Beyond Mergers: The Confederated Colleges of America
Several years ago, I spoke to a group of extraordinarily bright, committed colleagues from across a group of neighboring colleges and universities in a large metropolitan area. The subject – collaboration — was a precursor to a larger conversation about whether they might consider a merger of like-minded institutions to create huge efficiencies and a clear economy of scale.
College Leaders’ Arguments Against Mergers are Many and Varied
The answer – a resounding “no” – was instructive. Their reasons why any merger wouldn’t be possible, let alone successful, were many:
- Their institutions had overlapping programs.
- They competed fiercely in the regional market.
- They feared lay-offs and thought they would lose the support of their campus stakeholders.
- Their alumni would be up in arms even if the new institution were significantly stronger and with a better capacity to brand their education regionally and even nationally.
- And most important, they argued, their campus culture would object to any changes as an abandonment of their mission.
Their arguments made a great deal of sense from each institution’s perspective and from where higher education stood as a community several years ago. Further, we had presented the hypothetical question about merger as an “either/or” option. In addition, each college represented a unique social, economic, political, and cultural climate.
Finally, some leaders could choose against mergers because they were doing better at differentiating their programs, establishing a good consumer tuition price point, and establishing a firm toehold in the enrollment market.
Mergers, Collaborations Increasingly Palatable Options for Higher Ed
If we approached these institutions today, we might ask a similar question but phrase it very differently. To start, the financial situation at almost all of the colleges has not improved materially in recent years. Indeed, many face an existential crisis with net tuition revenue flat or decreasing.
While some new programs are providing additional revenue, the colleges as a whole do not have robust, well-differentiated programs across the board. The most successful new initiatives are not the core liberal arts programs generally but are more professional in nature. Efforts to grow graduate, continuing education, and online programming may appear to have improved the bottom line, but they are value-added tactics, not systemic changes.
Given the economic, demographic, and cultural landscape facing these colleges and universities today, the right question to ask is: how should these institutions create a stronger, better differentiated group of colleges and universities while retaining their historic independence, remaining true to their mission, and enjoying the benefits of brand in the marketplace?
Is there a way to “heighten the brand,” become more sustainable individually and collectively, and not anger key stakeholders, especially students, faculty, staff and alumni?
The answer may be “yes” based upon how these institutions imagine governance. In their case, what could be proposed is less of a union through mergers and acquisitions and more of a confederation.
Confederation, Rather than Merger, May be Viable Option
It is possible theoretically to imagine a new governance structure in which effectively nothing changes. Colleges would maintain their full independence, manage their affairs, fundraise, compete for enrollment, graduate their students with the college’s degree, and build their alumni base. They would employ their faculty and staff.
But a new, confederated University would work to create differentiated programs through open dialogue, diminish or eliminate repetitive operations and programming, and work creatively to create new ones to replace older strategies through basic efficiencies in an economy of larger scale.
This scale would also permit affiliated institutions to brand themselves better and attach their brand to the larger University. It would not interfere with individual mission, culture, or strategy.
In a critical way, a confederated University would bring order from the competitive chaos among small- and mid-sized colleges that would also permit them to compete more effectively with larger universities.
In addition, a confederated system of equal, collaborating colleges would draw strength from one another that might stabilize net tuition revenue and grow the enrollment base.
It would also encourage new initiatives like graduate and professional programming offered over a wider area and online efforts that could be supported by the better, more efficient resources created by the economy of scale.
Confederation Permits Small Colleges to Compete on Larger Field
In short, a confederation would permit smaller colleges to play competitively on a much larger field. The confederation itself would not need to be place-bound but might even cross state lines, depending upon how it developed.
One alternative to “we’ve always done it this way” is to pursue an unsustainable path with potentially dangerous outcomes. Mergers and acquisitions may make sense in some settings. It is unlikely that American higher education will ever face a “day the dinosaurs all died” moment. But the present operating models do not work for most colleges.
Higher education must experiment with systemic change. Some conversations will go nowhere. A number of colleges will be nimble and agile enough to flourish on their own.
But a reading of the tea leaves suggest that it may be better for some colleges to at least consider getting by with a little help from their friends.