- Former College president and university chancellor with more than 30 years experience in public and private education.
- Specializes in strategic turnaround for "fragile" private, non-profit institutions of higher education, consulting with small- to mid-size private institutions of higher education facing threats to their viability.
- Also consults in areas of online educational readiness, presidential performance assessment, institutional vitality assessment and turnaround planning, and board effectiveness.
- Higher education experience includes more than 13 years as institutional president, chancellor, and chief operating officer. These include stints at large public and private universities with worldwide reach as well as small local colleges struggling to survive.
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Business Model Innovation for Higher Education Institutions, Their Boards and Presidents
- Most private institutions of higher education use the same business model that has been in place for hundreds of years.
Too often, institutions are hampered by mediocre governance from ineffective boards. Such boards think and operate primarily in the fiduciary mode and are unwilling or unable to operate in strategic modes that generate fundamentally new business models. They rely upon an outmoded understanding of their relationship with the president of the institution that too often is antagonistic and unproductive.
These institutions are offering the same B.A. or B.S. degree that has been in place for centuries, while many students do not require the standard, four-year model of higher education. Many students no longer fit the 18- to 22-year-old stereotype of a college student. These new, non-traditional students require new methods to acquire the education that meets their needs, and many institutions have been slow to respond to this new marketplace.
- Growth in tuition revenue remains stifled by affordability concerns, legislative ceilings on tuition levels, and steep competition for students.
- In most colleges and universities, revenue is driven predominantly by tuition. In the near term, state financing of higher education will increase, on average, just 3 to 4 percent. This is simply not enough to meet the growth in expenses. One out of ten public and private colleges are suffering acute financial distress because of falling revenues and weak operating performance.
Extensive facilities, rising costs of staff benefits and increasingly complex regulatory demands are driving costs upward at a rate that outpaces inflation. Students and their families are simply unable to pay the tuition necessary to cover these costs. As costs escalate, in an environment in which there is huge resistance to price, most institutions are experiencing stagnant or declining net revenues and have limited resources with which to ride out what is more than merely a business cycle decline.
- Stiff competition for sponsored-research dollars is getting stiffer, with success rates for proposals dropping from 19 percent in 2008 to below 15 percent last year.
- Research efforts are the lifeblood of scientific and technological innovation and add prestige and visibility to institutions of higher education. As tuition revenues fail to cover rapidly rising costs, competition increases for alternative sources of funding for research. Competition for those sponsored-research dollars has stiffened, which means that the average proposal has less of a chance of receiving funding. This adds to the pressure on the traditional business model of higher education as institutions scramble to find other ways to provide for the research that differentiates institutions in the education marketplace.
- Public and private colleges will begin to feel the impact of underfunded pensions and health benefits for retirees.
- As health care costs increase, and other financial pressures grow, traditional colleges and universities will find that pensions and benefits for retirees will become a larger portion of their budgets. Many of these pension and benefit contracts and agreements were made under very different macro-economic conditions than prevail today and they hamstring institutions financially. As older faculty retire, many institutions are not replacing these tenured positions but relying on adjuncts who represent a smaller financial burden, but this is not a viable long-term solution. A better solution is business model innovation in the higher education sector.
- Most public colleges and many private ones will be unable to achieve a 3 percent annual growth rate in operating revenue, which is Moody’s benchmark for sustainable financing at a time of low inflation.
- Despite skyrocketing tuition and high student-loan debt among graduates on the current trajectory, most institutions of higher learning will not achieve the rates of net revenue growth that they require to stay above water, even in a period of low inflation. On the current business model, institutions have little recourse but to keep doing what they're doing, while expecting a different result. They will continue to defer much-needed improvements to existing infrastructure and the ratio of adjuncts to tenured positions will continue to grow. Rather than generating new business models through inspired leadership, boards and presidents are likely to predictably double-down on their traditional, unsustainable model.