Higher Education Must Look Inward to Improve Financial Viability


American higher education’s operational model is based on outmoded — and some (myself included) would argue, unsustainable — revenue and expense assumptions.

The premise is that student-generated revenues will expand to offset increasing operational expenses of the institutions. However, the decline in per-student net tuition revenues and the backlash against higher student loan debt have pushed this core assumption off the planning table. At the same, time, higher education faces evolving demographic, political, and economic trends that will constrain revenue, and produce smaller and more diverse admission classes.

In a “Futurist” piece in NACUBO’s Business Officer magazine (July/August 2016), I argue that institutions must look inward to develop a budget format that creates a sustainable financial model appropriate to changing circumstances on college and university campuses.

To achieve financial viability, each institution will have to manage change by developing new financial models after evaluation its own set of strengths and weaknesses. Many institutions will succeed; some will not. …The biggest variable is the experience and innovative capacity of the leadership.

Specifically, it will be critical to match changing financial practices with modernized, streamlined and better informed governance — beginning with how trustees see their role in shared governance.

In the article, I argue that American colleges and universities must reimagine what tools they have and how to use them. They must learn to do more with less. Four opportunities are emerging:

  • Compete better through collaboration;
  • End “mom and pop” financial aid shops;
  • Review the entire base of institutional assets;
  • Embrace communities and demonstrate higher education’s value to them.

Higher education will always be an inefficient business with extraordinary fixed costs. But it has enough flexibility built in to put the pieces of the puzzle together differently.

Systemic change in the transformation of information transformed educational institutions for the better. Now it must change how they operate internally.

My complete article can be read or downloaded online. To read the full issue of Business Officer, visit NACUBO’s site

3 thoughts on “Higher Education Must Look Inward to Improve Financial Viability

  1. Dr. Andrew Hines , at the University of Houston (ahines@central.uh.edu) just completed a study of student needs, 2025 funded by Lumina and which is scheduled to be a themed issue of :
    On the Horizon in 2017-2 (http://www.emeraldinsight.com/oth.htm)

    Basically, the demand will be for the softer skills, the ones in which content driven academics are not skilled nor focus on in their career paths. It also meshes with the fact that students come to a campus for more than the content oriented degree. It is the same, internationally, the desire to acquire the social and cultural capital that are needed to function in both the world of work and as contributing citizens. It is also the same for other populations that the campuses seek to attract at the basic undergraduate level. There are academic institutions that cater to those needs today from the medallion institutions to some public universities.

    On the other hand, there are growing numbers of post secondary education providers, some of which are private, stand alone, some are collaborative and an increasing number are taking programs international. Some compete on their models and others are competing on price or both. But most are student centric.

    The 3 essays in the NACUBO’s themed issue, for all the thought, are still content and institution centric. While Bryan, in one scenario does touch on AI, what was not addressed is what has had faculty stirred, MOOC’s, the idea that massive or AI driven courses can not replace faculty/student and Baumol’s disease.
    If, as the Lumina study suggests and the rise of AI as content provider is understood, the future demands will vindicate the need for faculty but there will be a shift in the faculty composition as content skills and soft skills will require a rebalancing.

    Administrators need to look carefully at their entire institution from who mows the grass and scrubs the floors, who engineers or re-engineers the campus or the global educational experience and the entire academic structure which may be collaborative, an AI blend or other combinations. This is a budgetary issue last and a faculty/admin/student issue first.

    One must remember that higher education in the US starting in the 17th century was aimed at giving, polishing and distributing social and cultural capital, albeit for an elite. This has come full circle in a new and demanding embodiment at the basic undergraduate level. Scholarly, traditional, academia at the graduate levels is another issue. This can not be framed as a way to save “Old Main”.

  2. It is interesting that “the Chronicle Review”, July 28 , http://tinyurl.com/z9ar25c , posted Alan Wolfe’s “The Vanishing Big Thinker”. For the purpose, here, Wolfe points out that in 1968 there was the start of a major shift towards the “research university”, the publish/perish, scientific model which oriented faculty towards the graduate/research dependent functioning of the faculty. While Wolfe is interested in the philosophical aspects, it also starts to change both the operation and the business model of the university and that trajectory evolving over time is one that is now needing to be addressed because the issue has now come full circle, particularly for the non RI institutions and even the smaller “liberal arts” institutions whose Ph.D. faculty are educated in this mold.

  3. Pingback: Towards the future of higher education economics | Bryan Alexander

Your comments are welcome. They must be relevant to the topic at hand and must not contain advertisements, degrade others, or violate laws or considerations of privacy. We encourage the use of your real name, but do not prohibit pseudonyms as long as you don’t impersonate a real person.