Magazine article University Business

Shaky Ground in Troubled Times: It's a Perplexing Paradigm-That of Fragile American Colleges and Universities

Magazine article University Business

Shaky Ground in Troubled Times: It's a Perplexing Paradigm-That of Fragile American Colleges and Universities

Article excerpt

IT'S THE SUMMER OF 1987, AND the scene is the venerable Tam Bar and Restaurant on Beacon Street in Brookline, Mass. In walk Drs. Martin and Samels for an evening of banter, ideation, and reinvention of higher education.

First thing, Martin brings in a Chronicle snippet announcing another small, single-sex-affiliated, tuition-dependent (yada, yada, yada) institution has bitten the dust. So we think to ourselves, there's something going on here--not yet palpable, but discernable in subtle ways. Sure enough, since that fateful night at the Tam, scores of small private colleges have met their untimely economic demise.

Fast-forward to today. Just about anybody who knows anything about higher ed knows that over the past 20 years private higher education has averaged nearly 6 percent annual tuition increases. Meanwhile, our economy seems to have reached a 3 percent plateau. Clearly, the differential grows significantly as tuition pricing outstrips inflation and for-profit competition infringes with value-added career connections to the workforce.

For its part, the middle class is being squeezed out of private choice and into the public system. Indeed, of the nation's approximately 4,000 institutions, there are close to 1,200 technical, community, and county colleges. In 2007 Americans will increasingly flock to state and community colleges in big numbers, as small, private liberal arts colleges discontinue, merge, or consolidate.

For those who doubt the existence of a merger and consolidation megatrend, take a look at the list of colleges and universities that have closed, merged, or changed names that's maintained by Ray Brown (www.wcmo.edu/wcusers/homepages/staff), director of institutional research at Westminster College (Mo.). Over the past 20 years, more than 200 colleges and universities have dosed or merged.

A correlation analysis of these closures and consolidations indicates a median frequency profile that looks like a small, single-sex, religiously affiliated, tuition-dependent, modest-endowment-ratio, heavy-depreciation, high-default, poor-retention, low-conversion-yield, junior or liberal arts college having underleveraged, nonperforming assets. These challenges create a cloud of deferred maintenance that detracts from curb appeal and that turns off prospective and current students and parents who are left wondering if their institution of choice might meet its end before their appointed commencement day.

A GENTLER MERGER MANIA

When we predicted the higher ed merger mania of the '80s and '90s, we were wrong--well, perhaps not totally wrong. For sure we had the American college merger model figured out. But we had not anticipated in our earlier writings which included our November 1989 article in The Chronicle of Higher Education titled "College Mergers Have Become Creative Effective Means of Achieving Excellence," and our book Merging Colleges For Mutual Growth (Johns Hopkins University Press, 1994)--that college mergers could occur through far less intrusive means: soft, gentle takeovers vertically integrating (and sometimes distinguishing) diverse campus cultures, programs, and market shares.

Over time, we learned that, through strategic alliances (i.e., affiliations, out-sourcing, co-developing, co-branding, and co-programming), institutions could effectuate economies of scale, efficiencies in operation, and non-duplication of program effort. Thus, the contemporary notion that remaining institutions would not so much play out the scenario of "the meek shall inherit the earth," but rather transform into collaborators through mission-complementary partnerships.

FISCALLY FRAGILE

Now, you ask, how does one determine whether an institution is fragile from a fiscal perspective? Inevitably, we observe that when good institutions go bad (or at least financially fail), the answer often lies in a lack of leadership talent, resources, and entrepreneurial zeal. …

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