Sweet Briar College’s decision to close has given heightened attention to a set of thorny questions that higher education leaders, particularly those in liberal arts colleges, have pondered for some time, revolving around a central theme: “Why do liberal arts colleges need to change their business model and what should that change entail?”
As is frequently the case, the answers are much more complicated than the questions. Although similar in many respects as a group, liberal arts colleges are quite diverse in their settings, their financial circumstances, the missions they pursue and how they allocate their resources. As was recently observed in the wake of the closing at Sweet Briar, “every small college’s circumstances are unique, as are the personalities of its leaders, and drawing conclusions based on what happened at other institutions may be of limited value.” [1]
In light of this diversity, perhaps a good starting point is to acknowledge that some liberal arts colleges, albeit a select few, are not pressed to change their business model. This small cohort of colleges distinguish themselves from the larger pack in their enjoyment of what Scott Bierman, president of Beloit College, has described elsewhere as “reputation and resources.”[2] That is, they are not tuition-driven in the way that many (if not most) liberal arts colleges are in their reliance on net-tuition revenue to pay the bills. And, they have large endowments—in the hundreds of millions or over one billion—and already-established niches carved out in the national liberal arts college landscape. A cynic might say, “To the winners go the spoils!”
For better or worse, however, this small cohort of liberal arts colleges is not sufficiently large in number to meet the demand for liberal arts education that exists across the market of prospective postsecondary students. And therein lies opportunity for the broader population of liberal arts colleges who must sustainably meet this demand by enhancing and/or stabilizing their financial position through strategic and deliberate planning. This will require innovation and change, not only in how those colleges think about and frame their business models, but also in what aspects of their programs (curriculum, facilities, student demographics, study-away programs, etc.) they choose to highlight in establishing or enhancing their niches. There is simply no single solution to the riddle that is higher education finance in an environment of extreme competition for students and stagnant or shrinking revenues.
Liberal arts colleges across the country are responding in various ways to this reality. Knox College, in Galesburg, IL, navigated this question approximately 10 years ago in a strategic review of its curriculum and how that curriculum could be refined to best serve the needs of today’s liberal arts student. Knox’s senior leadership offered the following caveat as the college began that process: “If all we do is become a smaller version of ourselves, then we will have maximized the chance of failure.” That is, Knox needed to innovate and leverage its strengths while also being strategic in its resource allocation. The new trajectories adopted have since taken root, helping Knox to regain a more stable financial position. In a much more dramatic set of circumstances, Antioch College in Yellow Springs, OH is literally reinventing itself after its closure in 2008, and is now well down a path that carves out a distinctive niche that is grounded in its 160+ year history of social justice and cooperative education, yet also innovative in its interpretation of all that a commitment to social justice demands of higher education in the 21st Century.
As both Knox and Antioch can attest, strategic change is hard, particularly in an environment in which governance is spread across boards, presidents and faculty. And while one might initially think that changing the business model is somehow separate from governance and the faculty’s ownership of the academic program, the fact is that there are few, if any, aspects of the business model that a college can change that do not directly or indirectly affect the academic offering. After all, the business colleges are in is educating students and the academic program is where the vast majority of that business transpires.
So, liberal arts colleges interested in pursuing strategic change as a way to manage revenue and expense budgets operate in a somewhat circumscribed environment. An institution, for example, might opt to reduce its discount rate (i.e., the percentage of its gross tuition revenue that it returns to students as financial aid) as a way of increasing net-tuition revenue. While this strategy might bolster revenue, it will do so, in most cases, at the expense of diversity in the college’s student population. This is because financial aid packaging is a commonly used tool to enhance diversity. This is important for an organization that is in the business of education because a less diverse student population results in a less diverse academic experience for all students. Alternatively, an institution might decide to freeze or limit salary increases as a means of controlling what, for most liberal arts campuses, is the most significant driver of expense growth. To the extent that salary stagnation adversely affects faculty recruitment and retention, however, it becomes difficult, if not impossible, to separate what seems on its face to be a “business decision” from the broader academic mission.
In each of these scenarios and others we might hypothesize, any decision to move forward without fully engaging all interested stakeholders, including the board, faculty and administrators is likely to result in resistance, frustration, and perhaps even public backlash. Some decisions, such as that which closed Sweet Briar College, can even prompt faculty votes of non confidence and efforts by dedicated alumni to reverse the decision through grassroots fundraising.[3]
While there probably is no process that will satisfy all interested stakeholders in every scenario, governance processes that educate and inform, involve and discuss, and then decide have the greatest potential to avoid the negative after effects. And I believe that the process of educating and informing, such as that pursued by the Associated Colleges of the Midwest’s Institute on College Futures, lies at the foundation of any successful decision. To date, the feedback from faculty who have participated in the Institute, as well as that from others who are aware of the ICF through their interactions with participants, has been positive. In this respect, the ACM colleges and their faculty have taken an important step in providing the education and information about higher education finances that should well serve their boards, presidents and faculty as they make the strategic choices about how to enhance their financial positions and market niches.
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Footnotes
[1] Lawrence Biemiller, “To Resurrect a College, Supporters Need More than Nostalgia,” Chronicle of Higher Education. April 3, 2015. Accessed at http://chronicle.com/article/To-Resurrect-a-College/229055/#disqus_thread
[2] Keynote Presentations from Associated Colleges of the Midwest’s 2013 Institute on College Futures. Accessed at http://www.acm.edu/ICFvideos
[3] See “Sweet Briar faculty unanimously votes no confidence in the president and board” at http://www.washingtonpost.com/news/grade-point/wp/2015/03/31/sweet-briar-faculty-unanimously-votes-no-confidence-in-the-president-and-board/ and https://savingsweetbriar.com/#home.
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