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[From the Archives] The False Dichotomy of Higher Education

Splitting the institution up into “the academic side” and “the business side” neglects how these two groups overlap and share responsibilities. Retaining student customers means reconciling these two groups to favor collaboration between them.

There are many ways the provost’s role and responsibilities can be defined and structured in colleges and universities. Some are responsible for academic affairs only, while others more broadly cover enrollment, admissions and designing the student experience, among other activities. Overseeing and managing expense budgets is common in all iterations of the provost’s role. Few institutions, however, think about how the provost directly impacts the revenue and the business.

Marketplace Changes

As enrollments continue to decline and students pursue other possibilities for finding good jobs than earning a degree, institutional success and financial sustainability rely more heavily on keeping the student customers enrolled than desperately trying to acquire new ones. It may be an adage for business in general, but in higher education it is a still a relatively new concept. Keeping the customers you have is more important to the bottom line than putting all the energy into acquiring new ones. Viewed through this lens, it is the provost who has the most important job: managing the strategies that retain student customers.

Academic Quality and Revenue Are Linked

The business functions and accountability involved in the provost’s role are directly tied to driving incremental revenue. Accreditation, persistence, retention, instructional design, faculty management, promotion and tenure are just a few.

Maintaining Institutional and Specialized Accreditation

Among the more straightforward and obvious ways in which the provost impacts the revenue is by maintaining and managing accreditation. Whether it is institutional or specialized accreditation, meeting accreditation agencies’ basic requirements provides access to Title IV funding. 

Persistence, Retention and Graduation Rates

Persistence from term to term, semester to semester, progress toward graduation rates are common metrics of academic quality that are reportable and essential to drive revenue. The more students persist, the more courses and credits they take, the more likely an institution is to achieve its revenue goal.

Faculty Role in the Student-Customer Experience

The people in a college or university who have the most direct impact on the student experience are the faculty. While there are few actual measures of how much of the student experience relies on faculty, a reasonable starting point is suggesting that at least 80% of a student-customer’s experience occurs with faculty. 

Despite this truth, few institutions consider how important it is to engage faculty in efforts to better manage the business’s financial health. While there is tension in mixing academic quality and financial decisions for some in higher ed, the reality is higher education is a business and everyone is part of the problems and the solutions. By creating engaging content, great teaching and learning environments in course rooms, faculty are determining which student customers are more likely to stay, return, persist, drop out, stop-out or move toward graduation. From a business and financial lens, all these dimensions of the student-customer experience with faculty impact the revenue. Because faculty ultimately report to the provost, it is the provost or the academic side managing business day to day.

Faculty Management, Promotion and Tenure Decisions

Among the more controversial topics in higher education is the role of tenure in recognizing the intellectual and professional contributions of faculty members make to the institution’s intellectual life and their respective professional areas of expertise. While many are deserving of such an esteemed level of recognition, rarely do institutions present a complete picture of the financial implications of a tenure decision on an institution’s financial health. In most instances, a slate of eligible and well-deserved faculty is recognized and rewarded. The final decision on who receives tenure flows through a review process, recommendations are made, and ultimately the provost presents the candidates to the board of trustees. The decision’s financial impact is usually presented by financial officers as the amount of salary increase in the current year’s budget. 

While this may be heading into deep waters and create upset and concern for raising the issue, the fact is that tenure is a long-term financial investment an institution makes in a faculty member at largely a fixed cost. Tenure decisions at many institutions where the college or university is responsible for supporting a position with tuition revenue commits an estimated 15-20 years of salary and related compensation. While the conversation may take place on some boards of trustees, rarely is there a discussion of the math. For example, if an individual is earning $100,000 per year as a newly tenured faculty, the salary is considered in the current year’s budget to determine whether it can be supported. What is not discussed very often is that tenure is a guarantee of employment for an undefined period. If it is assumed a tenured faculty member does remain at an institution for 15 to 20 years, then a provost is recommending and a board is approving a minimum $1.5 million investment. If ten faculty members were promoted within a year, which is not uncommon, then provosts would be recommending a $10.5 million investment. Again, faculty may be worth this type of investment, but it is rarely discussed or considered even at the highest levels of an organization. The provost has a fundamental role in recommending this type of financial investment. 

The False Dichotomy

In many colleges and universities, there is a swan song that can be heard in discussions about how to best manage the business of higher education. Phrases like the “academic side” and the “business side” of a college or university are commonly heard tropes. However, the conversations have emerged or continued, from a more elevated strategic or systems-based lens. It is a false dichotomy and one that is causing problems for collaborative work to address higher ed’s more pressing financial challenges. Understanding and recognizing that provosts are managing both the revenue and expense budgets is a better way forward. Boards of trustees, presidents and executive leadership teams and faculty and staff should hit pause, step back and challenge statements like “the academic side” and “the business side.”

A more accurate presentation is to start with the assumption is that the academic products and the revenue derived from meeting student customer and employer demand is in fact the business of higher education. Recognizing this fact and beginning to analyze the business impact of allowing this assumption to continue or foment tension between members of the academy and the people who offer skills in areas such as finance, marketing, HR and other areas, may create more collaboration as institutions try to identify strategies that can address declining enrollments, falling revenue and the downward spiral that many of them are facing.

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