American higher education's operational model is based on outmoded -- and some (myself included) would argue, unsustainable -- revenue and expense assumptions.
The premise is that student-generated revenues will expand to offset increasing operational expenses of the institutions. However, the decline in per-student net tuition revenues and the backlash against higher student loan debt have pushed this core assumption off the planning table. At the same, time, higher education faces evolving demographic, political, and economic trends that will constrain revenue, and produce smaller and more diverse admission classes.
In a "Futurist" piece in NACUBO's Business Officer magazine (July/August 2016), I argue that institutions must look inward to develop a budget format that creates a sustainable financial model appropriate to changing circumstances on college and university campuses.
To achieve financial viability, each institution will have to manage change by developing new financial models after evaluation its own set of strengths and weaknesses. Many institutions will succeed; some will not. ...The biggest variable is the experience and innovative capacity of the leadership.
Specifically, it will be critical to match changing financial practices with modernized, streamlined and better informed governance -- beginning with how trustees see their role in shared governance.
In the article, I argue that American colleges and universities must reimagine what tools they have and how to use them. They must learn to do more with less. Four opportunities are emerging:
- Compete better through collaboration;
- End "mom and pop" financial aid shops;
- Review the entire base of institutional assets;
- Embrace communities and demonstrate higher education's value to them.
Higher education will always be an inefficient business with extraordinary fixed costs. But it has enough flexibility built in to put the pieces of the puzzle together differently.
Systemic change in the transformation of information transformed educational institutions for the better. Now it must change how they operate internally.