Fiscal Consternation Is a Catalyst for Frugal Innovation

“Fewer than 4 in 10 college presidents express confidence in the financial sustainability of their institutions over the next decade.” This Inside Higher Ed lead sentence was striking, as the article came 10 days after Sweet Briar College’s announcement that it would close due to financial challenges its board considered insurmountable. That announcement itself followed Moody’s assessment that “tuition revenue and enrollment pressure remain acute for many U.S. universities” and Standard & Poor’s assessment that the “costs of luring top students keep the outlook negative on the U.S. not-for-profit higher education sector.”

Presidents who responded to the Inside Higher Ed survey, representing 647 public, private nonprofit, and for-profit institutions, were also asked to consider which sectors of higher education they believe have a business model that is sustainable. Non-elite private four-year institutions were at the bottom of the pack, with only 10 percent of presidents agreeing that the business model for non-elite privates can be sustained.

The same worry about finances was reflected in findings from a smaller survey conducted by The Lawlor Group at the end of last year:

  • Four out of five presidents from private colleges and universities cited some form of financial struggle when asked what issues or challenges they foresaw facing their institution in 2015.
  • More than a third of the presidents specified that meeting enrollment or net tuition revenue goals was a concern.
  • When presented with a list of items to rank according to their prediction of how significantly each will affect their institution in 2015, “families’ economic hardship (ability to pay)” and “perceptions of value and affordability (willingness to pay)” rose to the top for presidents, and they ranked “sustainability of the financial aid discounting model” fourth behind “demand for evidence of successful outcomes.”

The concern about evidence of successful outcomes was prominent in the Inside Higher Ed survey, as well. The college rating system proposed by the U.S. Department of Education would rely on outcomes metrics to guide both consumers and policy makers. Only 10 percent of presidents agree that the rating system, as currently conceived, would portray their institutions accurately.

Inside Higher Ed’s Survey of Presidents
The report documents presidential concerns about the financial futures of their institutions.

Survey of College Administrators
The results of our survey show that finding ways to deliver value and affordability are top concerns.

Latest on College Ratings Proposal
The Chronicle reports there may be two versions, one for consumers and one for policy makers.

 

Lawlor Recommends

“March Madness” is permeating the college and university landscape. There is considerable consternation in the higher education community as more and more financial challenges “spring forward” and illuminate multiple variables influencing the college and university value proposition in the marketplace. In light of the recent Sweet Briar financial situation and the resulting decision to close (and the continuing discussions related to that decision), engaging in frugal innovation and edupreneurism by seriously thinking differently about how to deliver a valued education with successful outcomes is a must.

A client college president recently shared with us that too much “thinking ahead” today is shaped by looking in a rearview mirror. Colleges definitely do not want to lose sight of their core identities, but they must stay focused on the road ahead. The speed limit for innovative thinking has been raised, and those that don’t put the pedal to the metal are going to be passed. Now is the time.