Higher Education Policy and Practice

Be Prepared for the Paradigm Shift in Higher Education

The Wall Street Journal, Chronicle of Higher Education, and the New York Times are trumpeting what they see as major changes in demographics, finances, technology, and regulations.  The evidence strongly suggests that these four factors are already having a significant impact on the financial stability and academic structure of colleges and universities, and upon the valuation of higher education by students and employers.

What can presidents and boards of trustees do to guide their institutions through these traumatic events? 

I offer the following ten suggestions to respond to these challenges:

One:  Refine the institutional financial forecast model so that it can test ”what if changes” in:  market demographics, peer net pricing competition, investments in IT, capital projects, debt service, government regulations limiting increases in tuition, loss in endowment principal, and inflation.  Then test current conditions for five years given several “what if” scenarios.

Two:  Use a Responsibility Centered Model to estimate financial performance by academic program and other revenue sources.

Three:  Estimate economic equilibrium defined as the funds needed to provide sufficient resources for the mission of the institution.

Four:  Describe the characteristics of the target student market, identifying demographic trends in age, income, and programs sought.

Five:  Prepare a ten-year trend report on changes in financial condition, the financial performance of academic programs and other revenue sources, enrollment, attrition rates, graduation rates, and rates of growth for posted and net tuition.

Six:  Conduct a SWOT Analysis (internal strengths and weaknesses vs. external opportunities and threats) for the institution and its academic programs.

Seven:  Prepare a strategic analysis that includes a description of your mission, long-term strategic goals, operational plans, and key performance indicators.  Summarize key findings from: financial forecasts, responsibility center modeling, equilibrium modeling, market characteristics, trend analysis, and the SWOT analysis.

Eight:  Work transparently with the Board of Trustees and institutional stakeholders to identify and develop the strategic options.

Nine:  Select highest priority strategic options and prepare operational plans.  Conduct a final set of financial forecast tests to assess the feasibility and outcomes of each option.  Identify obstacles to successful introduction of the strategic options.

Ten:  Monitor operational performance of each strategic option and refine operational plans when necessary to achieve strategic goals.

We believe that if colleges and universities follow these steps that they can substantially improve their chance of surviving the tumultuous economic and historical changes taking place in higher education.

For more information, please contact us at [email protected].

About the Author: Mike Townsley, Ph.D.

Michael Townsley has more than 20 years of experience in academic services, financial systems, budgets, marketing strategy, payment plans, IT administration, ancillary operations, and site management. Mike is Senior Consultant with Stevens Strategy and former President of Pennsylvania Institute of Technology. During his 20 years … (Read More)

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