performance-based compensation for publishers

Performance-Based Compensation for Publishers – A Model for the Future?

Editor’s Note: This article has first been published on edcetera – straight talk on edtech.

During a tell-all conversation with Brian Kibby, president of McGraw-Hill Higher Education, in which we learned about the publisher’s plans to tackle the different issues in today’s education system, Jay Chakrapani, GM of McGraw-Hill Higher Education Digital Group said that in two weeks the company will announce a new revolutionary business model.

Yesterday, we learned that this new model is the first-ever “pay-for-performance” agreement between a publisher and a university. Under the new agreement, Western Governors University, an online only university offering competency-based degree programs, is going to pay a reduced flat fee for course materials like textbooks, online content and software from McGraw-Hill. In addition, WGU will pay McGraw-Hill a bonus for each student who uses the materials and passes the course (a passing grade at WGU is equivalent to a letter grade of “B” or better).

Tying student performance to the payments a publisher receives is a pretty interesting move. It means McGraw-Hill is taking part of the responsibility for the performance of the individual student. If he/she is graded lower than “B” by WGU, McGraw-Hill won’t receive its bonus.

Consequently, this means McGraw-Hill must be pretty confident about their LearnSmart products. According to Inside Higher Ed, Brian Kibby states, “We’re making a statement that we know that it works,” and the publisher expects to make “10 or 20 percent less” than it would make based on the classic model, in which the university pays based on the number of students enrolled in a course.

To make up for this loss in revenue, WGU agreed to share something precious in return: data. McGraw-Hill will receive data on how the e-textbooks and courses are used. Which parts do students skip, where do they have problems, etc. This way the publisher is going to get access to some really important data points that will help create better material down the road, e.g. make sure that more students pass with a “B” or better. All data will be anonymized before being sent to McGraw-Hill, meaning. no student names will be shared.

Another interesting point about the partnership with WGU is the matching ideas of how students should advance in their courses. In a recent interview I had with Vineet Madan, he explained that McGraw-Hill believes students should be free to choose the way they want to take courses to achieve their goal at their own pace. He used the metaphor of taking the scenic route or the highway to travel and get to your destination.

The same is true for Western Governors University. The new business model supports WGU’s philosophy of providing a mentor-guided, competency-based education that allows students to advance when they demonstrate mastery of all course competencies, rather than accumulating credit hours by spending time in class. For each degree program, required knowledge and skills — called competencies — are defined in collaboration with education and industry experts, and assessments are being developed to measure these competencies. WGU has drawn national attention for its innovative, competency-based approach to learning, which offers affordable, high quality education. Tuition at the private, non-profit university is about $6,000 per 12-month year and has only increased by $200 in the past 6 years.

According to Inside Higher Ed, McGraw-Hill is planning to extend this model to other, more traditional universities and community colleges as well. And Pearson points out that it has similar arrangements already in place, including WGU.

All in all, I think this is a good model for everybody involved, especially the students who get access to the newest material at a lower cost, which hopefully will have an influence on student loans and the general cost of education as well. They also somewhat have an influence on the creation of new material as their usage data is going to be used to create better content.

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Kirsten Winkler is the founder and editor of EDUKWEST. She also writes about Social Media, Digital Society and Startups at