Trends at Work
Industry leaders who see the big picture discuss ways to capitalize on campus developments.
By Sandra R. Sabo
At Business Officer’s invitation, representatives of five firms recently offered their national—and sometimes international—perspectives on these key trends playing out on campuses today. They also cited creative solutions they’ve observed in working with college and university clients.
Reduce, Reuse, Recycle
Sustainability efforts are gaining traction in many countries, says Warren Jaferian of Sodexho, a food and facilities management services company, Gaithersburg, Maryland. On U.S. campuses, the trend often manifests itself in student demands for fair-trade coffee, cage-free eggs, and organic vegetables grown by local farmers. Jaferian, vice president of Sodexho’s worldwide education market, says, “From a broader perspective, sustainability includes environmental and social aspects. For example, does the food supplier, as well as the institution, pay living wages to the people who produce and serve the food?
“Students are asking not only what’s in the dining program but also what kind of buildings you have,” continues Jaferian. Colorado College, Colorado Springs, for one, has embarked on a campuswide initiative to encourage students to recycle their food waste rather than simply throw it away. After composting, the food waste becomes organic material that the facilities department eventually uses for fertilizer.
At the University of Vermont, Burlington, you’ll find another example of sustainability in action. Its just-completed University Heights Residential Learning Complex uses 68 percent less energy than comparable buildings. The energy savings come from features such as cork floors, composting toilets, and roofs covered with vegetation to naturally cool the building. In addition, 25 percent of the construction waste generated during the building process was either recycled or reused.
“We’re seeing a big push to build facilities that don’t further contribute to the planet’s demise,” concludes Jaferian. “Everyone wants to reduce their carbon footprint, and that trend has many positive implications going forward.” Confirming this growing interest is the Association of Sustainability in Higher Education’s 2006 annual review (www.aashe.org), which indicates an explosion of activity around sustainability on campuses across the United States and Canada.
In the save-a-tree category, Max J. Roberts, president of Barnes & Noble College Booksellers, Inc., Basking Ridge, New Jersey, predicts the college bookstore will change dramatically in the next 10 to 20 years, especially as digitized textbooks grow in popularity. Besides a far fewer number of printed books, you’ll see other changes that might be characterized as “green.”
“We’re partnering with some of our schools on developing environmentally friendly stores,” says Roberts, “most recently at Mississippi State and next with the University of Pennsylvania. Environmental approaches include everything from using geothermal heat and materials, such as nontoxic paint, to [installing] carpet made out of recycled plastic,” says Roberts. In fact, he believes the environmental trend can have educational institutions seeing green—literally.
Roberts notes, “Higher education is in the early stages of incorporating environmental awareness into planning. This increased awareness will give universities an edge when competing for research and development dollars. In the future, that could help hold down the cost of tuition.”
Funding Health Care, Educating Staff
From Mary Claire Bonner’s perspective, the “growing fiscal squeeze” is the trend placing the most pressure on higher education these days. And not far behind this reality is the demographic trend of an aging population, which has long-term economic implications for organizations providing employee benefits.
“Health care benefits costs for faculty and staff are rising much more rapidly than tuition increases,” says Bonner, senior vice president of small and middle market business for Aetna Inc., Hartford, Connecticut. “At the same time, you have a rapidly aging, soon-to-be-retired workforce that wants continued access to high-quality health care.”
Shifting part of the cost. Bonner sees more institutions moving away from copays and toward coinsurance, in which the employer and the employee share the cost of health care benefits. Some now require their faculty and staff to make larger premium contributions, which are linked to factors such as base salary, pay raises, and inflation. “Still others,” she adds, “are coming together to leverage their combined buying power in a particular geographic pocket.”
About 40 educational institutions, for example, currently participate in the consortium known as Emeriti Retirement Health Solutions. This program, launched in 2005 by Aetna and Fidelity Investments, is aimed primarily at tenured faculty who may be tempted to delay their retirement because of concerns about medical insurance.
“Emeriti provides a tax-advantaged savings vehicle during the active years of employment,” explains Bonner, “as well as access to a variety of post-age-65 health plans that complement Medicare coverage. Emeriti enables institutions to convert their defined benefits for retirees into a defined contribution model,” she adds. “The prefunding of retirees’ health care costs can significantly reduce long-term accounting liabilities.”
Enlightening employees about expenses. A trend toward “consumerism” has already appeared in the commercial sector, and Bonner expects it to take hold within higher education—including in the health care arena—in the next five years. She defines consumerism as “giving people more information and opportunities to make informed decisions.” In terms of health care costs, says Bonner, “It’s all about bringing consumers closer to the expenditure, so they really understand the full cost of a particular service or a particular physician.”
Aetna, for example, has established Web-based tools through which consumers can locate within their area high-performance physicians—performance being defined by the physician’s ability to meet certain thresholds for clinical abilities as well as for cost efficiencies. The insurer also offers medical management programs for 30 different diseases, helping patients learn how to achieve and maintain optimal health.
Last fall, in a nod to the emerging consumerism trend, Aetna introduced its Personal Health Record, an online tool that aggregates an individual’s health and claims histories and integrates them with a health risk assessment, disease management information, and medical alerts that identify opportunities to improve care. The record is not only personalized and secure but also portable—the faculty member teaching abroad can easily access his or her records anywhere in the world. “The Personal Health Record,” says Bonner, “enables consumers to manage their own health. It reinforces the concept of ‘earning your benefits.’”
Along those lines, some employers are moving toward providing incentives for staff to take a more active role in improving health and reducing risk. Such techniques include lowering copayments for people who sign up for a health risk appraisal or disease management program or who lose weight.
“Universities have the challenge of balancing value-based health care purchasing with helping faculty and staff truly reach optimal health,” Bonner observes. “Providing data-driven decision-making tools helps people think differently about how best to use their health benefits.”
Implementing Smart Systems
At the recent Alliance conference hosted by the Higher Education User Group, an organization composed of users of Oracle/PeopleSoft software, most of the 5,000 attendees had one topic on their minds: competitiveness.
“It’s not just competition with other [institutions] but competition with alternative ways of getting education,” explains Jim McGlothlin, vice president of higher education for Oracle, the enterprise software company based in Redwood Shores, California. “There’s quite a bit of speculation about the degree to which physical, traditional course attendance will be replaced or augmented by online distance learning.”
This and other potential threats to enrollment and revenue have increased the pressure on institutions to become more efficient in every administrative process. In some cases, a legislative mandate may dictate that they do so, says McGlothlin, pointing to the University of Virginia (UVA), Charlottesville, as an example. “The Commonwealth of Virginia issued a legislated directive requiring administrative departments of state government and of public universities to maximize on-contract buying statewide,” he notes. “In UVA’s case, compliance wasn’t optional.”
Efficiencies of e-procurement. The university took the initiative to ask its leading suppliers to develop—and maintain—electronic catalogs that reflected their negotiated pricing. Within seven months, UVA introduced an electronic procurement system that now enables users to make purchases from the recommended suppliers through requisitions or purchase cards.
Similarly, the University of Pennsylvania, Philadelphia, has made numerous improvements to its procurement system to not only make life easier for the system’s 1,700 users but also guide them to catalogs maintained by Penn’s 136 preferred suppliers. Once authorized faculty and staff have logged onto the system and made their selections, the requisitions are automatically routed to the appropriate person for approval and converted into purchase orders for electronic delivery to suppliers. When an invoice arrives, the system automatically matches it to the appropriate purchase order for payment.
This self-service procurement system has helped consolidate suppliers as well as spending. Of the 185,000 or so transactions that Penn processes annually, about 68 percent are now done with its predetermined list of companies. In the past two years alone, the university has documented savings of nearly $8 million as a result. “Purchasing is no longer about the art of processing a purchase order,” observes Shawn Noyes, Oracle’s director of higher education. “It’s really about negotiating the best contracts on behalf of the institution and ensuring on-contract compliance. [At the same time,] people don’t have to do the paper chase anymore.”
Benefits of integrated systems. Eliminating paper-driven operations was a key motivation for the University of Central Florida (UCF), Orlando, which recently improved financial processes for its 21 campuses by migrating from the state’s legacy system to a more integrated approach. “UCF streamlined the purchase order process, added controls for the use of purchase cards, and put in a new vendor tracking system,” Noyes explains, “which will probably lead to a reduction in the number of vendors used.” The centralized system provides localized access, so individual departments and designated employees can create their own reports and analyses.
The university also integrated its financial system with its supply chain management and human capital management systems—a move that Theo Bosnak sees as a sign of things to come. “People have always wanted access to actual, real-time financial information to put into operational or analytical reports,” says Bosnak, Oracle’s senior director of higher education. “But it was often painful to get. Newer tools can unify information across what was previously in silos, such as [those supporting] procurement, or housing, or facilities. You can take housing, food service, fleet management, facility management, and other areas,” says Bosnak, “and bring them all together for an enterprisewide view. And when you unify the information, through data warehousing and data marts, you can move beyond operational reporting and into analytics and a life cycle management approach.”
Moving Markets, Differing Demographics
Like the competition that is forcing streamlined systems, changing business models and shifting populations have their effects on enrollment and revenue. Add to that, says Barnes & Noble’s Roberts, the growing number of students asking whether spending four years at a traditional institution is really the most effective, economical way to earn a college degree. Despite the implications that fewer students may populate campuses—which would mean even steeper increases in the already skyrocketing costs associated with a college education—Roberts remains confident in the ability of educational institutions to resolve these problems.
“Higher education is not the first industry to experience significant inflation and cost increases, and it won’t be the last,” says Roberts. “Great retailers, great institutions, and great manufacturers all figure out a way to help customers finance their products through creative solutions. Automobile manufacturers, for example, developed their own leasing agencies and financing companies. And the electronics industry developed no-interest loans to interest people in buying the first high-definition televisions.”
Roberts has witnessed such creative problem solving at many of the almost 600 educational institutions served by Barnes & Noble. In higher education institutions, it’s as much about preserving or increasing overall revenue as it is about helping students finance tuition.
Expanding the business model. Alabama’s Troy University, a traditional four-year state school, is revamping its distance learning program, which it developed years ago when providing education to military personnel stationed at U.S. bases in Europe. When many of those military bases closed, Troy risked losing a large share of its distance-learning customers.
In response, says Roberts, “the university expanded its overseas reach, setting up teaching sites in more than 12 countries, offering both graduate and undergraduate programs to the local population. Additionally, Troy was an early innovator responding to the growing pool of ‘adult learners.’” Today, three of Troy’s four Alabama campuses are almost exclusively dedicated to serving adult learners, offering online and off-hours courses.
Taking advantage of market shifts. A shrinking pool of students, part of a larger population migration out of upstate New York, also plagued three other institutions: SUNY–Albany, the University of Rochester, and the Rochester Institute of Technology. The population shifts affected all three universities, but each successfully shifted its approach, Roberts recalls.
“You can view a shift in population as an opportunity or as something that could [extinguish] an institution,” he observes. “All three of these universities saw opportunity and now offer innovative business and scientific incubators. They’re attracting a significant amount of research dollars and creating funding for upstart businesses in the area.”
Such community involvement and redevelopment are on the agenda of other institutions. Johns Hopkins University, Baltimore, just opened a Barnes & Noble Collegiate Superstore. This college bookstore–Barnes & Noble hybrid carries “student lifestyle” products and spirit wear along with fashion merchandise. The expanded line of products helps strengthen community ties by serving the local population as well as the university’s students.
Increasing Consumer Empowerment
When it comes to paying the tuition bill, students and parents want to know more. Countless surveys have identified paying for college as one of the top concerns for families today—even those whose children haven’t graduated from kindergarten yet. Parents aren’t staying silent about those concerns either, as evidenced by recent legislative initiatives related to the cost of higher education.
“We’re seeing a consumer demand for easier-to-understand education payment choices, delivered how and when they want them, [services] they already have in other areas,” says Steven J. Dodd, president and chief executive officer of Tuition Management Systems, Inc., a Warwick, Rhode Island-based firm that provides tuition planning, billing, and payment services to more than 700 educational institutions. “A wide variety of services are available to consumers so they can get the best deal on any major purchase. For example, they can make mortgage companies compete for their loan business or use the Web, text messaging, and the telephone to become comfortable about a car purchase before walking in to buy.”
With consumer empowerment increasing, adds Dodd, “you’ll want to know what consumers want before they demand it—and that calls for consumer research and empirical data.”
Educating payers. Dodd offers Penn State University, University Park, as an example. Over the last two years, the university has enhanced many processes to create efficiencies and provide more comprehensive services to students on its 24 campuses. To learn what kinds of support were in demand, the university surveyed some of the people who pay the tuition bills for its 81,000 students. “Penn State recently embraced e-billing and simultaneously expanded its education payment options and financial counseling services,” notes Dodd, “because that’s what the survey data indicated bill payers wanted.”
Redesigning the payment experience. Another institution making consumer-friendly moves is Wentworth Institute of Technology, Boston. The institution began the process by physically combining its registrar, student accounts, and financial aid offices to form a student service center. But that was just the start, says Dodd.
“You don’t always see what Wentworth did next,” he observes. “They looked upstream and redesigned the entire student experience, from the admissions process to orientation to bill payment.”
Previously, Wentworth’s students simply received a tuition bill after they had been admitted. Now, discussions about payment options and financial aid occur during the admissions process, with additional assistance available through Wentworth’s Web site. Potential students—and the people paying for their education—can access a computer-modeling program that helps them figure out how to fit tuition payments into the family’s budget. Long before the bill arrives, they can also engage in a Web chat or a toll-free telephone conversation with an education payment counselor equipped to discuss the institute’s payment plans, loan options, and combination programs.
“Before the student or family has made a decision, or before the institution gets stuck in the tuition discounting mode,” emphasizes Dodd, “you have to talk about how people can fit the cost of education into their financial situation. A common theme with Wentworth and other institutions [that are] seeing a lot of success is to do some research and review all processes with an eye toward what the end consumer is experiencing. The goal is to create a common language about payment plans and loans, as well as a seamless progression from one department to the next.”
Dodd believes such changes have contributed to Wentworth’s measurable increase in student satisfaction—not to mention its 45 percent improvement in on-time tuition payment.
Addressing a Global Appetite
A diploma from an American college or university has long been coveted by international students—and that trend continues, with the Institute of International Education reporting that the 2005-06 academic year saw U.S. colleges and universities hosting more than a half million international students. In terms of international students worldwide, in 2000, the global demand for higher education totaled 97 million students. By 2025, that number is projected to reach 263 million students, with those from China and India accounting for half of the overall demand.
Those statistics say it all for Sodexho’s Warren Jaferian. “That globalization trend means you have to provide for international students while they’re here, for American students who go abroad, and for any students attending your institution’s off-shore facilities,” he explains.
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For the first group, Sodexho draws on its experience operating in 80 countries to give international students a taste of home while they’re living in the United States. Through its Global Chef program, for example, Sodexho recently brought its executive chef from Hong Kong to Northwestern University, Chicago, where the student population is 20 percent Asian. Chef Wah helped staff develop more authentic menus for Northwestern’s students and shared some cooking techniques, such as the preferred (i.e., non-American) way of preparing authentic Chinese sticky rice.
Conversely, U.S. institutions establishing campuses in other countries often want to provide American-style student services along with an American-style education. This is a change for students in many countries. “French universities, for example,” observes Jaferian, “don’t have the American ideal of total customer experience that provides a wide variety of dining services, including cooked-to-order food in a student union building that also has Wifi, banking, and concierge services. There’s a certain cachet associated with the American lifestyle, and, therefore, it’s being exported around the globe,” observes Jaferian.
With the American lifestyle, however, comes another issue. “Obesity is now a global epidemic and is no longer only a U.S. public health crisis,” Jaferian adds. “Students in all cultures need to learn the importance of moderation and making the right choices—to know they shouldn’t eat hamburgers, fries, and a milkshake every day.”
SANDRA R. SABO, Mendota Heights, Minnesota, covers higher education business issues for Business Officer.
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