Situation Assessment 2 of 2


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Situation Assessment 2 of 2

  1. 1. Auburn increasingly relies on tuition and fees, as state appropriations fail to keep pace with the university’s overall budget growth. While today representing about one-third of AU’s annual budget, public fiscal support as a percentage of Auburn’s revenue has been declining for more than a decade. AU receives lower funding per student from state appropriations combined with tuition than almost all out-of-state competing institutions. Accordingly, AU is not resourced appropriately to compete directly with these peers The “It Begins at Auburn” campaign will more than double AU’s endowment, advancing the University to the 75th percentile among its SREB peers (based on 2004 data and assuming no change in their endowment levels). Despite recent growth, annual giving to Auburn is not notably high, at 77 percent of the SREB median dollar level in 2005. Alumni participation, measured on different bases as 21 percent or 11 percent, also suggests opportunity for growth Messina & Graham 102 4. Finances
  2. 2. State budgets across the U.S. are under pressure, which will continue – driven by health care costs and other factors. “The share of the state pie garnered by higher education has fallen as that devoted to Medicaid has risen dramatically.” 2 Total state spending on higher education by all states combined dropped four percent from 2002 to 2004, and by ten percent after adjusting for inflation Alabama earmarks sales and income tax revenues for the Educational Trust Fund (ETF). This shelters education funding from health and other demands on the state’s tax revenue, but these taxes fluctuate with the economy. While the ETF’s revenues have grown at about five percent per year on average since FY 1992, (driven by employment growth and wage increases), they dropped by nearly five percent in FY 2001 and had no growth in FY 2003. ETF revenues grew by nine percent in 2004 and 11 percent in 2005. A proration-prevention account helps to cushion volatility somewhat; the state transferred $198 million (3.8% of the ETF tax share) to that Rainy Day fund in 2006 2 Ford Policy Forum, 2004 Messina & Graham 103
  3. 3. AU’s share of the Educational Trust Fund can be expected to vary in the future: the ETF is divided among K-12 schools, community colleges, the UA system, and other institutions. Even the fund’s continuing control of the major tax streams may carry some legislative risk, as health and other demands bear down Messina & Graham 104 AU’s state appropriation from 2001 to 2005 grew at an annual rate of about 2.6 percent, roughly the same as the CPI. The state appropriated 13 percent more for AU for 2005-06 than for 2004-05, and another 19 percent more than that for 2006-07, as the Alabama economy grew strongly State appropriations have represented a decreasing fraction of AU’s overall revenue, declining from 41.9 percent in 1995–96 to 30.1 percent in 2004–05. Based on the most recent information, that percentage will likely rise by a few points during 2006-07 Chart 37
  4. 4. State Appropriations as Share of Auburn’s Total Revenue FY 1996 - 2005 Source: AU OIRA Messina & Graham Chart 37 105 41.9% 34.4% 30.1%
  5. 5. • This ETF growth rate over the medium term will be probably less than the future growth in AU’s costs. AU total spending growth averaged 5.6 percent per year from 1995-96 to 2002-03, though the expense growth rate was only three percent in 2004-05. The possibility of a gap between appropriations growth and spending growth implies the need for developing other funding sources • AU’s state appropriation per student in 2004-05 was lower than that received by most of its direct competitors, including U of A (by a small amount), U of TN, U of FL, UGA and Georgia Tech. Chart 38. This may oblige AU to charge higher tuition than others in order to approach being competitive in total financial resources. Data are not yet available for assessing to what (if any) extent the double-digit increases in AU’s state appropriations since 2004-05 have closed the funding gap Messina & Graham 106
  6. 6. State Appropriations per FTE Student Auburn versus Competition – FY 2005 Source: SREB; AU OIRA Messina & Graham Chart 38 GA Tech UGA FL ST UFL UTN U of A AU Clemson UMS 107 $9,006 $10,062 $8,281 $8,144 $7,281 $6,010 $5,622 $5,180 $4,502
  7. 7. • The U.S. is in an extended period of increased private giving, resulting from the sharp rise in numbers of multi-millionaires, generational wealth transfer by the Baby Boomers, and other factors. Giving to universities has doubled since 1994 (reflecting accumulative annual growth rate of 6.85 percent), and it has risen 57 percent in CPI-adjusted terms. Chart 39 Messina & Graham 108
  8. 8. U.S. Private Giving to Higher Education Source: Council for Aid to Education Messina & Graham Chart 39 Up 57% after CPI adjustment 109 $ Billions 12.4 25.6
  9. 9. • Most institutions depend on regular gifts – both annual fund and endowment – from alumni and friends to help cover operating costs and to fund scholarships, programs, research, and expansion - The top universities in the nation raise as much as $600 million in a year, and several have multi-billion-dollar campaigns under way. The top ten money-raisers account for 16 percent of all funds raised - Friends who are not alumni have become significant contributors, although their participation varies appreciably from year to year - Annual support (excluding major, one-time capital gifts) may range from only a percent or two to nearly ten percent of a university's annual budget • Despite recent growth, annual giving to AU of $29.6 million in 2005 is not notably high, at 77 percent of the SREB median. Alumni participation, measured on different bases as 21 percent or 11 percent, also suggests opportunity for growth in view of the Auburn spirit and measures of graduates’ satisfaction Messina & Graham 110
  10. 10. • Projecting the “It Begins at Auburn” $500-million campaign to achieve its target and augment the current endowment by some $290 million, AU will more than double its current endowment. At $26,600 per student, this would put AU at the 75th percentile of its SREB peers (based on 2004 data and assuming no change in their endowment levels). This will place AU ahead of close competitors like U of A and Clemson, while still well behind the top regional research universities such as Georgia Tech. Chart 40 Messina & Graham 111
  11. 11. Endowment per FTE Student – AU versus Competitors – 2004 Source: AU OIRA Messina & Graham Chart 40 “ It Begins at Auburn” ($290 million total increase) GA Tech UGA FL ST FL UTN U of A AU Clemson UMS 112 $ Thousands 71 23 21 20 17 17 16 27 12 13
  12. 12. STRENGTHS • AU’s big-school, big-time sports, small-town campus near fast-growing Atlanta is attractive to many Alabama and Georgia students. AU draws the top share of Georgia students who leave their home state for a Southern Region Education Board public research university • AU has notable strengths in selected academic areas. AU’s Wireless Engineering program is a leader. The undergraduate Engineering and Business programs rank well in USNWR’s lists. Several of AU’s College of Architecture programs rank strongly in the Design Intelligence Survey • AU ranks well on USNWR’s retention value-added measure and on the National Survey of Student Engagement’s “supportive campus environment” measure • AU has research strengths in selected engineering and agri-science areas • AU has a track record of good financial management, and development has recently shown great progress with “It Begins at Auburn” • AU’s large alumni base expresses strong Auburn spirit – and AU has solid political support in Alabama Messina & Graham 113 Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) Auburn University
  13. 13. Messina & Graham 114 WEAKNESSES • Academically, AU lags nearby states’ best universities in measures of incoming undergraduate quality. It also has a reputation for students who do not study hard and are consumed by athletics • AU’s undergraduate education likely does not prepare students as well as it could to enable them to compete in the twenty-first century. On the Collegiate Learning Assessment, AU’s seniors achieve “at expected level,” like the students of a majority of other participating schools. The Spellings Commission and others regard “the expected” as no longer good enough. AU’s scores on National Survey of Student Engagement measures are Bs and Cs relative to the top ten percent of schools. AU’s six-year graduation rate is below that of its competitors as well as the national average for four-year schools • AU is not competitive on key measures in most research areas, and being located away from a major growth and research hub is problematic for research leadership • AU is under-resourced – for its array of programs and relative to competitors – owing to historically declining real state appropriations, comparatively low endowment and alumni giving, and limits on feasible tuition increases • AU’s cohesiveness as a community has been adversely affected over the last five years or so by several factors – including lack of consensus on vision and mission, a divided Board, presidential turnover, and frayed relations among the Board, administration, faculty, and other constituencies
  14. 14. OPPORTUNITIES • Coalesce Board and faculty behind a new President and an agreed-upon vision • Market AU’s stronger undergraduate programs and the Honors College much more proactively to win more talented students • Build on AU’s past lead in value-added retention by enhancing undergraduate education quality for the current profile of AU students; experimenting with innovative approaches in program design, teaching, and learning; and using the results to market to prospective students • Focus research in a few areas of natural strength and relative advantage, and drive collaborations with nearby research powerhouses, taking advantage of telecommunications technologies • Rationalize program offerings to moderate expense growth and gain critical mass in areas of focus • Harness technology thoughtfully to improve quality while containing costs in selective distance-learning offerings, elements of undergraduate instruction, back- office operations and extension • Continue to strengthen alumni and friends’ financial support of the University through “It Begins At Auburn” and intensified annual-fund campaigns, leveraging these communications opportunities to build greater awareness and understanding of Auburn, its accomplishments, and its aspirations Messina & Graham 115
  15. 15. Messina & Graham 116 THREATS • Demographic trends in high-school graduates are neutral for student enrollment, and the growing fraction of Hispanic students will present a new challenge for AU • AU’s dependence on Georgia for students paying out-of-state tuition is vulnerable to any flattening in Georgia’s high-school graduate numbers and to lesser-ranked Georgia colleges’ becoming more competitive with AU • AU could face increasing financial challenges if Alabama state appropriations do not keep pace with AU expense increases and if resultant tuition hikes meet market resistance • AU’s value proposition could erode if students, parents, or the state begin to emphasize the college years as a time for gaining competitive skills – unless AU can demonstrate stronger value-added • The U of A’s aggressive recruitment of high academic achievers could reduce AU’s share of strong in-state students and damage AU’s reputation. It may also have the potential to discourage state appropriations to both universities if the schools are perceived as using public funds to compete for prestige • Technology developments in higher education create opportunities for fast-moving competitors, so AU must be constantly vigilant about remaining at the forefront of applying relevant techniques
  16. 16. Messina & Graham 117 Strategic Challenges and Implications Auburn University • Areas of Strategic Concern • Potential Strategic Directions (Illustrative) • Action Implications of Possible Strategic Priorities (Illustrative)
  17. 17. Messina & Graham 118 AREA CONCERN STUDENT ENROLLMENT <ul><li>AU is accepting 84 percent of </li></ul><ul><li>applicants </li></ul><ul><li>Not much room for greater selectivity or </li></ul><ul><li>for managing enrollments by adjusting </li></ul><ul><li>standards </li></ul><ul><li>Vulnerable to decrease because of possible </li></ul><ul><li>Georgia economic downturn, policy changes, </li></ul><ul><li>or other factors </li></ul><ul><li>Could make it harder to build reputation for </li></ul><ul><li>excellence </li></ul>Areas of Strategic Concern • Over 40 percent of out-of-state students (entering fall 2006) are from Georgia • ACT scores, while among the best in state, are still well below those of nearby competitors Auburn University
  18. 18. Messina & Graham 119 AREA CONCERN RESEARCH <ul><li>Flat to declining projected federal research </li></ul><ul><li>funding </li></ul><ul><li>Increasing competition for federal research </li></ul><ul><li>dollars </li></ul><ul><li>• AU not in a strong position in many </li></ul><ul><li>research fields </li></ul><ul><li>• Research is costly, with expenditures </li></ul><ul><li>consistently exceeding revenues </li></ul>Areas of Strategic Concern (Continued) Auburn University STUDENT ENROLLMENT • Tuition increases averaged 8.9 percent per year from 1995-96 to 2005-06 • This is 3.5 times the increase in CPI, and twice the rate of increase of public four- year colleges in general. How sustainable? What effect on perception of value?
  19. 19. Messina & Graham 120 AREA CONCERN PRIVATE GIVING <ul><li>The percent of alumni giving seems </li></ul><ul><li>relatively low </li></ul><ul><li>May indicate that many alumni do not feel </li></ul><ul><li>informed about or strongly connected to AU </li></ul>Areas of Strategic Concern (Continued) Auburn University FUNDING <ul><li>AU is under-resourced. AU’s total- </li></ul><ul><li>revenue-per-student is below that of </li></ul><ul><li>competitors </li></ul><ul><li>The shortfall of between ~$1,500 to $3,500 </li></ul><ul><li>relative to regional competitors is not made </li></ul><ul><li>up by alumni giving or other sources. This </li></ul><ul><li>represents a significant disadvantage </li></ul>
  20. 20. Messina & Graham 121 • Instruction . Renew the University’s primary emphasis on instruction, with undergraduate education the top priority. Become more selective on admissions, raising standards over time. (This echoes the 21 st Century Commission report of a decade ago) • Research . Focus research on building from areas of strength and developing collaborations (including with industry); seek supplemental funding • Extension . Implement a technology-leveraged business model for extension and outreach • AU system . Better link with AUM, and collaboratively expand on-line presence and brand image among working students • Operations . Continue to improve efficiency to help reduce the rate of cost increases • Finances . Increase financial resources to enable excellence - Consider expanding capital campaign - Implement an initiative to increase annual giving - Pursue opportunities for special gifts Potential Strategic Directions ILLUSTRATIVE
  21. 21. Messina & Graham 122 IF A CHOSEN STRATEGIC PRIORITY WERE TO BE . . . THEN ACTIONS AU COULD TAKE WOULD INCLUDE . . . Improve the quality of the undergraduate experience <ul><li>Realign faculty responsibilities (and evaluations) </li></ul><ul><li>to allow more time for undergraduate teaching </li></ul><ul><li>Hire a larger fraction of teaching-oriented faculty </li></ul><ul><li>Challenge the deans and faculty to develop ways </li></ul><ul><li>to make AU a leader on the Collegiate Learning </li></ul><ul><li>Assessment </li></ul><ul><li>• Perform a broad review of the undergraduate </li></ul><ul><li>curriculum in light of pervasive and higher- </li></ul><ul><li>education trends and recent thinking </li></ul><ul><li>• Become more selective in admissions </li></ul><ul><li>Increase the use of technology to leverage </li></ul><ul><li>teaching and learning interactions </li></ul><ul><li>• Build additional dormitories and common spaces </li></ul>Action Implications of Possible Strategic Priorities (Continued) Auburn University ILLUSTRATIVE
  22. 22. Messina & Graham 123 IF A CHOSEN STRATEGIC PRIORITY WERE TO BE . . . THEN ACTIONS AU COULD TAKE WOULD INCLUDE . . . Increase research scale <ul><li>Focus resources on building from areas of natural </li></ul><ul><li>strength </li></ul><ul><li>Expand funding sources (endowment, annual </li></ul><ul><li>giving, special gifts) to support a larger research </li></ul><ul><li>enterprise </li></ul><ul><li>Encourage more research collaborations with </li></ul><ul><li>leading nearby universities </li></ul><ul><li>Take a series of best-practice steps to win more </li></ul><ul><li>grants (greater dollar value, higher success rate) </li></ul><ul><li>Realign faculty responsibilities (and evaluations) </li></ul><ul><li>to allow more time for research </li></ul><ul><li>Hire a larger fraction of research-oriented faculty </li></ul>Action Implications of Possible Strategic Priorities Auburn University ILLUSTRATIVE
  23. 23. IV. Auburn University Montgomery Messina & Graham • Comparison of Auburn University and AUM • Profile • Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) • Strategic Challenges and Implications 124 *Acknowledgment: The Vice Chancellor for Administrative Services and the Strategic Planning Committee of Auburn University Montgomery were extremely helpful in compiling and critiquing selected data presented in this profile of Auburn, and in suggesting additional sources. Even so, the selection of data to be presented, all judgments expressed, and any remaining errors are the sole responsibility of Messina & Graham
  24. 24. Comparison of Auburn University and Auburn Montgomery Messina & Graham 125 Chart 41 Master’s South – Third Tier Top National Universities USNWR CATEGORY 0 159 DOCTORATES AWARDED (2003) 800 3,000 NUMBER OF GRADUATE STUDENTS 5,100 23,000 TOTAL ENROLLMENT Education of Central Alabama’s Diverse Citizens, Supported by Research and Service Land Grant, Comprehensive Research Institution INSTITUTIONAL ROLE 1967 1856 YEAR FOUNDED AUM AUBURN
  25. 25. Comparison of Auburn University and Auburn Montgomery (Continued) Messina & Graham 126 Chart 41 $0.1 $45 FEDERAL RESEARCH ($ Millions) 16:1 17:1 STUDENT: FACULTY RATIO $4,600 $5,500 IN-STATE TUITION $22 $269 ENDOWMENT ASSETS ($ Millions) $61 $495 REVENUES ($ Millions) 80% Montgomery County, 3% Out-of-State 40% Out-of-State STUDENT SOURCE 60% 88% PERCENTAGE WHITE AUM AUBURN
  26. 26. Comparison of Auburn University and Auburn Montgomery (Continued) Messina & Graham 127 Chart 41 80-90% PERCENT WORKING STUDENTS 34% 9% PERCENT OF PART-TIME UNDERGRADUATES 18 / 23 21 / 27 FRESHMEN ACT SCORE (25 / 75 percentile) N/A 35% FRESHMEN FROM TOP 10% OF HIGH SCHOOL AUM AUBURN 28% 65% SIX-YEAR GRADUATION RATE
  27. 27. Comparison of Auburn University and Auburn Montgomery (Continued) Messina & Graham 128 Chart 41 AUM AUBURN Business (30%) Science (24%) Liberal Arts (17%) Education (15%) Nursing (10%) Liberal Arts (24%) Business (19%) Engineering (15%) Science & Math (13%) Education (8%) Architecture (7%) Human Sciences (6%) Agriculture (5%) Nursing (3%) LEADING UNDERGRADUATE COURSES TAKEN (%)
  28. 28. AUM’s students come mostly from the local Montgomery area, as do Troy-Montgomery’s. Chart 42 . This reflects the educational role of AUM, serving the more place-bound, job-oriented, working student for whom studying close to home and job are prime considerations. It makes AUM much more heavily dependent on local demographics, economics and competition than AU, for example The Montgomery-area population of prime potential students – high-school graduates age 18-24 – has been on a steady rise since 1990 and is expected to rise by another eleven percent in the next ten years. Chart 43 The working-adult population is projected to rise by about five percent in the same period. Chart 44 Messina & Graham 129 Profile of Auburn University Montgomery (AUM)
  29. 29. Source of Undergraduates Source: AUM OIRA AUM – Fall 2005 Messina & Graham Chart 42 Other 21% Elmore Co. 15% Lee & Dallas Co. 6% Montgomery Co. 49% Autauga Co. 9% 130 Troy-Montgomery – Fall 2004 Other 12% Elmore Co. 14% Montgomery Co. 64% Autauga Co. 10%
  30. 30. Montgomery Area High-School Graduates Age 18 - 24 Source: Center for Demographic Research, AUM Messina & Graham Chart 43 Note: Includes Montgomery, Elmore, Autauga, Lee and Dallas Counties 131 46,000 50,000 57,000 60,000 63,000 Growth Rates 1990 – 2005 21% 2005 – 2015 11% Actual 1990 Actual 2000 Projected 2005 Projected 2010 Projected 2015
  31. 31. Projection of Montgomery Area Working Adults Age 25 - 44 Source: Center for Demographic Research, AUM Messina & Graham Chart 44 Note: Includes the traditional five-county market area, only those with high-school diplomas 132 124,000 127,000 129,000 134,000 2005 - 2015 5.5% Increase Actual 2000 Actual 2005 Projected 2010 Projected 2015
  32. 32. Despite the population growth of AUM’s traditional five-county market area, enrollment declined between 1995 and 2000, and today it remains well below its 1995 level. Chart 45. There is some impact from strong job opportunities, (e.g., in the growing auto industry), that compete for prospective students, but a share loss to other Montgomery institutions may also have played a part. Chart 46 Of Montgomery area four-year schools, AUM comes second to ASU in enrollment, ahead of Troy-Montgomery, with Faulkner and Huntingdon much smaller. Chart 47. But the competition for Montgomery students is more with Troy than ASU, whose students appear – although various sources differ sharply on this – to come from across the state and nation. In terms of share of degrees awarded in Business (one of the most popular programs in all the institutions) AUM comes first and is far ahead of ASU, partly reflecting better success in graduating students. Chart 48 Messina & Graham 133
  33. 33. AUM Enrollment Trends Source: AUM OIRA Messina & Graham Chart 45 1995 - 2006 Fall Semester 134 1995 2000 2005 Number of Students 2004 2006 5,882 4,900 5,128 5,123 5,079
  34. 34. Montgomery Competitor Enrollment Trend Fall FTE Enrollment Source: ACHE Fall Credit Hour Production Reports and Alabama College System Enrollment Summary Fall 1994 - 2004 All Students (Undergraduate and Graduate) Chart 46 * Lower than headcount numbers because of FTE adjustment of part-time students AUM* ASU Troy-Montgomery 135 0 1000 2000 3000 4000 5000 6000 1994 2000 2004 1994 2000 2004 1994 2000 2004
  35. 35. Share of Montgomery Area Four-Year Institution Undergraduate Enrollment – 2005 Source: ACHE Public Four-Year Headcount Enrollment and FTE Fall 2005; Peterson’s 2006; Articles from Montgomery Advertiser ; Faulkner University Website 100% = 10,949 FTE (#) Messina & Graham Chart 47 AUM 28% (3064) Troy-M 23% (2511) Huntingdon 6% (622) ASU 38% (4152) Faulkner 5% (600) 136
  36. 36. Share of Montgomery Area Bachelor’s Business Degrees Conferred – 2005 Source: ACHE Institutional Data on Bachelor’s Degrees conferred 2005 Public and Private Four-Year Institutions; (Peterson’s) – Percent of Business / Marketing Majors by Institution 100% = 611 Degrees (#) Messina & Graham Chart 48 ASU 13% (77) Huntingdon 3% (20) AUM 34% (206) Faulkner 24% (146) Troy-M 26% (162) 137
  37. 37. Market research findings suggest that AUM has the best academic reputation in Montgomery across all segments. But Troy-Montgomery is widely perceived to be the better option for working adults, offering more convenience in several ways. Chart 49. AUM’s Education and Business programs are seen as strong by some key segments. Students and former students report problems with the financial-aid office and career center, while high-school counselors state that the admissions office is not user-friendly. There is a general perception that campus facilities and campus life are lacking. Chart 50 In terms of ACT scores, AUM, Troy and Faulkner compete for similar students and require an 18 for most of their admits, but have programs for a minority of lower achievers. Huntingdon students are on average academically stronger and ASU students weaker than those at AUM Chart 51 AUM’s six-year graduation rate, while low, is better than ASU’s and much better than Troy’s, consistent with the picture of AUM as a higher-quality institution. Chart 52. On the other hand, AUM seems to experience considerably more transfers out than the in-town competition Chart 53 Messina & Graham 138
  38. 38. Market Research on AUM’s Competitive Position Source: AUM Market Surveys and Focus Groups, August 2006 Messina & Graham Chart 49 139 Recent graduates; transfers-out; students at local competitors; Montgomery public AUM is harder but better than local competitors Recent graduates; transfers-out; students at local competitors; public HS counselors; HS parents; Montgomery public (46% versus 26%) Troy-Montgomery is a better school for working adults because of convenient course times, TV and on-line courses, and flexible mini-quarters Current students (85%); recent graduates; students at local competitors; private HS counselors; HS parents; Montgomery public AUM instruction and faculty quality is high, with the strongest academic reputation of local competitors MARKET SEGMENTS SHARING THIS VIEW OVERALL PERCEPTIONS
  39. 39. Market Research on Specific AUM Strengths and Weaknesses Source: AUM Market Surveys and Focus Groups, August 2006 Messina & Graham Chart 50 140 Current students; recent graduates; private HS counselors; HS parents Campus life and facilities need work Public and private HS counselors Admissions office not user-friendly Current students; recent graduates; transfers-out Unhelpful financial-aid office and career center Current students Inadequate course availability by time and day Public and private HS counselors; Montgomery public Education and Business programs are strong Students at local competitors But NOT Public HS counselors or Montgomery public Nursing program is strong MARKET SEGMENTS SHARING THIS VIEW SPECIFIC FEATURES
  40. 40. Source: Peterson’s, 2006 Messina & Graham Chart 51 Competitor ACT Comparison – 2005 ASU Troy U* (all campuses) AUM Faulkner Huntingdon Percent of Entering Freshmen Scoring 18 or Higher *No separate data available for Troy-Montgomery 141 26 72 74 84 96
  41. 41. Comparison of Selected Competitors – 2005 Source: Peterson’s; ACHE; USNWR ; Articles in Montgomery Advertiser Messina & Graham Chart 52 AUM Troy-Montgomery ASU % Completing Bachelor’s Degree in 6 Years or Less 28 9 23 % of Students 25 or older 26 63 55 % African-American 33 56 95 % Full-Time Students 66 36 57 % Living on Campus 12 0 43 Size of Campus (acres) 500 6 172 142
  42. 42. Transfers from Montgomery Public Universities Fall – 2005 Source: ACHE AUM received transfers of 83 students Messina & Graham Chart 53 As % of Enrollment 5% 1% 3% 143 99 To Other To AU 49 88 236 50 41 9 To Other To AUM 140 72 27 41 To Other To AUM To Troy To Troy
  43. 43. The annual cost comparison of local colleges in the Montgomery press – based on reporting by the Alabama Commission of Higher Education – shows AUM about ten percent higher than Troy-M and ASU. Chart 54. The effective cost of AUM for students taking the typical number of credits is no higher than at those competitors, but the perception of a higher price may be enough to drive some students’ choices. Even so, price did not emerge as a factor in AUM’s recent market research. Both Faulkner and Huntingdon offer attractive financial aid to attract Montgomery students, which puts them to some degree in competition with AUM, at least in attracting stronger students. Chart 55 Messina & Graham 144
  44. 44. Competitor Tuition and Fees 2005-06 Source: 1 ACHE Annual Undergraduate Tuition and Required Fees Combined, Public Four-Year Institutions 2005 - 2006 2 Peterson’s 2006 3 College Opportunities Online Locator, Faulkner Profile, 2005 - 2006 Estimated Expenses, Tuition and Fees Messina & Graham Chart 54 $4,640 1 $4,008 1 $4,004 2 $10,500 3 145 AUM ASU Troy-M Faulkner As Reported in the Press
  45. 45. Montgomery Private University Commuter Scholarships Source: Faulkner University Website – Financial Aid Messina & Graham Chart 55 146 TAKEN FROM FAULKNER WEBSITE HALF OFF TUITION FOR COMMUTING STUDENTS! The Capital City Commuter Award offers the opportunity for students from the surrounding area to receive a quality education in an excellent Christian environment! This award is the equivalent of 50% off tuition to qualifying students, and can be combined with any federal or state financial aid for which the student is eligible. It is also renewable for up to nine semesters! To be eligible for this award, you must have at least an 18 composite on the ACT, enroll as a full time student, with at least 15 semester hours, enter school following your graduation, and commute from your home to Faulkner. The first step to qualify for this award is to apply for admission!
  46. 46. AUM performs a range of public services, collaborating with state government and other partners. Chart 56 Messina & Graham 147
  47. 47. Messina & Graham Public Service 148 <ul><li>• AUM participates in several partnerships and collaborations with public and private organizations – for example </li></ul><ul><ul><li>- Black Belt initiative </li></ul></ul><ul><ul><li>- Writer’s Block </li></ul></ul><ul><li>• AUM partners with local, state, and regional governmental agencies to provide consulting and training – for example </li></ul><ul><ul><li>- Air Force Information Technology Conference </li></ul></ul><ul><ul><li>- Montgomery Police Department </li></ul></ul><ul><ul><li>- SMART Governing </li></ul></ul><ul><ul><li>- Governmental Accounting </li></ul></ul>Chart 56
  48. 48. State appropriations have declined as a percentage of revenue over the past decade, although the state decided on double-digit increases for 2005-06 and for 2006-07, as the Alabama economy grew strongly. Tuition and contracts are very significant components of AUM’s revenue. Charts 57 Messina & Graham 149
  49. 49. Source: AU Comprehensive Annual Financial Report, 2005 Messina & Graham Chart 57 AUM Revenue Components FY 2004 - 2005 Other* Contracts Tuition & Fees State Appropriations 150 2004 2005 2004 2005 2004 2005 2004 2005 $ Millions *Includes auxiliary revenue, sales and services of educational departments, and net investment income
  50. 50. Messina & Graham 151 STRENGTHS • AUM is academically stronger than local competitors, and it has built a reputation for quality among current and past students, high-school counselors, and the Montgomery public • AUM’s separately-accredited programs such as Business, Education, Medical Technology, Nursing, and Public Administration set AUM apart as a leader in preparing students for professional careers • AUM’s six-year graduation rate exceeds that of local competitors • AUM has a strong position in support of state government • AUM is named as a Best-Value College and Best Southeast College in the 2006 Princeton Review Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) Auburn Montgomery
  51. 51. Messina & Graham 152 WEAKNESSES • AUM has experienced declining enrollment, likely reflecting in part a loss of market share to competition, and it suffers high transfers out • AUM lags Troy-Montgomery on perceived convenience for working-adult students. AUM’s shift to a semester system and Troy’s more numerous on-line and TV-based program offerings contribute to this perception gap • AUM is seen as requiring harder work to obtain a degree and probably has not communicated the value to students of a more academically-demanding program • AUM is seen as not user-friendly in administrative areas such as admissions, financial aid, and the career center • AUM’s campus facilities and campus life are not perceived as attractive • AUM’s growth prospects are limited, since it already attracts a large share of high-school seniors from its traditional five-county market area, it accepts nearly 100 percent of applicants, and it enrolls roughly 80 percent of its acceptances
  52. 52. Messina & Graham 153 OPPORTUNITIES • Market the value to students of AUM’s program quality more effectively, in terms of superior job opportunities and graduation rates, leading number of degrees conferred in Business, etc. • Improve customer service and turn around perceptions of inconvenience by better communicating the array of evening and weekend course offerings • Shift to mini-terms for working students • Introduce competitive on-line course offerings where these appear to be educationally effective, and exploit information technology for “time-shift” convenience of working students • Capitalize on the connection with Auburn main campus for joint programs and other opportunities to create value for prospective students • Develop comprehensive international business (and possibly science and liberal arts) programs to address globalization trends, building on relationships with Korean, Chinese and Mexican schools and Auburn’s main-campus language / cultural programs • Focus on proven methods of raising the six-year graduation rate for AUM’s working students
  53. 53. Messina & Graham 154 THREATS • AUM is heavily dependent for enrollment on the Montgomery area, which is expected to experience slowing growth in high-school graduates, although the working-adult population may keep growing • AUM’s market is the working student, so credit hours, if not the absolute numbers of students, are vulnerable to how students weigh their immediate job pay against the value of studying for a degree. Continued growth in automotive jobs that do not require degrees could hurt AUM • AUM’s target students may increasingly choose the “easy option” of programs at competing schools, as on-line and TV (“distance-learning”) options become culturally even more attractive than more demanding learning approaches, regardless of quality • Troy’s business model – on-line, lower-quality programs with potentially higher fixed and lower variable costs – may generate more dollars than AUM for marketing to prospective students, leading to further loss of share for AUM • AUM’s pricing flexibility – for example, to respond to any shortfall in state appropriations – may be very limited, given its market demographics and local low-price competition • Generous commuter scholarships offered by Faulkner and Huntingdon may siphon off an increasing share of AUM’s most academically-attractive applicants
  54. 54. Messina & Graham 155 Strategic Challenges and Implications Auburn Montgomery • Areas of Strategic Concern • Potential Strategic Directions (Illustrative)
  55. 55. Messina & Graham 156 AREA CONCERN Areas of Strategic Concern Auburn Montgomery <ul><li>AUM enrollment decline </li></ul><ul><li>Possibly losing share to competition and/or to </li></ul><ul><li>employment as an alternative to college. Is </li></ul><ul><li>this trend reversible? </li></ul><ul><li>AUM cannot afford to concede this large </li></ul><ul><li>segment to a competitor </li></ul><ul><li>How should AUM respond to lower-cost, </li></ul><ul><li>more-convenient instruction? </li></ul>• Market perception that Troy- Montgomery is more convenient for working adults • Competition using more on-line and TV instruction than AUM, of uncertain quality
  56. 56. Messina & Graham 157 AREA CONCERN Areas of Strategic Concern (Continued) Auburn Montgomery <ul><li>Transfers out of AUM running at five </li></ul><ul><li>percent of enrollment, higher than </li></ul><ul><li>competition </li></ul><ul><li>Apart from direct loss of tuition revenue, if not </li></ul><ul><li>understood and reversed, this attrition could </li></ul><ul><li>harm AUM’s market image </li></ul><ul><li>Could be contributing to enrollment declines </li></ul><ul><li>and transfers out </li></ul><ul><li>Potentially missing opportunity to promote a </li></ul><ul><li>high-quality, joint AUM / AU program </li></ul>• Widespread dissatisfaction with admissions, financial-aid and career offices • Nursing program not perceived as leader
  57. 57. • Customer service. Make AUM’s admissions, financial aid and career offices the best in Montgomery, after objective review of the challenges in providing satisfying experiences to students and other ‘customers’ • Campus. Upgrade campus facilities and campus life in ways that increase enrollment and pay for themselves or are funded by private giving • Instruction. Implement educationally effective, alternative methods of course delivery for working adults – for example, mini-terms and on-line and hybrid (mix of on-line and face-to-face) instruction. Emphasize improvement of six-year graduation rate over time • AU system. Take fuller advantage of the Auburn brand and develop collaborative Auburn-AUM programs that meet market needs • State government. Further capitalize on AUM’s location in the state capital, a competitive advantage for both AUM and Auburn in meeting government’s consulting needs and preparing students for careers in government • Operations. Continue to improve efficiency to help reduce the rate of cost increases • Finances. Consider development campaigns and other ways of obtaining incremental resources that would allow AUM to compete more effectively Messina & Graham 158 Potential Strategic Directions Auburn Montgomery ILLUSTRATIVE
  58. 58. V. Next Steps Messina & Graham 159 • Building on the dialogue already initiated regarding external factors, discuss the AU and AUM profiles with the AU University Senate and Deans, and with AUM’s Advisory Board and Strategic Planning Committee • Perform additional fact-gathering in selected areas – for example - Profile the graduate programs and the faculty - Review research activities in greater depth - Benchmark best practices of other universities in selected areas, such as Hispanic student enrollment and retention • Initiate high-level financial analyses using recently-developed tools – for example - Evaluate research economics - Model the resource requirements associated with possible future scenarios • Continue to explore potential strategic opportunities for AU and AUM to pursue together
  59. 59. Appendices Messina & Graham 160 • Auburn University Strategic Planning – Profile of the Environment, July 2006 (separately bound) • Ranking Methodologies • Selected Information Sources
  60. 60. US NEWS & WORLD REPORT What goes into the USNWR rankings of national universities? Indicator Weight Peer Assessment of Academic Reputation 25.0% Graduation Rate 16.0% Expenditures per Student 10.0% SAT/ACT 7.5% Faculty Compensation 7.0% Class Size 1-19 6.0% Percent of Freshmen in Top 10% HS class 6.0% Alumni Giving 5.0% Value Added 5.0% Freshmen Retention 4.0% Percent of Faculty with Terminal Degree 3.0% Class Size 50+ 2.0% Acceptance Rate 1.5% Student/Faculty Ratio 1.0% Percent Full-Time Faculty 1.0% Total 100.0% USNWR gathers the data by survey from the colleges themselves . Ranking Methodologies Messina & Graham Source: OIRA; USNWR Website 161
  61. 61. PRINCETON REVIEW Princeton Review Top-20 lists are compiled based on comparing results of student surveys, “about 300 per campus,” completed in the prior three years, almost all administered on-line. The survey asks some 80 multiple-response questions about academics, students and life at school. The results are reported in 62 Top-20 lists DESIGN INTELLIGENCE Design Intelligence , an architecture and design publication, annually surveys the principals and recruiters of a long roster of firms of architects and interior, industrial and landscape designers. The survey asks these firms from which programs their best new associates have graduated over the past five years Results are compiled for each specialty (architecture, industrial design, etc.) A national list shows the responses of all firms from across the U.S. Another set of lists shows how firms in each region responded to the question However, since graduates of schools with top architecture and design programs go to work in every region, Southern firms, for example, might cite a Northeastern school as a leader. Design Intelligence therefore compiles a third set of lists that show the top Southern schools mentioned by Southern firms, and so on for each region Ranking Methodologies (Continued) Messina & Graham Source: Princeton Review Website; Design Intelligence 162
  62. 62. TheCenter Since 2000, the Lombardi Program on Measuring University Performance at the University of Florida, known as “ TheCenter ”, has published an annual report, “The Top American Research Universities.” This report is widely regarded as the most reliable and authoritative source of comparative data on the research performance of those American universities that have at least $20 million in annual federal research expenditures. The report ranks universities according to their standing on nine quantitative measures: total and federal research dollars, endowment assets, annual giving, national academy members, faculty awards, doctorates granted, post-doctoral appointees, and undergraduate SAT/ACT score ranges. Those that are in the top 25 on every one of the nine measures rank first (MIT, Stanford and U Penn were the only ones in the 2005 report), those who were in the top 25 on eight measures rank next, and so on. TheCenter goes to some pains to ensure comparability and accuracy in the data used. One consequence is a two to three year time lag in the data reported. The December 2005 report is the latest available as of October 2006, and is based on 2003 performance. Ranking Methodologies (Continued) Messina & Graham Source: TheCenter 163
  63. 63. Selected Information Sources Messina & Graham 164 Books on Issues and Opportunities in Higher Education Bok, Derek. Our Underachieving Colleges . Princeton: Princeton University Press, 2006. Brewer, Dominic J., Susan M. Gates, and Charles A. Goldman. In Pursuit of Prestige: Strategy and Competition in U.S. Higher Education . Somerset: Transaction Publishers, 2005. Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century . New York: Farrar, Straus and Giroux, 2005. Geiger, Roger L. Knowledge and Money: Research Universities and the Paradox of the Marketplace . Palo Alto: Stanford University Press, 2004. Hersh, Richard H., and John Merrow. Declining By Degrees: Higher Education at Risk . New York: Palgrave MacMillan, 2005. Rosovsky, Henry. The University: An Owner’s Manual . New York: W.W. Norton Company, Inc., 1991. Vedder, Richard. Going Broke By Degree: Why College Costs Too Much . Washington, D.C.: The AEI Press, 2004.
  64. 64. Selected Information Sources (Continued) Messina & Graham 165 Commissions and Reports Alliance for Regional Stewardship. “Making Place Matter.” 2004. Auburn University. “Recommendations of the Twenty-First Century Commission.” March 20, 1997. Baum, Sandy, and Lucie Lapovsky. “Tuition Discounting: Not Just A Private College Practice.” The College Board, 2006. Byrne, John V. “ Public Higher Education Reform Five Years after the Kellogg Commission on the Future of State and Land-Grant Universities.” NASULGC, January 2006. The College Board. “Trends in College Pricing.” New York: College Board Publications, 2005. Council for Aid to Education. “Report on Contributions to Colleges and Universities.” February 16, 2006. Huron Consulting Group and The Washington Advisory Group, for North Carolina State University. “ Enhancing the Ability of North Carolina Public Research Universities to Contribute to State Economic Development.” 2004.
  65. 65. Messina & Graham 166 Commissions and Reports Kellogg Commission. “Returning to our Roots: Executive Summaries of the Reports of the Kellogg Commission on the Future of State and Land-Grant Universities.” NASULGC, January 2001. McPherson, Michael S., and Morton Owen Schapiro. “ The Promise and Perils of Universal Higher Education.” Ford Policy Forum (2004). The National Center for Public Policy and Higher Education. “Measuring Up 2006: The State Report Card on Higher Education – Alabama.” 2006. National Science Board. “An Emerging and Critical Problem of the Science and Engineering Labor Force.” 2004. United States. Department of Education. Miller, Charles, and Cheryl Oldham. “Setting the Context.” Issue Paper, 2006. United States. Department of Education. Spellings Commission Final Report. “A Test of Leadership – Charting the Future of U.S. Higher Education.” 2006. Selected Information Sources (Continued)
  66. 66. Recent University Strategic Planning Documents University of Alabama Clemson University Dartmouth College Florida International University George Washington University Georgia Southern University Georgia State University Georgia Institute of Technology University of Georgia at Athens University of Illinois University of Kentucky Mississippi State University Rice University University of Southern California Middle Tennessee State University Texas A&M University of Texas, Trends Affecting Higher Education, September 2005 The Society for College and University Planning (SCUP) website SCUP Trends in Higher Education, July 2005 Messina & Graham 167 Selected Information Sources (Continued)
  67. 67. Messina & Graham 168 Databases ACT , website Alabama Council on Higher Education (ACHE) , website database American Association for the Advancement of Science , website database TheCenter, The Top American Research Universities , December 2005 and other years College Opportunities Online Locator , website database Design Intelligence: America’s Best Architecture & Design Schools , 2006 National Association of State Universities and Land-Grant Colleges (NASULGC) National Center for Education Statistics , 2004 National Science Foundation , website OECD Peterson’s , website database Princeton Review , college database SREB Fact Book on Higher Education , 2005 U.S. Census Bureau U.S. Energy Information Administration U.S. News and World Report , “America’s Best Colleges Premium Online Edition,” 2006 and 2007 U.S. News and World Report , “America’s Best Graduate Schools Premium Online Edition,” 2007 Selected Information Sources (Continued)
  68. 68. Periodicals The Atlanta Journal-Constitution , “Technology Reboots Curriculum,” May 10, 2006 Aviation Week , website Business Week , “Campus Revolutionary,” February 27, 2006 Chronicle of Higher Education , “Big Dreams in the Bluegrass State. The University of Kentucky Seeks to Make His State’s Flagship University a Top-20 Public Research Institution,” April 28, 2006 Chronicle of Higher Education , “College Presidents and Governing Boards Must Strengthen Bonds, Report Says,” September 29, 2006 Chronicle of Higher Education , “The Legitimacy of Assessment,” September 22, 2006 Chronicle of Higher Education , “Ole Miss Embraces Its Painful Past to Move Forward,” September 29, 2006 Chronicle of Higher Education , “Report Blames College Practices for Limiting Access of Minority and Low-Income Students,” September 1, 2006 Chronicle of Higher Education , “Researcher Proposes Basing College Rankings on Different Criteria,” September 22, 2006 Chronicle of Higher Education , “Regions and Universities Together Can Foster a Creative Economy,” September 15, 2006 Chronicle of Higher Education Forum , “The Spelling Report, ‘Warts and All,’” September 1, 2006 Chronicle of Higher Education News Blog , “Charles Miller Assails Private and Research Universities in ‘Personal’ Letter,” September 28, 2006 The Economist , Bill Gates’ Comment, May 4, 2006 Messina & Graham 169 Selected Information Sources (Continued)
  69. 69. Periodicals The Economist , “Poison Ivy,” Lexington Column, September 23, 2006 , “Learning Is A Leader’s Edge,” article written by Jim Citrin, quote by Jeff Immelt, May 10, 2006 Harvard Magazine , “Summers in Summary,” September – October, 2006 Huntsville Times , “Auburn University Professor: Football Too Big,” September 15, 2006 McKinsey Quarterly Web Exclusive , “An Executive Take on the Top Business Trends: A McKinsey Global Survey,” April 2006 McKinsey Quarterly , “Ten Trends to Watch in 2006,” January 2006 McKinsey Quarterly , “Sizing the Emerging Global Labor Market,” 2005 Montgomery Advertiser , “ASU Goes Over the Top,” October 10, 2002 Montgomery Advertiser , “At Auburn, AUM, Tuition Hikes Come Despite Better Funding,” April 16, 2006 Montgomery Advertiser , “Collegians Rally For Record Budget,” March 3, 2006 Montgomery Advertiser , “Local Colleges Expect to See Jump in Enrollment,” August 15, 2005 Montgomery Advertiser , “Students Find it Pays to Travel, Universities Reach Out to Commuting Students,” February 24, 2005 Motley Fool , “eCollege: Getting Good Marks,” May 11, 2006 The New York Times , “BMW’s Custom-Made University,” August 28, 2006 Opelika-Auburn News , “Auburn University Receives $5.6M For Aquatic Research,” September 18, 2006 Messina & Graham 170 Selected Information Sources (Continued)
  70. 70. Periodicals PARCA Quarterly , Winter 2005 – 2006 The Presidency , Winter 2006 The – South Carolina’s Home Page , “Higher Education Panel Calls for Strategic Plan,” September 29, 2006 University Business , White Paper “Connecting Enrollment and Fiscal Management,” January 2006 USA Today , “Retiree Benefits Grow Into Monster,” May 25, 2006 The Wall Street Journal , “Degrees at StateU.Edu,” May 9, 2006 The Wall Street Journal , “Hispanics Gain in Census,” May 2006 The Washington Post , “Canada Pays Environmentally for U.S. Oil Thirst,” May 31, 2006 The Washington Post , “Online Degree Programs Take Off,” May 16, 2006 Other Sources Alabama Cooperative Extension System , website Alabama Economic Outlook , Center for Business and Economic Research, University of Alabama, 2006 Auburn University Competition Analysis – Fall 2003 Freshmen Applicants Not Enrolled – Where They Enrolled , May 2004 Auburn University Comprehensive Annual Financial Report , 2005 Messina & Graham 171 Selected Information Sources (Continued)
  71. 71. Messina & Graham 172 Other Sources Auburn University Montgomery Market Surveys and Focus Groups , August 2006 Auburn University Montgomery Office of Institutional Research and Assessment (OIRA) Auburn University Office of Institutional Research and Assessment (OIRA) The Boeing Company , website Center for Demographic Research at AUM College Board , “ Advanced Placement Report to the Nation ,” 2006 Faulkner University , website IBM, website International Telecommunications Union , website Jet Propulsion Laboratory , website National Merit Scholarship Corporation Annual Report , 2005 Pew Internet and American Life Project Southern Regional Education Board (SREB) , Legislative Report, July 2005 Southern Union State Community College , website Texas A&M Fact Book The University of Alabama , website Selected Information Sources (Continued)