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The Path to Self-Sufficiency

The Path to Self-Sufficiency

Published in Chronicle of Higher Education

Self-sufficiency is a ubiquitous aspiration for individuals as well as institutions, to achieve self-reliance and exist beholden to none. For public universities, however, self-sufficiency is less of an aspiration and more of a mandate, given the current environment of declining and unreliable stat funding for higher education.

For universities, the pathway to long-term financial security requires new and sustainable revenue streams that will grow over time. While most universities already supplement state funding and tuition with grants and donor support, these latter sources are intermittent and difficult to predict, making it hard to plan and budget. The creation of consistent and reliable sources of income, therefore, should revolve around what a university knows how to do best: enroll and teach students the information, thought processes and skills they need to have successful and fulfilling lives. In short, growth in enrollments is imperative, and growth comes best from areas of strength. Growth is a vital topic for discussion, because in the near future, only two types of universities will exist: those with growing enrollment, and those with declining enrollment. Remaining static is not an option in today’s highly competitive environment. Universities that are growing will be adding programs and faculty, while schools with declining enrollments will be cutting programs and staff. University Business Officers Express Concern How tenuous is the current status quo for higher education? A recent Gallup poll of university business officers showed that only 42 percent were confident about their institution’s sustainability over the next 10 years – meaning almost 60 percent have some doubt that their university will survive for another decade. It’s a hard-knock matter of money. Ultimately, all the diverse things that universities represent – an educated citizenry, fulfilled individuals, critical research and, yes, faculty and administrator salaries – will not be sustained unless an institution brings in more money than it spends. Tuition is just one component of total revenue per student, but it is the source that institutions can most directly control and predict. In recent times, as tertiary enrollments have dipped, universities have tipped the scale toward rate increases. Public universities, in aggregate, raised tuition by 27 percent between 2007 and 2012. The major problem here is that in essentially the same period, 2007 to 2013, U.S. median household income actually declined by 8 percent, according to the U.S. Census Bureau. As a result, many families and prospective students are deciding that college is not worth the cost. However, it’s a simple fact that higher education remains crucial to the vitality of a nation and the overall quality of life – and economic prospects -- of an individual. Since raising tuition is not the sole solution, the focus of many universities is shifting away from tuition increases and towards enrollment growth. Indeed, the Gallup survey found that 82 percent of university business officers most likely will employ strategies to increase overall enrollment, and 70 percent are contemplating the launch of new revenue-generating academic programs. Growth strategies that emerge should be built around an institution’s historic strengths. A report from Bain & Company, “The Financially Sustainable University,” points out the need for universities to remain true to their brand and distinguishing characteristics even as they apply new strategies for growth. “The worst-case scenario for an institution is to be relatively expensive and completely undifferentiated,” said Bain authors Jeff Denneen and Tom Dretler. “Unfortunately, many institutions seem to be headed down that path.” But by focusing on the characteristics that are truly distinctive and channeling resources to them, institutions can positively improve their performance and get on the path to long-term sustainability. Academic Competition and Changing Student Populations Devoting resources to the addition of online programs has proven to be an effective means for increasing enrollments and tuition income while maintaining an institution’s core points of differentiation. Yet, in a U.S. landscape of more than 4,000 degree-granting institutions, enrollment growth is easier said than done. Prospective students today have more choices in higher education than in any other consumer category. The most significant opportunity for enrollment growth today, by far, can be found among working adults who are seeking advanced credentials to support their careers. These non-traditional students – typically older, mid-career and often with family obligations – comprise more than 70 percent of the total higher-ed student population in the U.S. This majority student population requires a measure of flexibility that can only be delivered through online offerings. According to a Gallup survey, nearly two-thirds of university leaders believe that an online strategy is critical to their institution’s long-term success. Yet surprisingly, fewer than 50 percent of top executives had included online programs in their campus strategic plan. Universities that are just now venturing into online degree programs will find a crowded and intensely competitive field. Less than 10 years ago, the online market was dominated by a dozen or so proprietary schools with high tuition costs. Today, the strongest competition comes from public universities that embraced online using virtually the same programs as before at low, state-subsidized rates. Students now have a wealth of online choices, including more than 450 MBA programs, more than 400 RN-to-BSN nursing offers, and more than 500 masters in education degrees. Another growth area for online providers is non-degree programs and specialty certificates, which have become the fastest growing credential in the US. They now account for about 22 percent of all conferred credentials, most of which are being earned online. The challenge today is recruiting significant numbers of nontraditional students who are deluged with choices. “Consistent growth of an online student body now depends upon constantly increasing exposure,” said Randy Best, founder of Academic Partnerships, an online services provider for higher education. “The number of students who must visit a website to achieve 100 applications has almost doubled in the last 5 years.” Creativity and increased investment in marketing is the name of the game, along with consistently building a larger portfolio of online offerings. Public universities have some of the most recognized and trusted brands in academe. Those brands need to be leveraged with sophisticated and focused marketing, supported by aggressive budgets that are significant and sustainable over time. The enrollment and revenue growth that can be achieved from this robust approach can go a long way toward making a public university not only self-sufficient, but ultimately unassailable.

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