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Building a Strong Future for Higher Education: Strategies for Tough Economic Times
This is no ordinary recession. And, for leaders in higher education, its impact will resonate long after it has passed. In the years ahead, I believe we will view the last thirty years as a kind of golden age of academic prosperity that was brought to a crashing end by this recession. Yet, the end of the golden age has also created a golden opportunity for us to implement the management philosophies, strategies, and actions that will shape a strong future for higher education.
Now in my third college presidency, I have experienced a wide range of institutions and economic environments, and learned a great deal from each. During that time, record philanthropic support bolstered colleges and universities, and consistently rising budgets financed new buildings, endless research opportunities, and new programs and initiatives. More students were going to college than ever before, and schools across the country competed for students in an arms race of lavish spending to produce increasingly dazzling new facilities.
That all ended in the fall of 2008, when the U.S. economy—indeed, the global economy—came to a crashing halt. Of course, we had all seen the early warning signs of the weakening economy before the bottom fell out of the market: slipping consumer confidence, difficulties in the housing markets, trouble in the financial sector that then spread to other industries, and states with swollen budgets facing diminishing resources and depleted coffers. As soon as the impact began to be felt broadly in the fall of 2008, people across the country began to retrench.
I actually believe that this belt-tightening will have significant long-term benefits—for higher education and for society as a whole. College Learning for the New Global Century, the report of the National Leadership Council for Liberal Education and America's Promise, calls on American society to commit to a vision for learning that today's students need for life, work, and citizenship (AAC&U 2007). This is our opportunity to support that commitment. Indeed, how we manage through this turbulent economic time will directly influence higher education for decades to come.
Take stock of the economic environment and its lasting impact
Success won't come without some hardship and, unfortunately, hardship is what many are seeing right now. The financial markets have recovered but are still significantly below their 2007 highs. Despite the unprecedented liquidity created by the Federal Reserve, lending is still sluggish. Along with rising unemployment—most recently just under 10 percent—we are seeing significant "underemployment," as workers who want full-time jobs make do with part-time work just to get by. Some workers are dropping out of the workforce altogether. The result is increasing wariness on the part of consumers—wariness that may affect their willingness to invest in higher education.
While public officials have jumped on the positive gross domestic product figures at the end of 2009 and, with this positive indicator, declared the recession "over," there is currently no consensus on how strong the recovery will be. Some prognosticators are proclaiming that unemployment may not decline significantly until 2011; others are talking about a "jobless" recovery and an economy that will not be able to absorb the unemployed from this recession plus normal job growth as more than two million workers—most of them recent college graduates—enter the labor pool every year. The reality is that even as the economy recovers, the effects of this recession will linger long after economists have declared it to be officially over.
This is the most severe and direct impact the economy has had on higher education since the early 1970s, if not since the Great Depression. The fallout we have seen across the higher education landscape is significant.
- State appropriations for most public four- and two-year institutions are decreasing. While California has certainly been the hardest hit to date, other states could reach their own crisis points as well.
- Community colleges are overwhelmed with unfunded students, and many have been forced to restrict enrollments.
- Fundraising is negatively impacted due to the decreasing net worth of many alumni and other supporters. For all institutions, this is severely impacting campaigns and annual funds.
- While endowments have recovered from their March 2009 lows, they have been hit particularly hard over this period. Whether it is large institutions with endowments in the billions, or much smaller colleges with relatively small endowments, the 25 to 30-plus percent losses we saw in 2008 and early 2009 have hurt. With many colleges' spending rules based on averages over a three-year period, we are not yet experiencing the full impact. Meanwhile, even as we hope for some recovery, budgets have been affected considerably.
- Because of families' financial situations, institutions are forced to exercise restraint in deciding whether to raise tuition.
- Some parents of current or prospective students are unable or unwilling to borrow due to negative home equity or concern over their jobs.
While college and university responses have varied, we have seen some similar actions taking place across the country. To date, these have included pay or hiring freezes, furloughs, curtailment or termination of programs, restrictions on travel, new limitations on outside consultants, and even paring back workforces in some cases. Additionally, certain institutions are overenrolling students—a short-term decision that can certainly have long-lasting repercussions.
At Connecticut College, we have continued to increase our budget during this crisis, although more modestly than in the past. But one response strategy we share with many other institutions is to increase spending on financial aid in order to assist students whose families have been affected by the recession. Amidst growing demand for financial support, schools have substantially increased their investment in financial aid, in some cases setting aside reserves that, under better conditions, would have been used to fund other institutional initiatives. The question we all face is how sustainable these financial aid increases will be, given the possibility of a weak recovery.
Reexamine mission and core values
Over the last thirty years, higher education institutions have had the resources to fund grand ambitions. In fact, many educational institutions have taken on activities, programs, even new facilities (with the associated operating budget consequences) during the last ten to twenty years that are not central to their core mission. This is no longer possible.
At this point, institutions need to evaluate everything—both in the short and long term—and reunite efforts to focus more directly on our core educational missions. We need to take a good, hard look at where our colleges and universities are headed, what central values we hold most dear, and then very purposefully connect all of the programs, practices, and initiatives back to the educational mission. This examination is critical before moving forward. We need to be bold, be honest and, most importantly, involve the entire institution—all stakeholders—in this analysis.
We can use the results as a filter against which to test all actions and responses to the economic downturn. In this environment, as always, continuous improvement should be both a goal and a reality. We should create on our campuses a culture of evidence in which decisions are informed by data. Connecticut College was an early participant in the Wabash National Study of Liberal Arts Education, which investigates critical student outcomes. We rely on Wabash data, as well as results from the National Study of Student Engagement and our own focus groups and surveys, to make decisions that support the achievement of our stated educational outcomes. We believe this will help our institution thrive over the long term. That is our focus.
Focus on critical financial and operating strategies
Across higher education, leaders can also use their own unique data to employ new or revised strategies to sustain their missions and remain successful. Any reaffirmation of the core educational mission must go hand-in-hand with a comprehensive review of operating budgets, because any changes in action plans will have budget implications. At the same time, we need to be constantly looking for additional liquidity in this increasingly uncertain climate. I have always followed the practice of submitting balanced budgets with ample contingencies.
In a well-run institution, the budget is based on strategic plans and priorities. But we must also be flexible and nimble enough to adapt our strategies to changes in the economic environment. We shouldn't be afraid to alter plans, if we can do so with essential outcomes firmly in place. On my own campus, the economic environment has led us to discuss and reconsider our approach to new science facilities. When we closely examined the program objectives through the lens of our core mission and the realities of available resources in this market, we concluded that we could achieve our academic goals by renovating and expanding a historic campus building rather than constructing a stand-alone new facility. We'll benefit further from our conservative construction policy: we don't put a shovel in the ground until we have full project funding in place, including a construction contingency and an endowment for the building's continued operation and renewal.
In the process of evaluating data and even as the economy may dictate some cutting back, keep the institution's aspirations on track by setting aside funds for future investment. Your vision may be altered during tough economic times, but moving the institution forward is critical.
In this economy, it is also important that the key revenue drivers and expenses that provide the framework for annual budgets are monitored more carefully than ever. Are the budgets sustainable? Is the senior team reviewing data on applications, enrollments, financial aid requests, and other important areas that provide an early perspective on critical revenue and expense trends? It is essential for the institution to monitor this data to avoid negative "surprises."
As for the budget process itself, one strategy that has worked well at Connecticut College is to keep all department budgets flat on a year-to-year basis. All managers must submit and justify any requests for funding above current levels to a committee of administrators, faculty, staff, and students who collectively recommend budget priorities to me. The advantage of this approach is that our managers become used to prioritizing initiatives and growing through substitution, putting forth only proposals directly related to the strategic goals of the college.
Finally, partnering has been an important higher education strategy over the last several decades. It needs to be reimagined in light of the economic downturn to assess whether additional partnerships might better achieve our business and educational objectives while conserving resources.
Communication and outreach are essential, especially in difficult financial times
As we make these decisions, it is important that we continue to communicate proactively inside and outside the institution. Communicating what we're doing is critical; communicating why we're doing it is even more important. In addition to building understanding of and consensus for decisions, we also can take advantage of these communications to build excitement and make the case for the support and continued involvement of current students, parents, faculty, staff, and the broader alumni body. This is the time to engage them, seek their input, and broaden their understanding of all issues that affect the institution.
With all that we do, we must be sure to keep the lines of communication open among our peer institutions and industry associations as well. In this more difficult economic period, greater demands are placed on all senior-level administrators. The institution can be isolated in the best of times, and especially so when daily demands seem daunting. We all need to reach out to colleagues, share our concerns, and discuss options. On a national and regional level, the Association of American Colleges and Universities plays an important role in bringing colleagues together.
As always, when we are with our peers, we need to engage in conversations about our model of educating students. Discuss new ideas, new concepts and how they might apply to our own colleges or universities. For example, how can technology provide greater support to achieve essential learning outcomes? Even in a challenging economy, there will continue to be opportunities to position our institutions wisely. We must weigh quests for national recognition and prestige against the desired student outcomes—how can we provide the best education and move our institutions forward within the limits of our resources?
We can come out of this difficult period stronger, but it will require focus and fundamental change. We need to look forward, past the current economic downturn. Can essential learning outcomes be achieved with different pedagogical approaches without impairing the educational mission? Does the approach need to change, and, if so, how will our institutions adapt while continuing to uphold our mission and pursue our vision? This is a good time to be innovative, to try new approaches—whether in the classroom or beyond.
From my perspective as the president of a highly selective residential liberal arts college, I believe the value of a liberal education will only grow over time. Liberal education opens the door to a life rich in intellectual engagement and provides the best possible preparation for successful and fulfilling lives. When we focus on our educational mission, and achieving the essential student outcomes to which we aspire, we foster an environment that supports students' exploration and self-discovery to the maximum degree. This kind of education requires significant, ongoing investment in people, programs, and infrastructure. And the returns on this investment last a lifetime.
Association of American Colleges and Universities. 2007. College learning for the new global century: A report from the National Leadership Council for
Liberal Education and America's Promise. Washington, DC: Association of American Colleges and Universities.
Leo I. Higdon Jr. is president of Connecticut College.
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