WASHINGTON, DC—Today, a group of higher education organizations and experts published a report distilling essential leadership policies and processes to prevent, mitigate, and overcome risks to the higher education business model. The report, “Collaborative Leadership for Higher Education Business Model Vitality,” and an associated microsite will help smaller colleges with limited financial resources weather strong economic headwinds. The partner organizations, the Association of Governing Boards of Universities and Colleges (AGB), Baker Tilly, the Council of Independent Colleges (CIC), and the National Association of College and University Business Officers (NACUBO), were advised by a distinguished group of higher education practitioners.
To address risks to the higher education business model, the report presents a series of leadership conversations that should take place between the governing board and senior administrators, including the president and chief financial officer. The key takeaways of these conversations are intended to create the right conditions for overcoming financial challenges through an empowered leadership structure, well-articulated organizational goals, a disciplined process for stress testing, risk assessment strategies, and more. While these recommendations may help fragile colleges avoid existential crises, they can also help assess and strengthen the business model for higher education more broadly.
According to an analysis of federal data by the State Higher Education Executive Officers Association (SHEEO), 861 colleges have shut down since 2004. While some institutions may have staved off financial crisis with a nonrenewing influx of federal COVID-19 funding in recent years, more closures are anticipated in the future.
“The rate of institutional closure, especially of smaller, private colleges, is likely to get worse, not better,” said Steve Golding, report author and AGB consultant. “Many higher education leaders can start making changes that can insulate their institutions and even help them thrive. But leaders have to start now, beginning with the conversations outlined in our report.”
The report lists discussion questions to initiate these strategic conversations. It begins with targeted, fundamental questions such as:
- What are the roles and responsibilities of our leadership?
- Does our institution have a resilient governance structure?
- Do we have a working knowledge of our business model?
Answering these questions ensures that leaders have the appropriate structures to endure significant disruption and respond to unanticipated crises with timely, deliberate, and informed decision-making.
“Boards, presidents, and chief financial officers have to collectively master the fundamentals of a sustainable business model before they reach a crisis,” said Christine Smith, managing director, higher education and risk advisory practices, at Baker Tilly. “When times are good, it can be easy to overlook the basics, or ignore gaps in understanding. Not so when institutions are facing dramatic upheaval. These questions ensure that everyone is on the same page and ready to make the tough calls.”
The conversations transition from the fundamental to the strategic, with questions about benchmarking and how to build situational awareness. The report includes recommendations for building a business continuity plan, thinking about organizational stress testing, and more.
The final conversation provides the chance for leaders to recognize when the institution has reached an inflection point—a moment when business model risks threaten the institution’s continued operations. Not only must leaders consider how to immediately respond to such a revelation, but they also must consider the long-term implications. For example, leaders should consider the timely opportunity for a merger, acquisition, or partnership.
“These conversations and moving to action are important because colleges, no matter whether they are considered ‘big’ or ‘small,’ are complex organizations. Leaders need to understand the institutional data, have a lot of conversations with multiple constituencies, and demonstrate a healthy dose of grit. This report can help boards and administrators adapt to precarious business model challenges,” said Jim Hundrieser, vice president of consulting and business development at NACUBO.
The authors drew insight from multiple listening sessions with institution board members, presidents, and chief financial officers over the course of 2022. During the sessions, participants identified threats and challenges that will likely overwhelm the viability of the current higher education business model. They also shared the difficulty in transforming those business models without a well-equipped set of leaders prepared to make informed decisions in a timely manner.
“New research indicates that the students affected by a college closure are less likely to earn a degree,” said Marjorie Hass, president of CIC. “Closures have real impact on student success, as well as on faculty, staff, and local communities.”
Please visit AGB.org/Businessmodel to download the report and explore the associated microsite.
The Association of Governing Boards of Universities and Colleges (AGB) is the premier membership organization that strengthens higher education governing boards and the strategic roles they serve within their organizations. Through our vast library of resources, educational events, and consulting services, and with more than 100 years of experience, we empower 40,000 AGB members from more than 2,000 institutions and foundations to navigate complex issues, implement leading practices, streamline operations, and govern with confidence. AGB is the trusted resource for board members, chief executives, and key administrators on higher education governance and leadership.
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About Baker Tilly US, LLP (bakertilly.com)
Baker Tilly US, LLP (Baker Tilly) is a leading advisory CPA firm, providing clients with a genuine coast-to-coast and global advantage in major regions of the U.S. and in many of the world’s leading financial centers—New York, London, San Francisco, Los Angeles and Chicago. Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 148 territories, with 38,000 professionals and a combined worldwide revenue of $4.3 billion. Visit bakertilly.com or join the conversation on LinkedIn, Facebook and Twitter.
The Council of Independent Colleges (CIC) is dedicated to the excellence and effectiveness of independent colleges and universities with a core focus on undergraduate education and a commitment to the liberal arts and sciences. Through institutes, seminars, workshops, networks, publications, and services, CIC supports college and university leadership, advances institutional excellence, and enhances public understanding of independent higher education’s contributions to society. CIC membership is open to nonprofit independent colleges and universities in the US and abroad, as well as to state associations and councils and other educational organizations. Since 1956, CIC has been the premier national organization serving small and mid-size independent colleges and universities and their leaders; currently more than 700 colleges, universities, and organizations benefit from participation in CIC’s programs, networks, and services. Learn more at www.cic.edu.
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