external forces. Interestingly,

Bennett found that although one of the goals of more business-

like boards was greater efficiency and responsiveness, many

boards – as evidenced by their meeting minutes, at least – were

relatively passive and appeared to have little impact on

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strategy. Bennett (2002) presents the view that a business-driven

governance approach raises concerns about a lack of democratic

decision-making, changed values, and decreased transparency and

accountability – alluding to just some of the challenges

associated with fitting a corporate-inspired model into a

university.

Challenges, Considerations, and Best Practices in Market-Oriented

Governance:

An Argument for Open Systems Approaches That Are Culturally

Aligned

To this point, this literature review has reviewed the

evidence in the scholarly literature to establish that across the

world, market and government forces are challenging traditional

governance models, and that market orientation and the adoption

of business practices or corporate governance models is a common

response. However, the question remains: even if market-oriented

or business approaches to governance are increasingly popular or

potentially well-suited to the new environment, what are the

challenges and risks of a corporate-like approach to university

governance, particularly within the context of a shared

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governance framework? What might some of the ideal features and

considerations be in implementing such a model? The literature

provides answers to these questions.

The Limits of Business Approaches: Aligning with Culture and

Prioritizing Shared Governance

Many scholars argue that a purely business-like, corporate

approach to governance – while featuring positives with respect

to operating in a more complex environment – is too narrow a

model and culturally inappropriate for higher education (Carnegie

and Tuck, 2010). Gumport (2000) believes that managerialism and

increased market orientation are challenging the “legitimacy” of

higher education institutions: that is, driving them to move away

from their historical character focused on academics and

learning.

Universities and academic culture are highly tradition-

bound, and historically, universities are fairly stable

institutions that are focused on long-term results – and in most

cases, they are not-for-profit. A particular tension in market-

oriented, business-driven governance approaches that is

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highlighted by a number of scholars is the risk of “short-

termism” borrowed from the for-profit business worldview. Both

Engwall (2007) and Gumport (2000) warn of this risk: Gumport’s

fear is that university leaders will be forced by competitive,

state, or management-oriented governance forces to realign their

resources (e.g., faculty and programs) to adapt to short-term

market demands in ways that are damaging to the character of

higher education. Lapworth (2004) also contends that

managerialism or business-like approaches tend to create a short-

term focus.

Both market forces and business approaches also force

institutions to make quicker decisions and/or rapid changes to

programs and activities (as highlighted earlier by Eckel (2000),

Kezar & Eckel (2004), and Lapworth (2004)). Based on a deep

analysis of an institution that had radically changed its

governance model, Kezar (2005) found that perhaps not

surprisingly, radical and rapid change could often have very

negative consequences. As a result, Kezar advocates for gradual

change as the most promising route for optimizing governance.

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In many analyses and studies, culture is a key consideration

raised in adopting new governance models or applying market-

oriented approaches. Trakman (2008), for instance, underscores

that evolving governance structures or creating new ones requires

attention to the institution’s identity – in other words, its

culture and politics. Middlehurst (2004) similarly places culture

at the core of a transition to more entrepreneurial models, and

likewise, Yokoyama (2006), found that the embrace of an

entrepreneurial culture differed markedly between studied

institutions in a case-based investigation of the adoption of

more market-oriented models in Japanese and British universities.

In another series of case studies, Kezar and Eckel (2002)

analyzed the change management process at six institutions and,

while not focused on market orientation specifically, found that

the success of the change process often hinged on culture. In

Kezar and Eckel’s summation, adopting new approaches is

fundamentally a cultural process, and change strategies must be

“culturally coherent or aligned with culture” (Kezar and Eckel,

2002, p. 457).

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Shared governance is of course at the center of traditional

academic culture – and given the polar differences between this

collegial approach and the more control-oriented, managerial

approach of market-based models, how to balance the inherent

differences and tensions is a key question. Lapworth (2004)

envisions the value of a governance model that is “hybrid” and

seeks a balance between corporate/managerial approaches and

collegial, academic decision-making: such a model would blend the

trust- and delegation-driven values of collegial, faculty-driven

governance with the necessary management approaches and corporate

strategies demanded by the new environment. According to Morphew

(1999), shared governance is a defining feature of the uniqueness

and complexity of American colleges, and it is precisely the

traditional notions of shared governance that are being

challenged by dynamic external forces in the turbulent

environment. Despite the rise of corporate models, Shattock

(2002) and Kezar (2005) also argue strongly for the relevance of

shared governance and the value of its consensus-based and

collaborative approach in the modern environment. Further, Kezar

and Eckel (2004) found in their literature review that

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consultation and the process of input, feedback, and debate

increase governance effectiveness and create an accountability

between the faculty and the administration. Similarly, Eckel

(2000) provides case studies examining program discontinuance

(which is often necessary due to changes in the external

environment). Contrary to critics who say that shared governance

is ill-suited to the modern university environment, Eckel’s study

found that shared governance can facilitate the change process by

creating campus-wide commitment and credibility between the

administration and faculty; uniting interest groups around high-

stakes issues; and creating a series of checks and balances to

quickly correct missteps in process (Eckel, 2000).

According to Kezar and Eckel (2004), market pressures mean

that it is increasingly critical to assemble the right

combination of expertise among the participants in governance. In

practice, this means valuing competence over the representation

of interest groups (with politically appointed boards often

leaning toward the latter). This suggests that if new forms of

competition, public accountability, finances, and so on are the

most influential factors pressuring governance, then governing

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bodies should employ political experts, financial experts, and

those schooled in consumer decision-making or markets, for

example. This is perhaps why business-like boards have become

more popular worldwide (Bennett, 2002; Salter and Tapper, 2002;

Shattock, 2002; Pusser, Slaughter, and Thomas, 2006), and why,

for example, it often may be appropriate for faculty to defer to

administrators on financial matters or other topics on which the

administration may represent strong professional expertise

(Simplicio, 2006). Simplicio (2006), commenting on shared

governance, emphasizes the value of technical expertise in

market-oriented governance models. This expertise can come from a

variety of circles.

The Value of an “Open Systems” Approach and New Stakeholders in

Governance

Borrowing from “open systems” in organizational theory, De

Wit (2010) advocates that the ideal governance model in a

changing environment is one that enables a university to adapt to

changes in its environment and organize its resources around

matrix-like management structures, as well as embracing a form of

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loose coupling. This matrixed or loose coupling approach is

commonly referred to in the literature as a best practice: Kezar

and Eckel (2004) also document that a loosely coupled

organization can be more responsive to its environment because

each unit can be attuned to a different micro-environment or

stimulus. They give the example of a college of education’s

ability to adapt to changes in teacher certification requirements

not affecting the undergraduate curriculum in physics (Kezar &

Eckel, 2004). As documented by Kezar and Eckel, the use of open

systems models to understand governance began in the 1980s, and

in this conception, governance systems are built on a series of

fluid relationships, with units and decision-makers highly

linked. Compared to the closed system perspective common among

faculty, Hubbell (2012) argues that there is value in the open

systems worldview often embraced by administrators – who

according to Simplicio (2006) are charged with “seeing the big

picture” and maintaining the vitality of the institution.

Carnegie and Tuck (2010) also advocate for an integrated approach

to governance that bridges academic and business areas. Further,

a key finding of Ma and Todorovic’s (2011) study of American

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universities was the empirical demonstration that to enable

greater market-orientation, universities should develop more

inter-departmental coordination within their institutions – in

essence moving beyond the “silos” that so commonly exist. In

these ways, the literature suggests that an environmentally

responsive institution embraces an open systems philosophy of

networks, linkages to the external world, cross-functional

internal coordination, and monitoring inputs from the environment

and acting on those inputs in coordinated ways.

These arguments and findings in the literature point to

potential consideration of “sharing” governance with a broader

array of participants as a way to access the environmental and

customer inputs and technical expertise that is valued by Kezar

and Eckel (2004), Simplicio (2006), and others. As a response to

universities’ increasingly diverse set of clients or constituents

and the expansion of revenue streams in today’s more complex

environment, Trakman (2008) offers the concept of “stakeholder

governance.” In this concept, stakeholders might include

students, staff, corporate partners, and government, all of whom

often play a role on university boards (Trakman, 2008).

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Clearly, students are key stakeholders, and perhaps

surprisingly they do not receive much attention in most of the

literature beyond the rise of student governance in the 1960s and

1970s. Luescher-Mamashela (2010) offers an interesting suggestion

on the role of students in the governance of a more market-

oriented, environmentally responsive university. Historically,

students were offered a role in governance due to their

membership in the academic community alongside faculty (Corson,

1971; Luescher-Mamashela, 2010). In a market-oriented

environment, however – defined by the idea of students as clients

or customers, rather than equal community members – student

inputs are tremendously valuable in the same way that

customer/user groups are used in a commercial business setting

(Luescher-Mamashela, 2010). While Luescher-Mamashela notes an

inconsistency between students as legitimate co-owners of

decision-making and students as clients, he suggests that student

involvement in governance can enhance an institution’s

responsiveness to changes in the market. This idea is also

consistent with Ma and Todorovic’s (2011) recommendation that to

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be more market-oriented, universities need to do more to

understand their customers better.

On a related note, Nadler, Miller, and Modica (2010) make

the unique case for staff participation (that is, administrators

who are not part of the institution’s functional leadership) in

governance, given that the rise of larger and more complex

institutions (as highlighted by Kezar and Eckel, 2004; Chan and

Lo, 2007; Engwall, 2007; Trakman, 2008; Brown, 2011) has led to

dramatic expansion in staff. Nadler, Miller, and Modica (2010)

suggest that staff – who are likely to work in alumni relations,

government relations, development, or technology roles, for

instance – bring a professional understanding of their domains

and specialized skills and expertise to the table that would

enable better decision-making and greater responsiveness.

Finally, Kezar and Eckel (2004), Simplicio (2006) and Toma (2007)

all highlight the continued movement toward part-time, non-

tenured faculty – who classically have little role in governance

– as an important challenge to be mindful of. Since these part-

time faculty are often industry practitioners, it is important to

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consider the potential expertise and value that they can bring

into governance as part of an “open systems” orientation.

An open systems approach that incorporates shared governance

appears to be a promising model for the new environment. Still,

while one might be tempted to find in the literature a single

model or clearer cross-institutional “best practices” on making

university governance more market-oriented and responsive to

external forces across a range of institution types, scholars

such as Trakman (2008) and Kezar (2005) underscore that there is

no one-size-fits-all or “best” model for university governance.

All governance models have their challenges (Kezar, 2005). The

model must be right for each institution and its specific

context, challenges, and culture. Despite the natural tensions,

market-oriented/business-inspired and shared governance

philosophies can co-exist: Trakman (2008) refers to this notion

of a hybrid system of governance as an “amalgam model,” which

adapts the strengths of various models (corporate, collegial,

etc.) to be more responsive. Lapworth (2004) interestingly points

out that those who would criticize the application of the

corporate model of governance to higher education should keep in

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mind that there is not one single “corporate” approach, but

rather, a wide variety of approaches with different strengths and

weaknesses that might be adapted and applied to universities in

various institutionally appropriate ways.

Summation

The literature on the impact of environmental forces on

university governance indicates that the changing environmental

landscape and the twin categories of marketplace and government

forces represent some of the most significant pressures on

traditional governance models (Eckel, 2000; Gumport, 2000; Kezar

and Eckel, 2004; Middlehurst, 2004; Kezar, 2005; Toma, 2007). As

a result, institutions and policymakers often adopt corporate-

inspired, business-like approaches to governance in order to

create greater responsiveness and market-orientation (Lapworth,

2004; Engwall, 2007; Trakman, 2008; Brown, 2011; Ma and

Todorovic, 2011; Hubbell, 2012). However, these approaches can be

challenging to mesh with the traditional culture and values of

higher education (Gumport, 2000; Lapworth, 2004; Engwall, 2007;

Carnegie and Tuck, 2010). Based on the thinking and case studies

of many scholars, governance approaches that view the institution

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as an “open system” and maintain the benefits and values of

shared governance are likely to be most effective in adapting to

the changing environment (Shattock, 2002; Kezar and Eckel, 2004;

Kezar, 2005; De Wit, 2010), and again, this is important because

scholars such as Kezar (2005; 2006) paint successful

environmental adaptation as one of the single most critical

challenges facing institutions of higher learning.

It is clear that change and adaptation in higher education

are a constant – “perennial” in the words of Gumport (2000). As a

result, there is a need for new scholarship. In addition to

identifying considerations and best practices for higher

education leaders, this literature review also uncovered a number

of areas for potential future research. Toma (2007), for example,

believes that future scholarship on governance should focus more

on external forces and universities’ relationships with outside

actors. Kezar and Eckel (2004) suggest that there are many

unanswered questions, such as understanding how the market

impacts policy decisions; how intertwined governance layers (such

as in an open systems model) interact with each other; what

degree of speed or amount of time is appropriately responsive in

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different contexts; and what the specific impacts of

globalization on institutional responsiveness will be. Writing

more recently, Ma and Todorovic (2011) observe a gap in the

literature on the application of a market orientation to higher

education, generally. In these ways, the themes explored in this

literature review represent a very promising area for future

original scholarship.

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