Joseph Geraghty Published in Dayton Business Journal
The Dayton Business Journal has published Joseph Geraghty’s article titled “Higher education changes put squeeze on smaller colleges and universities.”
Ohio is blessed with not only a large number of colleges – it has some of largest – starting with The Ohio State University – and some of the highest ranked schools in the nation, and significant density of schools in the state and our region.
Of the reasons for the richness of Ohio’s and, specifically, southwest Ohio’s high education environment is the diversity of colleges and universities, along with the variety of their respective degree programs and cultures.
Yet, there are dynamics at play that demonstrate the growing disparity in financial health between the region’s and the nation’s larger colleges and universities compared to their smaller counterparts.
The Importance of Healthy Enrollment
There are several factors that drive higher education’s financial stability and certainly the economy is a significant factor. It has been well reported that the Great Recession drove enrollment up – enrollment being another key driver – as fewer jobs were available for graduating students. Many students were left with the option of going to a college, university, or technical school during the recession because job and career options were virtually non- existent.
With the recession over in most industry sectors, however, some area schools have continued to grow their student populations, while others have seen flat or even a meaningful reduction in enrollment which also translates into a lack of growth or reduction in tuition fees. Overall though, there has been about a 4 percent drop from 2010 to 2015 in Ohio independent 4-year colleges and universities undergraduate population (as obtained from the Association of Independent Colleges and Universities of Ohio.
In addition to the effects of the economy, declining Ohio population and the ups and downs of enrollment upon a school’s finances, there are new trends and forces now that can have a significant impact, especially on smaller schools. These critical factors can have a significant impact upon the health and even the ability of a school to survive. Despite the very different culture of higher ed compared to private sector, for-profit companies, the one constant is the need for good decision-making. Just like both privately and publicly held companies, an obvious element of success is a strong management team or in the case of higher ed, a capable administration. Equally important, are engaged Board Trustees to assist and challenge administrations on success strategies.
Historically, when faced with increasing expenses or lower enrollment, the conventional decision by colleges and universities was to simply raise tuition. That solution, however, is much less an option today. While the overall economy has recovered, wages and salaries have remained flat. The result is few students and families have been willing to take on the huge, long-term debt often associated with college and, especially, private colleges. Careful management of expenses and revenue is always important but it becomes an especially critical function when secular economic shifts occur as is the case following the Great Recession.
National Universities Thrive
There is also another force to be considered as we look at the relative financial stability among regional colleges and universities and that factor is the comparative size and scale of local schools. Two measures of a college’s or university’s abilities to grow and thrive are whether it can attract students from across the nation and internationally or whether the school occupies a very desirable niche. In fact, the well-known US News and World Report employs those criteria in how it organizes rankings: the
National Universities ranked for 2016 in southwest and central Ohio include The Ohio State University (52), Miami University (82), the University of Dayton (tied 108). UD is also the largest private university in the state and boasts many top-notch degree programs. Ohio University and the University of Cincinnati are also in the region’s National University rankings at #135 and #140, respectively. Schools that offer desirable graduate degrees also help solidify enrollment and finances. Local examples of coveted graduate degrees are Miami University’s business school, ranked #3 in the U.S, UD’s School of Law, along with UC’s and Wright State University’s business school and School of Medicine.
Another niche that can help maintain financial health are those colleges that have a sustained position of academic excellence as recognized by US News & World Report’s National Liberal Arts College Rankings: Oberlin (23), Kenyon (25), Denison (55), Ohio Wesleyan (108), Wittenberg (148). While rankings are important, they are not enough to guarantee financial stability as seen by Wittenberg’s struggles over the last several years. Antioch College, Wittenberg University, Central State University, Wilberforce University, United Theological Seminary, and, more recently, Antioch University have all struggled with enrollment, small- to virtually non-existent endowments, and resulting threats to accreditation in some cases.
Conversely, the University of Dayton broke its student enrollment record for the 2015/2016 school year. Like UD, Miami University, in nearby Oxford, and the University of Cincinnati reported record enrollments of nearly 24,000 and 44,000 students, respectively. The Ohio State University also had record enrollment of 66,000 students for the school year that ended in May, 2016.
There are other forces in place that can impact smaller schools. According to Sean Creighton, president of the Southwest Ohio Council for Higher Education (SOCHE), larger schools often have larger endowments which can act as a buffer during economic downturns, translate into larger investments into student amenities, and sophisticated enrollment marketing.
Likewise, bigger schools tend to have larger and more sophisticated fund-raising or “advancement” departments and development capacity.
Creighton also cites increased competition from satellite campuses and on-line programs. Schools like The University of Phoenix (enrollment: 263,000), American Public University System (enrollment: 110,000), Liberty University (enrollment: 90,000), Devry University (enrollment: 76,000), and many other regional systems not only offer accredited degree programs but they also can offer lower tuition costs and employ significant marketing muscle to entice and enroll students.
Two other factors in promoting financial health for some larger schools are positions as research centers, such as the University of Dayton Research Institute (UDRI). While UDRI’s remarkable ability to attract research grants does not necessarily contribute to the undergraduate school’s financial picture, it does contribute to the overall positioning and recognition of UD as a learning center. Likewise, UD’s ability to form partnerships with private sector firms like GE Aviation, Midmark Corporation, and Emerson Climate Technologies further enhances the University’s position.
Strategies for Smaller Colleges and Universities
To address the challenges facing smaller colleges and universities they should consider a few critical operating initiatives, according to Sheila Curran, CEO and Chief Strategy Consultant of the Curran Consulting Group. These considerations include reconfirmation of the university’s identity and mission and evaluation of whether undergraduate offerings align with that identity.
The administration and trustees should ask themselves important questions such as, are we accomplishing that mission and what does it mean to have a degree from our school, what is its value? In support of the mission, are we meeting the market’s needs?
Another key initiative would focus on a comprehensive or holistic approach to the student experience. Consider aligning the organization around the “life cycle of the student” from initial student engagement, through admissions, matriculation, financial aid, retention, to graduate success, alumni engagement, and related development.
Finally, and perhaps most important, is to invest in graduate success. Focus and prioritize resources to improve the “return on investment” for the student’s investment.
As noted earlier, another key ingredient for viability is proactive administration and Board leadership to navigate these challenges. Among the most important tools to assist the administration and board is preparation of a realistic four-year financial business plan or model. The plan should be updated annually include enrollment trends, cost changes, the estimated impact of new offerings and other, key financial performance drivers. This tool will also challenge the organization to address pending liquidity issues and otherwise make needed decisions to managing the impact of the changing environment. As recently reported, WSU’s reserves have dropped over $100 million since 2012. This type of tool may have assisted leadership in making different decisions during that time period to mitigate such a decline.
As advisors to all types of businesses, including colleges and universities, we understand that successful management of an institution of higher learning is, in many ways, even more complex than running a typical for-profit business. Administrations and boards have the daunting task of providing a valuable education, while also managing housing, food services, collegiate sports, entertainment, alumni, donors, managing expectations of parents, accreditors, communities, law enforcement, and other key stakeholders.
Essentially, higher ed is charged with managing thousands of future lives, thus astute and disciplined planning and operations are paramount.