After nearly 50 years in business, for-profit college ITT Technical Institute announced last Tuesday that it would be shutting down its more than 130 campuses immediately. The move leaves tens of thousands of students without a school and some 8,000 ITT employees without a job.
ITT made the decision after the U.S. Department of Education said that it would prohibit the school from enrolling students who receive federal financial aid to pay for their education.
The Department of Education (ED) knew this might happen. In a message addressed to ITT students, Secretary of Education John King wrote that his department understood that “one possible outcome of oversight actions is that a school may choose to close.” King admitted that the choice to institute sanctions against ITT was a difficult one, but the department’s actions were designed to protect students and taxpayers, given concerns over ITT’s “administrative capacity, organizational integrity, financial viability, and ability to serve students.”
The Education Department’s decision offers a lesson for business leaders: even a sound decision, made for the right reasons, can pose severe consequences for those caught in the crossfire. In these situations, leaders must exercise their best judgement, says Harvard Business School Professor Joseph L. Badaracco Jr., who is the author of the recently published Managing in the Gray: Five Timeless Questions for Resolving Your Toughest Problems at Work. In his book, Badaracco offers a few methods to assess difficult decisions like the kind the Education Department had to make in its choice to sanction ITT. We examine them below.
Considering Your Core Obligations
As a starting point, Badaracco suggests that leaders consider the organization’s obligations when confronting a tough problem. The for-profit higher education has world has been subject to considerable scrutiny and criticism in recent years. Critics cite such schools’ aggressive recruiting tactics, poor student outcomes, and alleged fraud as indicators that school like ITT don’t fulfill their educational promises.
The Education Department’s stated mission is “to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.” Given this commitment, the department was likely on firm ground when it opted to sanction ITT, even at the risk of the school’s closure.
Casting Aside Wishful Thinking
Badaracco also suggests that leaders and organizations ask themselves to think practically about their course of action and its real-world implications. On this count, the Education Department may be on shakier ground.
Former ITT students are now left without a school and have a slim chance at gaining credit for the coursework they have completed. Former student Brittany Bernardo told the CBS affiliate in Richmond, Va. “Not a lot of schools take the credits ITT Tech offered,” and ITT student Leon Wiggins II told the Los Angeles Times, “I’m like angry times 10 million.”
For its part, the Education Department said that it would work with local community colleges and encourage schools to accept ITT credits. While some institutions have agreed to work with incoming students, as politicians ask that more do the same, by ITT Tech’s own admission, students are unlikely to receive transfer credit from many schools. An admissions officer at Miami-Dade College—which is located near three recently shuttered ITT Tech campuses—told How is the Answer that they have not, and will not, accept transfer credits because the for-profit college lacks regional accreditation.
Discouraged and in debt, students might consider giving up on their education. You can argue that these students are in the same boat they would have been in anyway: in debt and without a meaningful degree. But, as Harvard economist David Deming has previously argued regarding for-profit colleges, if “people aren’t getting degrees at all, that’s not very good either.”
Nevertheless, ITT’s closure will leave many students in a very difficult spot, making Education Secretary King’s plea to ITT students to continue to pursue a degree appear a bit like wishful thinking.
Remembering The Questions You Don’t Know to Ask
Badaracco acknowledges the difficulty of predicting the future, making the deliberation of any major decision all the more daunting. You can weigh all of the anticipated consequences, but that still leaves all the effects you don’t think to consider. The law of unintended consequences states that our actions always yield unanticipated or otherwise unintended outcomes. Then there’s what’s called “cobra effect,” a scenario in which a solution exacerbates the problem it was intended to solve. The term is said to come from 19th century India, when, in an effort to rid the country of cobras, the British colonial government offered a bounty on cobra heads. This led to the creation of cobra farms by those looking to capitalize on the policy and, ultimately, an increase in India’s cobra population.
ITT’s demise leaves some 8,000 employees jobless, tens of thousands of students out of school, and a host of pending lawsuits on the horizon. And American taxpayers may have to cover some of the costs of this fallout in the event that former ITT students seek forgiveness for the nearly $500 million in federal loans they took out to pay for their education.
Even if the Education Department’s move is a net positive for students and taxpayers, it’s going to hurt, and perhaps in ways that may not even realize right now.
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Bringing ITT Tech to a halt might have been a crucial step, one that was a long time in the making. Still, its closure offers a reminder that even the best judgment calls can sting.
Thayer Warne is a writer and researcher at LRN.