Published on 2014/10/27

Efficiency Is the First Step Toward Long-Term Sustainability

AUDIO | Efficiency Is the First Step Toward Long-Term Sustainability
If institutions don’t take seriously the need to modify their business practices, they will face significant consequences in the coming years.
The following interview is with Ken Hartman, senior fellow and principal analyst at Eduventures and former president of Drexel University Online. Hartman is a leading advocate for transformation in the postsecondary space and, in a recent Q&A with The EvoLLLution, discussed his exit ramp concept to explain the importance of committing to institutional change. In this interview, he expands on that concept and discusses why institutional leaders should be looking to transform their business practices sooner rather than later.

Click here to read key takeaways.

1. What is the biggest roadblock stopping senior institutional administrators from taking steps to make their institutions more efficient?

Every institution is different but many of them have some of the same issues. For example, the governance structure — how strong or influential the board is, the faculty senate, unions, etc. There’s an issue of leadership in the experience of today’s presidents; we’re seeing a great turnover of university and college presidents at the two-year and four-year level. Some reports suggest that there have been more calls for resignations and non-confidence months in the last 12 months than in the last four years combined. A lot of the young leaders coming into some of these positions fail to have any real management responsibilities. Consequently they’re faced with some very difficult financial challenges and they’re at a loss for experience to deal with that.

Overall the biggest obstacle for college and university leaders to confront issues of inefficiency is having courage. It takes courage to stand up to these various constituencies and it starts with an open and honest conversation with key stakeholders at your campus.

2. From an institutional leader’s perspective, what are the downsides to improving institutional efficiency?

Externally, sometimes the inefficiencies are portrayed as reducing the quality of the higher ed experience to those outside the academy. Therefore college presidents need to be cautious in terms of where they make their focus on efficiency. It should not just be one department, showing favoritism over one or the other. At every college that’s trying to create a more efficient environment there are complaints galore, and not just from the faculty but oftentimes from senior management and [alumni]. It comes down to having an open and honest conversation with your constituents as you begin to make these difficult decisions.

3. Why is it critical for institutional leaders to focus on creating internal operational efficiencies?

One, leadership must be seen to do everything that would benefit and improve students’ educational experience. Two, operational costs must be contained in every front with tuition constantly rising and putting education beyond the reach of so many. Three, institutional capacity — be it labs, online programs, face-to-face programs — must be expanded where able.

All of these items come at a cost. If an institution is looking to grow their program, they’re going to have to find those programs that are performing and invest resources in those programs. They’re going to have to find those programs that are underperforming and make a decision why they’re underperforming and either eliminate those programs or put additional resources to grow them. Sometimes it would be helpful for institutions to call upon organizations from outside the institution to give them an objective perspective on which program should be cut or which program should get additional resources.

4. What will happen to institutions that refuse to make necessary efficiency-related changes?

When the former CFO from Harvard said that their model is broken and has to change — and they’ve got $33-plus billion in endowments — that says the world about all the other institutions. Unless your institution has a bottomless bucket of resources, the odds are if you do not change, you’re going to go out of business or your institution will fundamentally transform and be merged into another institution, particularly if you’re a state university.

The other issue here is long-term debt for higher education has increased 12 percent a year and that’s not sustainable, especially when enrollments have started to decline and the cost of education continues to increase. At one point in time, the institution could borrow money and pay it back based on perceived future enrollments, and that was when there were 2,500 colleges and universities! Now there are over 4,000 colleges all fighting for a smaller piece of the pie.

Therefore, for many institutions, they’ve reached a tipping point. It’s no longer about building more buildings, it’s about focusing on creating a better product that has better outcomes, that the subject matter is well connected and that it’s affordable. It’s that simple.

Those institutions that fail to understand, those college presidents that fail to lead, are going to find that their institutions are going to be in a lot of trouble. It may be a year, it may be two years, but the forecast for those institutions is not good.

5. Is there anything you’d like to add about the importance of committing to institutional change sooner rather than later and the value that internal efficiencies can have on an institution trying to navigate the much rougher waters they’re facing today?

It all comes down to an open and honest conversation with your stakeholders. You must present the facts the way they are. You must provide the key stakeholders with options. It’s not going to make you popular, you may even lose your job over it, but ultimately it is bigger than the future of your institution. We’re talking about the future of our nation. Our country must educate these young people and if we do not offer them an option, if we do not offer them an opportunity to gain knowledge at an affordable price, our republic is at risk.

These are the conversations that university presidents with their CFOs and their Board and quite frankly with their leadership within the faculty must get together, put aside their differences, and put aside the pettiness. The efficiencies must come at the greater good, not necessarily at one department over the other and I believe we can do it. Historically speaking, colleges have done this in the past but now’s the time for institutional leaders to stand up and lead their institutions through what is going to be a very challenging period over the next three to 10 years.

This interview has been edited for length.

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Key Takeaways

  • Unless institutional leadership commits to changing institutional business models, colleges and universities will face dire consequences in the form of mergers and bankruptcy.

  • Exploring opportunities for greater operational efficiency is an important step toward this end.

  • The first step all institutional leaders should take when beginning this process is engaging in an open and honest discussion with key stakeholders about the state of the industry and the position of the institution.
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Readers Comments

Claire Fishbein 2014/10/27 at 10:10 am

Asking university presidents to make big changes even if it costs them their jobs is a bit dire, isn’t it? What good can these leaders do if they just end up fired or pushed out?

Sarah Rarier 2014/10/27 at 10:42 am

It’s not surprising that people on the outside (or on the outside of the administration, students at the universities surely feel it) see “operational efficiency” as code for cutting smaller, less lucrative programs. I’d like to hear strategies for streamlining operations that don’t end up sacrificing the education of students is programs that aren’t engineering and science research.

Dr. Antony Parker 2014/10/27 at 11:41 am

Sometimes the size of the program reflects the demand for that type of education. It’s unfortunate, definitely, but sometimes some things need to be sacrificed for the greater good. A bankrupt university doesn’t do anybody any good regardless of the size of their program.

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