BY BRIAN C. MITCHELL
The failure to grow net tuition revenue is an existential threat to America’s colleges and universities. Most are overwhelmingly dependent upon tuition, fees, and room and board to support the educational program that they offer.
Colleges operate with fixed costs in labor, benefits, land, state and federal reporting requirements, and debt repayment leaving only a small set aside for discretionary spending. Added to that are the paper losses that higher education incurs through tuition discounting off the advertised sticker price.
While the average discount among colleges is 50% of every potential dollar received, the cold fact is that for many institutions this number is now over 70% of what would be available absent a discount. This is unsustainable.
New Offerings May Be Promising But Resource Needs Can Stymie Success
For the moment, most colleges look to expanding their program base, turning often to new programs that meet perceived workforce needs. In one sense, this is encouraging because it forces institutions to adjust their offerings to the needs of the American workforce in a global economy. When done successfully, such strategic academic programs can produce an important new source of revenue.
However, it may not be as easy to relate new programming ideas to the college’s historic mission. And it can produce some ugly moments on college campuses as new, sexier programs run up against the turf wars and campus inertia that characterizes some campuses.
Further, new program measures may require expertise in areas that are beyond that of current staff.
- Are most colleges really ready to compete regionally and even globally with the online program capacity of large research universities?
- Do they have the technology in place or the cooperative partnerships waiting in the wings to pull it off?
- Further, are they prepared to commit to tenure-track positions or will they rely heavily on the use of adjunct faculty?
- Before it enters a competitive marketplace, does an under-resourced institution actually know what it does not know?
A further complication for many colleges arises when new program ideas are less grounded in the core mission on which many are based – a residential, liberal arts education.
In the most ugly settings, a kind of turf war can erupt among groups that understand that a college budget is a rationing tool. Occasionally, colleges approach new, “out of the box” programming through more normal faculty-led channels, greatly improving the chance that the new program will succeed.
The real issue, however, is that new program expansion is akin to putting a band-aid on an open wound. The wound may heal, but the remedy may not address a deeper problem that is far more dangerous and systemic.
New Model of Collaboration Holds Promise for Higher Education
What is needed most in an era of massive tuition discounting is a new, collaborative model that allows colleges and universities the financial space to develop programs true to their mission but relevant to their repositioning in a changing labor market.
In the end, it’s all about how colleges compete through collaboration. Thirty years ago, colleges began to look at collaboration in admissions markets, locally and abroad, cross-registration between neighboring campuses, administrative operations, off-campus study, joint purchasing, and even occasionally shared faculty appointments, among other tactical cooperative ventures.
Slowly, these approaches found some level of acceptance on college campuses often more noted by fierce turf protection shaped by campus cultural inertia. The good news is that there is a strong tradition of college and university collaboration upon which to build.
Successful Collaboration Is Systemic Part of Campus Culture
The difference today is, however, that higher education institutions must now reexamine collaboration as a way to survive and remain relevant both to their historic mission and to the rapidly changing needs of the global workforce.
There are precious few discretionary dollars on colleges and university campuses by which to experiment and innovate.
Collaboration must be systemic, woven into the very fabric of campus culture and creatively drawing upon opportunities among colleges that have remained dormant because there was no sense of urgency to explore them.
A college thrives with the right balance at the intersection of people, programs, and facilities. The solution – and the level of experimentation – may vary among collaborating institutions. Geography, resources, the force of will, and politics may determine the depth and breadth of collaboration.
All key stakeholders must look beyond the college gates to shape a collaboration that holds true to individual missions and differentiates the parts as clearly as the whole. In the best sense, it shapes how colleges adjust to a new reconfiguration of people, programs and facilities within a global market.
The alternative to a new culture of collaboration is a system that picks winners and losers based on outdated financial models. Some institutions will survive because they are adaptable. Others will have the resources to weather any storms.
But for more than a few, the alternative is a steady march past collaboration toward a future full of mergers and acquisitions. While this may be inevitable, there is still enough time to adapt and shape a stronger and more promising future.
Granted, the costs of running a college or university are very high. But what about the incredibly high salaries paid to admin while schools are over-relying on ever larger armies of underpaid adjunct faculty? A real imbalance there!
Thank you for reading and writing, Ms Gabin. You’re correct that faculty and staff compensation is a large piece of each college or university budget. However, the financial challenges that face many, many institutions are more complicated than salaries alone — costs of debt, deferred maintenance, tuition discount rates of more than 50%, stagnant or shrinking net tuition revenue all play a part in what I argue is an unsustainable financial model.
Concerning innovation, the most prominent candidate may be governance. See the WSJ, 15 June, “It’s Past Time for Real College Board Reform.” Concerning collaboration, universities do much joint venturing in research, especially on behalf of federal government. And they can often successfully collaborate with commercial corporations on research, and on commercial development. Stanford is an obvious example, as are the University of Illinois in electrical engineering, or the University of Chicago’s Fermi and Argonne Lab. The component of collaboration that may be most difficult is with private donors. Here, colleges and universities are used to, and often expect and encourage, a passive arms-length relationship with donors. This may be a mistake, for two reasons. One, it leaves un, or under, utilized the often deep management experience (and enthusiasms) of benefactors; and two, it fails to absorb the necessary cultural diversification and expertise that colleges usually quite desperately need, and without which, they can and do indeed, deteriorate, or even fail. The modern university is a multi-million (or billion) dollar institution identical to the modern corporation in most regards, but its governance culture; its labor model and its management practices are usually not. Those three areas usually contain the causal elements of university problems. College collaborations cannot indeed be “side projects,” and this includes perhaps especially its collaboration with outside related parties. Students, alumni, parents, corporations, donors, government (even for private institutions) and vendors are all effective shareholders, but they lack the claim rights of modern corporate capital structuring. Lastly, it is probably fairly obvious that a significant consolidation in higher education market structure will occur, including market exits, and merger and acquisition activity. This may help reinforce academic programs that struggle the most for funding resources, but are otherwise arguably the most vital in an enlightened higher education philosophy. The Humanities especially may benefit.
Thank you for reading and writing, Mr. Andersson. You raise many good points, particularly the prediction than consolidation in higher education is likely to continue. In my post later this week, I’ll write about an option — not merger or acquisition — that may prove viable for some small and medium-sized colleges.