August 11, 2011
Jitters Hit Colleges as Global Stock Markets Reel
By Brad Wolverton
A wild week on Wall Street has jolted higher-education leaders out of the summer doldrums.
More:http://chronicle.com/article/Jitters-Hit-Colleges-as-Global/128622/?sid=at&utm_source=at&utm_medium=en
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“We’re not-for-profit…
But we’re not for loss!”
By
Jim Castagnera
(Jim Castagnera is a university attorney and the author of Al Qaeda Goes to College [Praeger 2009].)
A university president I know likes to say with a savvy smile, “We’re not-for-profit… but we’re not for loss.” However, in academic year 2009-10, loss is a real possibility for some private, non-profit colleges and universities. In June, the U.S. Department of Education identified 114 private institutions as so fiscally fragile that they failed DOE’s financial-responsibility test. While many of these schools, frankly, are small and obscure, the list includes some more-prominent surprises, such as Utica College in New York and Rosemont College in Pennsylvania.
Higher Ed’s folklore has it that recessions raise enrollments, as the out-of-work return to retool their skill sets. Indeed, many public institutions and systems were deluged with applications for Fall 2009. For the privates, the story is more of a mixed bag. As one administrator told me, “The first wave of hits [from the financial crisis] have been on endowment-driven institutions. The next hits will be on the tuition-driven institutions, due to home equity, among other factors.”
One consequence of this phenomenon is that some schools have dug deeper --- in some cases, as deep as 50% --- into their tuition discount rates in order to meet their new-student goals for September. For example, my sources say that prestigious Villanova University spent $3.5 million more this year than last to bring in its freshman class on target. Meanwhile, on the other side of the coin, Portland, Oregon’s Reed College reportedly dropped 100 needy students from its list of acceptance letters, substituting 100 who were able to pay the full freight.
Such tough decisions have been accompanied by much hand wringing. In January, newly appointed AAUP General Secretary Gary Rhoades wrote to his membership, “It has begun. The dramatic downturn in the national economy is leading college and university administrations to reorganize and eliminate academic programs in the name of increased ‘efficiency,’ often with little semblance of shared governance.” He added, “We urge you to be healthily skeptical about administrators’ claims and to exercise the leadership that is critical to the future of our colleges and universities.”
By way of contrast, Ron Knecht, chair of the Board of Regent’s Budget and Finance Committee of the Nevada System of Higher Education, observed in an opinion piece published at about the same time, “[W]e in education should embrace the current budget challenges as an opportunity to begin, out of necessity, to do things we should have been doing all along. We should reorient our efforts, change operational models, lower costs, improve our product, and be more responsive to our changing markets.”
Howard Teibel of Teibel, Inc. in Wayland, Massachusetts, refers to the current economic climate in higher education as “the new normal.” The consultant, who has been helping administrators to be change agents since 1987, adds, “Although denial is a powerful emotion and an effective way of getting through difficult times, maybe ‘getting through this’ is not what we should be striving for.”
He asks, “If a crystal ball could somehow show that the next five years don’t look much different from today, would you navigate your business decisions differently right now?” Clearly, Teibel considers this a rhetorical question. All the same, he predicts that some private colleges will not be around in five years.
“Is there a crisis? Yes. Are some institutions past the point of no return? Some are,” he opines. Pointing to the “massive consolidation into strong institutions” in the wake of the banking industry’s near-meltdown of the past 12 months, he predicts a similar implosion in private higher education.
“How much more can tuition go up? Endowment returns will take 10 years to come back.” The bottom line according to Teibel: “A lot of schools are in danger of not being viable. Some are at the tipping point.”
Is there no hope, Mr. Teibel? “Even the strong schools are taking this seriously. Five years down the road, these schools will be better positioned.” They will reposition themselves by bringing business skills into the same room with traditional academic know-how.
Karen Kusler, director of Lean University at the University of Central Oklahoma, agrees. “Lean,” she explains, is a process-improvement method with roots in William Edwards Deming’s theories for streamlining manufacturing processes. “Deming streamlined machines that weren’t working at capacity,” Kusler explains. “Obviously, people aren’t machines. But we’ve taken this concept and adapted it to cut out waste.”
Kusler identifies four key components of a “Lean” operation:
• Clear expectations
• Standardized procedures
• Appropriate sequencing, and
• Fewer hands touching the end product
Exemplifying the last of these, she explains, “Every time you add a signature, you dilute ownership of a document. Sometimes people are required to sign off only for awareness. Cut them out of the process and send them a periodic report.”
“Lean” also means looking to front-line supervisors to analyze processes and identify potential changes to present to upper management for consideration and, hopefully, implementation. She adds, “The mission is to make the classroom experience great for faculty and students.” The job of the back office is to eliminate unnecessary “hoops” for these key constituencies.
Kusler’s emphasis on mission-focus is underlined by Charlie Moran of Moran Technology Consulting (Naperville, Illinois), who spent 20 years with IBM before embarking on his own business. “In IBM the whole decision process got down to one unifying thing called profit. So what’s the unifying theme in a non-profit organization? We try to distill what our clients tell us down to two or three things that are really core. Then we use those goals as the yardstick against which we measure all the organization’s services.”
Kusler, Teibel and Moran would all agree that problems and solutions revolve primarily around people. Listen to Charlie Moran: “Our firm came out of technical planning and implementation. Ten years ago we got pulled into runaway IT projects characterized by cost overruns. Typically, two-thirds of the problem was technical while one-third was people. Today people are usually 90 % of the problem.”
People are the problem in part because “schools operate on myths and legends,” Moran asserts. “When someone tells me, ‘We have to do it this way because of the law’ or a policy, I say, ‘Where’s the law? Show me the policy.’ As often as not, some administrator somewhere in the dim past said, ‘I don’t want this to happen again.’ A practice grew up around that order.”
Sometimes, he adds, ingrown practices involve failing to take full advantage of the IT resources available. “At most schools,” he contends, “people are working their butts off. Twenty years ago, the ratio was typically 75% faculty and 25% staff. Now staff is only 15% at a lot of places. More work needs to be done by fewer people. Staff often is working harder but not smarter.”
Teibel chimes in, “We favor clustered business services versus reinventing the wheel. We work at raising the bar on doing things correctly. Enterprise Resource Planning (ERB) systems, such as Banner, are a lot more complex than their predecessors and, so, people sometimes do things wrong.” Echoing Kusler’s maxim about allowing fewer fingers to touch a document, he recommends, “Decrease the number of people who touch these systems.” A good analogy, he adds, “is the increasingly common practice of providing students with one-stop shopping, i.e., putting the registrar, the bursar and financial aid all in one suite or on one floor.”
Teibel probably speaks for all three consultants, when he quips --- paraphrasing a famous ad for historically Black colleges --- “A crisis is a terrible thing to waste.” By this he means, don’t view the current crunch as a temporary bump in the road. Instead turn it into an opportunity to drive long-term improvements in the way we do business.
Kusler and Moran agree that the front line staff must execute such long-term changes. This means, says Kusler, the ideas have to percolate up from them. And, adds Moran, lots of communication and training is required to execute new efficiencies.
“In the last year higher education received a dramatic wake up call,” concludes Howard Teibel. “If I interpret the AAUP’s Gary Rhoades correctly, he is expressing skepticism about whether administrators will recognize and make the best choices. To do so, we need to bring enough constituencies to the table so that we see what the pool of available choices is. Then, we need to set clear goals from above, such as, ‘We need to save X this year.’ And we need to raise our expectations for managerial positions on the academic side of the house, our department chairs and assistant deans. They need to understand the business.”
“Those who do it,” he concludes, “will survive and prosper.”
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