Insights > A Foundation for Change: Creating a Sustainable Path Forward in Higher Education

A Foundation for Change: Creating a Sustainable Path Forward in Higher Education

Higher education went through an extraordinary and rapid pivot last spring in reaction to the COVID-19 pandemic. Over the following six months, institutions embraced a variety of short-term, tactical strategies on how to bring students back to campus and deliver on their mission. But even the best laid plans are yielding mixed results and questions regarding how universities should plan for 2021. The problem, however, is multi-year and far more complex. Universities must find the path that stabilizes the safe delivery of education in the short term and navigate the demographic crisis that threatens their sustainability. In short, now is the time for long-term strategic thinking.

While the long-term impacts of these trends are still unknown, students are increasingly turning to viable alternatives to traditional higher education that are more affordable, efficient, and without an onerous student loan burden.

Strategic planning is difficult in ordinary circumstances. The New York Times recently reported that 1,190 US colleges recorded more than 88,000 coronavirus cases, including at least 60 deaths since the pandemic began. These numbers are likely understated given the current state of testing, rise in campus student populations, and asymptomatic transmissions. And while no one knows for sure, there are growing drumbeats that the availability and distribution of a vaccine may dictate that the strong safety protocols we follow today could last into late 2021 before the desired efficacy allows a return to normal life.

It has long been recognized that declining high school graduates have already impacted college enrollment rates; tuition discounting is now a competitive tool that squeezes margins while nonacademic expenses have been increasing. Skyrocketing tuition has prompted questions about the value of higher education altogether.

Families must not only grapple with safety concerns, but many are unwilling to pay full price for a reduced experience or can no longer afford the hefty price tag of tuition amid today’s deteriorating economy. International students, who previously provided one way for institutions to maintain enrollment levels, are turning to education options closer to home as they face restrictive travel and immigration policies. While the long-term impacts of these trends are still unknown, students are increasingly turning to viable alternatives to traditional higher education—trade schools, coding and data analytics academies, or entering the workforce directly—that are more affordable, efficient, and without an onerous student loan burden.

State budgets are further constrained in the COVID environment with lost tax revenue and higher expenses, putting a squeeze on the availability of state money for public universities.

For US higher education to remain a sustainable institution that continues to be the envy of the world over, transformation must start now in order to retain current students and attract future ones. Implementing measures to navigate the COVID-19 crisis and reforming institutions for long-term sustainability do not have to be mutually exclusive actions. As Winston Churchill famously said, “Never let a good crisis go to waste.”

Strategic moves can be done well or done poorly. Southern New Hampshire University is a shining example of how it grew from 3,000 students in 2004 to 120,000 today by being an early leader in online education, continuing education, and flexible curriculum designed to meet local job needs. With thoughtful, consistent leadership and a healthy marketing budget, SNU established a national brand for quality affordable education.

Alternatively, Newbury College executed poorly as it shifted from its 2+2 program that offered an Associate degree with the option of earning a Bachelor’s degree to trying to compete in a full four-year program.  Lack of clear strategic direction coupled with consecutive leadership changes led to the school’s closure in 2019 after failing to maintain enrollment and graduation rates in its high priced, traditional four-year program.

Universities must approach long-term strategic planning through two steps that include building confidence in the target market audience of high school students that school will be a safe, mission-driven environment; and undergoing a thoughtful self-assessment regarding market positioning tactics and strategic direction.

In the near term, campus administrations are rightfully focused on mitigating the public health crisis and keeping their communities safe. Without clear and coordinated federal guidance, each institution has been left on its own to handle the crisis, straining administrations, frustrating communities, and jeopardizing the health of many. Shouldering the burden individually has the potential to distract administrations from dealing with financial, operational, and strategic issues that need resolution to ensure long-term sustainability. While the administration is focused on the community’s safety and public health response, it should assemble a team, supplemented by external professionals if necessary, to focus on immediate financial and liquidity considerations. Extensive scenario planning and financial modeling must occur to understand potential worse-case scenarios. Communication with lenders and stakeholders should happen early and often. Creative and aggressive solutions to preserve and enhance liquidity may include monetizing assets, cutting operational expenses, temporarily deferring payments, identifying and utilizing unrestricted endowment funds, redirecting fundraising efforts, and maximizing government grants. Buying time and preserving option value is the immediate goal while identifying long-term strategies.

Combining tools usually reserved for corporate turnarounds and restructurings—like 13-week cash flows, program-level profitability analysis, and long-term financial projection models with more traditional demographic, environmental, and budgeting analyses—can yield powerful insights and help drive near-term solutions. This type of analysis will also provide a foundation to communicate clearly and concisely with key stakeholders. College and university administrations are already stretched thin from a resource perspective and responding to the public health crisis of COVID-19 can be all consuming.

As the operation is stabilized, colleges and universities must take advantage of the opportunity to reevaluate the sustainability of their mission statements and operating structures. A comprehensive analysis should simultaneously be pursued to evaluate the demographics of current and future applicants, the relevant competitors, differentiating competitive advantage elements, and, of course, costs. Everything should be on the table as 5-, 10-, and 50-year plans are developed. Sound analysis, data, and transparency will form the currency to build consensus among varying stakeholders: students, alumni, faculty, staff, lenders, communities, local and state governments, and others. Difficult tradeoffs and creative solutions will be necessary to ensure long-term viability and prosperity. Corporate partnerships, government investment, and technological shifts are just some of the solutions that may pave the path.

We all understand that “academic time” can move at a glacial pace and have learned the harsh and unrelenting lessons of “pandemic time.” Now is the time for higher education to take decisive action to weather the immediate crisis and build a foundation for change.

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