Posts Tagged “consolidation”
I’ve been thinking a great deal lately about how disruption will play out in American higher education. My hopes – and concerns – reflect a bedrock belief that America’s colleges and universities operate on an unsustainable finance model that must adapt to new realities. It is impossible to predict how many colleges and universities have the capacity or willingness to make the kinds of structural changes that reach beyond where most have charted their courses.
That having been said, it seems likely that we will see an uptick in mergers, closures, and acquisitions, particularly for poorly endowed and under-resourced institutions that cannot control their financial aid discounts and spending rates.
While almost all institutions feel some level of pain, those with weak governance, internal fiefdoms that fail to communicate across the campus, uninformed faculty, and poorly articulated value propositions will be the first to fall.
External Forces Compound Higher Ed’s Internal Problems
External forces compound the growing problems faced by higher education, where the annual outlook by the ratings agencies has now eroded once again to “negative.” There are a number of quality institutions with financial aid discount rates over 70 percent. A number of these institutions are unable to stop the rise in these rates.
Basic math suggests that as the effects compound, these institutions will so severely limit their options that the impending question on the horizon is how and when they will lose their independence.
It’s Not Too Late to Avoid the Debacle Ahead
In the once robust world of decentralized American higher education, the tragedy is that so much of what will play out could be stopped. There are a number of players who can step in to avoid the debacle ahead.
The first is, obviously, the higher education community itself.
Each and every college or university must determine its value to its community and to American society as a whole. Once defined, its leadership must be courageous in articulating its own value proposition.
Stakeholders – led by trustees and faculty – must accept this value proposition and must adjust their roles accordingly, clearly differentiating what is truly distinctive about their institution – what it does differently than its peers.
The campus community must live within its footprint. And it must adapt to the new realities that fund what it can do best within its means to serve the common good.
State and Federal Governments Have Stake in Higher Education
The second stakeholder group is government, both at the state and federal level. There has never been an effort to have the state and federal governments coordinate their support, especially their financial support, of America’s colleges and universities. The impact varies widely across states.
- Is it the responsibility of state governments, for instance, to bolster student aid and infrastructure needs rather than simply provide direct public subsidies?
- Should the federal government effectively designate America’s research universities as the lead participant in many strategic national research and development efforts?
- Can the federal and state governments lighten regulatory restrictions in an overregulated higher education industry?
Media Plays Powerful Role in Shaping Public Perception of Higher Ed
The third stakeholder group is the media through which the message about higher education is delivered. Much of the negative perception of education shared by American consumers comes from the sensationalism of anecdote, political posturing, and polling. It festers in an unregulated, hyperactive, and reactionary social media environment. Good stories seldom draw ratings and sell print media. This combination of ratings-driven establishment and out-of-control social media has encouraged new – generally negative — perceptions not driven by data.
The cumulative effect is to throw higher education under the bus, often through some combination of bad data and self-inflicted wounds.
The positive message of higher education’s contributions to the common good in American society is often drowned out by sensational, if often accurate, stories of colleges in crisis. The weakness of its parts effectively drowns out the good of the whole.
Can Disruption Restore Public Faith in American Higher Education?
This is the point at which disruption can play a critical role in restoring the faith of the American consumer in the value proposition of American colleges and universities. As disruption sweeps across colleges and universities, higher education is facing the same kinds of pressures as the health care industry.
If higher education, government, and the media that together shape the parameters of higher education continue with their current level of disconnected incoherence, the results may work against a robust college community.
America loses in the end. However, there is an alternative view.
Led by America’s colleges and universities, disruption within higher education can be good for American society – especially if it is intentional and self-directed.
Higher education must break out of the “we’ve never done it this way before” mindset that governs broad national policy despite solid evidence of remarkable innovation in isolated sectors of the academy.
The fact is that the financial model of American higher education is broken. The revenue generated no longer supports the people, programs, and facilities that form the decentralized higher education community that is still admired globally.
Something must be done soon. The answer will likely come from within higher education. My strong hope is that positive disruption arrives before consumer perception and the fiscal crisis intersect to do irretrievable damage.
One of the more interesting and at times alarming changes in American higher education is the redistricting of public college systems in various states. The most active discussions – some of which produced radical change – have been in states like Vermont, Pennsylvania, Georgia, Maine, New Jersey, and Wisconsin.
In Vermont, higher education officials have merged Lyndon and Johnson State Colleges to create efficiencies in their region. Taking a different tack, Pennsylvania opened discussions on whether to merge colleges within its state system, producing a report that ultimately called for no dramatic changes. In Georgia, a more systemic “rolling” reorganization occurred, with consolidation affecting 14 state campuses unveiled in phases as the reorganization continues.
Wisconsin’s Comprehensive Reorganization of Higher Education System
Wisconsin’s leaders have taken a different approach, favoring a comprehensive reorganization of the state’s public higher ed system. Following an unsuccessful effort to split the flagship Madison campus from the rest of the state university system, lawmakers approved appropriations that cut $250 million from the system’s budget. They also stripped tenure and shared governance protections from the law. More recently, faculty objected to new policies that punish students who disrupt speakers and that give the regents more power in hiring, including administrators from outside academe.
The proposal will merge all 13 of the state two-year campuses into seven of the state’s four-year universities. The Wisconsin Technical College system will not be affected. The system’s president, Raymond W. Cross, argues that this approach will increase access and reverse the declining enrollment of the two-year campuses. It will encourage more students to pursue a four-year degree and better reflect the demographics realities of an aging population and a shift from rural to urban areas. Specific details remain sketchy.
Faculty Call for Slower Change Unlikely to Win Favor with Public
The faculty are, by and large, deeply concerned about the proposed changes. Budgets are, after all, rationing tools. Efforts to save money may do little to improve what many faculty believe to be a declining position as they fight budget cutbacks and perceived threats to academic freedom and shared governance.
Many faculty are calling for a more orderly, slower, and structured approach that is systematic and research-based with substantially broader input from them. For these faculty, the process matters.
This strategy may buy some time but it is unlikely to win in the broader court of public opinion. It’s an “inside baseball” tactic that will cast concerned faculty, staff, and students as proponents of cultural inertia who are out-of-touch with the needs of a global workforce and the tolerance of taxpayers to foot the bills for the growing cost of higher education.
The public will have little interest in a public drama about how appointment and tenure decisions will be made in a combined system.
Some Support for Merger of Community Colleges into Four-Year Campuses
The merger of the community college system into the seven four-year public campuses may or may not be a good idea. In most respects, it’s up to the voters of Wisconsin to decide what they wish to support with their tax dollars.
Some of this decision is already obscured by the lack of transparency that went into the planning before the Wisconsin system announced the proposal.
And yet, the primary motivation behind whatever turns out to be the outcome must answer the question of how best to provide access and affordability for Wisconsin’s college-bound students.
What Solution Will Provide Students Access, Affordability?
This is where both sides can come together. They will need to demonstrate transparency, open communication, clarity, precision, and an eagerness to assess a drastic reorganization like the one proposed.
To foist change on a higher education community that values process will not work. To maintain an inefficient higher education system that is not nimble enough to react to changing demographics and new workforce needs is equally impractical.
Yet there are broader policy questions that must be immediately addressed.
What is the purpose, mission, and value proposition of the community colleges and the state four-year public colleges? Are they the same or different? Does their history correlate or were they organized in their hiring, facilities, and program development for different reasons and designed to promote different outcomes? Surely the institutions are better than chess pieces that can be moved around to suit demographic and budget projections.
What is the value to this merger for the students and taxpayers? If the system can demonstrate that this change serves students better and meets the needs of Wisconsin’s workforce, there is value in developing an agenda and timeline for this merger, especially if there is broader input from the public system’s stakeholders.
But there is also a responsibility to demonstrate beyond a reasonable doubt that such changes will also create new opportunities, basic economic efficiencies, and enhanced opportunities for innovation, creativity, and collaboration.
It’s unclear, for example, if the Georgia reorganization has accomplished much of what its officials promised in these areas.
The takeaway from Wisconsin is that changes are coming in higher education, including for public colleges and universities. What isn’t clear is if the process for promoting change can withstand the challenge of making change happen.
In The Hechinger Report’s recent story, “University Bureaucracies Grew 15 Percent During the Recession, Even as Budgets Were Cut and Tuition Increased,” reporter Jon Marcus examined the confounding trend that many university systems are showing “new resolve . . . to improve the efficiency and productivity of stubbornly labor-intensive higher education” when “statistics suggest the opposite is happening.”
Looking at a variety of public systems across the country, Mr. Marcus found that “the number of people employed by public university and college central system offices . . . has kept creeping up, ever since the start of the economic downturn and in spite of steep budget cuts, flat enrollment and heightened scrutiny of administrative bloat.” Mr. Marcus reports that this growth happened at a time when states have collectively cut their higher education spending by 18 percent. He also notes that some systems like Maine’s central office grew by 26 percent – despite an enrollment decline and budget cuts.
There is a silver lining according to Mr. Marcus, however, who suggests that “after years of promising to save money by streamlining operations, cutting duplicate staffs and maximizing purchasing power, some university systems have been forced by political pressure and economic realities to finally start doing it.”
In Maine, for example, Mr. Marcus found under a new “One University Initiative” in which the system consolidated the budget, legal, personnel, information technology, insurance, purchasing, and other departments from its seven campuses resulting “in a 37 percent decline in the number of administrators at the universities that will save about $6.1 million a year.”
The findings are modestly encouraging and hardly surprising. Elected officials are increasingly placing American colleges and universities – at all levels – under greater scrutiny especially at the state and federal levels.
There is, of course, an ongoing historic frustration in the higher education community when politicians – most of who are not skilled in finance and who have not run businesses of substantial scale – wade into the management of higher education.
It’s easy for higher education officials to point privately to great gaps in how the state and federal government runs and finances their own enterprises in terms of archaic, disruptive, and conflicting management practices and protocol across all levels of government.
The complaints are not often voiced publicly, of course, because colleges and universities depend on government partnerships to fund student and institutional aid.
The Incremental Inertia of Higher Education
But in the end that may not be the point. The argument still holds that America’s colleges and universities operate in a culture dominated by incremental inertia.
No place is more conservative in its management practices than a college or university campus.
Smaller campuses operate on a time-worn academic cycle which can inhibit transparent decision-making when the campus powers down in the summer and during academic breaks, effectively five months a year at many colleges.
Challenge of Shared Governance
Shared governance is also a problem. The key to good governance is transparency and communication. It’s critical because key stakeholders – trustees, administration and faculty – have important roles to play. It sometimes means that everything takes longer than it would in a corporate setting or in government regulated in the days before the overuse of the “continuing resolution” by an annual budget cycle.
Decentralization Can Make Cost-Cutting More Difficult
Another problem, depending upon the institutional setting, is decentralization. In a decentralized setting without strong administrative leadership, college and university divisions, departments, and programs are their own fiefdoms. It’s impossible to create a standard data protocol because of bad record keeping and the differences among divisions like enrollment, financial aid, alumni, and advancement, or so the argument goes.
At the opposite end, the college’s adherence to state and federal regulation, its need to commit to key residence life programs, including athletics, mental health and wellness counseling, diversity initiatives, and internship and career counseling programs, as well as support accreditors’ demands for tighter accountability standards can cause administrative bloat.
One impact of the Great Recession has also been to “beef up” enrollment and advancement operations – a practice that demonstrates their importance to bottom line revenue so critical in weak admission markets. Should these programs be scaled back?
On any level, an ongoing effort to streamline to create efficiencies and economies of scale is a good idea.
But the practical dimension of the problem is that the operational model doesn’t work anymore for American colleges and universities.
Higher education cannot reasonably address the question of cost until its leadership understands that cost is first about whether the older operational models continue to serve them well.