Thank you, Wayne (Watkins) for your thoughtful introduction and thank you, the members of the University Economic Development Association, for your invitation to share some thoughts and perspectives today on the issues facing our universities as we advance the economic development opportunities that lie before us.
I want to congratulate you for the significant work that you have undertaken to launch a professional association that comprehensively addresses University related economic development. UEDA's focus on policy, practice and partnerships will do much to enhance the relationships between industry, government and universities a key to successful university wealth creation and economic development.
As both a member of the university community and an individual profoundly interested in the economic growth of our country, I commend all of you on your hard work and accomplishments. Congratulations!
We have not come to this opportunity easily.
As recently as the 1990s, the majority of university leaders did not share our outlook; universities did not want to accept, nor take responsibility for economic development. Some even went so far as to consider a partnership with industry a sort of Faustian bargain, believing that such relationships forced universities and faculty to sell their souls and corrupt their noble purposes in exchange for worldly riches. Other universities, if not to that extreme, simply were so conservative that they succumbed to analysis paralysis. It made them anxious just to think about engaging with industry.
But remember that risk and anxiety are two quite different conditions and a simple story will illustrate my point . . .
The Surgeon General tells us that cigarettes kill more than 150-thousand Americans each year, and that automobiles on our highways kill more than 50-thousand people per year. But, nobody seems to be afraid of cigarettes, nor of automobiles. However, according to the Deputy Director of the National Institutes of Health, everyone is afraid of sharks. The Navy says that there are about 50 shark attacks worldwide each year.
The National Bureau of Health Statistics doesn't even keep a record of shark attacks because there are so few. (They know how many people are killed by bee stings, but not shark bites.) The best guess is that sharks kill two or three people each year in the United States. But, the fact is that if you went to a crowded beach and shouted "shark" -- everyone would race out of the water, jump into a car, light up a cigarette, and drive home!
That's the difference between anxiety and risk.However, where reason and calm prevail, there is much that can be accomplished for the common good.
As universities, we are indeed in an ideal position to take the educated and informed risks that few others can afford. For one thing, we don't have to turn a substantial profit each quarter for our investors. Nor do we need to be reelected every four years. Yet, we are often so cautious and conservative that, when it comes to undertaking new ideas at all, we are in a state of analysis paralysis.
This morning, I want to focus our attention on the process by which universities enhance economic growth. I will first provide a brief historical glimpse to demonstrate how the past is prologue. I will then suggest how we can improve upon those historical approaches to economic development in both education and research. Finally, I will consider some of the challenges we face and look at often underutilized and underdeveloped resources that will be our next great tools for creating wealth.
Past is prologue . . .
As you know, much of the focus on university economic development to date has been on technology development and technology transfer. Although university involvement in developing and transferring technology dates back more than 100 years, this approach was dramatically accelerated by the passage of the Bayh-Dole Act in 1980 (PL 96-517), where universities were given ownership of intellectual property developed under federally-funded research . Bayh-Dole helped us to embrace our roles as engines of economic development by precipitating increased activity and attention to university created innovation. It caused universities to become entrepreneurial in the management of a portion of their immense assets, their intellectual property.
By 1985, only about 50 universities had technology transfer programs. Today, there are more than 3,600 members of the Association of University Technology Managers (AUTM) representing hundreds of colleges and universities, and it seems like university administrators have taken control of "company" assets in much the way companies, investors or stockholders manage their assets.
The "stockholder" metrics show that university research revenue has grown from $20 billion in 1996, to more than $35 billion in 2006; Universities now execute about 5,000 licenses each year; and universities are viewed as part of the economic development infrastructure.
Obviously, we have come a long way since the days when some universities looked upon industry collaboration as making a pact with the devil. And many of us now believe that collaborating with industry achieves quite the opposite effect - restoring our souls by returning universities to their original purposes as engines for innovation with practical applications and of education with applicable purposes.
However, it behooves us to remember that IP is but a very small subcomponent of the total intellectual capital available to universities and, thus, reflects only a fraction of their true economic development potential.
The University of Akron, like many of the institutions represented here today, was created by founders who had quality of life, wealth creation and appreciation for arts and letters as the primary objectives of the institutions they founded.The foundational origins of many universities represent both philanthropic gifts and economic investments, with research spurring economic growth and leading to future wealth. And the efforts of these early universities, public and private, played a major role in the industrial revolution and in the success of our nation. As a matter of fact, John D. Rockefeller was to say later in his life that the University of Chicago was "the best investment (he) ever made."
But remember, also, that one of the earliest experiments was one of curriculum, bringing together the liberal arts and research within a single institution and under a common, general education curriculum.
Improving on the past . . .
In his 2005 report Universities, innovation, and the competitiveness of local economies, MIT professor Richard K. Lester lists four key points about the modern role of universities in economic development. He suggests that . . .
Of course, I expect that most of us probably agree with Professor Lester's assessment of the role of universities in economic development. But how do we execute upon this model?
I need not tell you that there are myriad university models for economic development: research parks, venture funds, urban redevelopment programs, small business development centers, industry collaborations and research consortia to name just a few. And surely you know that some universities are far more successful than others in creating and supporting strong and vibrant economies. In our case, The University of Akron has become particularly successful in providing added value to industry by linking resources and by developing and commercially exploiting technology. In fact, an NSF-supported study released just a couple of weeks ago identifies The University of Akron and nine other smaller and medium sized research institutions as exemplars for technology transfer, commercialization and industry partnerships.
Thus, I thought I might share just a few of the projects currently underway at my home university that have led to our being recognized as an exemplar and why we enjoy some distinct competitive advantages.
Founded 137 years ago, in 1870, The University of Akron grew up alongside the rubber industry that emerged in Akron in the mid 1870s. It offered the world's first academic program in rubber chemistry and continued to shape its R&D interests alongside those of industry. Today, The University of Akron has the largest and best-known academic center focusing on polymer science and polymer engineering--areas in which we compete better than better-known universities such as MIT, CalTech, or Case Western Reserve.
Notably, The University of Akron's intense focus on polymers has enabled us to take significant leadership among our industrial partners. The University has taken leadership roles in the formation of an industry association, Polymer Ohio, Inc., and an industry-led public/private strategy council that advises the Governor of Ohio and the Ohio Department of Development, The Ohio Polymer Strategy Council.In the context of this major polymer industrial cluster and its interrelated historical context, the university has called for a bold commitment that signals strategic intent by undertaking four major initiatives:
First, we have initiated a plan to double the size of our R&D base in polymer science and polymer engineering as well as to make investments in chemistry, physics and biomedical engineering.
Second, we have formed a Global Polymer Academy, leveraging our own strength in distance learning technologies and our close association with the Rubber Division of the American Chemical Society. It uses automated broadband technologies in synchronous and asynchronous modes and is linked to major industry sites around the globe.
Third, we are creating an industry-led, but university-managed and university-situated National Polymer Innovation Center (NPIC). The NPIC will house talent in basic and applied R&D to focus on small- and mid-sized polymer processing companies as well as on the development of valued-added products and opportunities.
Finally, we have initiated a significant commercialization engine: The University of Akron Research Foundation - consisting of our own technology transfer personnel coupled with our programs in intellectual property law, science, engineering and business. The non-profit University of Akron Research Foundation is a model for working flexibly with industry and establishing long-term relationships that lead to future opportunities. It has achieved success through the efforts of an impressive team of professionals who understand and appreciate both the academic and commercial worlds. Some of my colleagues are here today and I urge you to meet and get to know George Newkome and Wayne Watkins and do feel free to come to Ohio and spend time with us; we'll learn much from each other, I am sure.
Examples of the interesting things that this is enabling us to do are the following: First, as industries adjust their talent and space utilization needs, we are managing their vacant space to accommodate incubator needs of new start-up companies and expanding research programs. Likewise, we are consolidating industrial research equipment within our own facilities. We are assembling technical libraries, allowing us to expand our holdings as well as to manage the holdings of industrial partners. We also are managing industrial talent and providing industry with the equivalent of academic research and teaching assistants--namely, industrial assistants. Finally, we are exploring strategic partnerships that tie our research activities more closely with those of industry as well as partnerships that enable bundled intellectual property portfolios to create new enterprises that benefit industry and the university. And we have started and angel investment network, ARCHangels, and an entrepreneurial Guerilla Ventures enterprise group.
Despite great strides that universities have made in commercializing their own technology, we must ask ourselves if we have focused too much on the technology transfer component of economic development and in doing so, ignored the opportunity to explore other, perhaps more impactful opportunities.
Consider this: on average, U.S. universities hold only 3,700 of the more than 150,000 U.S. patents granted each year; they gain less than $28,000 in licensing revenue for each $1 million of research funding, and capture only $36 billion, or 13 percent, of the nation's $276 billion R&D economy.These statistics show that we are just one of many players, perhaps a minor player, in the areas of R&D and technology transfer. Thus, a natural question is whether we should not be seeking to gain a larger percentage of the total R&D marketplace, both nationally and globally.
Moreover, we should regularly exercise a "reality check" for tech transfer. All universities will not be tech transfer winners. In part, this is because most regions are not Silicon Valley or Route 128 and because most industries are not software or biotechnology and because most universities are not multi-billion dollar research engines. Some of us simply will be lucky, the beneficiaries of an exceptional piece of IP or entrepreneurial spirit, while others will be lucky just if we hit the average numbers annually reported by AUTM.
What I am trying to say is that we should remember that not all of the economically impactful university products go through the tech transfer office. In fact, there are many economically valuable "products" coming out of universities. Our colleague and friend, Cleveland State University Professor and Distinguished Scholar of Economic Development Edward W. "Ned" Hill identifies educational services, cultural products, tacit knowledge, contract research and new technology-based products or industries, to name just a few.
So why do most economic development speakers focus only on technology-based products? Why do they only occasionally branch out to include the know-how of a university and the value of its faculty in bringing in research funding, creating jobs for graduate students and support personnel, and teaching students?
Indeed, if 95% of all technology transfer takes place as people move from college into the workplace or from one company to another, why do we seldom include in our economic development discussion the first responsibility of every university - our responsibility as educator? What is the economic value of the role we play in teaching and training members of society, in a way that will make them productive, proactive, and inventive?
For years, technology has held dominance in economic development discussions, perhaps because of the sheer velocity of its progress. As one analogy-happy Washington Post writer put it, if universities had progressed at the same rate as that of information technology, then a high school and college education-which still takes a total of 16 years and about $120,000-could today be completed in less than 10 minutes for about 5 cents!
Now, I cannot imagine that we will measure the rate at which our students learn in megabytes per second, but I do think that we, as educators, should be giving more thought to the way in which our educational system is structured for economic development purposes. Our methods of education have developed at an extremely slow pace when compared with virtually all other value-producing endeavors. Indeed, despite the fact that the first responsibility of every university is that of educator - teaching and training members of society in a way that will make them productive, proactive and innovative - we devote precious little attention to research designed to demonstrate what works educationally. Do we hear anyone clamoring for evidence-based education?
This paradox can perhaps be expressed if we look at how companies have optimized nearly every aspect of their supply chain. Through what I refer to as the Wal-Mart effect, large multi-national corporations have achieved unprecedented profits through systematic partnerships with suppliers to cut the pesky "middle man" expenses that had long plagued industry.Industries have specs and standards for suppliers of goods, as well as ISO 9000 and 6000 standards of performance. Business has squeezed almost every ounce of efficiency out of managing time, raw materials, quality, price and performance and they have the data to prove it.
There is paradox and irony here: How do we reconcile industry saying that workforce is its highest priority with its apparent inability to optimize its talent supply chain asset?
In much the same way universities harp on about the importance of well-prepared students but fail to sufficiently leverage its relationship with K-12, industry says workforce is its number one issue, but doesn't pay the same attention to its human capital supply chain as it does to the supply chain of materials and components.
"Business" partners with "business" to improve the transfer of goods, but it fails to adequately partner with universities to facilitate the transition of students into the workforce. Indeed, there are few specifications for what industry expects from the droves of individuals entering the workforce each year.
In case you find yourself being skeptical about my comments on the talent supply chain, please remember what I said earlier - it is estimated that 95 percent of technology transfer happens when people move from universities into the workforce and then move from one job to another. Since companies spend an average of $1,000 per year per person on enhancing the skills of workers, you can understand that our economy could save about $150 billion dollars and increase its return on investment by as much as an order of magnitude by managing the talent supply chain as diligently as the supply chain of materials and components.
Thus, I suggest that it is the responsibility of universities to develop a serious academic approach to the concept of talent supply chain management.
This topic of talent supply management leads me to a related matter. At The University of Akron we often say that "our expertise creates the new materials for the new economy," by which we mean to convey a double meaning - both with regard to our expertise in materials science and our ability to create human capital.
Entrepreneurs launch hundreds of thousands of new firms annually and these new firms create 50% of all new jobs. Yet, failures in business are the norm, rather than the exception. Clearly improved training in economics, entrepreneurship and small business ownership would be useful to improve the success of entrepreneurial efforts.
How is it, for example, that Mexico's MIT, the Monterrey Institute of Technology is able to impart an entrepreneurial spirit in its students so that 80% of its students start new business upon graduation? Wow! That is a result American universities would be hard pressed to even approximate, or emulate. Still, the Kaufmann Foundation is focused on stimulating American entrepreneurship and many universities are reorganizing their entrepreneurship programs, moving them outside the Colleges of Business and into efforts that incorporate more and more students across other departments and colleges throughout a university.
For example, at The University of Akron, efforts are underway to create a wide-reaching entrepreneurship program integrated in all academic and research units. It is our version of "entrepreneurship across the curriculum", if you will.
The effort is a radiating, three-tiered system that includes:
Through our expanded efforts, we are teaching all students about the importance of entrepreneurship and, thus, advancing the role of innovation in America's economic competitiveness.
Let me now take a few minutes to address three special challenges confronting universities as they take on larger roles in economic development. . .
The first challenge is that of realistically adapting to the dynamics of the marketplace:
Consider the fact that in 1899, the commissioner of the U.S. Patent Office recommended that his office be abolished, because-in his words-"Everything that can be invented has been invented."
Today, virtually everyone recognizes that free markets drive innovation, which in turn creates economic growth. It does so by stimulating cycles of "creative destruction" - a concept first described by Harvard's Joseph Schumpeter in 1934.
In my judgment, innovation and the process of creative destruction also have implications for education and the production of human capital. What I mean is that new technologies always have destroyed jobs at the trailing edge of an economy at the same time that new jobs are being created at the leading edge. In other words, progress occurs when we make obsolete the old through the continuous effects of innovation.
Of course, since the time of the Luddites - those 19th century English textile workers who took to smashing mechanized looms for fear of losing their jobs - Americans have feared the loss of their jobs when innovation destroys trailing edge jobs. But it would do us well to remember, as Ralph Peterson, Chairman of CH2MHill, recently remarked, that the "stone age did not end because we ran out of stones".
From this perspective, our current personal or political preoccupations about outsourcing seem quaint and patently at odds with reality. Indeed, as they say, those who ignore history are bound to repeat it, and history certainly is replete with examples of how "fights over trade, technology and immigration foreshadowed debates over outsourcing..."
(Bob Davis, "Finding Lessons of Outsourcing in 4 Historical Tales," The Wall Street Journal, March 29, 2004, p. A1)
"What is missing . . ." from the current debate is the historical understanding and appreciation of ". . . the social and political tumult caused by America's dynamism. The rise and fall of industries and regions, the convulsions that attended industrialization and mass immigration, the revolution in values catalyzed by widespread affluence, the never-ending struggle over dividing the pie - all . . ." of these and more have their counterparts in today's economy and will surely be evident as technological innovation unfolds in the decades and centuries ahead.
(Brink Lindsey, "The Biggest Rags to Riches Story Ever," a review of An Empire of Wealth by John Steele Gordon (Harper Collins), The Wall Street Journal, September 23, 2004, p. D10)
The fact is that "industry structures are in constant churning - firms are merging, acquiring, leaving, dying, entering, growing, downsizing, outsourcing and spinning off. At a faster and faster pace, the U.S. economy is experiencing the phenomenon the economist Joseph Schumpeter called ‘creative destruction'..."
(Andrew Reamer, Larry Icerman, and Jan Youtie, "Technology Transfer and Commercialization: Their Role in Economic Development," Georgia Institute of Technology, August 2003, p. vii)
What does this challenge mean for us? It means that we must become much more effective at managing the talent supply pipeline and of educating our politicians about the futility of protectionism.
The second challenge is one of understanding the full dimensions of our universities' role in economic development. I call this the challenge of relevance.
Think about this: In many respects, linking our universities with various parts of our community and with various industries are examples of our efforts to optimize the geographically proximal parts of the "National Innovation Ecosystem" - that system of loosely interrelating elements, of which universities are a key part, that has enabled our society to make new discoveries, capture their value in the marketplace, enhance productivity and thereby increase our standard of living.
We all know that university innovation does not occur in a vacuum. The environment for innovation is complex and interactive, shaped not only by the quantity and sources of funding for research, but also by the talent pool, the setting and culture in which research is conducted and the surrounding physical and regulatory infrastructure. This "infrastructure" also is conditioned by prevailing public attitudes about the usefulness of education and the perceived usefulness of research and innovation. Moreover, it also depends on the availability of funds and human resources - together constituting the net entrepreneurial and innovation capacity or "innovation ecosystem.
And while Thomas Friedman has convinced most of us that the world is flat from an economic perspective, I suggest that the world is, in fact, spiky. Consider the fact of global urbanization: more than 50% of the world's population now lives in cities and this trend of urbanization is increasing a very rapid rate. Already, America is largely an urban nation, as this nighttime satellite image illustrates. And tomorrow morning, precisely to highlight our urban challenges and opportunities, the Brooking Institution will unveil a national policy agenda entitled Blueprint for American Prosperity: Unleashing the Potential of a Metropolitan Nation.
Statistically speaking, what this slide shows is that 85% of all jobs are in our urban/metropolitan areas and almost 90% of the nation's university-driven economic activity occurs in cities. Similarly large percentages in the 80 to 90% range reflect where most colleges and universities are located and where most students are going to school.The statistics are clear - America is a metro nation and universities and their cities are naturally aligned strategic partners.
There are thousands of universities employing hundreds of thousands of people, educating millions of students, and spending billions of dollars, all in the urban core and fringe.
So it is easy to understand why Neal Peirce said, ". . . universities could and should be a resource, a secret asset, for the health and growth of great cities . . . there is an appetite out there for attuned universities, truly engaged with their communities." . . . for universities ready to be RELEVANT!
Indeed, urban universities generate the innovations that give cities and regions a competitive advantage, and they do this in several ways. * They create new knowledge and economic value through research and tech transfer,
According to a paper published by CEO's for Cities, "...these so-called ‘anchor institutions' represent ‘sticky capital' in cities. They cannot easily pick up and leave the community. So they have special importance to the re-making of the city and its future, and they have special reason to want to be instrumental in shaping their city's future..."
(Maurasse, David, City Anchors: Leveraging Anchor Institutions for Urban Success, CEOs for Cities, September 2007)
For example, at The University of Akron, we are engaged deeply with our urban environment. Through the National Association of State Universities and Land-Grant Colleges Commission on the Urban Agenda, which I presently chair, and in partnership with my colleague, Nancy Zimpher, president of the University of Cincinnati and chair of the coalition of Urban Serving Universities, we have convened summer workshops designed to create a higher education urban agenda that consists of three strands of activity - 1. Talent development; 2. Strengthening communities; and 3. Health services.
For example, our ongoing campus transformational initiative, which we call a New Landscape for Learning campus, has in turn led us to create a University Park Alliance, a project designed to revitalize 1000 acres of decaying neighborhood that surround our campus that will improve the economic viability of the surrounding community and demonstrate our commitment to the City of Akron. A major national foundation has provided the "walking around money" and we have catalyzed private sector investment that already exceeds our most optimistic wishes.
The third and last challenge that I want to address this morning is the challenge of the two cultures, business and industry.Recently there has been growing criticism from industry about working with U.S. universities. The complaints leveled by industry tend to focus on the slowness of negotiating agreements and on the two particularly contentious issues of intellectual property rights and third party access to the research information that has been supported by a company. Companies are telling us and Congress that international universities are much easier to work with and also that foreign institutions are willing to grant university IP rights to the company sponsor without license commitments. It was also noted that international universities are willing to limit third party access to research. Some companies allege that these concerns about U.S. universities are the result of Bayh-Dole and you may know that there was a recent hearing at the US House of Representatives to suggest the need for amendments to the Bayh-Dole Act.
The hearing evidence, although mixed, showed that Bayh-Dole has been very effective in supporting university innovation. Recommendations were made to continue the basic model supported by that piece of legislation. Suggestions were made that universities should continue to reserve to themselves and other academic institutions the rights to practice research results.
There also was support for minimizing the licensing of future improvements and insuring access to broad research tools. The evidence showed that while most universities are not making money on technology transfer, the economic benefit is substantial for the communities commercializing IP derived from university research.
Moreover, it has been noted that many of the problems of collaboration stem more from the university general counsel offices as opposed to technology transfer offices. The role of corporate and other IP law practitioners is also questionable in many cases - reflecting clear disconnects between these components of the innovation ecosystem/
In this regard, I would note that a 2003 PCAST report on technology transfer had important recommendations to advance the understanding of Bayh-Dole and the practice of technology transfer. Also, the Kauffman foundation is suggesting that the boundaries of universities and industry need to become more porous. They suggest that universities should push the volume of technology up, rather than seek the individual economic home run and we are seeing examples of this emerge. For example, Carnegie Mellon University has adopted a "Five percent and go" policy in an attempt to reduce delays and lower transactions costs.
Of course, this will continue to be an evolutionary process as universities and industries continue to adapt, both to each other and to the practice of technology transfer. Universities are comparatively "new" to the world of economic development, so they need to be especially attuned to how much we have to learn and how much we need to do in order to bridge the cultural divide between these "two cultures".
Schooling ourselves in the language of business would be a good start. Understanding the full dimensions of Bayh-Dole, which many universities misinterpret, is a necessity. Adapting our university structures to more closely address applied and business issues, as Arizona State University and The University of Akron are doing, will also help bridge the divide. And I am encouraged by the fact that a University Industry Demonstration Partnership has been formed by a consortium of companies and universities to identify solutions and models that will improve our mutual appreciation and support the essential partnerships that are being formed.
This brings me to my final point . . .
Consider these two facts:
That is a startling statistic that is repeated in many of the national reports we have seen in the last few years - whether you read the Innovate America report of the Council on Competitiveness or the Rising Above the Gathering Storm report of the National Academy of Sciences, we know that the global distribution of talent and R&D activity has been changing. And while the U.S. remains the dominant player, other nations are gaining rapidly.
What this means is that we must do better, lest we fall behind. If we are to fully utilize the talents of American students, we must make the tools of education available to more. Education can and should be affordable and accessible. And we must find ways to create and incentivize interest in STEM among a larger fraction of our students.
One thing that I think is essential is to rethink our model of university excellence and to craft an entirely new model of university performance, something that both Arizona State University and The University of Akron call a New Gold Standard for a great American university.
This is how we describe it at Akron:
"Unlike others, we shall not be measured by how many students we exclude, but rather by how much value we add in enabling the success of our students.
Unlike others, we shall not be measured by the barriers we erect between ourselves and our communities, but by the collaborative impact that we create for each other and for our common future.
Unlike others, we shall not be measured by the isolation of our disciplines, but by their integration as applied in solving the problems of today."
Ladies and Gentlemen, the task before us is not easy, but I say to you . . .
Be cheerful, and plunge ahead!
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