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Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
Higher Education's Dilemma
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Higher Education's Dilemma

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Universities and colleges must develop new business models to deal with scarce resources, increased demand for productivity and lower tuition, and changing demographics. This presentation to leaders …

Universities and colleges must develop new business models to deal with scarce resources, increased demand for productivity and lower tuition, and changing demographics. This presentation to leaders in a major corporation outlines the pressures and the actions that a national higher education association is recommending to the institutions.

Published in: Education, Economy & Finance
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  • Top Line Findings:Spending Continues to RiseDoesn’t show effects of revenue volatility – (b/c investment return not part of budget?)Overall spending continued to increase for all institutions:increases were greater for the publics (2.5 – 3.5% between 07-08) than for the privates (.5 – 1.5%)All institutions are spending at or slightly above where they were in 2000 -Public Res, Pvt MA, BA <1% annual increase -Pvt. Res was up 2.5% annually.(note – incomparability in public data for 2000 b/c uses gross scholarships/fellowships, but later years use net)2. Overall spending per student continues to obscure what’s being spent on the core academic programLooking just at E&R.. See smaller disparities that when looking at total spending, but still evidentPublic MA and CC spend similar (10-12k), Pub Res (15k)Pvts all spend more than publics – Pvt MA (16k), Pvt BA (20k), Pvt Res (34k)All institutions spent more on E&R in 2008 than in prior yearsFastest growth in 07-08 was in Public Res, MA, and Pvt BA(2.5-3%), which outpaced prior years annual spending growthpvt Res and MA institutions also still spent more, but growth was slower (<2%) and growth was less than in prior years
  • Cost-Benefit can refer to the budget (revenues and funded activities) or the value proposition to clients (our activities will attract their investment sufficient to fund our activities)
  • Transcript

    • 1. The Higher Education Dilemma: In Search of Long Term Sustainability<br />[Major Corporation} Mid-Atlantic Regional Meeting<br />February 23, 2011<br />Ellen Chaffee, AGB Senior Fellow and <br />President Emerita, Valley City State University<br /> <br />
    • 2. Agenda<br />9:00 The Changing Landscape of Higher Education<br /> * Where funds come from and where they go<br /> * Changing expectations and circumstances<br />10:30 Break<br />10:45 Our Advice to Universities and Colleges – Can ARAMARK Help?<br /> * Getting our minds right<br /> * Reverse engineering the future<br /> * The discipline/innovation paradox<br />12:00 Lunch<br />2<br />
    • 3. Changing Landscape of Higher Education<br />
    • 4. Higher Education Pressure Points<br />Declining/drying-up resources<br />Federal and State budgets<br />Tuition rate ceiling<br />Investment losses, foundation and charitable declines<br />Rising expectations<br />More graduates<br />More focus on results, accountability, performance funding<br />Changing students – less prepared, less able to pay, new learning styles and expectations, more distant<br />4<br />
    • 5. Federal Government<br />Economy<br />Available State and Local Govt. Funds<br />Higher Education<br />The Flow of Funds for Public Higher Education<br />Stimulus Funds<br />Tax Policy<br /><ul><li>K-12
    • 6. Corrections
    • 7. Health Care
    • 8. Other Govt.</li></ul>Appropriations/Grants<br />Student Aid<br />Tuition<br />Students<br />Institutions<br />Scholarships &Waivers<br />Dennis Jones, NCHEMS<br />5<br />
    • 9. Federal Government<br />Economy<br />Available State and Local Govt. Funds<br />Higher Education<br />The Flow of Funds for Private Higher Education<br />Stimulus Funds<br />Tax Policy<br /><ul><li>K-12
    • 10. Corrections
    • 11. Health Care
    • 12. Other Govt.</li></ul>Private Gifts<br />Appropriations/Grants<br />Student Aid<br />Tuition<br />Endowment<br />Students<br />Institutions<br />Scholarships &Waivers<br />6<br />
    • 13. The Business Model of Higher Education is Broken<br />7<br />We sell below cost.<br />The “customers” of (nearly?) all public, private, and for-profit universities and colleges pay less than their “product” costs.<br />Yet few customers can pay what we charge out of pocket. <br />Our “natural” margins are negative.<br />Without grants from public and private sources, our margin would be negative – typically, SIGNIFICANTLY negative.<br />So we cannot grow our way to prosperity.<br />Growing with tuition only (beyond filling current capacity) drives us into deficit. <br />But we generally choose to ignore that. <br />
    • 14. State Revenue Pattern<br />8<br />
    • 15. State Funding is Stressed<br />9<br />
    • 16. State Budget Pressures<br />Pension programs<br />Medicaid – more beneficiaries, $87B stimulus<br />Unemployment assistance<br />$72B shortfall in state budgets for FY12<br />State Outlook AASCU Nov 2010<br />
    • 17. So Our Prices are Skyrocketing<br />
    • 18. Students have to borrow more & more<br />12<br />
    • 19. Yet we still have ever-greater difficulty balancing the budget<br />Gap<br />
    • 20. 40% of Americans Struggling “A Lot;” Only 20% “Not Struggling”<br />14<br />http://www.publicagenda.org/economy-and-american-dream-2011<br />
    • 21. Views on What Might Help<br />15<br />http://www.publicagenda.org/economy-and-american-dream-2011<br />
    • 22. College is more necessary, accessibility is falling fast<br />Importance and Access<br />16<br />
    • 23. Spending Within Education & Related (E&R)<br />All data are in 2008 dollars. Source: Delta Cost Project IPEDS Database, 1987-2008, 11-year matched set.<br />
    • 24. …where the money goes by major functional area <br />
    • 25. Attainment Goals<br />19<br />“By 2020, America will once again have the highest proportion of college graduates in the world”<br />- President Obama, 2/24/09<br />to increase the percentage of Americans with high-quality degrees and credentials to 60 percent by the year 2025 <br />– Lumina Foundation for Education<br />Currently: 39%<br />VA: 42%<br />OH: 36%<br />KY: 32%<br />PA: 43%<br />WV: 28%<br />MD: 45%<br />
    • 26. Demographic and Competitive Challenges<br />Fewer traditional students, more disadvantaged, more working, more older, more low-income, less well-prepared<br />Opportunities/challenges of international students/experiences<br />Opportunities/challenges of online enrollment<br />Growth of for-profit sector<br />Constraints on serious innovation such as lack of venture capital and multi-faceted regulatory environment<br />20<br />
    • 27. The Leaky (gushing) Pipeline<br />100 High School Graduates<br />VA OH KY PA MD WV <br />46 45 44 49 49 42 * Enter College <br />13 12 6 16 11 7 * Grad 4-Yr in 4 <br /> 4 3 3 5 5 2 * Grad 2-Yr in 3<br />www.complete college.org<br />
    • 28. Enrollment Growth 1973-2008<br />22<br />
    • 29. Online Enrollment Findings, 2010<br />•          Almost two-thirds of for-profit institutions now say that online learning is a critical part of their long term strategy.<br />•          The 21% growth rate for online enrollments far exceeds the 2% growth in the overall higher education student population.<br />•          Nearly one-half of institutions report that the economic downturn has increased demand for face-to-face courses and programs.<br />•          Three-quarters of institutions report that the economic downturn has increased demand for online courses and programs<br />http://sloanconsortium.org/publications/survey/pdf/staying_the_course.pdf<br />23<br />
    • 30. The Noose is Tightening<br />Less State Money<br />Lower Family Income<br />Deferred Maintenance<br />End of Stimulus Funds<br />Changing Demography<br />High Cost of Innovation<br />Even LESS State Money<br />Higher Workloads (furloughs, layoffs, productivity efforts, increased enrollment)<br />Limited Revenue Sources<br />More Financial Aid<br />Keep Tuition Down<br />Keep up with technologies<br />
    • 31. Our advice to universities<br />
    • 32. Banish the Iron Triangle<br />26<br />QUALITY<br />ACCESS<br />COST<br />
    • 33. Not this!<br />27<br />QUALITY<br />ACCESS<br />COST<br />Coping Strategies of Public Universities during the Economic Recession of 2009. APLU, November 2009<br />
    • 34. How Can We LEAD to the BEST Future for the University?<br />Develop a shared understanding of where you are and what you want!<br /><ul><li>Target, long-term thinking</li></ul>Do more of what will get you there and less of what won’t<br /><ul><li>Align activities – organizational and personal
    • 35. Align resources, cut costs, increase productivity
    • 36. Innovate, re-invent</li></ul>Monitor your progress and exercise self-discipline<br />- Scorecard, strategic governance<br />28<br />
    • 37. 29<br />“The best way to predict the future is to create it.”<br />
    • 38. Old Way New Way<br />Improve today<br />Iron Triangle<br />Inputs, actions<br />Program benefit<br />Continuity<br />Achieve tomorrow<br />Reduce U & student costs<br />Outcomes, outputs, results<br />Program cost-benefit<br />Innovation and continuous improvement<br />
    • 39. Checklist for Reverse Engineering the Future<br />Define the desired long-term future state and understand the gap between here and there.<br />Will the university’s clients’ costs-benefits be in balance?<br />Will the university’s institutional costs-benefits be in balance?<br />What will be the evidence that you’ve arrived?<br />Do less of what won’t get you there – off track, inefficient<br />Do more of what will get you there – cost/benefit and INNOVATION focus<br />LEARN and exercise DISCIPLINE over time<br />Test options for impact on metrics and cost-benefit, learn<br />Test progress on metrics, recalibrate, re-strategize<br />31<br />
    • 40. Changing the value proposition<br />
    • 41. Strategic Planning by SWOT is not enough<br />33<br />Of the university<br />Of the environment<br />
    • 42. Strategic Planning by SWOT is not enough<br />34<br />Future<br />Typical Plan<br />We will:<br /><ul><li>Do more of this
    • 43. Do that better
    • 44. Get more money
    • 45. Make people happier
    • 46. Get more famous</li></li></ul><li>Strategic Thinking: Reverse Engineering the Future<br />35<br />Critical Success Indicators:<br />*Vision achievement<br />*Resource equilibrium<br />
    • 47. Sample Scorecard – Top Level Target<br />
    • 48. How Could [Your Company] Support Such Strategies?<br />37<br />
    • 49. Could [Your Company] help with any of this?<br />38<br />
    • 50. Leadership Mind-Set<br />Defined future as the guiding light<br />Forecast across a rolling horizon<br />Continuous effort to reduce cost and increase productivity<br />Continuous allocation and reallocation of resources in accordance with cost/benefit examinations<br />Continuous transparency, communication, and stakeholder engagement<br />
    • 51. How Much is Already in Place at Your Institution? <br />Please indicate the presence of these strategic finance building blocks at your institution using the following key:<br />1 = Yes, we have it<br />2 = Yes, but it needs attention<br />3 = No, and we need it<br />4 = No, and we don’t need it<br />
    • 52. Bottom line<br />Reverse engineer to a desired, viable future state<br />Continuously manage costs and increase productivity<br />Communicate openly and often<br />Collaborate, engage<br />Focus on RESULTS<br />41<br />
    • 53. 20th Century was one of technological innovation<br />21st Century must be one of institutional innovation<br />David Wiley, BYU, http://davidwiley.org/<br />

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