Succeeding in an era of difficult trade-offs

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Succeeding in an era of difficult trade-offs

It’s no longer news to say that colleges and universities are under increasing financial pressure. A decade after the Great Recession, most institutions are in worse rather than better financial condition as the number of traditional age students declines and state funding lags far behind rising costs. At the same time, rising student financial need and increasing competition for students is driving up financial aid faster than tuition prices at many institutions.

All signs indicate that these trends will continue to worsen over the next decade as a demographic cliff approaches in 2026. This is not simply a “bad period” to be waited out. Even recent growth engines such as international students or adult and online students are now stagnating or declining. And, while the next recession will likely spur increased enrollments (esp. in adult and professional programs), those gains are likely to be overwhelmed by public funding cuts, increased need for financial aid, and lowered endowment returns.

We know that higher education is one of the best investments that we can make at an individual, state, and federal level. Unfortunately, increased public investment in colleges and universities is far from certain. While the vast majority of institutions will survive, many will be forced to downsize, and a few will merge or close. Even those institutions able to continue growing will typically see growth in a small number of academic programs and declines in many others.

Making difficult trade-offs

Historically, colleges and universities have struggled to cut costs and make the difficult trade-offs that go along with that. Most have used incremental budget models and consensus-based decision-making that spread budget increases or cuts proportionally across all units. Few used data in any meaningful way to make resource allocation decisions, and even fewer collected the basic data needed to understand which activities drive positive student outcomes or financial sustainability. Perhaps most importantly, they failed to empower chairs and faculty governance bodies to make those tradeoffs. Faculty came to perceive any reduction in resources for their department as an attack on the fundamental value of their academic discipline. As a result, they saw their role in governance as defending their existing resources rather than identifying financially viable approaches for the future.

This approach was workable as long as resources continued to grow, but as they began to decline during the Great Recession, institutions realized that across-the-board cuts were often counterproductive. Some programs had lost 30 percent of their students while others had gained 30 percent or more.

Thriving in an environment of declining resources, volatile enrollments, and intense competition will require new capabilities. After years of saying “you cannot cut your way to excellence” or “you cannot do more with less,” colleges and universities need to face facts and find ways to further their mission with lower revenues, fewer students, or a different mix of academic programs.

Data-informed rather than data-driven decisions

Some see the use of data as a threat to mission, quality, and faculty governance. They rightly point to bad decisions justified by data, such as closing academic programs based solely on the number of majors, increasing course loads across all faculty, or increasing class sizes despite the impact on student learning outcomes. Others look to data as a cure-all for overcoming institutional inertia and exposing wasted resources. The truth is that data are simply inputs to the decision-making process. However, data (used appropriately) can help institutions have more honest and productive conversations about the trade-offs that lie ahead—or that must be made now.

New budget models, program review processes, and resource allocation formulas can help bring transparency to complex resource allocation questions, but ultimately these decisions must be based on the collective judgment of the administration, faculty, and staff. Data should not replace shared governance but rather enable all stakeholders to agree on a set of facts that define the current situation. Based on that shared understanding, they can then move forward to identify potential responses, and acknowledge that some activities must be prioritized over others. The alternative is to base decisions on the loudest or most politically powerful factions on campus.

How EAB supports data-informed decision making

EAB’s role is to help institutions generate reliable data, put that data into context with peer benchmarks, and provide examples of how other institutions have used data to make better decisions. Access to good data, we have found, is necessary but not sufficient to improve decision-making. So, we also help to train faculty, chairs, and deans to participate effectively in a data-informed decision-making process.

EAB provides our partners with the tools they need to make better decisions for themselves. We recognize that these decisions must leverage academic judgment and respect shared governance. The assessment of individual faculty members in particular, is an area where individual knowledge and academic judgement are paramount. For this reason, EAB does not provide data to be used for, or make recommendations with respect to individual hiring, tenure, or promotion decisions. Our metrics focus on program and departmental performance with the goal of helping institutions identify opportunities for improvement.

Often, we find our greatest value is helping colleges and universities to avoid simple-sounding solutions that would have long-term negative impacts on their ability to support their mission. Some academic programs will never be revenue-positive or even revenue-neutral, and EAB understands that. In fact, one of our recent studies found that program prioritization processes that force rank all academic programs and cut the lowest-performers rarely generate the short-term cost savings that institutions were looking for. Instead we recommended a process focused on annual performance improvement across all programs.

Overcoming the organizational and cultural barriers to good decision making

Institutions are being forced to make tough decisions. Boards of trustees and state systems, reacting to mounting deficits and headlines about campus closures, are losing patience and demanding rapid change. Industry leading associations and thought leaders too are urging for institutions to make changes in how they approach these decisions in order to maximize their effectiveness. Faculty, recognizing that their academic programs and perhaps even their jobs are at risk, are organizing to resist aggressive plans to reorganize or restructure.

In the increasingly polarized environment on many campuses, it is important to avoid over-simplified all-or-nothing dichotomies such as: liberal arts vs. professional studies, traditional residential undergraduates vs. working professionals, face-to-face instruction vs. online, quality vs. efficiency. While there are trade-offs to be made, it is possible, even essential, to make them in a way that protects the institution’s mission and values. We believe that better data and lessons from other institutions will be critical to navigating this path, but they will only be effective if you can build a culture of trust, transparency, and collaboration on your campus.

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