To grow academic programs profitably, ask these questions first

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To grow academic programs profitably, ask these questions first

Despite declining funding and enrollment, many non-profit colleges and universities are still tasked with growing profitability without sacrificing educational quality.

To help achieve growth goals, many campuses are opting to launch new and often less conventional academic programs. However, hastily launching new programs can lead to profitless growth—when a school grows faculty, instructional resources, and perhaps even enrollment, but not the bottom line. Instead, we recommend schools take an informed approach to evaluate a potential new program’s cost and opportunity that will lead to smart growth.

What is smart growth?

We define smart growth as the targeted expansion of existing academic programs based on thorough analysis of capacity, costs, and student demand. Our research shows that this thoughtful approach—rather than rushing into launching potentially unnecessary new courses, faculty, and/or facilities—better positions schools to achieve the financial goals of their new program launches, rather than detract from them.

One EAB member school recently shared with us that the typical amount they spent on their new program start-up costs over the first six years totaled an average of over $2.2 million! This makes it easy to see how new programs can lead schools further from their financial goals. Below we’ve outlined some guiding principles and questions we recommend colleges and universities follow to ensure their program launches are taking the smart growth approach.

Review your academic program portfolio regularly

With the demographics of the typical college student changing quickly and constant innovations in fields like technology, it’s more important than ever for colleges and universities to conduct frequent reviews of their program portfolio. While we believe the ideal frequency of reviews depends on the field, we recommend schools conduct them more than every three years at a minimum. However, for some particularly fast changing fields, we advise schools to consider reviewing programs even more frequently—even annually.

Yes, you should have annual departmental reviews. Here’s why.

Key questions to ask in this phase of the evaluation process are:

  • Which fields do we think are changing the fastest?
  • Which programs require the most significant changes during departmental reviews?

Discover growth opportunities within existing programs

An important early step in the smart growth approach is to look at your existing program data to identify programs with growth potential. Specifically, it’s important to look for programs with high student demand and vacant seats. To find such trends we recommend analyzing attempted student credit hours and median fill rate for a program and compare the results to other similar departments (i.e. a school would not want to compare a writing program to a biology program, which have very different equipment and operational requirements).

Key questions to ask in this phase of the evaluation process are:

  • Which departments are the most similar in operations and teaching methods that would make sense to benchmark against each other?

Use peer benchmarks to test assumptions

Another critical step is to use benchmarks from comparable peers to test assumptions. For example, if a college is considering launching a new bioinformatics program, they should look at peer college and universities to examine enrollment trends for similar programs. While the comparison peer group may vary based on your individual institution’s characteristics and goals, one peer group we recommend a school include in their comparisons is their geographic peers.

Key questions to ask in this phase of the evaluation process are:

  • From where will we recruit new students?
  • What resource-related barriers exist when creating a new program?

Use diverse labor market data points

When schools conduct program evaluations, we encourage them to consider a diverse set of relevant labor data points. This will help colleges and universities develop a broad, yet nuanced, understanding of their regional and national labor market which can help contextualize employer demand and support a more holistic understanding of their best growth opportunities.

Key questions to ask in this phase of the evaluation process are:

  • Is the regional labor market large enough to support the instructional needs for the potential new program?
  • Is there enough national demand in this field to warrant us adding a program that could produce more qualified job candidates for it?

When planning for program growth that actually supports institutional cost-savings and revenue growth goals, there are many data points and factors to consider. However, including these guiding principles in the evaluation process can help schools to achieve not just profitless growth, but instead smarter growth.

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