FINANCIAL SUSTAINABILITY IN US HIGHER EDUCATION

Transformational Strategy in Troubled Times

Marcel J. Dumestre

Financial Sustainability in US Higher Education

Financial Sustainability in US Higher Education

Transformational Strategy in Troubled Times

Marcel   J.   Dumestre

ISBN 978-1-349-94982-3 ISBN 978-1-349-94983-0 (eBook) DOI 10.1057/978-1-349-94983-0

Library of Congress Control Number: 2016953183

© The Editor(s) (if applicable) and The Author(s) 2016 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the pub-lisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made.

Cover illustration: Détail de la Tour Eiffel © nemesis2207/Fotolia.co.uk

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature The registered company is Nature America Inc. New York

Marcel   J.   Dumestre Arvada, Colorado , USA

To Margie

vii

Permissions were appreciatively received from the following publications to quote aspects of the history of US higher education and a substantive analysis of contemporary problems that universities face today.

Lucas, Christopher J. American Higher Education: A History, Second Edition . New York: Palgrave MacMillan, 2006.

Amit Mrig, “The Other Higher-Ed Bubble (The Bubble We Aren’t Talking About),” Academic Impressions Higher Ed Impact Diagnostic , June 6, 2013, http://www.academicimpressions.com/news/other-higher-ed-bubble .

Amit Mrig, Daniel Fusch, & Patrick Cain, “Small But Mighty: 4 Small Colleges Thriving In a Disruptive Environment,” Academic Impressions Higher Ed Impact Diagnostic , June 2015, http://www.academicim-pressions.com/sites/default/fi les/0615-small-colleges-md.pdf .

* * *

Fundamental elements of Part Three: Transformational Strategy came from articles that I wrote for the following publications. I thank them for their authorization to include that material in this book.

“Strategic Thinking For Innovation in Higher Education, Part 1: Thinking About Thinking,” InsideTrack Leadership Series , March 2015, http://www.insidetrack.com/wp-content/uploads/2015/03/marcelj-mumestre-strategicthinkingpart1-oped_-1.pdf?be6563 .

“Strategic Thinking For Innovation in Higher Education, Part 2: Thinking Together,” InsideTrack Leadership Series , March 2015, http://www.

ACKNOWLEDGMENTS

viii ACKNOWLEDGMENTS

insidetrack.com/wp-content/uploads/2015/03/marceljdumestre-stra-tegicthinkingpart2-oped_-1.pdf?be6563 .

“Strategic Thinking For Innovation in Higher Education, Part 3: Strategic Thinking Leadership,” InsideTrack Leadership Series , March 2015, http://www.insidetrack.com/wp-content/uploads/2015/04/marcelj-dumestre-strategicthinkingpart3-oped_-3.pdf?be6563 .

“The Transformational Small College President,” Academic Impressions Higher Ed Impact, December 10, 2015, www.academicimpressions.com/news/transformational-small-college-president .

ix

1 Introduction: An Uncertain Future 1

Part I Fundamental Problems 7

2 How We Got Here 9 US Elementary and Secondary Education Movements 10 US Higher Education Development 12 Strategy Implications 20

3 Foundational Problems 25 The Bennett Hypothesis 26 Cost-Push Infl ation 27 Five Fundamental Problems 28 Strategy Implications 35

4 Financial Sustainability in Troubled Times 41 The Effect of Endowment on Institutional Structure 42 A Liquidity Crisis 43 Institutional Fragility Indicators 44 The Other Higher Education Bubble 46 Strategy Implications 48

CONTENTS

x CONTENTS

Part II Exemplars 53

5 The Adult Learner: An Awakening 55 Disrupting College 56 Understanding the Adult Learner 57 Academic Negotiations in the Traditional College 58 Strategy Implications 67

6 A New College 71 The Power of  Totally Online Learning 72 A New College for Working Adults 77 The Decision to Separate 79 Strategy Implications 81

7 University Transformations 83 Incremental Change 84 Transformational Change 86 Strategy Implications 93

Part III Transformational Strategy 97

8 Strategic Thinking for Transformation 99 Why Strategic Plans Fail 100 Thinking about Thinking 102 Generalized Empirical Method 103 Biases 109 Strategic Thinking for Transformation 111 Planning for Transformational Change 112 Strategy Implications 114

9 Transformational Leadership 117 Types of Management Styles 118 Types of Leadership 120 Transactional Leadership 123

CONTENTS xi

Transformational Leadership 123 Qualities of Transformational Leaders 126 Talking with Transformational Leaders 128 Strategy Implications 131

10 The Case of Bon Sens University 135 The Background 136 The Problem 139 The Question 141

11 Transformational Strategy in Action 143 Strategy Implications 143 Answers 145 Strategic Thinking for Transformation 146 Final Notes 154

12 A Call to Action 157 An Ideal Student Population 159 An Outcomes Orientation 159 Inspiring a  Community of Change 160

Bibliography 163

Index 171

xiii

Table 8.1 Generalized empirical method 104Table 8.2 Authentic strategic planning 108Table 8.3 Strategic thinking for transformation 113Table 9.1 Strategic thinking leadership 125

LIST OF TABLES

1© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_1

CHAPTER 1

Abstract US higher education is in trouble. The cost of a college education is out-pacing the middle class’ ability to pay for it, which places many small-to-mid-sized institutions in a fi nancially at-risk situation. Moving from fragility to fi nancial sustainability requires a fundamental reexamination of assumptions about what a college should look like, how it operates, and whom it serves. Only this type of strategic thinking can result in an institutional transformation that meets the exigencies of troubled times. The primary purpose of this book is to outline a strategic thinking methodology that enables fundamental change, along with an analysis of the type of university leadership that makes it possible.

Keywords College fi nancial instability • University leadership • Strategic thinking • At-risk higher education

Higher education in the USA is in trouble. Media reports are rife with sto-ries about escalating tuition rates. Educational outcomes are being ques-tioned. A liberal arts foundation for the baccalaureate degree—a hallmark of US higher education—is under attack. Increasingly, we hear: “Is college worth it?” Statistics support the increased earning power of college gradu-ates, but debt loads threaten to delay the payoff advantage.

All of these problems are hallmarks of fi nancial unsustainability. Simply put, many US universities are either fi nancially at risk or are moving in that direction because the cost of the traditional model is outpacing the middle-class family’s ability to pay for it. Tuition-dependent universities, in particular, are vulnerable. This book outlines why that is the case.

Introduction: An Uncertain Future

There is hope, however, for at-risk institutions—a lot of hope. US higher education continues to be a unique social institution that not only fuels the economy but also provides civic and cultural values that shape the fabric of who we are as a people. But moving from at-risk status to fi nancial sustainability requires a fundamental reexamination of assump-tions about what a college should look like, how it operates, and whom it serves. Only this type of strategic thinking can result in an institutional transformation that meets the exigencies of troubled times.

Because universities are complex organizations, there are many obsta-cles that prevent fundamental change. Three endemic problems create organizational inertia in higher education.

1. The Intransigence of Tradition . Despite the fi nancial unsustainabil-ity of many institutions, there tends to be unwavering dedication to the primary cause of escalating costs—the traditional university model. The traditional college experience is still the gold standard that fewer and fewer people can afford.

2. Insuffi cient Reform . Institutional reforms have made peripheral changes in university operations, but those adjustments have not addressed fundamental problems that cause fi nancial instability.

3. Organizational Blindness . In many at-risk universities, there tends to be self-imposed institutional blindness—a form of scotosis —in which fundamental problems are either ignored or dismissed as being temporary.

Colleges and universities have changed a lot over the past three centu-ries, but fundamental assumptions about what constitutes the essence of quality higher education remains unchanged. There is hope, however, for fi nancially vulnerable institutions if the following issues are addressed.

1. Critical Realism . A critical evaluation of the current socio-economic environment that threatens fi nancial sustainability will not change for the better in the foreseeable future. The creation of realistic alternatives to the traditional university organizational structure is necessary for the survival of many institutions.

2. Value Preservation . Transforming the current model of higher edu-cation into a different type of structure does not equate with aban-doning the intellectual values and outcomes of a university education. Alternatives to the traditional college experience must provide

2 M.J. DUMESTRE

educational outcomes that are highly valued by students and society in general.

3. Strategic Action . Institutional transformation comes about only as the result of successful strategic planning; and effective planning is dependent upon authentic organizational strategic thinking. Substantive change requires a comprehensive assessment of the cur-rent situation and an unbiased evaluation of reasonable alternatives that lead to responsible action. Avoidance of this type of critical self-evaluation is likely to leave an institution mired in inaction.

If these realities are addressed in a way that builds upon an institution’s mission and values, there is the chance of creating a transformational moment. But this type of substantive change takes courageous leadership.

A primary purpose of this book is to outline a strategic thinking pro-cess that enables transformational change. This methodology is dependent upon a thorough assessment of the current socio-economic environment as well as a clear-eyed evaluation of a university’s fi nances, internal struc-ture, and operation.

As comprehensive as this approach may be, not every aspect of uni-versity life is included in this book’s analysis. Tactical issues like inter-scholastic athletic programming, fund-raising, specifi c approaches for information technology (IT) support, optimal campus design, and myriad other micro-concerns are not examined in detail. Likewise, I do not focus on how to fi ne-tune fi nancial ratios, income statements, and balance sheets in order to better position a university’s valuation. This book emphasizes strategic analysis of an institution’s viability as a whole and offers ways to enhance it.

* * *

Part I: Fundamental Problems (Chaps. 2 , 3 , and 4 ) explores problems in US higher education from three viewpoints: historical perspectives, deep contemporary problems, and an analysis of the traditional univer-sity structure. Too often attempts at higher education reform focus on micro-strategies that fi x the exigencies of the moment. It is important to use an historical perspective to sort out how institutions came into being, fl ourished, and now, fi nd themselves in trouble. There is no retreat from historical consciousness, but it takes courage to act on it.

Chapter 2 , How We Got Here, contextualizes contemporary problems in higher education by presenting key developments from the Colonial

INTRODUCTION: AN UNCERTAIN FUTURE 3

Period through the latter part of the twentieth century. This brief review provides insight into the origins of how and why today’s traditional uni-versity structure has become anachronistic. The review highlights the role government has played in making US higher education a worldwide archetype and the negative impact that current funding cuts are having on universities and their students.

Chapter 3 , Foundational Problems, explores economic problems that plague present-day universities. Financial instability is simply a barome-ter of overall institutional health. Universities fi nd themselves in trouble because of deep systemic issues that question their very fabric and pur-pose. It is an inescapable fact that higher education has moved from the status of unique social institution to that of an industry.

Chapter 4 , Financial Sustainability in Troubled Times, examines the fi nancial situation of highly endowed universities as contrasted with inad-equately fi nanced institutions. An at-risk situation exists when an insti-tution’s self-understanding is intimately connected with the traditional university model, but without the funding to support it because of a rapidly changing socio-economic environment. Indicators of economic fragility are explored to help institutions recognize their probability of becoming fi nancially unsustainable.

Part II: Exemplars (Chaps. 5 , 6 , and 7 ), outlines how some universities increased enrollment through their awakening to a substantial new stu-dent constituency that previously had been overlooked—part-time adult learners. Meeting the needs of these students saved some not-for-profi t institutions from fi nancial peril. The discovery of the size of the adult learner market also created the for-profi t higher education industry.

Chapter 5 , The Adult Learner: An Awakening, reveals the story of how adult learners disrupted the traditional university way of operating, put-ting into question almost universal assumptions about the process and outcomes of higher education. The popularity of andragogy (adult learn-ing theory) in the 1970s gave rise to innovative ways of educating and set the stage for the emergence of new types of campuses, including the fi rst steps into online learning.

Chapter 6 , A New College, chronicles the development of colleges primarily devoted to adult learners. This change in university structure furthered the andragogical movement and supported the creation of fully online degree programs. For-Profi t regionally accredited universities emerged during this same period, proving that a university can accommodate thousands of working adult learners in cost-effective ways. This for-profi t

4 M.J. DUMESTRE

university disruptive innovation would encounter serious operational prob-lems when these institutions became publically traded because of stock-holder expectations for annual increases in profi ts. Similarly, not-for- profi t universities expected their colleges dedicated to non-traditional learners to fund defi cits caused by their ineffi cient traditional colleges. These successful adult-oriented colleges tried to separate from the traditional university struc-ture. But only a handful of them were able go their own way.

Chapter 7 , University Transformations, drives home the point that the source of fi nancial unsustainability often is a traditional undergraduate col-lege structure and operation. Examples of ways in which some colleges reinvented themselves are featured. These fundamental changes came about only after overcoming signifi cant confl icts within each institution.

Part III: Transformational Strategy (Chaps. 8 , 9 , 10 , 11 , and 12 ), emphasizes the need for strategic planning rather than a process of simply adopting models that have been successful at other institutions. Strategic thinking as a transformational methodology that underlies strategic plan-ning is not only the primary theme of Part III, but also a central message of the book.

Chapter 8 , Strategic Thinking for Transformation, introduces philoso-pher Bernard Lonergan’s Generalized Empirical Method as the foundation of reliable strategic thinking. Lonergan’s experientially-based epistemol-ogy is ideal for assessing the current situation and developing unique solu-tions that make sense for at-risk universities. The overall objective of the methodology is innovation that constitutes a transformative moment for these institutions.

Chapter 9 , Transformational Leadership in Higher Education, pres-ents the origins of different management styles and leadership theories that currently exist in higher education. Connections are made between incremental change and transactional leadership as differentiated from transformational change and transformational leadership. Traits of the transformational leader are discussed as necessary elements of the strategic change process.

Chapter 10 , The Case of Bon Sens University, presents a realistic sce-nario of a fi ctional university that fi nds itself in a fi nancially unsustain-able situation. This narrative is a composite of events I have witnessed at many institutions over the past 30 years as well as what colleagues have told me about their own personal struggles and successes. Administrators and faculty members will readily recognize the dynamics of organizational dysfunction in the case study. An interesting wrinkle is that, according

INTRODUCTION: AN UNCERTAIN FUTURE 5

to current thinking, Bon Sens made all of the right changes by adopting online graduate programs and opening extension campuses. Yet, it still fi nds itself in a downward fi nancial spiral.

Chapter 11 , Transformational Strategy in Action, outlines the details of a strategic planning process that addresses the Bon Sens case study. This chapter demonstrates how strategic thinking can concretely be used to create a transformational planning process. A signifi cant aspect of the methodology used to address Bon Sens’ problems is its comprehensive-ness. All too often, solutions for fi nancially at-risk institutions concentrate on cost cutting and streamlining operational procedures at the periphery of root causes. Every aspect of this university’s structure and operation are examined.

Chapter 12 , A Call to Action, focuses on how institutions can engage in transformational change. It is easy to conceptualize a change process, but implementing it is quite another matter. Institutional focus is the primary theme of this chapter. The identifi cation of a core student population and the educational outcomes they need give direction to institutional change. But in order to carry out this daunting organizational task, universities need to have a sense of community that is grounded in institutional mis-sion. When a president and senior leaders are viewed fi rst and foremost as community leaders, and not simply as administrators, transformational change can not only occur, but can also happen expeditiously.

* * *

The USA does not have too many institutions of higher education. It has too many colleges and universities that continue to operate with a self-understanding that fi ts the elite university model. The strategic think-ing methodology that underlies authentic strategic planning is outlined in detail in order to enable a different model to emerge. It would be most unfortunate if a signifi cant percentage of small-to-mid-sized institu-tions drop out of existence due to unrefl ective planning and operation. As we will see in Chap. 2 , a uniquely American strength is the depth and breadth of a higher education system that meets the needs of a very diverse population.

6 M.J. DUMESTRE

PART I

Fundamental Problems

9© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_2

CHAPTER 2

Abstract This chapter contextualizes contemporary problems in higher education by presenting key developments from the Colonial Period through the latter part of the twentieth century. This brief review provides insight into the origins of how and why today’s traditional university structure has become anachronistic. The way in which the traditional college model developed over time is explored, along with the many disputes about what exactly should be the purpose and outcomes of a college education. For-profi t regionally accredited universities amounted to a disruptive innovation that challenges the traditional college model. Successes and problems of the for-profi t uni-versity are explored. The review highlights the role government has played in making US higher education a worldwide archetype.

Keywords US college archetype • For-profi t universities • Anachronistic university structure • College outcomes • Government funding of higher education

This is a critical moment in US history. Efforts to increase college gradu-ation rates are tied not so much to economic prosperity, but to economic necessity. Technology transformations of the late twentieth century helped create what is now alternately described as an information/creative/inno-vation/global economy. Most segments, including manufacturing and skilled trades, utilize sophisticated techniques and strategies with inex-tricable global connections. If US higher education does not meet the challenge of preparing students for this new world, the chances of eco-nomic leadership will eventually fade.

How We Got Here

In order to have college graduates, you obviously need colleges; but many small-to-mid-sized colleges and universities are in danger of closing within the next few decades. 1 This book outlines reasons why and proposes ways of preventing that fate from occurring. When a college closes, it almost always is because of its own failings. All colleges and universities face similar challenges. Those that adjust their structure, operation, and fi nances to meet the needs of a new environment will not fail. Universities that operate as usual, ignoring changing environments, will drop out of existence.

In order to better appreciate why some institutions are change averse, even when under fi nancial stress, it is necessary to understand the origins and fl ow of education in the USA. A brief review of historical develop-ments provides important perspectives.

US ELEMENTARY AND SECONDARY EDUCATION MOVEMENTS

Higher education depends upon feeder systems that prepare students for the academy. Two successful education movements built reasonably suc-cessful preparatory institutions over the past centuries. These movements were driven by both economic and cultural forces.

The “ common school movement ” of the mid-nineteenth century estab-lished tuition-free public elementary schools. 2 Previously, education was a mixture of apprenticeship, tutoring, and intermittent attempts at basic literacy. There also was a version of a more advanced schooling for those who could pay. The elite in society had their children tutored or educated abroad. Local schools tended to be of rather poor quality (especially in rural areas), along with some church-related free schools providing mini-mal education, consisting of a few grade levels for the poor and freed slaves.

The common school movement took root only after decades of politi-cal and religious debate. For the fi rst time, local property taxation was allowed to fund public schools. The Industrial Revolution advanced the need for more educated workers. In the North and Mid-West, especially, public schools helped educate and enculturate immigrant populations entering small towns and cities.

The movement also was grounded in the need to teach American common values that were deemed necessary for a democratic republic. Catholics and others, however, claimed that those values were in fact tradi-tional Protestant values of the dominant culture. As a result, better- quality church-related private school movements gained momentum and continue

10 M.J. DUMESTRE

today, albeit now for different reasons. Nevertheless, the common school movement took root and was a beginning of the realization of Jefferson’s dream of an enlightening and educated citizenry.

A remarkable “ high school movement ” began just after the begin-ning of the twentieth century. From 1910 to 1940, the graduation rate of 17-year-olds increased from 9% to 50%. 3 An amazing accomplishment: and the trend continued beyond World War II with the graduation rate level-ing off at about 75% in the early 1960s. For primarily political and social reasons, it remained the same or slightly decreased until fairly recently. The 1983 “ A Nation At Risk ” report stressed the fl attened graduation rate and problems with US education standings in a global context. 4

Due to highlighted attention and multiple initiatives, the high school graduation rate surpassed the 80% mark in 2013. This achievement was due primarily to gains in minority student completion rates, but this increase can hardly be celebrated. It means that in the twenty-fi rst century at least one in fi ve young people are not graduating with a basic education necessary for sustainable employment. Compounding the problem is the fact that some minority populations still graduate from high school at a rate just above 65%. 5

Statistics indicate that people without a high school diploma will earn 25% less in lifetime earnings than a high school graduate, over 50% less than someone with an associate’s degree, and over 60% less than that of a college graduate. 6 Moreover, high school dropouts forego social, civic, and critical thinking skills when they leave school.

One of the more recent and promising programs focusing on increas-ing the high school graduation rate is America ’ s Promise Alliance . 7 Led by former Secretary of State Colin Powell and his wife Alma, the now Chair of the Board of Directors, the organization grew out of the 1997 Presidents’ Summit for America’s Future, which was sponsored by all living presidents (Clinton, Bush, Carter, and Ford) with Nancy Reagan representing her husband. The Alliance gathered a powerful and diverse group of partners who committed themselves to raising the high school graduation rate to 90% by 2020, thereby making the US the world leader in high school grad-uation. A signifi cant part of their strategy is to focus on high schools around the country with the lowest graduation rates, termed “dropout factories,” which account for half of all dropouts. The Alliance’s successful initiatives help make the ambition of actually reaching their goal a plausible reality.

As elementary and secondary school systems matured, educational quality reform movements took root. A most notable effort is the 1965 Elementary and Secondary Education Act (ESEA) . 8 Congress, in the

HOW WE GOT HERE 11

President Johnson administration, recognized the problem of inadequate school funding in the poorer districts of many states. The act authorized Federal funds and programs to assist states in remediation efforts. The act has been reauthorized seven times with a signifi cant iteration being the No Child Left Behind Act of 2001 (NCLBA). 9

Assessment and accountability systems have been part of the ESEA since its beginning, but the NCLBA substantially increased the scope and breadth of the standards. Standardized high stakes testing and teacher performance measures are but a few of the intensely debated parts of the act. While methods of reform may be controversial, the intent to improve elementary and secondary education is unquestioned.

A recent attempt at reform is the Common Core State Standards Initiative proposed by the National Governors Association Center for Best Practices and the Council of Chief State School Offi cers. 10 The standards focus primarily on English Language Arts and Mathematics to insure bet-ter preparation in schools across the country for college and workforce training programs.

The achievements of US elementary and secondary education provided unprecedented numbers of students prepared for higher education. No doubt, graduates of poorer school systems are still not as ready for college as those from more affl uent and supported districts. And political entan-glements have held other school systems behind as well. Overall, there remains a desire for continued improvement in the quality of elementary and secondary education.

The trajectory of US higher education from the Colonial Period to the present follows a different pattern of development and achievement. US higher education’s ancestry dates back to antiquity. Colonial colleges were founded over 100 years before the Declaration of Independence with European universities and their ancient antecedents serving as models. Higher education in this new land would evolve as the nascent United States of America came into being.

US HIGHER EDUCATION DEVELOPMENT In order to appreciate the nostalgia and dedication that alumni(ae) of col-leges and universities exhibit today, it is necessary to understand the evo-lution of higher education in the USA. This history can be told in many ways, but four developments particularly shed light on how the current situation came into being.

12 M.J. DUMESTRE

The Development of Colleges into Universities

Harvard and eight other colleges were founded in the Colonial Period. 11 Initially, students were not necessarily the elite of society. The fi rst settlers wanted to insure the education of a local clergy to lead their churches in this new land. And the Great Awakening accelerated the perceived need for an education that countered the European Enlightenment thought of the period.

As the cost of operating colleges increased, the student body became more affl uent and elitist. Colleges were essentially private, requiring self- support through tuition and philanthropy. As colonial colleges matured, the curriculum tended to follow the European classical style of learn-ing, concentrating on a unifi ed body of knowledge that educated not only clergy but also civic leaders, physicians, lawyers, and others for the learned professions. Students were required to master the Old and New Testaments, ancient languages, rhetoric, logic, mathematics, natural and moral philosophy, and other dictates of classical thought.

True to its New World sensibilities, colonial colleges—with few excep-tions—did not require a confession of faith to a particular religious denomination. Not only did Enlightenment thought increasingly make its way into the curriculum, but so did “secular learning” such as surveying, navigation, and other more practical pursuits. 12

In essence, these colonial colleges were professional schools grounded in the liberal arts. But even more professionally oriented courses started to appear toward the end of the eighteenth century. Over time, differ-ent types of colleges were formed, some actually with an anti-intellectual (denominational) bent, and others with a primarily state or city orienta-tion. As historian Christopher J. Lucas notes, “At the time of the American Revolution there were nine colleges; the total had jumped to 250 by the time of the Civil War.” 13

Along with the proliferation of colleges came emerging disagreements about purpose and structure. Should the primary purpose be the classical education of the societal elite; or should higher education be democra-tized, opening admissions for all who are prepared; or should it be for more practical pursuits (agriculture, commerce, and the emerging sci-ences)? Toward the end of the nineteenth century, calls for the integration or even replacement of classical learning in favor of practical professions were becoming more pronounced. A remarkable attack on the traditional curriculum came from Andrew Carnegie in 1889 when he complained

HOW WE GOT HERE 13

about college students wasting time on learning dead inert languages and ancient history instead of preparing to take on the emerging challenges of business and industry. 14

These types of critiques were gaining momentum, but the call for curric-ular reform was hardly uniform. Moving from a classical mode of learning was unthinkable for many faculty and administrators. The sheer number of colleges dictated a very mixed sense of what constituted higher learning.

Emerging differences about institutional organization and purpose added to the debate about the structure of higher education. Should there be a difference between a college and a university? If so, what is it? Lucas identifi es alternative views that were being promulgated. 15 They ranged from the familiar undergraduate liberal arts college with instruction in the professions, to a primarily post-collegiate institution, to a collection of institutions dedicated to different disciplines.

None of the options became a precise standard. The “university” des-ignation now carries the connotation of a large institution with graduate programs and an intensive research agenda. The “college” title most often means a concentration on baccalaureate degrees with a liberal arts orienta-tion. Today, there are many institutions that could fi t either description, including many small non-research-intensive institutions that call them-selves a university. Nonetheless, the university title continues to convey the perception of gravitas.

Toward the turn of the twentieth century, universities started to include more utilitarian disciplines as part of their curricula offerings along with the adoption of a German model of graduate education. Concurrently, many small colleges held on to a seminary, classical model of education. Amid the turmoil about identity, quite a few small colleges closed, each having fewer than 100 students. By the fi rst decade of the twentieth century, however, total higher education enrollment went from about 62,000 in the mid-1870s to over 350,000 in 1910. 16

Federal and State Support

The Federal Government, in many ways, has been a primary supporter of higher education. The Morrill Acts of 1862 and 1890 enabled “Land Grant” state institutions to be founded. The initial purpose of these insti-tutions was to teach the agricultural sciences, and included a working farm to help support them.

14 M.J. DUMESTRE

Much to the surprise of lawmakers, very few people enrolled. Agricultural advances outside of higher education were being made, and many farmers’ sons were more interested in moving to the city than stay-ing on the farm. Enrollments increased only when professional fi elds were added to Land Grant university curricula. To this day, Land Grant institu-tions offer agricultural sciences, but they have become the pride of most states by becoming research-intensive institutions offering a wide spec-trum of degree programs.

Just as Land Grant universities provided access for rural Americans, municipal colleges and universities cropped up in urban centers to provide a variety of general higher education majors and specialized training. A plethora of privately endowed small colleges, including many faith-based institutions, also were founded in the latter part of the nineteenth cen-tury. 17 It would not be until after the World War II that enrollments in all of these institutions would increase substantially.

Expansion and Entrenchment

Federal funding was infused into higher education during World War II and particularly in the post-war period. A signifi cant amount of fed-eral funds were devoted to grants and subsidies for university research projects deemed to be of benefi t to the country. Most notable was the passage of the 1944 Servicemen’s Readjustment Act (the GI Bill) and the 1952 Public Law 550 provision, which devoted billions of dol-lars for post- secondary tuition benefi ts to millions of veterans. College enrollments skyrocketed. Other post-war federal programs included the following:

• The 1944 Surplus Property Act provided valuable war surplus equip-ment, supplies, and buildings to universities;

• Congressionally authorized governmental loans during the 1950s were provided for buildings;

• Throughout the 1950s, a dozen or more governmental agencies were spending around $150 million annually on research conducted in universities;

• The 1963 Facilities Expansion Act along with other federal programs spent substantial sums on the construction of university residence halls, classrooms, laboratories, and libraries;

HOW WE GOT HERE 15

• The 1965 Higher Education Act funded university research and community educational outreach programs to create solutions for social problems such as health care, housing, and systemic poverty;

• The Higher Education Act of 1972 provided teaching fellowships, tuition grants, and low-interest loans for students. 18

These programs refl ect the post-war Federal Government belief in the value of higher education research. The Cold War and the Space Race were subtexts to a greater sense of university research’s place in ensuring the USA’s technological and economic future. But research was just part of the belief in the power of democratized higher education to shape an enlightened culture.

Federally infused resources coupled with a massive infl ux of students provided funds for the creation of what now constitutes the constella-tion of colleges and universities in the USA. These high post-war enroll-ments continued for decades because of the Baby Boom generation that populated college campuses in great numbers throughout the 1960s and beyond.

Substantial increases in funding and support helped shape the now- familiar university structure of today. Differences in higher education institutional type, size, structure, and other profi les gave rise to the 1973 Carnegie classifi cation system . Six revisions have been forthcoming since then. 19

As indicated above, the now familiar landscape of US colleges and uni-versities emerged in the last half of the twentieth century. Vibrant junior (community) college systems provide general education and vocational training. Liberal arts colleges refl ect traditions that resemble the late-nineteenth- century college. Higher education now includes a vast array of structures and curricula. Choice abounds for potential students. As of 2011, over 4500 degree-granting institutions were operating, of which about 1700 offered associate degrees and 2800 offered baccalaureate degrees or higher. 20

Despite the diversity in higher education, there are commonalities that have become entrenched into the very identity of these institutions. And they are driven as much by public expectation as they are from within the institutions themselves. The term “university” evokes a common sense of what higher education looks like to the average person. This began to change in the 1970s.

16 M.J. DUMESTRE

Disruption

Post-secondary proprietary (for-profi t) business schools and others dedi-cated to workforce training have existed for centuries. Other not-for-profi t specialized post-secondary training has a long tradition as well. These alternatives to university education are most appropriate for those who seek employment in the skilled trades and other positions that do not require a bachelor’s degree. But in the mid-1970s, the post-secondary landscape changed considerably with the appearance of regionally accred-ited for-profi t universities offering baccalaureate and graduate degrees.

The effect of the founding of the for-profi t University of Phoenix in 1976 has been profound. 21 Phoenix disrupted higher education by focus-ing on arguably the least desirable student segment—working adults attending part-time. This is a classic example of what Harvard busi-ness professor Clayton Christensen terms as “ disruptive innovation .” According to Christensen, disruptive innovation is “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.” 22 Examples include personal computers replac-ing mainframe computers, cell phones replacing fi xed line phones, and discount retailers replacing full-service department stores.

Few—if any—universities in the 1970s would have viewed a focus on the part-time adult learner as enhancing their institution’s reputation. This type of student would be considered at the “bottom of the market.” The “top of the market” would be an 18-year-old full-time student with a high Scholastic Assessment Test (SAT) score and the ability to afford a hefty tuition bill.

The relatively few students enrolled in the University of Phoenix in the mid-1970s have grown to a student population of about 300,000. According to the National Center for Education Statistics (NCES), in 2011, the University of Phoenix was the largest university in the USA, by far. 23

True to a “disruptive innovation” strategy, Phoenix ignored the tradi-tional university model and set itself up entirely according to the needs of the adult student. Student admission policies emphasized access as opposed to exclusivity. There is not a mega home campus with sports teams and all of the amenities of the traditional college campus. Adult students do not value those services. They do not expect college to be a coming-of-age experience. Most of them are working full-time (or sub-stantially part-time) and have families.

HOW WE GOT HERE 17

Phoenix leased space for their campuses in offi ce buildings close to where their students live and work. Team-based learning is the primary teaching modality. The principles of andragogy (learner-focused methodologies) were embraced, including accelerated six-week and eight-week terms. Centralized curriculum development enables the almost exclusive use of adjunct part-time faculty to teach courses. Online and evening courses accommodate working adult schedules. A robust online library meets the needs of students studying at a distance. Signifi cant resources are put into advertising, promotion, and recruitment. And there is not a research fac-ulty that relies upon foundation and government grant funding.

The University of Phoenix was an early adopter of online education. It now has more than twice the number of students in online programs than in its on-campus programs. The online delivery system increased its ability to reach students nearly anywhere in the country, and beyond.

One of the most signifi cant aspects of the Phoenix model is its regional accreditation. Its ability to gain accreditation gives credibility to its educa-tional programs. Phoenix’s regional regulatory agency, the Higher Learning Commission of the North Central Association of Colleges and Schools , is the same one that accredits well-established, not-for-profi t universities. All of this was created to help students who used to be an afterthought or simply viewed as social outreach by many traditional universities.

Other for-profi t universities emerged in the late twentieth century. Embracing the Phoenix model, private for-profi t universities soon became publically traded education holding companies. Regionally accredited for- profi t higher education emerged as a lucrative industry and a darling of Wall Street .

Operational problems of these higher education disrupters have become apparent over the past few decades. Because student complaints became so frequent and serious, Senator Tom Harkin , Chairman of the Senate Committee on Health, Education, Labor, and Pensions sponsored a two-year audit of 30 for-profi t universities and issued a report in 2012, titled For Profi t Higher Education : The Failure to Safeguard the Federal Investment and Ensure Student Success . 24 The executive summary includes the following fi ndings:

1. For-profi t universities operate like for-profi t businesses of most any type, which includes the need to generate net profi t for owners and stockholders. There can be an apparent confl ict between net profi t and high-quality education objectives.

18 M.J. DUMESTRE

(a) About 76% of students attending for-profi t universities were enrolled in one of the 15 publically traded universities. There is Wall Street pressure on these types of universities to continually increase annual net profi ts. This differs from a long tradition of small, privately held, for-profi t post-secondary institutions.

(b) Approximately 86% of total revenue earned by the 15 publically traded institutions came from federal taxpayer funds.

(c) The annual chief executive offi cer (CEO) compensation of the publically traded institutions averaged a little over $7 million each.

2. Operation of for-profi t universities can be seen as more focused on generating new enrollments (starts), as opposed to increasing edu-cational quality, student satisfaction, and high graduation rates.

(a) About 23% of total revenue was spent on marketing, advertis-ing, recruiting, and admissions; 19% was devoted to pre-tax profi t; and only about 17% was spent on instruction.

(b) The Government Accountability Offi ce (GAO) investigations uncovered misleading tactics used by recruiters to attract stu-dents as a result of high pressure to continually produce new “starts,” as opposed to attracting those who are most likely to be successful graduates.

(c) Over 50% of students who enrolled at the beginning of the study dropped out without a degree or certifi cate after about four months (a median measurement).

(d) Undercover GAO fi ndings and a review of student complaints suggest that some institutions have curricula that are not challenging and that academic integrity policies are not enforced.

(e) Having 80%–90% of faculty as part-time in very large institu-tions calls into question the faculty’s ability to exercise academic independence and interest in the quality of the institution.

3. The high dropout rate of for-profi t institutions causes student debt default rates to increase and creates an onerous fi nancial burden.

(a) The study found that 96% of for-profi t university students took out loans to fi nance their education, compared to 13% at 2-year public colleges, 48% at 4-year publics, and 57% at private not-for- profi t universities.

HOW WE GOT HERE 19

(b) About 57% of bachelor’s degree graduates who have $30,000 or more in student loan debt attended for-profi t universities, as opposed to 25% in private not-for-profi ts, and 12% in public universities.

(c) Even though only about 13% of all US students attend for-profi t institutions, they account for 47% of federal student loan defaults. Such high default rates have to do with a large percentage of stu-dents who get loans but dropout before completing their degree.

These statistics and observations are only a small part of the Senate Committee’s report. It, no doubt, is a rebuke of for-profi t, post-secondary institutions that are publically traded.

STRATEGY IMPLICATIONS A brief review of education movements in the USA and the development of higher education in particular inform how contemporary fi nancial sus-tainability issues emerged. These historical antecedents of current trends inform how these diffi culties can be remediated.

1. Elementary and Secondary Education Feeder Systems . The remark-able education movements from the Colonial Era into the twentieth century provided US higher education with a large pool of students to choose from for admission to colleges and universities. The egali-tarian spirit of the American people provided multiple types of pre-paratory institutions for several forms of post-secondary education that fi t their needs and aspirations.

The quality of high school preparation for college is questionable because the value of high school education can vary greatly. Graduates of well-fi nanced, politically stable high school districts tend to be well- prepared. Currently, however, about 50% of fi rst-year college students need to take remedial reading or math courses, with the highest percentage enrolled in community colleges. The cost of remedial courses to states, institutions, and students is esti-mated to be over $2.5 million each year. 25 There is still work to be done with higher education feeder schools.

2. Government Investment. The US higher education movements of the ninetieth and twentieth centuries were the result of government- supported economic and social movements. In the mid-twentieth

20 M.J. DUMESTRE

century, the Federal Government (Congress and the Executive Branch) and state legislatures made tremendous investments in post-secondary education through the GI Bill and other large pro-grams that generated a boom in university enrollments and infra-structure. Had these investments not been made, it is unlikely we would have the diversity and quality of higher education that we enjoy today. It appears that this level of governmental investment has come to an end. This lack of fi nancial support has obvious nega-tive implications for both public and private institutions.

3. Curricular Development . The traditional college structure of the Colonial Period was modeled after European universities, but with continued curricular and structural development from the seven-teenth century through the twentieth century. A unifi ed theory of higher education grounded in the quadrivium to prepare ministers and others for the learned professions evolved into an accommoda-tion for the inclusion of practical, commercial, and technical pro-grams of study. Over time, the current US higher education curricular model emerged (two years of general education plus two years of concentration in a major). Post-secondary technical, profes-sional colleges, and training programs also proliferated according to changing economic needs. Contemporary efforts to provide alterna-tives to a college education (Massive Open Online Courses (MOOCS), badges, certifi cations, and other credentials) have these historical predecessors.

4. The Rise of the University . Disputes over the nature of higher edu-cation led to the current multifaceted US system. Three types of institutions emerged: publically assisted, private not-for-profi t, and private for-profi t. Carnegie classifi cations further divide higher edu-cation into different categories. The research-intensive university became the most prestigious institution, along with elite private liberal arts colleges. In different ways, both of these types of institu-tions have become the gold standard of higher education. The overwhelming majority of higher education falls into other Carnegie categories. The temptation is to emulate the elite, prestigious model without the resources to fi nancially sustain its operation.

5. From Common Good to Individual Good . As noted above, major advances in US education, at all levels, were supported by the socio- economic investments of State and Federal Government. The cur-rent reality is that fi nancing higher education is increasingly viewed

HOW WE GOT HERE 21

as the responsibility of individuals and their families, not the govern-ment. While tuition assistance programs are substantial, federal and state legislators increasingly view investment in education with sus-picion. Irregularities and problems in for-profi t universities, in par-ticular, fuel feelings of mistrust. Likewise, legislators complain about ineffi cient operation and duplication of programming in state insti-tutions. Educational consumers are caught in the middle of the funding dispute.

6. One Size Does Not Fit All. The rise of for-profi t institutions had a signifi cant impact on higher education in the latter part of the twenti-eth century, and it continues today. Their disruptive innovation has had positive and negative effects. On the positive side, they have shown that tailoring education according to the specifi c needs of student con-stituencies (like the part-time working adult) can be highly successful. A one-size-fi ts-all attitude negates possibilities of differentiating a uni-versity from its competition. And meeting the needs of students does not automatically mean a diminishment of academic rigor. Negatively, there is suspicion about the ability of publically traded for-profi t uni-versities to avoid stockholder pressure to continually increase profi ts at the expense of providing high-quality education.

* * *

These observations provide a context for how US higher education evolved over the past three centuries. This rich tradition is part of the story of the development of the USA. If higher education is an important ingredient to the advancement of the nation, why is it that so many institutions fi nd themselves in trouble? The answer to this question is a primary thrust of this book. The next chapter outlines the more proximate roots of prob-lems that higher education faces today.

NOTES 1. The terms “college” and “university” are used interchangeably to refer to

institutions of higher education. 2. Carl F. Kaestle, “Victory of the Common School Movement: A Turning

Point in American School History,” Historian On America : Decisions That Made a Difference , (April 3, 2008): 22–29, accessed February 17, 2014, http://iipdigital.usembassy.gov/st/english/publication/2008/04/20080423212501eaifas0.8516133.html#axzz2tiZyzYf4

22 M.J. DUMESTRE

3. Claudia Goldin and Lawrence F. Katz, “Why The United States Led In Education: Lessons From Secondary School Expansion, 1910 To 1940,” National Bureau of Economic Research Working Paper Series , Working Paper 6144 (August 1997), accessed February 9, 2014, http://www.nber.org/papers/w6144.pdf?new_window=1

4. “A Nation At Risk: The Imperative For Educational Reform,” The National Commission on Excellence in Education (April 1983), accessed March 1, 2014, http://www2.ed.gov/pubs/NatAtRisk/index.html

5. “Building A Grad Nation Report,” America ’ s Promise Alliance , accessed February 8, 2014, http://www.americaspromise.org/Our- Work/Grad-Nation/Building-a-Grad-Nation.aspx

6. Anthony P. Carnevale, Stephen J. Rose, and Ban Cheah, “The College Payoff: Education, Occupations, Lifetime Earnings,” The Georgetown University Center on Education and the Workforce , accessed February 17, 2014. http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/collegepayoff.pdf

7. See America ’ s Promise Alliance website, accessed February 22, 2014, http://www.americaspromise.org/

8. “New America Foundation Federal Education Reform Project: Background and Analysis,” (July 1, 2013), The New America Foundation , accessed February 5, 2014, http://febp.newamerica.net/background- analysis/no-child-left-behind-overview

9. The No Child Left Behind Act of 2001 , U.S. House. 107th Congress, 1st Session. H.R. 1, accessed http://www2.ed.gov/nclb/landing.jhtml

10. See Common Core State Standards Initiative, accessed May 20, 2014, http://www.corestandards.org/

11. This section on U.S. higher education is informed by the work of Christopher J.  Lucas, American Higher Education : A History , Second Edition . (New York: Palgrave Macmillan, 2006).

12. Lucas, p. 110. 13. Lucas, p. 117. 14. Lucas, pp. 150–151. 15. Lucas, p. 150. 16. Lucas, p. 146. 17. Lucas, pp. 159–160. 18. Lucas, pp. 252–254. 19. See Carnegie Foundation for the Advancement of Teaching, accessed July

10, 2014 http://www.carnegiefoundation.org 20. See The National Center for Education Statistics , Fast Facts , accessed July

10, 2014 http://nces.ed.gov/fastfacts/display.asp?id=84 21. See the University of Phoenix website, accessed February 17, 2016 http://

www.phoenix.edu/

HOW WE GOT HERE 23

22. For an explanation of Disruptive Innovation see the Clayton Christensen website at http://www.claytonchristensen.com/key- concepts/ , accessed November 5, 2014.

23. Institute of Education Sciences, National Center for Education Statistics , accessed July 23, 2014 http://nces.ed.gov/fastfacts/display.asp?id=74

24. For Profi t Higher Education : The Failure to Safeguard the Federal Investment and Ensure Student Success , prepared by the U.S. Senate Committee on Health, Education, Labor, and Pensions, July 30, 2012, accessed November 5, 2014 through the U.S. Government Printing Offi ce website http://www.gpo.gov/fdsys/

25. “Hot Topics in Higher Education: Reforming Remedial Education,” National Conference of State Legislatures, accessed February 10, 2015 http://www.ncsl.org/research/education/improving-college-completion-reforming-remedial.aspx#FF

24 M.J. DUMESTRE

25© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_3

CHAPTER 3

Abstract This chapter explores economic problems that plague contemporary uni-versities. The traditional university model that emerged in the USA over the past half-century depended upon governmental assistance and philanthropy to make it affordable. A middle-class lifestyle (or better) was considered more assured by a college degree. Because of cost-push infl ation and attacks on ineffi cient structures and opera-tion, like “The Bennett Hypothesis,” the traditional university model is now showing cracks that need repair. It is an inescapable fact that higher education has moved from the status of unique social institution to that of an industry. Other fundamental problems include: waning public confi dence, increasing student debt load, shrinking state fi nancial support, regulatory compliance, and escalating costs of the traditional college model.

Keywords Student debt load • Shrinking state fi nancial support • Bennett Hypothesis • US university problems

US universities historically have depended upon governmental assistance for fi scal viability. While federal fi nancial aid now amounts to about $240 billion annually, students and their families are still struggling to pay for college. 1 A politically conservative articulation of the reason for continu-ously increasing tuition prices came from William Bennett in 1987 when he was Secretary of Education. He wrote a New York Times article titled “Our Greedy Colleges,” in which he articulates what has become known as the “Bennett Hypothesis.” 2

Foundational Problems

THE BENNETT HYPOTHESIS Bennett claims that federal subsidized loans actually contribute to uncon-trolled higher education price infl ation. According to him, this type of stu-dent aid is a “Federal Bailout” and gives colleges a blank check to increase tuition because the government will pay for it.

In 2013, Bennett and collaborator David Wilezol expanded Bennett’s Times article thesis with their book Is College Worth It ? 3 Bennett and Wilezol argue that if government gets out of the way, colleges will be forced to fi nd ways of operating more effi ciently or go out of business. They further claim that ineffi ciencies are rife in terms of duplicative or ineffectual curricula and overall organizational bloat.

The “Bennett Hypothesis” has been the topic of heated debate. Dissenters argue that universities are not like factories. Colleges are per-sonnel intensive. They employ highly educated and skilled faculty and staff in a system that values substantive student–professor interactions. Critical thinking, effective communication, and other knowledge and skills obtained in a higher education are transferrable in many organi-zational settings. Government investment in higher education is a good value for addressing the needs of an increasingly diverse culture and the sophisticated socio-economic reality emerging in the twenty-fi rst century.

Dissenters also maintain that the “Bennett Hypothesis” underestimates the complexity and cost of university original research, which is vital to the health of the US society and the economy. Knowledge transfer emanating from university research has created multiple industries. The Silicon Valley phenomenon arguably would not exist without Stanford.

In the American Council on Education (ACE)- sponsored monograph Does Federal Financial Aid Drive Up College Prices ? Donald Heller reviews a number of studies that attempt to test the “Bennett Hypothesis.” 4 The conclusion is that results are ambiguous because studies use different vari-ables and methodologies in their analysis.

Despite not having a defi nitive answer about the “Bennett Hypothesis,” the monograph highlights very important fi ndings about fi nancial aid, uni-versity costs, and pricing strategies. For example, over the past 30 years, adjusting for infl ation, the attendance cost (tuition, fees, books, room, board, travel, equipment, etc.) of a private university increased by more than 180%, by 265% in public universities, and by over 175% at public community colleges. 5

26 M.J. DUMESTRE

These extraordinary increases, however, do not paint an accurate pic-ture of what students currently pay for college. When evaluating atten-dance costs over the past 15 years, taking into consideration governmental aid, institutional aid (scholarships), tax deductions, and tax credits, the net price actually paid by students rose by only 22% in private institutions and by 30% in public institutions. The actual cost of attendance is still not good news for students; but for very different reasons, these increases are not good news for universities either.

Government grants and guaranteed loans have not kept pace with the actual cost of operating a university. The difference between published costs of attendance and real (net) cost has been borne by the institutions themselves. Private non-profi t universities are discounting tuition with their own funds. A 2013 National Association of College and University Business Offi cers (NACUBO) report indicates that these universities allot-ted an average discount (grants or scholarships) of about 46% of tuition cost to attract fi rst-year students. 6 Yet, nearly 50% of institutions still failed to meet enrollment goals.

COST-PUSH INFLATION The current failure to meet enrollment goals is a new phenomenon, par-ticularly in non-profi t private institutions. A 2012 study by Snyder & Dillow highlights the signifi cance of the current downturn. 7 It found that college enrollments over the past 30 years actually grew by nearly 70% even though tuition and fees increased substantially over the same period (not accounting for fi nancial aid and scholarships). In other words, even though the cost of college rose considerably during this period, the demand for attendance still increased.

The social and intrinsic value of a college degree coupled with greatly increased earning power made the price of college something worth pay-ing for, even at increasingly higher prices. This phenomenon is known as cost-push infl ation. 8 This type of infl ation occurs when there are a limited number of suppliers of a service and the demand for those services con-tinually exceeds the supply. Therefore, the price of services increases at an infl ationary rate. This is exactly what happened in higher education. The number of new universities did not signifi cantly increase over the past 30 years (the supply), and the demand continued to be robust.

The supply of university services remained relatively fi xed because it is diffi cult to establish a new university. For-profi t universities have been the

FOUNDATIONAL PROBLEMS 27

exception. But the total number of for-profi ts that offer bachelor’s degrees or higher is relatively small. Their student population is in the hundreds of thousands. Those enrollments, however, still only account for just over 10% of the total college student population. 9

For-profi ts typically charged higher tuitions than the non-profi ts because the demand was robust, and these universities spent a high per-centage of their tuition revenue on marketing and promotion. As indi-cated in Chap. 2 , access (a large number of enrollments) was the name of the game for them. They were not concerned about prestige and high rankings associated with selectivity (turning applicants away).

Is the for-profi t model an exemplar for all of higher education? The consensus opinion is: defi nitely not. A new archetype is likely to emerge from within existing not-for-profi t institutions; however, over the past 30 years, a signifi cant number of new non-profi ts have not material-ized. When enrollments were high, existing universities found ways to increase their enrollment capacity with new buildings and larger class sizes. But the expansion of campuses and academic programs has become problematic.

Now that enrollments have slowed or declined, buildings have excess capacity and some academic programs have a minimal number of majors taught by tenured faculty. These are classic examples of fi xed costs that are diffi cult to eliminate. The old adage is that: “Universities are good at addi-tion and terrible at subtraction.” Compounding the problem is the public perception that if buildings are closed and there are signifi cant layoffs in a university, the institution is downgrading academic quality to match a weak fi nancial status. That can quickly lead to enrollment problems.

FIVE FUNDAMENTAL PROBLEMS Financial unsustainability is not an issue separate from other problems in a university. Educational philosophy, the content and mix of degree pro-grams, marketing and promotion, faculty reputation and staff expertise, and so on, are all part of a whole. Financial viability is an indicator of the health of the entire enterprise.

Universities have been slow to face the depth and breadth of an at-risk situation. A key factor to remediating the problem is not only to recognize a dire fi nancial reality but also to truly understand its origin and cause. This type of organizational introspection is hard to accomplish. Yet, it must be done.

28 M.J. DUMESTRE

Critiques about higher education are coming from all segments of soci-ety. Media outlets are rife with stories about onerous student debt loads, low job placement rates, and low graduation rates. As previously cited, Congress has investigated for-profi t universities, but there also have been numerous state and federal hearings on higher education as a whole. In an effort to explore root causes of the current situation, these critiques are collated into the following issues.

Waning Public Confi dence

In the last half of the twentieth century, college education became not only affordable, but also an expected aspiration for those who sought a good career. The Greatest Generation and their Boomer children were introduced to post-secondary education through government programs and a positive employment picture that engendered an abiding belief in the value of higher education. Higher education was part of The American Dream. College was not considered to be for everyone, but college access was meant to be for all.

Richard Arum and Josipa Roksa , however, are not convinced about the assumed value of a college education. They present a cutting critique about US college academic outcomes in their book Academically Adrift . 10 The authors conducted a study of academic skills achievement that included over 2000 students at 24 colleges using the Collegiate Learning Assessment tool .

The results were shocking. They found that 45% of students demon-strated no signifi cant gains in critical thinking, complex reasoning, and writing in their fi rst two years of college. Those who showed increased skills did so only modestly. Also, approximately 36% of seniors demon-strated no signifi cant increase in the same skills. Findings revealed a lack of academic rigor due to a signifi cant number of classes not requiring sub-stantive amounts of reading and writing. Less shocking fi ndings included high student interest in socializing and/or working in order to pay for the cost of attendance.

The Academically Adrift authors’ methodology and analysis have been challenged. Their emphasis on the three academic skills ignores knowledge gained in discipline majors. And the educational value of co-curricular involvement also was not tested. Nevertheless, the book’s fi ndings created a media stir about the academic value of a college education, attacking the very nature of the institution.

FOUNDATIONAL PROBLEMS 29

Increasing Student Debt Load

A 2013 Forbes article cites student loan debt as crossing the trillion- dollar mark. 11 Somewhat supporting the “Bennett Hypothesis,” over 80% of loans are federally backed through Sallie Mae or the Department of Education (DOE). While headlines focus on the relatively few students who graduate with loan debt amounting to $100,000 or more, the aver-age is about $27,000, but around 10% of borrowers carry a debt load of $40,000 or more. Loan debt is in addition to expenditures of the personal savings of students and their family members.

Obviously, loans carry interest payments. Forbes reports that the long- standing 3.8% federal interest rate has expired. Congress is not helping. Recent legislation was passed which tied future federal loan interest to mar-ket rates, with a cap of 8.25%. Assuming the average $27,000 student debt obligation, this means that the standard 10-year monthly payment will even-tually rise from a current $320 expense to something substantially higher. If the desire is to increase the college graduation rate over the next decade, it is diffi cult to fi nd helpful legislation coming from the halls of Congress.

Compounding the problem are anecdotal stories about students using loan money for frivolous expenses, ignoring the expensive payback with interest. Nevertheless, addressing the college loan debt problem is vital for US higher education. The “Bennett Hypothesis,” or more aptly put, the “Bennett Critique,” is alive and well.

As of this writing, President Barack Obama’s proposal for “free com-munity college tuition” has yet to make its way through Congress. No doubt, this proposal will help millions of people and promote increased associate and baccalaureate degrees over the next decade. But community colleges will need to address issues that result in the current low associate’s degree graduation rate, amounting to just fewer than 30%. 12

Shrinking State Financial Support

A recent report by the Center on Budget and Policy Priorities indicates that over 75% of higher education students are in public colleges and uni-versities. 13 States used to provide over 50% of revenue for these institu-tions. But, primarily due to the 2008 recession, state contributions to their colleges and universities have decreased by nearly 30%. Despite pressure to hold tuition rates down, university tuitions still increased by 30%. In effect, the fi nancial burden of higher education has shifted from the state to students and their families.

30 M.J. DUMESTRE

Making matters worse, according to the Center’s report, median household income fell by 8.1% from 2007 to 2011. Increased costs of attendance and decreased ability to pay are putting lower-income and middle-class families in an untenable situation. Some have turned to com-munity colleges with lower tuition rates, with the intent to transfer to a four-year institution. Others have simply given up on attending college.

State colleges and universities are indeed decreasing operational costs, but they claim the cuts are threatening the quality of their programs. The following are just a few examples of personnel and expense reductions during the 2008–12 recession period cited in the Center’s report:

• Arizona’s university system cut more than 2100 positions; consoli-dated or eliminated 182 colleges, schools, programs, and depart-ments; and closed 8 extension campuses (local campuses that facilitate distance learning).

• The University of California laid off 4200 staff and eliminated or left unfi lled another 9500 positions; instituted a system-wide furlough program, reducing salaries by 4–10%; consolidated or eliminated more than 180 programs; and cut funding for campus administrative and academic departments by as much as 35%.

• The University of Colorado system, between 2009 and 2011, laid off 339 staff and faculty, even as enrollment grew by 2100 students.

• The University System of Louisiana furloughed 727 employees, laid off another 210 staff and faculty members, and cut 217 academic programs. In addition, campuses have reduced library services and cut funding for athletics, student scholarships, and research.

There are few—if any—reasons to believe that state funding will return to pre-recession levels. Students will increasingly fi nd it hard to get into the classes they need for their degree program. The original Land Grant Institutions that were “state supported” have become “state assisted” and soon may become only “state provisional . ”

Regulatory Compliance

Higher education in the USA is highly regulated at every level. The Higher Education Compliance Alliance (created by National Association of College and University Attorneys) tracks a list of over 250 federal laws and regulations that must be adhered to by US colleges and universi-ties. 14 Most aspects of higher education are covered by the regulations,

FOUNDATIONAL PROBLEMS 31

with an emphasis on student (consumer) protection and employee safe-guards. Some larger or more complicated institutions have a compliance offi cer position to insure timely reporting and fulfi llment of institutional responsibilities.

In recent years, distance education (especially online programs) has become an intense focus of governmental attention. The novelty of the programs, use of new technologies, and skyrocketing enrollments in the for-profi t sector have raised effi cacy and academic integrity suspicions. The US DOE has been so concerned with distance education programs that the Offi ce of Inspector General launched a compliance audit of online programs within every sector of post-secondary education. 15 The audit (covering 2009–11) consisted of interviews with offi cials from the Offi ce of Post-secondary Education and Federal Student Aid (FSA), nine accred-iting agencies, eight universities (with high online enrollments), and fi ve state agencies charged with oversight of higher education.

The rapid growth of distance education was fueled by the DOE removal of the “ 50% Rule ” in 2006. Prior to that time students were not eligible for federal fi nancial aid if they were enrolled in academic programs that had 50% or more of classes taken in a distance education format. Now that academic programs offered in entirely distance education formats are eligi-ble for fi nancial aid, enrollments have increased substantially. For instance, the study reports that in 2011 nearly half of all colleges and universities offered distance education programs , with over 6.5 million students tak-ing at least one online course that year (32% of all students). The audit recommends that the following issues be addressed by the DOE, accredit-ing agencies, participating institutions, and state agencies:

• Develop regulations that require schools to verify the identity of all distance education students at the time of enrollment.

• Amend the regulations to require more frequent disbursements of Title IV funds. The disbursements should coincide with the timing of institutional charges and other expenses, such as child or depen-dent care expenses and monthly internet fees.

• Amend the regulations expressly to apply the defi nition of atten-dance in 34 C.F.R. § 668.22(l)(7) to the regulations for returning Title IV funds for students who do not begin attendance.

• Issue guidance that clearly explains what is considered acceptable evidence of a distance education student’s academic attendance.

32 M.J. DUMESTRE

• Work with Congress to revise the Higher Education Act (HEA) so that schools are required to develop cost of attendance budgets appli-cable to the student’s actual educational needs and not include costs that are unnecessary to complete the student’s program of study. 16

It can be onerous for universities to follow these regulations, but the sad reality is that abuses are occurring. Financial aid fraud schemes are operat-ing much like identity theft rings. The audit found that during the 3-year report period, about 40,000 students were awarded over $220 million in loan funds despite never having attended any classes while enrolled at the eight participating audit institutions (for-profi t and not-for-profi t).

A potentially disastrous regulation was recently added to higher educa-tion bureaucratic obligations. Universities now need to obtain authoriza-tion for online programs in all states where their students reside. State regulations and reporting requirements vary widely. Previously, state authorization was required only if instruction was provided “on ground” in the state. This regulatory change adds tremendous complexity to online programming. For instance, in some states, if a university has only a couple of online students, the university has to apply for authorization to operate. Also, if a student is enrolled in one state and moves to another state while still enrolled in the online program, the university has to obtain approval in the new state.

The National Council for State Authorization Reciprocity Agreements (N-SARA) is helping to address this uneven state regulatory environment for online programs. 17 This council is addressing compliance regulation issues for universities, state agencies, and regional accrediting boards. As of this writing, 18 states have signed on to N-SARA, with an additional 7 states completing the process for membership. The goal is to have all 50 states participating in the program. The Council is a model for preserv-ing state higher education regulation autonomy and, at the same time, enabling innovation.

The Traditional College DNA

In their book The Innovative University , Clayton Christensen and Henry Eyring present compelling reasons why Harvard University became the implicit model of high-quality US higher education. 18 They trace the deep identity of the traditional US university back to the origins of Harvard in

FOUNDATIONAL PROBLEMS 33

the 1600s and follow it through the 1950s. This prototype university has structure and characteristics that almost all US universities emulate; so much so, that, according to the authors, Harvard formed the DNA of the American university.

According to Christensen and Eyring, traditional university DNA traits developed at Harvard include: the traditional academic calendar, curricular innovations, graduate education, academic honors, interscholastic athlet-ics, externally funded research, faculty rank and tenure system, admissions selectivity, fund raising, and other hallmarks of what is considered a high- quality higher education experience. 19 All of these traditional characteris-tics look very familiar to anyone who has attended college. In fact, they are taken for granted.

What, then, is wrong with the Harvard model? Nothing, so long as a university has over a $35 billion endowment to go along with it. This is where the DNA metaphor is helpful. Organizational models can change; DNA has to evolve.

At the risk of stretching the DNA metaphor a bit, the evolution of universities, like most forms of evolution, is a gradual process that reacts to environmental changes. Many voices in US culture claim that the time for university evolutionary change is overdue. The traditional model is in danger of extinction.

Current environmental factors are eroding the fi nancial health of the bottom quartile (if not more) of each university category. Christensen predicts that 25% of universities will either close or merge within the next 10–15 years. 20 While many researchers think this failure rate may be over-stated, they do believe that it is likely that the percentage of college clo-sures and mergers will increase substantially over the next decade. The Darwinian dictum, “Survival of the Fittest,” is a likely scenario.

The traditional model will be able to be supported by only the most fi nancially secure institutions. But according to a 2013 NACUBO study, the median endowment of 849 participating US and Canadian institu-tions amounts to slightly over $100 million, an insignifi cant fraction of Harvard’s endowment and a long way from the top decile. 21 If a univer-sity’s endowment is closer to median or lower, income has to come from other sources.

For most universities, physical plant costs, faculty and staff salaries, and other overhead expenses are too high to be covered by net tuition income. Endowment returns are supposed to fund the gap, but for many institutions, the endowment corpus has not kept up with the increasing cost of running

34 M.J. DUMESTRE

the university. Yet, these universities try to emulate Harvard, often without realizing they are doing so. Lack of organizational self-awareness is another way of describing the diffi culty of analyzing one’s own DNA.

All too often, universities try to grow themselves out of fi nancial stress by trying to attract more students by building a larger footprint, more academic programs, and increased services and activities. The assump-tion is that this type of growth, adhering to the traditional model, assures progress and stability; but an increase in size and complexity comes with a price. Size matters. Tuition-dependent institutions are in trouble unless they evolve structurally and operationally.

If the current situation remains unchanged, the ability to attend an elite university with a high-quality traditional model will be reserved for the wealthy and a few disadvantaged full scholarship students. The middle class need not apply. But high-quality education and reasonable cost need not be mutually exclusive. New models can make quality affordable higher education a reality.

STRATEGY IMPLICATIONS Foundational problems that universities face today are unique to this era. The traditional university model that emerged in the US over the past half-century depended upon governmental assistance and philanthropy to make higher education affordable. A middle-class lifestyle (or better) was considered more assured by a college degree or post-secondary tech-nical training. That traditional model is now showing cracks that need repair.

Financial troubles are symptoms of more fundamental challenges that universities face today. Key foundational problems include:

1. The End of Cost-Push Tuition Infl ation. In the second decade of the twenty-fi rst century, college enrollment growth is slowing, and even declining in many non-profi t private institutions. Consequently, the fi xed costs of the traditional university model often are exceed-ing tuition net revenue and other sources of income. Public univer-sities have had funding cut dramatically, and state legislatures have either pressured or prevented state universities from increasing tuition to cover costs. Universities of all types cannot depend upon signifi cant increases in tuition to cover expenses because tuition is now outpacing the middle-class ability to pay.

FOUNDATIONAL PROBLEMS 35

2. Reconnecting with the American Dream. Complaints about rising university tuition rates and disputes about educational outcomes question the actual value that students and families place on higher education. The increased earning power of a college degree remains undisputed, but the value of the increase is being chal-lenged. Student loan debt accumulation delays the increased earn-ings payoff, and job placement in a chosen fi eld of study is becoming more diffi cult other than in Science, Technology, Engineering, Math (STEM) and niche areas. But universities need to demonstrate the value of a college education as more than career preparation. Other modes of credentialing (certifi cations, digital badges, and endorsements) are vying to be alternatives that employers value. Universities have the dual task of showing how well they prepare students for employment as well as how they articu-late the cultural and social values of a college degree.

3. Making the Case for Investment . State university education in Germany is free. This enticement better insures the existence of an educated workforce. It is an example of how some governments view higher education as an investment as opposed to a cost. Despite the perception that the USA will never completely follow suit, it is imperative for universities as a whole to intensely advocate for federal and state funding of higher education as an investment in the future. The Post- World War II expansion of higher education came from government fi nancing. That investment was a factor in unprecedented US economic expansion and world leadership. The 2008 severe recession cut a signifi cant amount of government and philanthropic fi nancial support. A post-recession return to at least those funding levels is a critical factor for the viability of many universities.

4. Dealing with Regulation Complexity . Regulation tends to be a reac-tionary process. When problems arise regulatory agencies try to fi x them with preventive rules. The more individual universities, con-sortia, and associations are proactive in dealing with problems the less likely onerous regulation occurs. Non-traditional teaching mod-els and emerging forms of distance education compel universities to demonstrate academic effectiveness and operational oversight. The practical reality is that non-traditional instructional technology is crucial for successful educational reform. It is incumbent upon uni-versities to initiate performance evaluation alongside of any new ini-tiative. Failure to do so invites regulation.

36 M.J. DUMESTRE

5. The Intractability of Identity . Christensen and Eyring’s traditional col-lege DNA metaphor vividly explains deep seated assumptions about quality higher education. It also serves as a good explanation about why universities try to be something they can never afford to become. It is like the diffi culty of trying to alter one’s self-perception.

The metaphor answers the question: why do very smart people act against their own self-interest? Even very smart people fi nd it diffi cult to break out of a system that has been so meaningful and signifi cant in their lives. They want to pass on the value they received, and they do so typically without great fi nancial reward. The intimacy of the learning experience they see in the traditional classroom makes it hard to imagine how that can be replicated online or in other more effi cient modalities. If these innovations are rejected because they do not adhere to the traditional model, then indeed only elite institutions will be able to thrive.

* * *

These foundational problems indicate the complexity of higher educa-tion in today’s world. There still is the temptation to describe the halls of academe as not in the real world—places for leisurely contemplation, research, and preparation for a bright future. Those who dedicate their lives to academe experience a much different reality.

For better of worse, higher education has become an industry. It had no choice. Most colleges and universities are tuition-dependent entities that struggle to stay afl oat. Operating a university is a complex endeavor that requires not only a talented teaching faculty, but also competent research-ers and administrators who attend to the many facets of what comprises the traditional college experience. Institutions have turned to alternative sources of revenue to prop up their operations, often to no avail. And reliance upon an endowment as a safety net is a luxury that only the most highly funded elite universities enjoy.

Adding to operational complexity is the tradition of egalitarian gov-ernance. University leadership is a complicated endeavor. Presidents and chancellors need to be adept at balancing competing constituencies with sometimes very different ideas about the nature and operation of their institutions. Corporate CEOs rarely have to deal with the same sense of entitlement by competing groups, except in highly unionized environ-ments. Operating universities like for-profi t corporations is not the answer. Rather, enlightened leadership can help colleges face the reality of their situation, which is the fi rst step toward transformational change.

FOUNDATIONAL PROBLEMS 37

NOTES 1. “30 Years: 1983–2013,” Trends in Higher Education Series, The College

Board , accessed October 17, 2014, http://trends.collegeboard.org/sites/default/fi les/student-aid-2013-full-report.pdf

2. William Bennett, “Our Greedy Colleges,” New York Times , February 18, 1987, accessed October 18, 2014. http://www.nytimes.com/1987/02/18/opinion/our-greedy-colleges.html

3. William Bennett and David Wilezol, Is College Worth It ? (Nashville: Thomas Nelson, Inc., 2013).

4. Donald E. Heller. Does Financial Aid Drive Up College Prices . (American Council on Education, Leadership and Advocacy . April 2013), accessed October 17, 2014, http://www.acenet.edu/news-room/Documents/Heller-Monograph.pdf

5. See Heller, 4–10 for attendance costs and analysis. 6. Ry Rivard, “Discount Escalation,” Inside Higher Ed , July 2, 2014, accessed

October 19, 2014, https://www.insidehighered.com/news/2014/07/02/prices-rise-colleges-are-offering-students-steeper-discounts-again

7. T.D. Snyder, & S.A. Dillow, Digest of Education Statistics 2011 , retrieved from U.S. Department of Education , National Center for Education Statistics website: http://nces.ed.gov/programs/digest/ , cited in Heller, p. 9.

8. Heller, pp. 7–8. 9. “Students Attending For-Profi t Postsecondary Institutions: Demographics,

Enrollment Characteristics, and 6-Year Outcomes,” U.S.  Department of Education , December 2011, accessed January 10, 2015, http://nces.ed.gov/pubs2012/2012173.pdf

10. Richard Arum and Josipa Roksa. Academically Adrift : Limited Learning on College Campuses . (Chicago: University of Chicago Press, 2011).

11. Chris Denhart, “How The $1.2 Trillion College Debt Crisis Is Crippling Students, Parents And The Economy.” Forbes August 7, 2013, accessed October 6, 2014 http://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-parents-and-the-economy/

12. “Institutional Retention and Graduation Rates for Undergraduate Students,” National Center for Education Statistics (NCES), May 2015, accessed October 20, 2015. http://nces.ed.gov/programs/coe/indica-tor_cva.asp

13. Phillip Oliff, Vincent Palacios, Ingrid Johnson, and Michael Leachman, “Recent Deep State Higher Education Cuts May Harm Students and the Economy for Years to Come,” Center on Budget and Policy Priorities , March 19, 2013, accessed October 6, 2014, http://www.cbpp.org/cms/index.cfm?fa=view&id=3927

38 M.J. DUMESTRE

14. Compliance Matrix , Higher Education Compliance Alliance, accessed October 7, 2014, http://www.higheredcompliance.org/matrix/

15. Final Audit Report. Title IV of the Higher Education Act Programs : Additional Safeguards Are Needed to Help Mitigate the Risks That Are Unique to the Distance Education Environment. Control Number ED-OIG/A07L0001, Offi ce of Inspector General, United States Department of Education, accessed October 13, 2014, http://www2.ed.gov/about/offi ces/list/oig/auditreports/fy2014/a07l0001.pdf

16. Final Audit Report. Title IV of the Higher Education Act Programs , p. 13. 17. See the National Council for State Authorization Reciprocity Agreements

at http://nc-sara.org/ , accessed October 13, 2014. 18. Clayton M. Christensen and Henry J. Eyring. The Innovative University :

Changing the DNA of Higher Education From The Inside Out . (San Francisco: Jossey-Bass, 2011).

19. Christensen and Eyring, The Innovative University , p. 136. 20. Clayton M.  Christensen and Michael Horn, “Innovation Imperative:

Change Everything.” New York Times , November 1, 2013, accessed November 11, 2014, http://www.nytimes.com/2013/11/03/educa-tion/edlife/online-education-as-an-agent-of-transformation.html?pagewanted=all&_r=0

21. “Table of U.S. and Canadian Institutions Listed by Fiscal Year 2013 Endowment Market Value and Change in Endowment Market Value from FY 2012 to FY 2013.” National Association of College and University Business Offi ce rs (NACUBO), accessed November 11, 2014, http://www.nacubo.org/Documents/EndowmentFiles/2013NCSEEndowmentMarket%20ValuesRevisedFeb142014.pdf

FOUNDATIONAL PROBLEMS 39

41© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_4

CHAPTER 4

Abstract This chapter examines the fi nancial situation of highly endowed universi-ties as contrasted with inadequately fi nanced institutions. An at- risk situation exists when an institution’s self-understanding is intimately connected with the traditional university model, but without the funding to support it because of a rapidly chang-ing socio-economic environment. The following indicators of economic fragility are explored: the effect of endowment on institutional structure, a liquidity crisis, institu-tional fragility indicators, and a denial bubble. These indicators of fi nancial fragil-ity that many institutions face today—or are about to encounter—should be calls to action by administrators and trustees.

Keywords Endowment crisis • University fi nancial bubble • University fi nancial fragility • University liquidity crisis • University structure problems

The traditional US university model that became the norm in the second half of the twentieth century is no longer viable for many small-to-mid- sized institutions. A September 2015 Inside Higher Ed article supports this contention by reporting that the rate of college closings will triple over the next few years. 1 The prediction comes from a Moody’s Investor Services report that includes analysis of the fi nancial health of these types of institu-tions. This includes private colleges with operating revenues under $100 million and public institutions under $200 million. If changes are not made, Moody’s estimates that about 15 institutions per year will close, starting as early as 2017. Additionally, mergers may double to about six per year.

Financial Sustainability in Troubled Times

Reasons for such dismal predictions include heavy tuition dependency, discount rates that approach 50%, and little-to-no growth in enrollments. Cost cutting and other fi scal constraints can go only so far. Small institu-tions have the advantage of less bureaucracy to deal with in order to effect change, but there is also the reality of having fewer resources to correct substantive problems.

Moody’s has issued cautious ratings for the past several years. 2 University operating costs are increasing, and nearly a quarter of public and private institutions experienced decreases in net revenue last year. According to Moody’s, the long-term outlook can be positive for institutions that are able to identify target student constituencies, control costs, and differenti-ate themselves from their competition.

It also is clear that a signifi cant number of institutions are simply not nimble enough to address these pressures because of both internal and external environmental factors. Foundational problems that threaten their very existence are increasingly being brought to light under the glare of escalating media coverage. For many institutions, these are troubled times.

THE EFFECT OF ENDOWMENT ON INSTITUTIONAL STRUCTURE

The National Association of College and Business Offi cers (NACUBO ) also provides cautionary statistics for small institutions. A 2015 NACUBO report offers insights into how universities invest their endowment and how returns fund annual operating expenses. 3 Not surprisingly, the top decile of institutions in the study, each with over $1 billion in endowment assets , earn the greatest return on their investments compared to universi-ties with an endowment under $25 million, roughly the bottom decile.

The study also reveals that the top decile institutions invest over 55% of their assets in alternative strategies such as: commodities, private equity, non-campus real estate, and other more sophisticated investments. The bottom decile devoted only about 10% to such investments. The fewer funds a university has to invest, the more risk averse they need to be with their portfolio. The “rich” get richer because they have more investment options. The “poor” get poorer because safety carries lower rates of return.

The NACUBO report also affi rms that universities with the largest endowments are able to fund their operating budgets at a relatively high rate. Even though expense budgets of the top decile universities are massive,

42 M.J. DUMESTRE

they are able to annually spend from endowment returns at a much higher rate than the average university. According to the report, universities with the largest endowments typically fund almost 17% of their very sizeable operating budgets, while institutions in the bottom decile are able to cover only about 4% of their much lower expense budgets.

Even very high tuition rates at elite institutions cannot support the tradi-tional college model. Their endowment fi lls the gap. Yet, small-to-mid- size, inadequately endowed universities try to emulate the same model. Typically, attempts to raise endowment funds through capital campaigns only pro-duce moderate gains. The operating cost–endowment fund gap is too large.

A primary implication of this NACUBO report is that institutions with-out the endowment of top decile institutions need to structure themselves quite differently. In order to live within their means, low-to-modestly endowed colleges and universities need to appeal to a different student constituency that appreciates the unique educational experience these insti-tutions provide. Differentiation, not imitation, is the name of the game.

A LIQUIDITY CRISIS A 2012 Bain & Company report “ The Financially Sustainable University ” provides more pointed fi nancial cautions about what they term as a liquid-ity crisis in higher education. 4 Using Integrated Postsecondary Education Data System ( IPEDS ) statistics from 2006 to 2010, the report identifi es one-third of institutions as having signifi cantly increased weakness in their fi nancial statements. These institutions are on the road to at-risk status because their expense ratio (expense as a percentage of revenue) is increas-ing while their equity ratio (equity as a percentage of assets) is decreasing. In other words, expenses are outpacing net assets.

A troublesome aspect of this report is that the authors revised their sta-tistics in 2014 with updated IPEDS data. Using the same methodology, the percentage of at-risk institutions moved from one-third to over 40%. The fi nancial environment is getting worse for many colleges and universities.

The report contains indicators of other fi nancial problems that have emerged over the past decade. The average tuition price as a percentage of the median family income has increased by nearly 15%. Governmental appropriations per Full Time Equivalent (FTE) are down signifi cantly, and tuition rates are projected to increase at twice the level of the consumer price index (CPI) over the next 15 years. Increasingly, it will be harder for tuition-dependent universities to charge tuition rates that cover operating costs.

FINANCIAL SUSTAINABILITY IN TROUBLED TIMES 43

There is the unfortunate tendency for at-risk institutions to try and build their way out of fi nancial trouble by enhancing campus facilities, increasing marketing, recruiting, and adding new programs. But all of these initiatives fail to question fundamental assumptions about institu-tional structure.

Given their analysis, the authors suggest four corrective strategies that challenge the status quo:

1. Developing a clear strategy, focused on the core; 2. Reducing support and administrative costs; 3. Freeing up capital in non-core assets; 4. Strategically investing in innovative models. 5

These strategies compel a university to identify their core constituencies . Universities must determine which student populations they serve, and how they differentiate themselves from their competitors. Support ser-vices, administrative costs, and capital should be directed to educating the core student population. Diffi cult decisions about eliminating non-core assets may include closing some academic departments—a rare occurrence even in stressed institutions.

In the corporate world, core means the primary business of the enter-prise. Their operations are devoted to providing products and services that make them the best in the business. Likewise, universities need to orient their operations in the same way. This is not a commoditization of university education. Rather, it forces a university to move away from a generic understanding of higher learning. Each institution must iden-tify what it does best and why students should choose them over their competitors.

INSTITUTIONAL FRAGILITY INDICATORS In their 2009 book Turnaround : Leading Stressed Colleges and Universities to Excellence , James Martin and James E. Samels provide another analysis of reasons why many institutions fi nd themselves in an at-risk situation. 6 Utilizing insights from decades of higher education consulting experience, the authors identify indicators of institutional fragility. They can be orga-nized according to three institutional areas: (1) Finances and Resources, (2) Enrollment and Retention, and (3) Academic and Organizational Culture. 7

44 M.J. DUMESTRE

These indicators come from the authors’ discussions with presidents and other university senior administrators as well as from contributors to their book (chapter authors). Even though the research is several years old, most university presidents and chief fi nancial offi cers would no doubt consider them just as relevant today.

Financial indicators include substantial tuition discounting, high tuition dependency, deferred maintenance, underfunded technology needs, inad-equate endowment, and other signs of fi scal stress. While enrollment and retention indicators are expressed in minimum numbers and percentages, trends are most important. Institutions on a downward slide fi nd it dif-fi cult to recover. An absolute number is less important than the reasons behind a downward cycle.

The perception of value drives enrollment much more than tuition pricing. The same is true about retention. Even though students most often list lack of fi nances as their primary reason for dropping out, it really means they do not value their experience at the institution.

Aspects of academic and organizational culture also signify the relative health of an institution. A turnaround is less likely to occur when a univer-sity is predominately populated by long-term employees, the people who inadvertently created the current deteriorated state of affairs. As the saying goes, “It’s hard to recognize the water in which we swim.”

A signifi cant at-risk factor is lack of new academic programming and the avoidance of new instructional technologies. Adherence to the sta-tus quo is very diffi cult to change in a static system. These issues are emblematic of resistance to change, even if it is a matter of institutional survival.

Martin and Samels make it clear that no one indicator determines at- risk status, nor is there a cluster of factors that heighten an institution’s fragility. While a university may have deteriorating fi nances, the willing-ness for fundamental change may be robust enough among faculty and staff to put the institution back on the road to recovery. Other universities may still have adequate fi nances, but an intransigent organizational cul-ture can cause a rather quick downturn. These indicators are best used for institutional self-evaluation, either facilitated with outside help or led by respected leaders within the university.

When the Bain and NACUBO reports are coupled with other at-risk indicators, they create a call to action for many small-to-mid-sized uni-versities. Yet, there seems not to be a sense of urgency coming from these

FINANCIAL SUSTAINABILITY IN TROUBLED TIMES 45

institutions. Is such inaction causing the formation of a higher education bubble that is about to burst?

THE OTHER HIGHER EDUCATION BUBBLE The preponderance of negative indicators compels critics to compare the state of US higher education with the dot-com bubble at the turn of the twenty-fi rst century and the housing/mortgage bubble of 2008. There is a fair amount of disagreement, however, that higher education as a whole is headed for a similar fate. The diversity of post-secondary institutions makes the comparison to those industries problematic. It is undeniable that inadequately fi nanced segments of the higher education landscape may be facing a bubble-type scenario. The character of that bubble may be different than what it appears to be on the surface.

Amit Mrig , President and CEO of Academic Impressions , writes about a “ denial bubble ” in US higher education. His contention is that, “Institutional leaders continue to rely on what has worked in the past while ignoring criti-cal warning signs—increasing costs, stagnant revenues, market shifts, and declining public trust in higher education—that require a new and different approach.” 8 In effect, many leaders of potentially at- risk institutions are in denial about these warning signs actually affecting their institution.

Not only is there a denial factor, but there is also a marked dissonance between higher education leadership and public perception. Mrig cites the following survey fi ndings:

• 89% of US adults believe higher ed is in crisis.

Yet:

52% of college leaders feel the opposite.

• Only 40% of consumers believe colleges provide an “excellent” or “good” value for the money invested.

Yet:

76% of all college and university presidents believe their institutions deliver a “good” to “excellent” value. 9

These very different perceptions about the value of a college education indicate something more than a public relations problem.

46 M.J. DUMESTRE

Mrig contends that higher education leadership, particularly in at-risk institutions, can become mired in the following false assumptions that prevent substantive change:

• Demand for higher education is inelastic. • New sources of revenue will always be available. • Higher ed will always be consumed in the same way. • The public’s faith is unwavering. 10

As we have seen in previous chapters, the era of inelastic demand and cost-push infl ation is coming to an end. Out of necessity, the educational consumer is becoming more conscious of the cost-value proposition . Demonstrating how an institution is the best value for specifi c student constituencies is now the name of the game. If a university has not identi-fi ed their optimal student constituency, they are in trouble.

The escalation of the tuition discount rate has eroded net revenue. New sources of revenue will not come from adding more students in the tradi-tional college. Income from alternative sources often requires a change in institutional self-perception, opening up the university to different types of programming. Additionally, introduction of fully online degree pro-grams that enhance net revenue requires investment and a sometimes very diffi cult change in mindset.

The new reality is that if you build it, they may not come, especially if it is simply more of the same with a new façade. In this environment, it makes more sense to build student support systems that enhance retention and graduation rates. More importantly, design, as a planning concept, needs to move from facilities to programming. Alternatives to the traditional college degree are fast emerging, including micro-credentials and other certifi cations of post-secondary competencies. Designing different types of credentials does not require an abandon-ment of the traditional college degree. Universities that ignore threats to the baccalaureate degree as a preferred credential do so at their own peril.

Despite all of these problems, Mrig believes that US higher education has the following tailwinds that insure near-term viability :

• During the recent recession, the unemployment rate for those with a bachelor’s degree was only about 5%;

FINANCIAL SUSTAINABILITY IN TROUBLED TIMES 47

• Lifetime earnings of college graduates are typically $1 million more than high school graduates;

• A college education is still a reliable gateway into the middle class; • The President’s college completion agenda provides political sup-

port for the economic and cultural value of higher education. 11

These signifi cant tailwinds protect many at-risk institutions from having to close the doors—at least in the near term. It is incumbent upon these universities to accomplish their turnaround while it is still possible. Their university communities deserve nothing less than a future that continues to serve their students and to contribute to the common good.

STRATEGY IMPLICATIONS These studies and reports indicate the depth and breadth of problems facing inadequately fi nanced colleges and universities. When taken as a whole, the following common themes emerge:

1. The Small-to-Mid-Sized Private University At-Risk Sector. The liquidity crisis is most prevalent in small-to-mid-sized institutions. Expenses are increasing while net assets are decreasing. Heavy tuition dependency coupled with high discount rates and little to no ancillary income make decreases in enrollment a particularly serious problem. Similarly sized public institutions with the same diffi culties have state funding supporting their operation, although at rapidly decreasing rates. But the municipalities in which these institutions are located do not want them to close. Merger with other state insti-tutions is a more likely scenario. Private institution mergers are much more complicated endeavors.

2. Financial Indicators as Barometers of Institutional Health. As important as various fi nancial ratios are for determining bond rat-ings, Title IV eligibility, and other indications of fi scal condition, they are simply barometers of the health of the entire institution. These indicators do not cause at-risk status. They reveal the exis-tence of substantive problems that threaten institutional viability. Efforts to improve ratios are only stopgap measures.

3. Student-Driven Institutional Differentiation . Adult learner-oriented universities direct their academic programming, structure, and orga-nization to meet the needs of those specifi c students. That is the

48 M.J. DUMESTRE

reason why those institutions tend to be successful. Similarly, fi nd-ing the right traditional-age student niche is a primary task of many at-risk institutions. Merely adding online programming for adult students to enhance total enrollment is not the answer either.

Listening to traditional-age student needs such as multiple intern-ships, blended course delivery systems, micro-credentials , and enhanced career services are ways to distinguish a university from its competitors. When a specifi c undergraduate student profi le becomes clear, the university can orient its structure and operation to meet the needs of those particular students. They ordinarily attend full-time, drive enrollment revenue, and determine the cost of student services. This type of analysis leads to true differentiation.

4. It Is Not About the Liberal Arts . Much of the tension surrounding changes in how university education is delivered centers around a presumed abandonment of the liberal arts. Teaching the liberal arts in conjunction with disciplinary majors is part of the genius of American higher education. College is as much about intellectual horizon expansion, historical consciousness, and critical thinking as it is about professional education. People in the C-Suite of corpora-tions look for college-educated employees to rise through the ranks because a well- rounded education better insures a comprehensive view of the world. The task for many institutions is to deliver the liberal arts in a cost- effective way through the use of technology. Sitting at the foot of the learned professor is no longer fi nancially viable; and it probably always has been more satisfying for the pro-fessor than educationally effective for students.

5. The College Value Proposition . The large gap between college presi-dents’ perception of the merit of education in their institution and the general public’s opinion about the value of higher education is a serious problem. In effect, presidents are saying that defi ciencies exist elsewhere, not in their back yard. Verifi cation of their assertion is hard to fi nd. Media-driven college rankings provide little substantive help. The assumed value of a college education is now being questioned despite the undeniable increase in the earning power of graduates.

Escalating cost of college attendance, while middle-class incomes remain stagnant, makes the decision to take on a signifi cant amount of debt more diffi cult. State and Federal Government funding poli-cies seem to send the message that families need to shoulder the burden of education, not the government—a radical change from

FINANCIAL SUSTAINABILITY IN TROUBLED TIMES 49

the twentieth-century view that higher education is an important investment in the future of the nation.

While a college degree remains the preferred credential for entry into the professions, other post-secondary credentials are emerging. Badges, competency portfolios, and numerous types of certifi cations are gaining popularity. Colleges should not dismiss the value of these credentials. Instead, they can provide them as part of their institutional offerings. Just as importantly, colleges need to continu-ally demonstrate the value of the baccalaureate degree as the most in-depth and comprehensive form of post-secondary education—an experience worth investing in for the sake of personal development and professional preparation. The value proposition needs to be articulated now more than ever before.

* * *

Financial warning signs abound for many small-to-mid-sized US colleges and universities. Critics differ about the need to reinvent higher educa-tion. As evidenced by a high degree of philanthropy, there is a lot of sup-port for the continuance of the traditional model for institutions that can afford it. Original research and development are economic drivers, and the traditional college coming-of-age experience is of equal value.

Institutions that equally value this higher education orientation, but can no longer afford to support it fi nd themselves in troubled times. How can these at-risk institutions change in ways that do not abandon the liberal arts, graduate degree programs, and research agendas? Examples of how some smaller institutions successfully restructured are to be found in Part II of this book. Part III presents a strategic planning process that even the smallest uni-versities can use to transform themselves into viable and valuable institutions.

NOTES 1. Kellie Woodhouse, “Closures to Triple,” Inside Higher Ed , September 28,

2015, accessed December 19, 2015. https://www.insidehighered.com/news/2015/09/28/moodys-predicts-college-closures-triple-2017

2. Kelly Blessing, “Higher Education Outlook for U.S. Still Negative, Moody’s Says,” July 14, 2014, Bloomberg. Com, accessed October 27, 2014. http://www.bloomberg.com/news/2014-07-14/higher-education- outlook-for-u-s-still-negative-moody-s-says.html

3. NACUBO report, “Building on 11.7% Gain in FY2013, Educational Endowments’ Investment Returns Averaged 15.5% in FY2014,” January

50 M.J. DUMESTRE

29, 2015, accessed November 6, 2015, http://www.nacubo.org/About_NACUBO/Press_Room/2014_NACUBO- Commonfund_Study_of_Endowments_(Final_Data).html

4. Jeff Denneen and Tom Dretler, “The Financially Sustainable University,” Bain Brief , Bain and Company, July 6, 2012, accessed December 29, 2015, http://www.bain.com/publications/articles/fi nancially-sustainable-university.aspx

5. Denneen & Dretler, p. 4. 6. James Martin and James E. Samels. Turnaround : Leading Stressed Colleges

and Universities to Excellence , (Baltimore, MD: The Johns Hopkins University Press, 2009). E-book edition.

7. Martin and Samels, the entire 20-item list can be found in Chap. 2 . The categorization of items is for the purposes of this book.

8. Amit Mrig. The Other Higher-Ed Bubble ( The Bubble We Aren ’ t Talking About ) . Academic Impressions Higher Ed Impact Diagnostic, June 2013 . p. 5, accessed January 3, 2016, http://www.academicimpressions.com/news/other-higher-ed-bubble-full-report

9. TIME/Carnegie and Pew Research Center survey results as cited in The Other Higher-Ed Bubble , p. 20.

10. Mrig, p. 10. 11. Mrig, p. 8.

FINANCIAL SUSTAINABILITY IN TROUBLED TIMES 51

PART II

Exemplars

55© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_5

CHAPTER 5

Abstract This chapter reveals the story of how part-time adult learners disrupted the traditional university way of operating by putting into question almost universal assumptions about the process and outcomes of higher education. The emergence of andragogy (adult learning theory) popularized by Malcolm Knowles in the 1970s gave rise to innovative ways of educating. It set the stage for the creation of new types of campuses, including the fi rst steps into online learning. Universities accommodated the adult learner by better meeting their instructional needs, altering class formats, delivery systems, and conceptions about what constitutes academic quality. The sheer size of the adult learner student population changed the structure and operation of many universities.

Keywords Part-time adult students • Malcolm Knowles • Andragogy • Adult learning theory

Given that the current socio-economic environment is so different from the governmentally supported post-World War II high point of higher education, it is clear that universities must adapt. Changing an entrenched traditional organizational model is a diffi cult task, even if opportune ways of doing so present themselves. This became evident when universities awakened to the depth and breadth of a student population in their midst that previously had been overlooked—the part-time working adult.

College is not for everyone, nor should it be. This reality is part of the reason why on average only a little more than 60% of those who entered college in 2006 as fi rst time, full-time students actually earned

The Adult Learner: An Awakening

their bachelor’s degree within 6 years. 1 The graduation rate varied greatly depending upon the type of institution. For instance, the rate was 57% at public institutions, 66% at private not-for-profi ts, and only 32% at private for-profi t institutions. As to be expected, universities with an open admis-sions policy had the lowest graduation rate at 33%, while the most highly selective universities had a graduation rate of 86%.

College dropouts are many and varied. Steve Jobs, Bill Gates, and Mark Zuckerberg, all dropped out of college; nevertheless, gambling on being part of the billionaire’s dropout club is not a good bet. Many of the 40% who started college but left without their degree realized this and tried to fi nd their way back. And the dropout student syndrome continues each year putting a lot of people in the situation of trying to fi nd a way to com-plete their degree.

DISRUPTING COLLEGE Accommodating part-time adult students who return to complete their degree—which most often was started at another institution—has been a diffi cult undertaking for traditional universities. That has not been the case in for-profi t institutions. As already noted, the for-profi ts recognized the size of this potential student population, and they created a university structure and system to almost exclusively meet their needs.

Traditional universities have been slow to adapt. In this context, it is useful to return to Clayton Christensen’s concept of disruptive innova-tion. In the same year in which The Innovative University was published, Christensen and co-authors Michael Horn, Louis Caldera, and Louis Soares wrote a monograph for the Center for American Enterprise titled Disrupting College : How Disruptive Innovation Can Deliver Quality and Affordability to Post Secondary Education . 2 Christensen and his co-authors document the discontinuities and ineffi ciencies of the traditional university model and recommend online learning as a powerful way to decrease expenses and increase educational outcomes. Just as importantly, they point out that the structure of the university has evolved, trying to be all things to all people.

Three important points about university structure can be taken from this monograph. First, the traditional university campus should be broken up into smaller units that more directly serve the needs of different constitu-encies. The traditional university model that developed over the last cen-tury engages in businesses and functions that: teaches students who are in at least four different educational levels, directs original research, operates

56 M.J. DUMESTRE

full-service housing food services, runs health clubs, fi elds high- profi le ath-letic teams, engages in multiple community service operations, manages entertainment venues, provides career services, and conducts its own mar-keting and promotion. University administrators could, no doubt, add other operations and services to this list. Yet, there has not been a coordinated appeal from university administrators to conduct substantive restructuring.

Second, a university’s fi nancial business model must be sustainable, with-out the assumption that governmental funds will cover escalating costs. Accurate cost accounting of university functions and services is often hard to assess. Each operation should be self-supporting, but that rarely is the case.

Third, and most importantly, the teaching–learning experience must be updated through online technologies for not only greater effi ciency but also greater depth. Universities have expended a signifi cant amount of resources to provide technology infrastructure, but extensive and coordinated utili-zation of technologies for effi ciencies and greater effectiveness in teaching is often lacking. This is the lament of many academic administrators.

The account about how adult learners disrupted traditional higher edu-cation exemplifi es how diffi cult it is to change the entrenchment of the traditional college model despite the power of an idea whose time has come. The story about how adult learners became a focus of attention at particularly inventive universities also demonstrates how diffi cult it is to make disruptive innovation a reality.

UNDERSTANDING THE ADULT LEARNER The 1973 publication of Malcolm Knowles ’ book The Adult Learner : A Neglected Species refl ected a growing movement of educators interested in learning theory and how teaching adults should be different from teaching children and adolescents. 3 Knowles’ work challenges the principles of peda-gogy—the familiar theory of education primarily oriented for young people.

According to Knowles, andragogy is based upon four assumptions that distinguish it from pedagogy. The assumptions have the following characteristics:

1. Changes in Self-Concept Adult self-concept arises as a result of the transition from childhood dependency on others to self-directedness. Thus, if adults perceive themselves as being forced into a dependent learning situation, they consider it as being treated like children.

THE ADULT LEARNER: AN AWAKENING 57

2. The Role of Experience Adults possess a wealth of experience. Teaching techniques should emphasize connections between newfound knowledge and the learner’s experience, deepening its quality and quantity. If adult stu-dent experiences are devalued in the educational setting, they per-ceive this as a devaluation of their sense of adulthood.

3. Readiness to Learn Adults feel the need to understand why they are required to learn something. If learning is connected to personal developmental or valued professional roles, they are more likely to participate and thrive in the learning process.

4. Orientation to Learning Adults have a problem-centered orientation to learning, as opposed to the subject-centered orientation of children. Children learn in order to enter developmental phases that prepare them for a distant future. Adults enter a learning experience in order to solve proxi-mate personal or professional problems. Therefore, they want to immediately apply their learning. 4

These assumptions challenge much of what occurs in the traditional university classroom. College professors, however, point out that the 18–22-year-olds they face everyday do not have the depth of experience that Knowles assumes in his adult learning theory. But this is a misun-derstanding about the heart of Knowles’ theory. In effect, he advocates for learner-centered teaching (as opposed to teacher-centered teaching), meaning that educators need to know the self-identity and desired out-comes of their students. This theory of education counters a “one size fi ts all” attitude about teaching, even at the college level.

ACADEMIC NEGOTIATIONS IN THE TRADITIONAL COLLEGE Universities have long taught adult students, but they primarily have been in non-credit, continuing education programs that do not lead to a bac-calaureate degree. State universities and colleges are expected to provide non-credit classes for community needs. Art appreciation, foreign lan-guage instruction, wine tasting, computer skills, fl ower arranging, and other areas of general interest are typically offered in the evening and on weekends. Clearly, this type of adult education is a form of community enrichment.

58 M.J. DUMESTRE

Academic credit-bearing classes—night classes—also have a long his-tory in both state and private universities. Typically taught on an overload basis by university faculty or by adjunct faculty, offerings were class-centric, meaning that if one wanted to complete an entire degree some required classes would need to be taken during the day—an impossibility for most working adults. Student services were diffi cult for adult students to navi-gate as well. Most offi ces were closed at 5:00 p.m.

In the 1970s, the combination of the popularity of adult learning the-ory and adult student demand compelled universities to address the needs of these students. Educating working adults who wanted to attend full academic degree programs on a part-time basis gave rise to the need for a separate unit in the university dedicated to them. Universities usually formed an “evening division ” with staff dedicated to providing the aca-demic and administrative needs of adult students.

Faculty and administrators dedicated to serving this student population faced signifi cant challenges. Among the most vexing concerns were the following issues.

Pedagogical Prejudice

Some faculty members did not think older students had the ability to learn as quickly or in the same way as 18-year-olds. And they were correct, but this was not a negative. Knowles’ articulation of adult learning theory simply points out that teaching must be oriented toward the needs of the learner. Adult and traditional-age students should be taught differently because of disparities in their level of experience and learning goals. Putting these very dissimilar types of students in the same classroom was problematic. Unfortunately, a sig-nifi cant number of faculty members viewed teaching adults differently from younger students as “watering down” the content, giving the impression that evening degree programs were not as rigorous as the full-time day programs.

Tuition Rate Differences

Given that universities are oriented toward traditional-age, full-time stu-dents, tuition is based upon taking a “full load” of courses (typically 12 to 18 credit hours) in each of two semesters in the academic year. If a student takes less than a “full load,” they have to pay a much higher part- time credit hour tuition rate, which amounts to a penalty. Universities want full-time students to remain full-time because they are more likely to complete their degree.

THE ADULT LEARNER: AN AWAKENING 59

Some faculty members and administrators insisted that evening stu-dents pay the signifi cantly more expensive part-time rate. This made the degree much more costly than the daytime equivalent. After numerous battles, most universities determined that the evening tuition rate should actually be less than the day part-time rate because those students consti-tuted a different constituency (market), and should be priced differently. Traditionalists argued that those who would normally attend the regular (day) programs would select the evening program in order to earn their degree at a lower cost. At many institutions, a compromise was reached when entrance into the less expensive evening programs carried a mini-mum age requirement of 23 years.

Faculty Confl icts

As soon as adult continuing education moved into the realm of full aca-demic degrees, confl icts arose about who should teach evening courses. Full-time tenure track professors usually did not want to teach in the eve-ning unless it was for an overload pay adjustment (stipend) as a percentage of their salary; and yet other faculty members were still not interested at all. More aggressive academic department chairs encouraged their full- time faculty to teach in the evening so that they would be able to add more faculty members and increase the infl uence of their department.

Most successful evening programs settled upon a primarily adjunct fac-ulty model. Evening program administrators assisted in the recruitment of adjunct faculty according to academic credentials deemed to be acceptable by department chairs. Additionally, part-time faculty members needed to be professionally experienced in the fi eld of study in which they taught. They also needed to demonstrate an ability to teach adults in an andra-gogical mode (facilitation) much like what Malcolm Knowles advocated. The better evening programs required potential adjunct faculty members to validate their andragogical teaching ability in a certifi cation workshop before being allowed to teach their fi rst course.

The rigor of adjunct faculty selection procedures impressed many tradi-tional faculty members. Others viewed the practice as favoring educational process over content mastery. Nonetheless, the introduction of adjunct faculty in the classroom who occupied professional positions to which adult students aspired made evening degree programs especially attractive to those students.

60 M.J. DUMESTRE

Academic Integrity Issues

Even though evening programs were taught differently, the academic out-comes of evening programs needed to be the same as day programs in order to protect the academic reputation of the institution. Not all faculty members thought that was possible. To this day, pedagogical prejudice still persists among some departments.

This opinion assumes that it is not possible for part-time adult stu-dents to have the same academic experience as full-time traditional college students. For instance, it assumes that an evening program Bachelor of Science (BS) in psychology could never be as rigorous and effective as the same degree for full-time, traditional-age (day) students. In order for evening programs to become institutionalized and thrive, this perception and other critical academic issues needed to be resolved.

Academic administrators facilitated deep differences in faculty views about the appropriateness of extensive, highly enrolled adult degree pro-grams in the university. Often these differences resulted in compromise.

The “Studies” Compromise

An enduring question was whether or not evening programs would have the same academic majors as the regular day programs. Instead of offering an evening program major in psychology, for example, a major in applied psychology or psychology studies would only be offered. In other institu-tions, it was proposed that evening programs should even have a different baccalaureate degree designation. Instead of the Bachelor of Arts (BA) or BS, the evening degree would be a Bachelor of General Studies (BGS), or a Bachelor of Liberal Studies (BLS), or a Bachelor of Applied Studies (BAS).

The “studies” label for majors and degree designations carried the patina of being “off brand.” Advocates for these “off-brand” majors and degree designations countered by pointing out that these degrees actu-ally gave more freedom for credit transfer from other institutions into degree requirements (a signifi cant value for adults) and a greater variety of courses to choose from in the curriculum. Not all institutions settled on this compromise, but a quick look at university catalogs across the country today will indicate that many of these “studies” labels in evening programs still exist.

THE ADULT LEARNER: AN AWAKENING 61

Credit for Prior Learning and Learning

Typically, after a failed fi rst try at college (due to self-infl icted problems or having to leave because of circumstances out of their control), adult learners know that a degree matters. They need it for advancement in their company, or to keep their current position, or a possible change in career, or for self-fulfi llment, or all of the above. And they need to earn it as soon as possible. Unscrupulous colleges take advantage of this need and charge hefty tuition fees for a “quick degree,” which often is not valued by potential employers or society at large. This makes it an almost ethical imperative for reputable universities to offer degree programs that accelerate time to completion in an effi cient and high-quality way. This means much more than reducing the number of months or years it takes for degree completion.

Transferring course credit from previous institutions has been a fairly straightforward way of reducing the number of courses needed to com-plete a degree. Courses earned at an accredited institution with a passing grade typically were accepted as fulfi llment of degree requirements. Some universities disallowed transfer of courses completed many years prior to admission. These policies changed with the increase in waiver petitions for general education courses in which the body of knowledge did not signifi cantly change over time. Timeframe restriction policies soon became a thing of the past.

Given adult students’ sometimes extensive professional experience, they also have documented learning that could apply to their degree pro-gram, which also reduced the number of courses needed for graduation. The ACE College Recommendation Service was created to evaluate and certify military training, professional certifi cations, and other modes of learning, by assigning a suggested number of academic credits for these experiences. 5 When students are competently advised about these oppor-tunities, ACE certifi cations help document authentic previous learning that can be applied to a specifi c degree program. Being able to document and include these learning experiences greatly assist adult learners.

Another important aspect of successful adult-oriented degree pro-grams was the emergence of Prior Learning Assessment (PLA). 6 This type of documented learning from varied experiences was often misla-beled as “credit for life experience.” Academic credit was never awarded just for the experience of living; it was for documented learning that had taken place through personal and professional achievement. Putting

62 M.J. DUMESTRE

together a PLA portfolio is an arduous process and must be directed (or approved) by each university. Examples of PLA credit are experiences such as corporate training courses, professional certifi cations, operating a successful business (with proof of expertise and achievement), mas-tery of programming languages, and so forth. Each university assesses the portfolio and assigns a specifi c number of credit hours for those documented learning experiences, often confi ned to elective courses in a degree program.

Another way for adult students to accelerate their time to degree completion was to “test out” of a particular course through The College Board’s College Level Exam Program (CLEP). 7 The CLEP system gained popularity over the years. Currently, there are over 30 CLEP exams that cover content in lower-level general education courses. A passing grade on a CLEP exam carries the equivalent of three credit hours (or more).

The acceptance of documented prior learning of various types has been the result of hard-fought clashes with the traditionalist academic faculty members and administrators. They argued against these changes in academic policy not for the sake of simply adhering to the status quo or an uncaring attitude toward the adult learner. Rather, they have been concerned about protecting the academic reputation of their university. Meeting the needs of this new type of student stretched notions about the nature of college-level learning in ways that are still foreign to many faculty members. For traditionalists, their concerns increased as evening degree programs matured and further deviated from the traditional model.

New Delivery Systems

Greater emphasis on adult learners necessitated more fl exibility in how courses and degree programs were organized. Clearly, it is hard, if not impossible, for adults with family responsibilities to attend class two or three evenings per week over a full semester in order to complete one course. This reality gave rise to new course delivery models tailored for the adult learner.

The Accelerated Course Format Universities have long offered summer courses. Harvard’s summer school began in 1879. 8 A hallmark of the summer session is the accelerated course

THE ADULT LEARNER: AN AWAKENING 63

format, which is anywhere from one week to eight weeks in length. The number of contact hours with an instructor in the traditional classroom setting approximated that of a full semester.

Another traditional accelerated format is the intersession. These one to two week terms are offered between semesters (January, May, and August). In this format, courses meet daily for extended time periods, approximat-ing the same contact hours as a semester. The intersession enables students to explore different topic areas or to catch up on credits not earned in the traditional term.

Faculty members accepted these accelerated course formats because they typically were taught on campus, the instructional contact hours were acceptable, and they were meant to augment the traditional semester, not replace it. But when evening program administrators proposed course format changes many faculty members resisted them because of radical changes in both format and instructional assumptions.

It soon became very clear that if the university wanted to more ade-quately accommodate the needs of the adult learner, course formats and delivery systems needed to change. Universities experimented with active learning strategies and developed four-week, six-week, and eight-week course formats—all three credit hour classes. Accelerated programs also offered “weekend formats” that required attendance for six to eight hours on three weekends over the semester.

In order to institutionalize these new formats, it was incumbent upon evening administrators to demonstrate their effi cacy. Over time, the aca-demic integrity of these new formats indeed was documented. 9 Also, prin-ciples for good practice emerged, including the following:

• Enrollment is restricted to adults (over age 23) to insure a mature, motivated class environment;

• Students also were required to have work experience—another hall-mark of an adult learner orientation;

• Student outcomes should be evaluated and deemed the same as a full-semester course;

• Four-hour class sessions are held one night per week in an accelerated term to accommodate the needs of working students with families;

• Out-of-classroom work is assigned by the instructor that equates to instructional time, for example, projects, group work, fi eld studies, online discussion board, wikis, and so forth;

64 M.J. DUMESTRE

• Active learning strategies (not just lecture/discussion) should be employed by the instructor to elicit connections with adult learner experiences and to productively utilize the longer class period;

• Adult students are typically restricted to taking only one class at a time (two courses over a traditional semester) because of the inten-sity of the accelerated format;

• Academic and student services should be accessible in the evening for the convenience of adult students.

These principles insure academic integrity and situate adult students in a supportive environment. True to andragogical values, learning is con-textualized according to the needs of the learner, not the instructor, nor unproductive constraints of institutional tradition.

Extension Campuses In the 1970s, and to a certain extent today, many faculty and administra-tors frown upon viewing students as customers. The traditional under-standing of the college student stems from a pedagogical viewpoint. This educational understanding considers students as passive vessels to be fi lled with knowledge in a structured setting for future use beyond graduation. Perseverance is part of the college coming of age experience. But, true to andragogical principles, part-time adult students view higher education from a more utilitarian standpoint. They expect universities to meet them halfway in the teaching/learning process. And that literally includes the distance and time it takes to reach campus.

Successful adult-oriented degree programs set up extension campuses in offi ce buildings close to where their students live and work. This outreach met two important needs. First, extension campus locations made it con-venient for adult students to attend class after work. Dealing with traffi c during evening rush hour is a very real obstacle for these students. Second, offi ce building locations were comfortable and appropriate settings for students who either worked in that environment or attended company training classes in those venues.

Teleconferencing Accepting an accelerated term format and extension campuses, as hard as they were to institutionalize, was easier than removing the professor from the face-to-face immediacy of the classroom. One way of experimenting

THE ADULT LEARNER: AN AWAKENING 65

with technology-assisted instruction was to duplicate the classroom envi-ronment by teleconferencing class sessions to multiple extension sites. The professor moved from behind the podium virtually to a large screen tele-vision monitor for student viewing at extension campuses. This format preserved the traditional classroom environment, and it enabled faculty to teach their class to students at multiple sites.

Advocates of the format emphasized the real time, synchronous aspect of the technology—almost like being in the same classroom. Teleconferencing also enabled classes to be videotaped for students who either missed a class session or wanted to review some part of the session. It was considered best practice to have teaching assistants at the extension sites to help with the technology and to organize student questions and group work for the professor.

Critics pointed out that increasing the number of students in a class at different locations was actually worse than a large auditorium classroom. The logistics of answering questions from multiple locations tended to be awkward. A television modality (albeit on a very large screen or multiple screens) fostered passivity instead of active learning. The teleconferenced class was an interim e-learning technology. It would soon be replaced by more sophisticated internet technologies.

Online Blended Format The fi rst online academic classes were hybrids of face-to-face and computer- mediated (internet) modalities. These classes blended time in the classroom with online work done away from class. It was easier for faculty members to accept this format because the online work tended to take the place of homework as well as independent study and group projects. It was still anchored to the classroom, but faculty members rightly complained that minimal assistance was typically given to them for mastering online technologies. Also it was onerous for them to properly restructure their classes for this new modality.

Nevertheless, the blended format has become increasingly popular since the beginning of this century because of three primary reasons. First, investments already have been made on internet infrastructure on campus. Initially, many administrators questioned this type of expensive investment without specifi c academic plans on how it would enhance teaching and learning. More often than not, investments in high-speed internet lines and wireless connectivity were made out of a vague fear of being left behind. The blended format emerged as an excellent, concrete example of how e-learning technologies can be effectively used.

66 M.J. DUMESTRE

Second, increased sophistication of the Learning Management System (LMS) made it easier to use technology for the blended format. Most every university has an LMS for course management, content delivery, student interaction (discussion boards, online collaboration, and group work), assessments, grading, and other academic functions that can be facilitated online.

Third, the effectiveness of the blended format has been documented by a DOE meta-study investigating online learning. 10 The study found that students in academic programs utilizing online technologies actually performed modestly better than those in totally face-to-face traditional classes.

Ironically, blended classes tend to use more active learning strategies (structured exercises, peer critiques, group projects, etc.) than what is typically employed in the traditional face-to-face classroom environment. These strategies help students deepen their learning through collaboration and application.

* * *

Distance does matter; working outside of the classroom can actually increase student interaction. If students do not have an instructor behind a podium directing their learning (lecturing), it becomes evident that the onus of learning is on the learner, not on a good lecturer. Students either immediately realize this and respond positively, or they drop out of the program. Online learning is not for the unmotivated or immature student.

STRATEGY IMPLICATIONS When universities awakened to the needs of the adult learner, changes in structure and operation were necessary in order to fully engage these students. Some universities made substantive changes, others made nominal adaptations. Institutions that fully embraced the needs of part-time working adult students did so by acknowledging the authenticity of andragogical principles by either restructuring or creating new evening programs.

Typically, enrollments in adult student programs of these universities increased substantially. The relatively high net revenue from those pro-grams affected university budgets positively because the needs of adult learners were oriented almost exclusively to academic operations, a fraction

THE ADULT LEARNER: AN AWAKENING 67

of the cost of operating a traditional student college with all of the neces-sary social amenities.

In summary, the following developments made possible a full accom-modation to the needs of the working adult student:

1. The Power of Andragogy as Learning Theory. Malcolm Knowles’ popularization of andragogical principles was much more than an articulation of how to teach adults. Andragogy compels instructors to understand the educational needs and motivations of their stu-dents. It reorients a one-way transmission of knowledge from the instructor (the pedagogical style) to mutuality, recognizing that stu-dents bring experience and insights into the teaching–learning expe-rience (andragogy). The truth and power of andragogy helped to advance the part-time adult learner into an increasingly valued stu-dent status in the university.

2. New Students in Plain Sight. In great part, the success of for-profi t universities awakened not-for-profi t private and state universities to the potential large student populations that have been underserved for many years. It took a change in mindset for traditional universi-ties to adequately address the needs of the adult learner; some insti-tutions made the transition, while others have not done so. Many universities are to be commended for expanding their perceptions of what constitutes the university student population. The creation of robust evening programs dedicated to the adult learner, for some very tuition- dependent universities, actually saved them from fi nan-cial ruin. But, more importantly, serving the educational needs of this very large student constituency taught many universities a les-son in adaptability and change management.

3. The Studies Compromise . Better access to university academic degree programs for working adults was a signifi cant achievement. Academic battles were won over the use of the accelerated term, credit for prior learning, computer-assisted instruction (e-learning), extension cam-puses, and even, fully online learning. But these changes came with a price. There was the insistence on having adult learner-oriented pro-grams carry “off brand” academic labels. The “Studies Compromise” still exists in many institutions today; however, this was the beginning of an opening to a large new student constituency.

4. Restructuring Successes and Problems. The university restructuring that was required to address the needs of working adult students was

68 M.J. DUMESTRE

minor compared to what Christensen and Eyring call for in The Innovative University . Yet, it was not an easy accomplishment, and many universities only partly restructured—a primary reason for minimal success. Institutions that radically restructured tended to have greater success.

Once academic confl icts were settled, some evening divisions were left with insuffi cient power and infl uence. For instance, it took a signifi cant change in traditional university marketing, recruiting, and admission strategies to become successful with adult-learner degree programs. Returning adult students need a lot of encourage-ment to return to college. Adult program recruiters emphasize access and ease of enrollment rather than selectivity. Despite the signifi cant net revenue returns from the adult program, there sometimes is great reluctance to fi nance this new way of recruiting students.

* * *

It is diffi cult to interweave the sometimes Byzantine institutional prob-lems outlined above with the deep positive effect successful programs have had on the lives of these students and their families. Seeing the unbridled joy of adult learners crossing the stage to receive their diploma at a com-mencement ceremony and hearing the cheers of their family makes all of the diffi cult institutional change efforts worthwhile.

The most profound advancement in a new academic delivery system will be dealt with in the next chapter. Completely online degree programs fl ourished only after more autonomy was given to faculty, administrators, and staff specifi cally dedicated to them. A new college in the university structure was born out of the awakening to this underserved student population.

NOTES 1. Fast Facts: Graduation Rates, U.S. Department of Education , Institution

for Education Sciences , National Center for Education Statistics , accessed November 26, 2014, http://nces.ed.gov/fastfacts/display.asp?id=40

2. Clayton M. Christensen, Michael B. Horn, Louis Caldera, Louis Soares, Disrupting College : How Disruptive Innovation Can Deliver Quality and Affordability to Post Secondary Education (Washington, D.C., Center for American Progress, 2011).

3. Malcolm Knowles. The Adult Learner : A Neglected Species (Houston: Gulf Publishing, 1973).

THE ADULT LEARNER: AN AWAKENING 69

4. Knowles, pp. 45–49. 5. See the American Council On Education website, accessed November 21,

2014, http://www2.acenet.edu/credit/?page=transcripts_faq 6. See “Adult Learners Guide to PLA,” American Council of Education,

accessed November 22, 2014, http://www.acenet.edu/news-room/Pages/Adult-Learners-Guide-to-PLA.aspx

7. See “CLEP.” The College Board, accessed November 22, 2014, http://clep.collegeboard.org

8. See Harvard University entry in the New World Encyclopedia, accessed November 23, 2014, http://www.newworldencyclopedia.org/entry/Harvard_University

9. Raymond J.  Wlodkowski, Jennifer E.  Mauldin, and Sandra W.  Gahn. “Learning in the Fast Lane: Adult Learners’ Persistence and Success in Accelerated College Programs,” Lumina Foundation for Education , New Agenda Series , Council for Accelerated Programs, Resources, accessed November 25, 2014, http://www.capnetwork.org/wp-content/uploads/2014/02/fastlane.pdf

10. “Evaluation of Evidence-Based Practices in Online Learning: A Meta- Analysis and Review of Online Learning Studies,” revised September 2010. U.S. Department of Education Offi ce of Planning, Evaluation, and Policy Development, accessed December 6, 2014, http://www2.ed.gov/rschstat/eval/tech/evidence-based-practices/fi nalreport.pdf

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71© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_6

CHAPTER 6

Abstract This chapter chronicles the development of colleges primarily devoted to adult learners. This change in university structure furthered the andragogical movement and supported the creation of fully online degree programs. For-Profi t regionally accredited universities emerged during this same period, proving that a university can accommo-date thousands of working adult learners in cost-effective ways. This for-profi t university disruptive innovation would encounter serious operational problems when these institu-tions became publically traded because of stockholder expectations for annual increases in profi ts. Similarly, not-for-profi t universities expected their colleges dedicated to non-tradi-tional learners to fund defi cits caused by their ineffi cient traditional colleges. These success-ful adult-oriented colleges tried to separate from the traditional university structure. But only a handful of them were able go their own way.

Keywords Adult learner colleges • For-profi t universities • Online degree programs • Online colleges

The emergence of the adult learner student population transformed some traditional universities and moderately benefi ted others. For-profi t institu-tions, however, disrupted US higher education by creating new universi-ties almost exclusively dedicated to the part-time adult learner.

For-profi t universities made their campuses and programs accessible by not trying to compete with the highly selective elite institutions, and the elite aspirants. Why did this not happen in more traditional not-for-profi t institutions? Utilizing Christensen’s metaphor, it is hard to change one’s own DNA. Not-for-profi t universities that evolved did so by a change in structure.

A New College

THE POWER OF  TOTALLY ONLINE LEARNING The invention of the World Wide Web (the Web) laid the foundation for totally online learning. Created by Tim Berners-Lee in 1989 at Conseil Européen pour la Recherche Nucléaire (CERN), the European Council for Nuclear Research, in Switzerland, the World Wide Web made the internet available to the world with three interconnected innovations:

1. Hypertext Markup Language (HTML); 2. Uniform Resource Identifi er (URI); 3. Hypertext Transfer Protocol (HTTP). 1

Most notably, CERN made the Web open source, royalty-free. This now ubiquitous medium matured in a remarkably fast timeframe. In less than a decade after its creation, it was being used for education, shopping, social media, and in myriad other ways.

The Web became widely accessible, but only after signifi cant infrastruc-ture build-out costs. Universities had to overcome substantial obstacles in order to offer online programs. There was a lot of learning through experimentation. Initially, staff and faculty members tried to duplicate the classroom in the online environment. This was a problem because, as indi-cated in the previous chapter, viewing lectures was simply being a passive student watching television. Eventually, the wisdom of using the online medium to take advantage of its interactive power prevailed, and the now familiar structure and tools eventually emerged: discussion boards, team-work wikis, interactive video, and so forth.

Many of these interactive tools were developed only after high-speed connectivity became more accessible. The 56k modem was the fastest connection available for consumers in mid-1990s. High-speed lines were available only in educational institutions, corporations, libraries, and other select organizations. Wireless connectivity would not be practical until at least the end of the decade. In a very real sense, the sophistication of online courses developed in tandem with the capacity of the internet.

Initially, being able to complete an entire degree online from a regionally accredited university was a novelty. For-profi t universities dominated the market, even with an “off brand” or untested reputation. In the late 1990s, for-profi t universities used their substantial investor-funded resources to fi nance an unprecedented amount of advertising portraying their type of higher education as education for the real world. Many people thought this

72 M.J. DUMESTRE

educational approach was the leading edge of the way universities should teach and be organized. Not only did Wall Street buy this premise, but so did regional and state accreditors, as well as many legislators.

Large, accredited for-profi t universities were ideally structured for a strong entry into the online market when the Web appeared and internet connectivity started to become robust. These institutions were at the fore-front of a new wave of higher education. Online enrollments increased at a rapid rate and would soon constitute much of the vast majority of the for-profi t student population. Substantive problems would not appear for a decade or more. For-profi t university education was riding high.

Reactions in the not-for-profi t higher education community were dis-missive and bordered on ridicule. The viral-like increase in for-profi t online education was an attack on the traditional university. It was inconceivable to take totally online education seriously. But some university educators dedicated to the adult learner viewed for-profi t online successes as indeed the beginning of a very real change in higher education.

Just as for-profi t universities were ideally organized for online edu-cation, so were successful not-for-profi t university evening programs. Academic arguments about academic integrity were undertaken. Evening degree programs were offered on campus and increasingly in neighboring community extension campuses. Seeing the success of for-profi t online programs, the next step would be from the campus into cyberspace.

In order to make this leap into totally online degree programs, the following challenges needed to be resolved in not-for-profi t universities.

1. Academic and Regulatory Approval for Online Courses . Typically, a university-wide academic committee would need to approve new courses or changes in delivery systems. This was a challenge for many institutions. In some cases, academic traditionalists would try to block the initiative. The move to online delivery could have very easily stopped there. The regional accrediting agency also would need to approve any type of distance education because it was con-sidered to be substantive change. It was the infl uence of persuasive academic administrators and the creation of credible academic safe-guards that made it possible to gain required authorizations.

2. Common Syllabus and Instructional Design . The structure and design of online courses started to evolve in the mid-to-late1990s. As noted above, that mode of instruction evolved into more interactive discussion boards, case studies, and group projects. But expertise was

A NEW COLLEGE 73

a problem. Universities might have only one or two media experts to help faculty in a Center for Teaching Excellence that served the entire university. But universities that were serious about getting into fully online programming soon had multiple instructional designers work-ing with faculty on uniformity of methodology and design. Consistency in look and feel of the course platform was a paramount concern for students studying at a distance. The enterprise model (uniform course design) for degree programs was also important for adjunct faculty who typically did not have instructional design expertise.

3. Intellectual Property Right Issues. Some faculty members who cre-ated the fi rst online courses wanted to view them as their own intel-lectual property subject to the receipt of royalties, much like what they would receive from a published book. This claim was fraught with serious problems from the university’s point of view. The reso-lution was to pay a stipend to faculty who worked with instructional designers to produce a course. This was deemed “work for hire,” which meant that the course was owned by the university. In this way, other faculty members could teach the course as a template, making minor adjustments of their own.

4. Academic Administration Accommodations. Admitting students totally online took many accommodations in the admissions, regis-trar, and fi nancial aid offi ces. Before the Federal “50% Rule” was rescinded, online students were ineligible for fi nancial aid. It took university fi nancial aid administrators some time to adjust to the change. Until university systems were adapted for this new mode of course delivery, there often was a lot of tension between academic administrators and admissions/fi nancial aid administrators.

5. Faculty Selection and Training. Best practices for online teaching soon emerged. Much like adult evening classes on campus, faculty members needed to be comfortable with an andragogical mode of teaching (facilitation) as opposed to lecturing. In the online envi-ronment faculty members had to learn online technologies; but most importantly, there was the need to connect with students sev-eral times each week. Accelerated interaction is simply the nature of the online medium. Partly because of full-time faculty lack of inter-est and workload issues, adjunct faculty taught the overwhelming majority of online courses. It is for this reason that most universities required orientation and certifi cation workshops for potential adjunct faculty members. Even if from a distance in an online

74 M.J. DUMESTRE

environment, they represented the university to their students. They needed to give assent to the mission of the university and to be immersed into the university’s academic culture.

6. Marketing and Promotion. Some prestigious universities entered the online market fairly early through online consortia agreements. They assumed that the power of their reputation would attract stu-dents, which proved to be a recipe for disaster. These efforts failed rather quickly. As noted above, for-profi t universities spend over 20% of revenue on advertising and promotion. This amounts to mil-lions of dollars annually. Not-for-profi t institutions with successful online programs spend about half that amount, but that is still unimaginable for most traditional universities. The lack of adequate advertising is a primary reason that many not-for-profi t online pro-grams (even at elite universities) either failed or underperformed.

This change in mindset was very diffi cult for traditional university administrators, even with the prospect of impressive fi nancial net revenue projections coming from online programming. Moving to an aggressive promotion mentality means much more than devoting more funds to advertising. It also takes an investment in highly paid new personnel who know how to manage online advertising and promotion.

7. The Partnership Solution . It typically costs about $3 million for a university to successfully launch online degree programs. 2 New posi-tions are needed and additional funds must be devoted to program development and promotion. Consequently, positive net revenues are not generated until about the third year of operation. Most uni-versities are not willing to make an investment of that size to launch new programs. If an institution tries to enter the market “on the cheap” by only modestly investing in online programming, failure becomes a self-fulfi lling prophecy.

There is a good alternative to a university’s aversion for this size of investment in unfamiliar initiatives—the partnership solution. Over the past few decades, a new outsourcing industry developed to assist traditional universities with the launch of online programs. Online Program Management (OPM) providers are companies that create “turnkey” solutions for the creation and delivery of fully online degree programs. For a fee of about 50%–70% of tuition, these companies work with faculty and staff to put existing degree programs into the online environment. Typically, these types of companies provide the

A NEW COLLEGE 75

following cluster of services for no upfront fee: assistance to faculty for course creation, LMS hosting, coordination with university services, recruiting and admissions, and advertising and promotion. Alter-natively, an OPM can provide unbundled services for a reduced fee.

Perhaps the most signifi cant value proposition for employing an OPM is local, regional, national, and international market analysis for the demand of particular degree programs. Additionally, a fore-cast of enrollments for each degree program would be presented as part of an eight–ten-year contract. If those enrollment goals were met, the university would realize net revenues in the millions of dol-lars, depending upon the number of programs offered.

Characteristically, some faculty members balk at such an arrange-ment. It appears that the university is being taken over (little by little) by a for-profi t company. More specifi c objections include: the large percentage of tuition revenue paid to the OPM, the length of the contract, anxiety about overly aggressive recruiting practices, possible misrepresentation of the university’s mission and values, and concern about the university’s reputation for high-quality, personal faculty–student interactions.

The more reputable and successful OPMs view their contractual relationship with each university as a partnership, as opposed to an outsourcing contract. They answer university concerns by: demon-strating a deep understanding of the university’s mission and values, respecting faculty academic freedom as subject matter experts, hav-ing company recruiters and admissions personnel visit the campus to understand the university culture; and emphasizing retention and graduation rates over new student enrollments (starts).

These partnerships can provide a powerful boost to traditional universities, but problems can also result in an underperforming or a failed relationship. Diffi culties on the university side of things can be: faculty who will not fully participate in the course creation pro-cess; uncooperative admissions and fi nancial aid personnel; obstruc-tionism by university marketing and recruiting departments; and in some cases, there can be disputes over which departments (or the university general fund) benefi t from increased net revenue.

On the other hand, problems occur when an OPM does not fully understand faculty needs and values; communication with university services offi ces might be dismissive; too much pressure could be put upon university admissions to accept questionable applicants; the

76 M.J. DUMESTRE

amount of advertising and promotion funds may not be suffi cient enough to meet enrollment goals; and there could be miscalcula-tions about the demand for particular degree programs.

When these types of partnerships work well, it can be a signifi cant university advancement. When partnerships fl ounder or fail, both parties suffer. Consequently, it is vitally important for potential OPM partners to be vetted thoroughly by the university. And good OPMs equally assess whether or not a university is ready to move wholeheartedly into fully online degree programs.

* * *

The trajectory of these new formats for adult learners moved increasingly away from the traditional campus classroom. Many tradition- bound uni-versities had great diffi culty in making this transition; and some institu-tions, to this day, have never fully made the leap. The more a university is selective in its admission criteria and highly endowed, the less likely it is to have robust online degree programs for adult learners. (MOOCs and online consortia would appear much later.) Universities that had early suc-cess in its evening and online programs were likely to make an even bigger change in their institution—a new college.

A NEW COLLEGE FOR WORKING ADULTS A review of many university websites today will indicate a college devoted to the adult learner. Names tend to be something like the College of: Professional Studies, or Continuing Education, or Continuing Studies. These names carry a somewhat lower-quality academic connotation, despite the fl exibility that comes with having a non-traditional title.

As previously noted, these colleges were formed by their respective uni-versities in the 1970s through the 1980s when enrollments in the evening divisions began to increase and the number of degree offerings started to proliferate. The college designation gave adult degree programs new-found freedom, but it also came with a price. The following conditions, explicitly or implicitly, were placed upon these new colleges:

• The college would be oriented toward the needs of the adult learner, both part-time and full-time;

• Strict cost accounting would be applied to all capital and operational expenses, including those associated with extension campuses;

A NEW COLLEGE 77

• The tuition rate was expected to be less than the traditional “day programs”;

• Students would need to be at least 23 years old, with some work experience;

• Enrollment revenue needed to provide positive annual proceeds to the university;

• Both undergraduate and graduate degrees could be housed in the college;

• Program directors would provide administrative oversight of their degree programs, with a small number of full-time faculty;

• Faculty members would not need to be tenure track, but could be eligible for renewable annual contracts or multi-year contracts;

• The large majority of classes would be taught by adjunct faculty, but only with the appropriate academic credentials and professional experience in the discipline (supervised by program directors);

• College administrators would be responsible for marketing and promotion of programs, as opposed to the university admissions/marketing department;

• It was expected that new degree programs would be created to meet industry/service sector demand;

• Student services would be limited to providing timely access for effective academic and administrative needs for students (not tradi-tional campus social needs);

• Admissions, advising, and credit for prior learning services would often be specialized and separate from academic departments;

• Faculty and administrators could invite academic departments of dif-ferent colleges in the university to contribute to interdisciplinary or multidisciplinary degree programs;

• Underperforming degree programs (under-enrolled and/or lacking in academic quality) would be phased out, and new in-demand pro-grams would be created;

• The college often had extension campuses throughout their region; • Online degree programs were almost always housed in this college.

The characteristics of this new type of college sounds like what many crit-ics of higher education are calling for today.

The traditional undergraduate college does not operate with these same conditions. Ordinarily, the university does not charge the total operational costs of these colleges to their operation. They do not carry

78 M.J. DUMESTRE

expenses associated with classroom buildings, residence halls, recreational complexes, student service operations, athletics, and the other expendi-tures associated with amenities that traditional-age students have come to expect. Rather, they are considered part of the overall overhead expenses charged to all of the colleges in the university on a proportional basis. In other words, the adult oriented college is charged for its total operational costs; but traditional undergraduate colleges are not charged for their total costs, which are considerably higher.

THE DECISION TO SEPARATE Universities that have had signifi cant success with their adult learner- oriented colleges sooner or later found themselves with an “ Identity Crisis .” Due to very different advertising and promotion strategies necessary for recruiting adult learners, university administrators and some trustees wor-ried about changing perceptions about the very nature of their university.

A College for Professional Studies (CPS) must conduct mass advertis-ing on TV, radio, and now increasingly through social media to reach adult learners. Ad messaging must include accessibility, convenience, rel-evant in-demand majors, one night per week classes, up to six enrollment periods in a calendar year, and compelling reasons why working adults should choose this college to complete their degree.

Traditional colleges in the university still recruit in conventional ways, through high school enrollment counselor visits, college fairs, mailings to lists of eligible high school student families, and social media chan-nels. Their recruitment narrative is very different from adult learner ads. Focus is on campus life and amenities, athletics, availability of scholar-ships, rating agency rankings, and other ways of indicating high-quality reputation. There also is the subtle balance of promoting the university’s selectivity (being fortunate to be accepted) and accessibility (encourage-ment to apply). The “coin of the realm” is the reputation as a selective, high- quality institution, presumably giving its graduates an advantage on employment applications and in social circles—a good value (lifelong enhanced personal identity) for a necessarily substantial tuition bill.

Managing the identities of very different types of colleges in the same university is a diffi cult task. With few exceptions, students singularly value the name of the university on their diploma, not the individual college in which their academic program was housed. Identity problems are more an internal political matter than one of public perception.

A NEW COLLEGE 79

If, within the same private not-for-profi t university, a CPS has 12000 adult students (mostly part-time and online), a College of Arts and Sciences with 1200 full-time, traditional-age students, and a College of Music with 1000 full-time, traditional-age students, the internal identity problem is almost a certainty. Traditionalists in the university (including some staff and administrators) will complain that the university has become a vir-tual online institution, only one step removed from the highly suspect online for-profi ts. They contend that families of 17-year-olds hear the CPS commercials and do not differentiate that college from the university as a whole. Why would those families send their daughter to a for-profi t looka-like for $40000 per year in tuition, room, and board?

The CPS administrators’ reply is two-fold. First, traditional-age stu-dents and their families recognize the difference between it and the tradi-tional colleges in the university because of the advertising. Their daughter is not interested in attending only at night with working adults. And, most likely, the family has surely received information about the reputa-tion and amenities of the university’s traditional colleges. Second, most of the university’s competitors of equal reputation have an equivalent adult- oriented college like CPS. There should be no loss of reputation by simply advertising that the university is friendly to the adult learner as well as to its traditional age constituency.

In some, if not many, cases logic does not apply to this dispute over identity. The desire to operate the university in the same way it has func-tioned for over 100 years can be much stronger than reorienting to meet the needs of a relatively new student constituency. Traditionalists view the founding college of the university (oriented to traditional-age students) as the “heart of the university’s identity.” In their view, the addition of graduate programs and other types of students should serve the needs of the traditional student population.

Resolution of this identity debate is analogous to an intractable family dispute. Should the resolution be separation, divorce, or simply living with the tension? An example of separation is to have, in this example, CPS located on a nearby campus separated from the main campus, with its own academic governance structure, marketing, admissions, and operations.

The divorce option is for CPS to separate completely in a different location, and apply for its own accreditation. In effect, it would turn the university into a university system. Both universities in the system would need to be fi nancially self-supporting. This option is least desirable for the traditional colleges that need the net revenue from CPS operations.

80 M.J. DUMESTRE

The living with the tension option is the least desirable, but most com-mon option. This one avoids the diffi cult work of restructuring, with a prevailing hope that things will get better if there are personnel changes. Non-action is an avoidance mechanism that eventually leads to questions about sustainability—fi nancial and otherwise.

State universities can avoid these problems because of longstanding gov-ernance systems that have multiple campuses with separate accreditations. For example, Colorado State University (CSU), in Fort Collins, Colorado, created the Colorado State University Global Campus ( CSU-Global ) in 2007 as a fully online university. 3 The institutions share the same Colorado State University name, but they operate independently, serving very differ-ent types of students. CSU-Global is now part of the CSU system along with CSU-Pueblo, located in Pueblo, Colorado.

STRATEGY IMPLICATIONS 1. The Emergence of Colleges Dedicated to Working Adults.

Dedicating a new college in the university to the needs of a particu-lar student constituency has a profound effect. It necessitates a restructuring of all aspects of academic and student service systems to meet the needs of adult learners. These new colleges demonstrate organizational creativity, which allows universities to meet the needs of students other than traditional 18–22-year-olds.

2. The “Cash Cow” Syndrome . Because adult-learner-oriented col-leges operate in effi cient ways, foregoing many of the amenities of the traditional college experience, they tend to provide a signifi cant amount of annual net revenue for the university. Some administra-tors rather unabashedly admit that adult learner-oriented colleges were founded to supplement the annual defi cits of the traditional colleges. Generating signifi cant annual net revenues is very positive for the university so long as the adult programs themselves are adequately supported. Otherwise, these colleges are simply cash cows that cover annual losses endemic in the fi nancial structure of traditional undergraduate colleges.

3. The Value and Consequence of Transparency . It is most important to determine the cost of operating each unit of the university. Too often the founding college dedicated to traditional-age students is exempt from absorbing its true cost. Accounting solely for instruc-tional costs is inadequate. These students require a full suite of

A NEW COLLEGE 81

services that constitute the college coming-of-age experience. This reality is less of a critique of the traditional college experience, but more of an observation that this system of higher education must be paid for by tuition, net revenue from student services, and from endowment funds. Dependence upon adult student colleges and other more effi cient academic operations eventually leads to fi nan-cial unsustainability. Without the benefi t of an enormous endow-ment, losses from traditional colleges in the university will eventually exceed the net revenue generated by adult student colleges. Administrators and trustees need to demand nothing less than this type of transparency.

4. The Structure Decision. Universities with successful adult-oriented colleges eventually will need to make a decision about structure. Should the university detach the adult college from the university and apply for separate accreditation? Most institutions will not do so, despite questions about university sustainability. The unfortu-nate tendency is to merge the adult college with traditional colleges in the university. This type of structural change most often results in decreased enrollments in adult learner programs due to resources being diverted to traditional colleges along with a return to the dominance of pedagogy over andragogy. All too often this structural change is the beginning of a downward spiral.

NOTES 1. See “History of the Web,” World Wide Web Foundation , accessed April 17,

2015, http://webfoundation.org/about/vision/history-of-the-web/ 2. Carl Straumsheim, “A Market Enabled,” Inside Higher Ed , September 11,

2015, accessed January 17, 2016, https://www.insidehighered.com/news/2015/09/11/online-program-management-providers-now-billion-dollar-industry- look-ahead

3. See the CSU-Global website at https://csuglobal.edu/

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83© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_7

CHAPTER 7

Abstract This chapter drives home the point that the source of fi nancial unsustain-ability often is a traditional undergraduate college structure and operation. Two types of change are explored as ways of addressing unsustainability—incremental and transformational. Incremental change can substantially alter university operations for the better. Transformational change modifi es the fundamental structure of the institution, thereby reinventing it. Examples of incremental change are cited, but universities that engaged in transformational change are featured. Transformations at Southern New Hampshire University, Brandman University, St. Leo University, and Arizona State University are outlined.

Keywords Incremental change • Transformational change • Southern New Hampshire University • Brandman University • St. Leo University • Arizona State University

University fi nancial sustainability is principally a structural issue. Even the best faculty cannot effectively teach, advice, and conduct research in a misaligned environment. Successful universities operate like an ecosystem. When everything is in balance, the system is healthy; when an important part of the system is ailing, it places the entire organization at risk.

Undergraduate colleges oriented toward traditional-age students tend to be the ailing part of the university ecosystem. As already noted, for many traditional colleges, the pool of applicants is stagnant or declin-ing, tuition is being discounted at nearly 50%, and the cost of operation is increasing. Graduate schools, online programs for adult learners, and

University Transformations

ancillary services (profi t centers) are expected to make up losses incurred by the traditional colleges. To make matters worse, many undergraduate college expenses have outgrown the endowment’s ability to cover them.

INCREMENTAL CHANGE The character of almost all universities is grounded in the founding col-lege. Usually, a college of arts and sciences (especially in private not-for- profi t universities), is viewed as embodying the identity of the university. Admission selectivity, academic reputation, student services, and all of the other traditional characteristics of a college education are rooted in this college. Typically, all of the other undergraduate colleges (business, music, engineering, etc.) in the university depend upon the founding college for common curriculum (general education) courses.

Understandably, faculty and administrators in the founding college see themselves as safeguarding the legacy of the institution. And that college normally has the most alumni(ae) with the greatest sense of loyalty to the university. This identity makes structural change very diffi cult in the col-lege that is most in need of it— The Founding College Syndrome .

Some types of change are easier to implement than others. Incremental changes that occur within an existing organizational system are easier to accomplish than transformational changes that alter the system itself. Incremental change is most prevalent in institutions dealing with the Founding College Syndrome. Examples include: refi nement of teaching strategies, curriculum redesign, student affairs initiatives, enhanced mar-keting strategies, admissions outreaches, and so forth. In other words, incremental refi nements of the existing system are the primary goals.

In two 2015 The Chronicle of Higher Education articles, Lawrence Biemiller outlines how seven small colleges and universities accomplished incremental, but very signifi cant, changes in their operation. 1 These insti-tutions are introducing new strategies that address concerns about waning enrollments and fi nancial sustainability. Biemiller cites the following adap-tations made by these colleges:

• Resetting (decreasing) tuition rates and greatly reducing the dis-count rate;

• “Buying back” up to $10,000 in student loans for those who gradu-ate in four years;

• Building a new science complex to enhance STEM majors and build prestige;

84 M.J. DUMESTRE

• Eliminating or reducing intercollegiate athletics to a lower National Collegiate Athletic Association (NCAA) division;

• Attracting new students with an accelerated immersion study abroad experience;

• Instituting professionally-oriented graduate degree programs and certifi cates (including online) to increase enrollment;

• Concentrating on retention enhancement efforts that include aggres-sive student advising to increase graduation rates;

• Placing greater emphasis on career services, internships, and job readiness, beginning as early as the sophomore year;

• Introducing global change leadership as a primary outcome of the college’s curriculum and student experience;

• Emphasizing e-portfolios for students to demonstrate competencies for employers and graduate schools;

• Positioning a liberal arts college as a quality alternative to large state institutions that cannot offer enough classes to enable students to graduate in four years;

• Emphasizing transfer agreements with community colleges to increase enrollments at the upper division level.

All of these changes look familiar, but they are new initiatives for the col-leges that are trying them. The hope is that new strategies will enable these institutions to differentiate themselves from their competition in ways that stimulate enrollments, thereby ensuring greater fi nancial stability.

Small colleges are not alone in their search for sustainability. Research- intensive universities fi nd themselves in a similar pursuit, but in different ways. Preservation of the undergraduate college in a research university can be a serious challenge. The essence of the traditional university model is to have undergraduate education as a priority, no matter how prestigious the univer-sity’s graduate programs and research activities have become over the years.

This concern was the focus of the Boyer Commission ’s report “ Rein-venting Undergraduate Education : A Blueprint for America’s Research Universities.” 2 The report’s executive summary lists the following recommendations:

1. Make research-based learning the standard. 2. Construct an inquiry-based freshman year. 3. Build on the freshman foundation. 4. Remove barriers to interdisciplinary education. 5. Link communication skills and course work.

UNIVERSITY TRANSFORMATIONS 85

6. Use information technology creatively. 7. Culminate with a capstone experience. 8. Educate graduate students as apprentice teachers. 9. Change faculty reward systems. 10. Cultivate a sense of community.

All of these recommendations should enhance the teaching–learning undergraduate experience, but without substantially altering the under-graduate college structure— a hallmark of incremental change.

At the time of the report in 1998, about one-third of all US stu-dents graduating with a bachelor’s degree did so from a Research I or II institution. That statistic, in and of itself, supports the Commission’s contention that undergraduate education in research-intensive universi-ties matters.

The documentation of signifi cant changes made in the seven small colleges cited above as well as the Boyer Commission’s report presume that the tradi-tional college model serves as a university’s primary identity—The Founding College Syndrome. But there is a type of change that does not depend upon a particular model of higher education—transformational change.

TRANSFORMATIONAL CHANGE Transformational change creates impressive outcomes by altering the existing system, but it entails a signifi cant amount of risk. And colleges are by nature risk averse. That is the reason why some institutions close instead of reinventing themselves. For those colleges, a different way of operating is just inconceivable.

Institutions that take the risk of instituting transformational change can be greatly rewarded. The following three private universities did so in dif-ferent ways.

1. Southern New Hampshire University . Founded in 1932 as a propri-etary business school, Southern New Hampshire University (SNHU) grew into its current not-for-profi t university status in fairly tradi-tional ways. 3 It became New Hampshire College in 1969 with regionally accredited not-for-profi t status, offering associate and bac-calaureate degrees. It created more undergraduate majors and mas-ter’s degrees throughout the rest of the twentieth century, including the acquisition of two small colleges. It became SNHU in 2001.

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SNHU grew through incremental change, including an innovative three-year bachelor’s degree in business that was launched in 1997. But three developments set the stage for the beginning of transforma-tional change. First, in the mid-1990s, it started online programming. As an early adopter, the online programs grew slowly and did not have a signifi cant effect on total enrollment. That would eventually change. The second development was the 2003 inauguration of Paul J. LeBlanc as president. When he took offi ce, the university was struggling both in name recognition and enrollment. The third development was reg-ulatory approval to institute a new form of higher education.

The fi rst two developments are connected because of the vision that LeBlanc had for SNHU.  A friend of Harvard professor and innovation theorist Clayton Christensen, LeBlanc took to heart the potential of online programming as a transformational technology. It was LeBlanc’s leadership that enabled SNHU’s small online divi-sion to grow through the use of sophisticated marketing and opera-tional strategies that for- profi t universities have used successfully for decades. In a 2014 Slate article, LeBlanc points out that, nation-wide, traditional-age students make up only about 20% of the total student population. He was determined to position SNHU to reach out to the 80%—mainly adult learners. 4

No doubt, LeBlanc had to deal with the Founding College Syndrome as online programs grew quickly through the university’s investment in marketing and recruitment. The growth of the SNHU Online operation was not unanimously heralded as a positive devel-opment by some traditionalist faculty members, despite the signifi -cant amount of funding that became available for programs and infrastructure needs across the campus. In a 2009 The Chronicle of Higher Education article, Paul Fain writes about LeBlanc’s outreach to his faculty and staff critics. LeBlanc personally invited them to dinner. The conversation was reportedly diffi cult, but LeBlanc lis-tened and earned some respect from skeptical colleagues—a pre-cious commodity for a president. 5

SNHU Online now has an enrollment of nearly 35,000 students. Its on-campus programs have not suffered. Traditional campus enrollment is just under 3000, a signifi cant increase over the past decade. Because of the size and sophistication of the online pro-grams, SNHU Online is now the Southern New Hampshire University College of Online and Continuing Education (COCE) .

UNIVERSITY TRANSFORMATIONS 87

The third SNHU development occurred in 2015. A truly trans-formational moment came when the US DOE and the Middle States regional accrediting association gave approval for SNHU’s competency- based education (CBE) program, the “ College For America (CfA) .” The CfA degree is granted through SNHU with the following innovations:

• CfA programs currently are not open to the general public, but are only offered in conjunction with 30 corporations and other organizations nationwide, with more to come in the future;

• Demonstration of competencies through online structured proj-ects replaces credit hour classes and seat time;

• College instructors are replaced by an academic team composed of a learning coach, a reviewer, and a mentor from the student’s employer;

• The associate’s degree is composed of 20 core goals comprising 120 competencies;

• BA degrees in Communications and Health Care Management have 40 goals with 240 competencies;

• Tuition cost for both the associate’s and bachelor’s degrees is $2500 per year. 6

The SNHU College for America is a prime example of transformational change. The structure of the existing university system is being trans-formed. The SNHU example, however, demonstrates that the existing structure does not need to be dismantled in order to reinvent alongside of it. In a 2013 Inside Higher Ed article, LeBlanc said he anticipated that CfA would mature quickly, with a goal of over 300,000 students enrolled by 2018. 7

True to ongoing innovation instincts, LeBlanc has spun off the in-house computer platform that supports CfA’s CBE program into a for-profi t “learning relationship management system” called Motivis Learning . Its mission is to partner with other universities to create CBE programs that meet the mission of the universities and the constituencies they serve. 8

2. St. Leo University . Established in 1889 in connection with St. Leo Abbey, St. Leo underwent different identities until it became a col-lege in 1959. The college’s development was typical of many small colleges of that era. A big difference, however, was that the institution

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opened extension campuses on military installations in the early 1970s. It expanded also by having a presence on community college campuses, all the while not abandoning a traditional college experi-ence for students on its home campus in St. Leo, Florida, just north of Tampa.

The impetus for transformation occurred when Arthur Kirk became president in 1997. 9 Despite its innovative outreaches through extension campuses on military installations and commu-nity colleges, St. Leo was not in a good fi nancial situation. Recognizing the disruptive power of online learning, President Kirk determined that St. Leo needed to expand into online degree pro-grams to serve its extension students. Increasingly, St. Leo’s sub-stantial active military students were being deployed to installations worldwide. Online delivery systems enabled these adult learners to continue their education while abroad.

The addition of online programming necessitated a substantial investment, along with its attendant risks. It was only shortly after Kirk arrived on campus that he reallocated about $600 million from a very tight budget to start the online initiative. This bold move initiated a transformational moment in St. Leo’s history. President Kirk was able to get trustee and overall university support (with a heavy dose of trepidation) by clearly articulating a dual need for investment in new degree delivery systems as well as for addressing deferred maintenance on the main campus.

A lot was done in a short amount of time with this crucial invest-ment. President Kirk was as resourceful as he was strategic in obtain-ing the funds needed for new innovations. A key to his success was the strategic reallocation of funds from less productive assets to a potentially transformational opportunity for growth.

Associated with St. Leo’s intense move to robust online pro-gramming was a fundamental change in the university’s administra-tive procedures. Kirk made strategic planning, including benchmarking, a university priority. On a regular basis, administra-tors hold each other accountable for attaining goals that are set for each iteration of St. Leo’s planning for the future. Strategic plans do not collect dust on offi ce shelves. They are active operational guides.

3. Brandman University . In 1958, Chapman University formed its University College primarily to serve adult learners (with an emphasis on the military) at extension sites throughout California. Because

UNIVERSITY TRANSFORMATIONS 89

University College became so large and successful, in 2007, it became Brandman University, with its own regional accreditation. This transformation created the Chapman University System . 10

This structural realignment gave autonomy to Brandman that allowed for innovation. Using best practices for adult student instruction and outreach, it eventually expanded to 25 locations offering over 50 undergraduate and graduate programs.

Under the leadership of Gary Brahm , Brandman’s founding Chancellor and CEO, the University’s 2012–13 enrollment (head-count) was just under 11,500, compared to Chapman University’s 9-college enrollment of about 8300 students. Brandman’s unfet-tered growth came from accelerated class formats offered at its mul-tiple locations, and eventually, from its fully online classes. But the full effect of the separation would only be recently realized.

In 2014, Brandman launched its Bachelor of Business Administration (BBA) degree program in a CBE format. 11 Along with Southern New Hampshire’s CfA, this is one of only a few fully accredited CBE programs in the nation. Brandman students choose from one of four specializations: marketing, supply chain and logis-tics management, management and organizational leadership, and information systems management. This fully online program does not contain any formal courses.

Through readings, tests, simulations, and other assessments, stu-dents demonstrate mastery in the following areas:

General Education 13 Competencies Business Core 34 Competencies Specialization 9–12 Competencies Total 56–59 Competencies

The competencies map to Brandman’s regular 120-credit-hour format. Upon completion, students receive a dual transcript that lists the com-petencies and the equivalent credit hour designations.Tuition is $5400 per year, payable in the equivalent of two semesters. Tuition includes the following:

• All required textbooks and course materials; • Mentoring, coaching, and support resources; • Access to the Brandman and Chapman libraries;

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• Services from the Brandman Career Center, Math Resource Center, and Writing Center;

• No limitation on the number of competencies that students can complete each year.

Prior to admission to the program, students must successfully complete math and English assessments.

Brandman created the BBA with its own faculty and educational support partnerships. This university–educational services partner-ship build out is key to insuring academic quality and robust student services. Continued tweaking of the system will go on for some time. But Brandman has not given up on the liberal arts components of the core competencies. General education competencies are based upon the American Association of Colleges and Universities Liberal Education and America’s Promise (LEAP) essential learning outcomes and the Lumina Degree Qualifi cations Profi le (DQP). 12

Like the SNHU’s CfA, Brandman’s BBA is offered through its corporate partners, although it is not tied to a representative from each organization. The program has started with less than 100 students. Clearly, however, Brandman will be marketing its program regionally, if not nationally.

4. Arizona State University . The Boyer Commission’s report on rein-venting undergraduate education outlines a noble, but very chal-lenging endeavor for large research-intensive universities. Dramatic cuts in state support make this type of change all the more diffi cult. Despite these problems, Arizona State University (ASU) President Michael Crow ’s ambition is to not only reinvent undergraduate education but also create a model for the New American Research University .

Crow’s previous position was executive vice provost at Columbia University, where he also was a professor of science and technology policy and chief strategist of Columbia’s research initiatives. His passion for research helped create large-scale transdisciplinary schools at ASU. In his tenure as president, he tripled research expen-ditures and made signifi cant enhancements to infrastructure. Crow has increased ASU’s national reputation through his positions as a fellow of the American Association for the Advancement of Science (AAAS) and the National Academy of Public Administration, along with his membership on other high-profi le federal advisory boards. 13

UNIVERSITY TRANSFORMATIONS 91

Crow makes it clear that the new model emphasizes not only intensive research but also high-quality teaching. More importantly, the model highlights increased undergraduate acceptance and grad-uation rates. He contends that highly rated universities have tradi-tionally viewed the top 5% of high school graduates as their student constituency, but that percentage should be expanded to the top 25% of graduates. This enhancement in university access allows for more diversity in the university population and, at the same time, increases the number of US college-educated workers to meet the economic and social demands of the twenty-fi rst century.

According to Crow, the objective of the new model is, “to pro-duce not only knowledge and innovation, but also students who are adaptive master-learners, empowered to integrate a broad array of interrelated disciplines and negotiate over their lifetimes the chang-ing workforce demands and shifts in the knowledge economy driven by continual innovation.” 14 In other words, a large research univer-sity should exist for knowledge discovery and education that meets the needs of a fast- changing world. This model challenges two assumed dichotomies: (1) a university is either research-intensive or known for high-quality teaching, (2) an institution has to be either academically exclusive (a low acceptance rate) or settle for a lesser reputation because of increased accessibility (high acceptance rate). The ASU model contests both dichotomies.

ASU’s redesign efforts are proving to be successful. Over the past decade, there has been a 50% increase in total enrollment to over 83,000 students, which includes over 65,000 undergraduate stu-dents. In 2013–14, ASU awarded over 19,000 degrees, a 67% increase. Minority enrollment is at about 35%, a 146% increase. 15

Enrollment growth is the result of multiple initiatives that include: the creation of new transdisciplinary majors, increased emphasis on totally online degree programs, seamless transfer poli-cies for community college graduates, a signifi cant upsurge in inter-national students studying on campus, aggressive recruiting in neighboring California, and other efforts to make the university more accessible for qualifi ed students.

How was this transformation fi nanced? ASU made its large size an asset rather than a liability. It attracted a signifi cant increase in externally sponsored research. In 2014, research-related expendi-tures amounted to over $400 million without a signifi cant increase

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in research faculty. The number of out-of-state students who pay more than double the tuition rate of in-state students rose from 14,000 to over 27,000 over the past decade. Over 40 academic departments were eliminated by restructuring them into larger mul-tidisciplinary units, saving millions of dollars in administrative costs. The current 4-year graduation rate (50%) refl ects a 20% increase. Net revenue from online programs is signifi cant, with enrollments now amounting to about 13,000. 16

The ASU experiment with a model for the New American Research University shows promise. An impressive aspect of this ASU initiative is the speed at which it is occurring and the scale of its implementation. It demonstrates that good leadership can overcome the inertia of a large-scale organization. Higher education needs these types of exem-plars to encourage similar ventures in transformational change.

* * *

Changing a model of education that has been in place in the USA for centuries, with antecedents dating back to the Colonial Period, is indeed a diffi cult endeavor. The university transformations outlined in this chapter exemplify how access to quality undergraduate education is possible for a sizeable percentage of people who would not be able to attend college otherwise—the 80 percenters. Students in the 20% category will be able to have the traditional college experience, but in a fewer number of universi-ties and at a higher cost.

The Reimagined College and the model for the New American Research University are beginning to emerge. The tools are becoming available (hybrid online modalities, built-in internships, streamlined cam-puses, and many types of educational partnerships), but implementing them is a daunting challenge.

STRATEGY IMPLICATIONS 1. The Founding College Syndrome. Structural change is most diffi -

cult for those who have the most to lose. Traditional undergraduate colleges in many universities are facing a changed reality. Their fi nancial model is unsustainable. Professional schools, ancillary income, and endowment funding cannot keep up with the escalat-ing costs of the elite college model. Yet, all too often, faculty and staff (as well as alumni and some trustees) are entrenched in the culture and ethos of an antiquated era.

UNIVERSITY TRANSFORMATIONS 93

2. The Seductiveness of Incremental Change. Incremental change helps. But there is a type of seductiveness to successful changes that give temporary relief to structural problems. If enrollment increases in a tuition- dependent college are due to enhanced marketing, pro-motional activities, or new academic programs, that does not help if net tuition remains the same or decreases. Also, if there is continual cost cutting, there is the danger of diminishing academic quality and reducing the retention rate. Incremental change does not address structural problems.

3. The Impetus for Transformational Change. The examples of trans-formational change cited above came from institutions that were not in imminent danger of closing. In fact, they were doing quite well, due to their innovative online programs. It is for this reason that the CBE programs are being launched alongside of other more traditional programs. Undoubtedly, leadership came from the presi-dent of each institution, but these types of innovations require a cadre of leaders at different levels in the organization in order for them to be successful. These examples of transformational change demonstrate the need for entrepreneurial spirit in an American insti-tution that highly values tradition.

4. An Opportunity. If predictions are correct about a signifi cant increase in college closings and mergers in the next decade or so, institutions that seek transformational change early on will be able to avoid that fate. Universities that determine how to educate tra-ditional-age students on an effi cient streamlined campus or perhaps in ways that have not yet been conceived will be greatly rewarded. Current technologies, instructional design strategies, and partner-ships can make this happen if there is the courage to rethink the entire college enterprise. Students, faculty, parents, employers, and the public in general are waiting for an authentic new model to emerge. University leaders must have the courage to research, experiment, and act. The risks are substantial, but so are the rewards.

NOTES 1. Lawrence Biemiller, “How 3 Colleges Made Tough Choices,” The Chronicle

of Higher Education , March 2, 2015, accessed March 25, 2015, http://chronicle.com/article/NIH-Refuses-to-Release-Its/190493/ . Biemiller also

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documents changes made by colleges in “Survival At Stake,” The Chronicle of Higher Education , March 2, 2015, accessed March 26, 2015 http://chronicle.com/article/With-Survival-at-Stake-Small/190491/

2. “Reinventing Undergraduate Education: A Blueprint for America’s Research Universities,” Boyer Commission on Educating Undergraduates in the Research University, Stoney Brook, NY. ERIC, Number : ED424840, 1998.

3. See the History section of the SNHU website, accessed April 7, 2015 http://www.snhu.edu/198.asp

4. Gabriel Kahn, “The Amazon of Higher Education, Slate , January 2, 2014, accessed April 10, 2015. http://www.slate.com/articles/life/education/2014/01/southern_new_hampshire_university_how_paul_leblanc_s_tiny_school_has_become.1.html

5. Paul Fain, “A College President Breaks Bread With His Foes,” The Chronicle of Higher Education , August 31, 2009, accessed April 10, 2015, http://chronicle.com/article/A-College-President-Breaks/48202/

6. See the Southern New Hampshire University College for American web-site at http://collegeforamerica.org/ Accessed April 10, 2015.

7. Paul Fein, “Credit Without Teaching,” Inside Higher Ed , April 22, 2013, accessed April 10, 2015, https://www.insidehighered.com/news/2013/04/22/competency-based-educations-newest-form-creates-promise-and- questions

8. Carl Straumsheim, “Managing Competency Based Learning,” Inside Higher Ed , September 29, 2014, accessed April 11, 2015, https://www.insidehighered.com/news/2014/09/29/college-america-spins-its-custom-made-learning-management-system

9. The St. Leo story is found in “Small But Mighty: 4 Small Colleges Thriving in a Disruptive Environment,” Academic Impressions Diagnostic , June 2, 2015, accessed October 2, 2015, http://www.academicimpressions.com/news/small-mighty-4-small-colleges-thriving-disruptive-environment

10. See the Brandman University Website, About History, website, accessed April 11, 2015 at https://www.brandman.edu/about/history

11. See the Brandman University CBE website, accessed April 12, 2015, https://www.brandman.edu/cbeducation

12. Michelle R. Weise and Clayton M. Christensen, “Hire Education: Mastery, Modularization, and the Workforce Revolution,” Clayton Christensen Institute for Disruptive Innovation , 2014. See the Brandman BBA degree profi le, p. 44, accessed April 12, 2015, http://www.christenseninstitute.org/wp-content/uploads/2014/07/Hire-Education.pdf

13. See information about Michael Crow at “About Michael M. Crow,” Offi ce of the President, Arizona State University website, accessed January 15, 201, https://president.asu.edu/about/michaelcrow

UNIVERSITY TRANSFORMATIONS 95

14. Michael Crow, Michael, M and William B. Dabars, “A New Model for the American Research University,” Issues in Science and Technology , Spring 2015, (pp.  55–62). p.  56, accessed January 15, 2016 http://issues.org/31-3/a-new-model-for-the-american-research-university/

15. Crow, “A New Model for the American Research University,” p. 61. 16. ASU expenditure and enrollment statistics are from: Jon Marcus, “Is

Arizona State University the model for the new American University?” The Hechinger Report , March 11, 2015, accessed January 16, 2016, http://hechingerreport.org/is-arizona-state-university-the-model-for-the-new-american-university/

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PART III

Transformational Strategy

99© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_8

CHAPTER 8

Abstract This chapter outlines reasons why many strategic plans fail. A strategic thinking methodology, grounded in philosopher Bernard Lonergan’s Generalized Empirical Method, is introduced as a way of developing a strategic plan that avoids pitfalls that prevent success. Lonergan’s experientially based epistemology is ideal for assessing the current reality and developing unique solutions that make sense for at-risk universities, in particular. The overall objective of the methodology is innovation that constitutes a transformative moment for these institutions.

Keywords Bernard Lonergan • Generalized Empirical Method • Episte mology • Strategic planning • Transformational change

The call for change in US higher education is clear. But each institution has its own unique set of problems that needs attention. Some universities are on solid fi nancial ground and do not need fundamental restructuring. Their endowment and other sources of funding are adequate, and they seek to build upon their success. Others face the prospect of closure if they do not engage in substantive change. In either case, when institutions are ready to address their situation they most often turn to what is familiar—a new strategic plan.

Consultants can be helpful in recommending a planning process. But many plans still end up being the product of insular thinking. They often simply result in incremental change expressed in broad terms. There are reasons for this phenomenon.

Strategic Thinking for Transformation

WHY STRATEGIC PLANS FAIL Often viewed as a necessary evil, much like self-studies, university strategic plans tend to have little effect on the long-term operation of the institu-tion. Strategic plans fail primarily for the following reasons:

1. Silo Structure . A strategic plan should address the future of a univer-sity as a whole despite the institution’s siloed structure, which is made up of academic colleges, research areas, student affairs, and other disparate operations. The silos, especially academic colleges within the university (and even some departments within an indi-vidual college), see themselves as forging their own future within their particular fi elds of study.

Each unit would like to have its own strategic plan with the uni-versity supporting it, not the other way around. Some academic col-leges within the university are allowed to do this, but they are warned by senior administration that those plans cannot interfere with the goals and intent of the university plan. The result reinforces the silos, making successful units even more successful and allowing failing units to place the institution at even more risk.

2. A History of Infectiveness. Only the appearance of university stra-tegic plans has gotten better over the years—literally. Strategic plans have become showpieces, promoting lofty goals with slick graphics on university websites. It is the unusual university that highlights all of the signifi cant accomplishments of the last strategic plan, and how the university advanced because of the goals it set for itself. Consequently, university employee expectations are low when entering the planning process, which foreshadows lackluster results.

3. Lack of Accountability. A university president’s tenure in offi ce typi-cally does not depend upon the success of the institution’s strategic plan. If a president is fi red, it is only tangentially tied to the plan. The president’s departure typically is either because of the universi-ty’s poor fi nancial health or philosophic differences with faculty or trustees. The same thing could be said about other senior adminis-trators. It is the unusual institution that connects performance eval-uations directly with a strategic plan. Failure to meet the plan’s metrics can easily be dismissed or not referred to in assessing the competence of individuals.

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4. Inadequate Environmental Scanning. Planning consultants most often point out the need for inclusive university participation in the planning process. No doubt this is important, but there tends not to be a countervailing appeal for outside perspectives. A consultant (or research company) should conduct an internal scan of the institution’s fi nancial sustainability, priorities, self-perception, strengths, and weak-nesses. Thorough and independent research often uncovers surprising data that simply has been overlooked by administrators. Most impor-tantly, external environmental scanning provides valuable data that typically are inaccessible to university employees. This more expansive outside perspective is most important because it uncovers micro and macro trends in higher education, and in the general culture.

5. Mission Confusion . In many institutions, their mission statement is sacrosanct. Any attempt to alter it is viewed as heresy. But it can become a moribund sacred text if there is not a willingness to under-stand it in light of the contemporary situation. This does not mean that institutions should adapt their values according to the winds of social change—chasing after student markets. Rather, a mission state-ment should be a living document that is open to interpretation.

For example, many colleges made the change from being denom-inationally attached, to being church-affi liated. Their denomina-tional religious values were preserved as an integral part of their approach to higher education, but they became structurally detached from church polity. Other institutions moved even farther from their religious roots to being ethically and socially conscious but thor-oughly secular. Conversely, some universities have become confes-sional—requiring a denominational confession of faith. The choice to be a higher education extension of their religion was made to appeal to church members and devotees. If institutional mission is not intentionally examined as part of strategic planning, then it is likely not to be helpful as a guide to positive change. If mission is not assessed in light of the contemporary situation, a university will likely try to be all things to all people—the antithesis of strategic planning.

6. Scotosis . Despite all of these obvious planning diffi culties, senior administrators and Boards of Trustees still allow ineffectual strategic planning to occur. Why is that the case? As already noted in previous chapters, an endemic problem is institutional scotosis—self-imposed blindness about the health of the organization. Scotosis can occur

STRATEGIC THINKING FOR TRANSFORMATION 101

when the president does not present a clear picture of the institu-tion’s defi ciencies and threats. It also can arise if trustees minimize the importance or severity of fundamental problems either because they deem them to be temporary or their nostalgic loyalty causes them to keep intact the college they experienced as students—their own coming-of- age experience.

Given these entrenched reasons for failure, no wonder strategic planning tends not to advance institutions in ways that insure progress and fi nancial sustainability.

Correctives to these problems are not found in a foolproof strategic plan template. Universities may look alike structurally, but there are more differences than commonalities. Successful strategic planning for transfor-mational change must emanate from something much deeper—namely, strategic thinking.

THINKING ABOUT THINKING Understanding how we come to knowledge greatly assists us in arriving at strategic choices, and even transformations. Authentic thinking is not a linear process devoid of emotion, creativity, and imagination. But there is structure to arriving at what we can reliably call knowledge. And it is available to all of us. In other words, knowledge is not restricted to the intellectually gifted. It is available to all who seek it.

Auguste Rodin’s sculpture, The Thinker, is a solitary fi gure, sitting down head in hand, lost in his own thoughts. It has come to symbol-ize intellectuals, poets, and other creatives. Rodin beautifully captures a moment in the artistic process.

Creativity and innovation are current preoccupations in culture, sci-ence, and commerce. The last decades of the twentieth century were rife with transformative innovations that created the Digital Revolution. What sort of thinking went into those innovations, and how can others be forth-coming? Creativity is certainly an element in the process but innovations seldom, if ever, come from an “Aha Moment,” and they are rarely the work of a single individual.

Water Isaacson knows this to be true. A quick reading of his biography of Steve Jobs might give the impression that a solitary force of genius can give rise to an innovation giant like Apple, Inc. Actually, Isaacson put aside another book he was working on when he got the call from Jobs.

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That book was published in 2014: The Innovators : How a Group of Hackers , Geniuses , and Geeks Created the Digital Revolution . 1 Isaacson chronicles the Digital Revolution through emerging technologies and companies that coalesced into ecosystems that now drive the digital world. While individuals certainly play dynamic roles in this story, it was really team-work, a kind of collective and progressive creativity over time that made things happen.

The Digital Revolution was the result of technological inventions and innovations that met genuine needs. Moreover, these powerful tools sometimes met needs that people did not know they had. For exam-ple, sheer panic sets in when folks cannot fi nd their smartphone. And Facebook, Twitter, Instagram, and LinkedIn are now considered by many to be personal and business necessities, with other social media outlets rapidly emerging.

GENERALIZED EMPIRICAL METHOD The key to knowing how transformational change and innovations emerge is to examine the thinking process itself. Exactly how can we reliably know that something is true and of value? Philosopher Bernard Lonergan (1904–84) spent his life grappling with this question. His opus Insight : A Study of Human Understanding methodically outlines how knowledge emerges in the theoretical sciences as well as in the common sense of our everyday world. 2 As reported in a 1970 Time Magazine article, Lonergan was considered by many intellectuals to be the fi nest philosophic thinker of the twentieth century. 3

According to Lonergan, knowledge (insight) emerges from three levels of human consciousness: experiencing, understanding, and judging. Once knowledge develops, a fourth level becomes possible—deciding (what should be done with this newfound knowledge).

As a Critical Realist , Lonergan affi rms that we can know what is real, true, and of value in the world through our experience of it. But experi-ence requires critical evaluation (through understanding and judging) in order for it to become reliable knowledge.

The process does not occur in the abstract. It takes practical attention. Lonergan outlines four transcendental imperatives that drive refl ection at each level. They are termed transcendental because they rise above specifi c categories of human activity and move beyond the confi nes of a specifi c worldview.

STRATEGIC THINKING FOR TRANSFORMATION 103

The imperatives are: (1) to be attentive to experience, (2) to be intel-ligent in our understanding, (3) to be reasonable in judgment, in order (4) to be responsible in deciding. Lonergan deems the methodology to be an invariant pattern that is composed of related and recurrent operations that yield cumulative and progressive results. 4 In other words, the more we pay attention to how we think, the more authentically we can trust our determination of reliable knowledge. Because this method of think-ing is applicable to all of human affairs, he terms it: Generalized Empirical Method (GEM). 5

The following table depicts GEM. The conscious operation we use at each level of refl ection is paired with the corresponding transcendental precept (Table 8.1 ).

We automatically use this method of thinking to navigate the simplest of everyday affairs as well as to determine the most complicated theo-retical formulas. The problem is that much of the time our thinking is on automatic pilot. We tend to focus on desired results without paying atten-tion to how we arrive at them.

Table 8.1 Generalized empirical method

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This method may simply look like an articulation of the scientifi c method. It also may seem to be too logical for the messiness of navigating the vagaries of everyday life. But these critiques fail to understand its compre-hensiveness. We live in the world of common sense in a mostly uninten-tional way. Lonergan’s GEM gives us more than a tool for how to discover knowledge, of any sort. It is the opportunity to open up ourselves to greater self-knowledge—understanding what it means to live a refl ective life. Paying attention to this dynamic process in our quest to make sense of the world enables us to transcend the immediacy of our own worldview. The more we know, the more we know what we do not know.

CONNECTIONS BETWEEN STRATEGIC THINKING AND STRATEGIC PLANNING

Philosophers have fi lled volumes on the nuances of GEM itself as well as on the dynamics of each level of human consciousness. 6 But the best way of understanding this method of thinking is to apply it to a specifi c prob-lem. The table below depicts how GEM can be used to generate a reliable strategic planning process, avoiding the pitfalls cited above (Table 8.2 ).

The table reads from the bottom up and left to right. The somewhat ethereal notions about four levels of human consciousness come alive as we move through their application to a complicated problem. In essence, this is an exercise in depicting how strategic thinking generates authen-tic strategic planning . We begin with the most reliable starting point, an examination of the current situation—organizational experience.

1. Being Attentive to Experience . The path to knowledge (insight) begins with experience. At the experiential level, we need to attend to the fullness of our experience—the physical senses, intuiting, imagining, dreaming, and other ways we experience the world. So, there is both the data of sense and of consciousness that make up our experience.

Engagement with experience starts when something catches our attention. It could be a problem, a curiosity, or some sort of uncer-tainty. At this level, creative people tend to pay attention to outlying data, incongruences, or an intuitive sense of importance. The more we are in touch with our experience, what is going on around us, the more we are likely to see problems and opportunities.

In terms of university strategic planning, this level corresponds to the fi rst movement in the planning process— Focused Data Collection .

STRATEGIC THINKING FOR TRANSFORMATION 105

Internal and external environmental scanning are ways for the insti-tution to get in touch with its collective experience. The key here is focus—paying attention to the data that are relevant. Good environ-mental scanning helps to identify potential student constituencies as well as other educational consumers. It also directs the types of data that should be collected internally, including an audit of resources necessary to recruit and accommodate these student populations.

2. Being Intelligent in Understanding. When we experience some-thing, there is the immediate need to understand it. We try to understand the meaning of what we are focusing upon. It is an auto-matic refl ex. Thoughtful people apply multiple ways of understand-ing the nature of what catches their attention.

Returning to the strategic planning process, the second move-ment— Coherent Data Interpretation —corresponds to this level. Intelligent understanding of the data should be a strength in the university setting, if objectivity rules the day. When data collection is thorough, there is the tendency to be overwhelmed by the sheer amount of facts to be analyzed.

The data collected on potential students should assist in the identi-fi cation of the desired student constituencies (market segment). Analyzing the needs of this desired student segment is most important as well as an assessment of potential competitor institutions. In the for- profi t world, this is called Competitive Intelligence . If done ethically, the collection of strategic data about current and potential competitors (universities and other educational providers) can help determine the viability of new opportunities. This second movement in the planning process requires an initial construction of strategies that meet the needs of the institution’s targeted educational constituencies, even if that means substantial change in organizational structure and operation.

3. Being Reasonable in Judgment . At the level of judgment, we ask our-selves if our understanding is really true. Reasonable judgment involves testing initial understandings with alternative viewpoints. A fi nal judg-ment is the result of the most comprehensive use of reason possible.

Continuing with the strategic planning process, the next movement— Reliable Judgment —tests the ability of the university community to judge which of the multiple strategies and structures best serve its desired student constituencies and other educational consumers. The more rational and judicious the university planning committee is in selecting a new preferred future, the more likely the entire institution will be in agreement.

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The question at this point is: what should the university look like and act like in order to attract and best serve its desired student con-stituencies (both existing and new ones)? Multiple scenarios (orga-nizational structures) should be considered to determine which one is most desirable. A common mistake is to determine a structure that is most comfortable for the university, and not what best serves the needs of students. It is critical that the university community under-stands this judgment about structure and operation.

4. Being Responsible in Deciding . Once a determination of knowledge (insight) has been made, the question arises: What to do about it? Responsible decision-making (action) can only be the result of reasonable refl ection. To act otherwise is to be irresponsible. In other words, decision-making must emanate from our own critical refl ection—not from the persuasive dictates of others.

The last movement of the strategic planning process— Strategic Action —involves acting responsibly and decisively once a determi-nation of the right thing to do has been made. If the entire process is communicated to the university community, the reasons for this decision will most likely be viewed as responsible stewardship of the institution’s future.

Strategic plans are only as good as their implementation and results. Part of the need for university buy-in is the willingness to implement the plan. If the previous three movements are done well, action will most likely be viewed as a natural result.

Operational details and performance metrics are crucial elements of a successful implementation. Communication to internal and external audiences should focus on how the educational needs of targeted student constituencies are uniquely addressed by the uni-versity. An authentic construction of a preferred future should engender excitement. Equivocation fuels fear of change. Confi dent implementation creates positive momentum.

Adherence to performance metrics should be a preoccupation for administrators. If alteration of objectives and outcomes is needed, then those changes should be made within the context of the overall goals of the plan. The plan should not be an unalterable route, but rather a compass for directing the institution toward its destination. Just as life presents surprises (good and bad) for individuals, univer-sities should expect the same. A thoughtful strategic plan accom-modates the unexpected, and, if necessary, redirects itself toward its preferred future.

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Strategic thinking, as a concept, is a way of describing the emergence of innovative insights that makes transformative change possible. If employed with integrity, strategic thinking is the basis for strategic planning, but suc-cessful planning is not the product of a single individual. In essence, it is a social process.

THE SOCIAL NATURE OF STRATEGIC THINKING AND PLANNING

In different ways, both Isaacson and Lonergan affi rm the social nature of innovation. Lonergan asserts that knowledge is never the sole work of an individual. Rather, we draw from and contribute to a common fund of knowledge. 7 This does not mean we simply take what passes for com-mon sense as true. Rather, our experience and worldview are shaped by the insights of others that we fi nd to be true based upon our own critical refl ection.

Table 8.2 Authentic strategic planning

GENERALIZEDEMPIRICAL

METHOD

STRATEGIC PLANNING PROCESS

Being responsible in action

Strategic action

Taking responsible action to create and implement an exciting worldview and structure to meet the needs of constituencies.

Being reasonable in judgment

Reliable judgment

Being reasonable about selecting the best possible desired future for the institution.

Being intelligent in understanding

Coherent data interpretation

Being intelligent about constructing possible worldviews and structures that address the needs of selected constituencies.

Being attentive to experience

Focused data collection

Being attentive to gathering comprehensive data about the current situation and about the needs of new student constituencies and other educational service possibilities.

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It is an organizational reality that strategic thinking cannot be done solely by an individual or a small group. It is best operationalized, espe-cially in the creation of a strategic plan, by community cooperation. But that is easier said than done.

Two heads are better than one. This is only true when both people intelligently refl ect upon their experiences, share different viewpoints (meanings), reasonably judge what is actually true, and decide how to act upon it. A small group can increase the chance for the attainment of comprehensive knowledge. But that takes good facilitation of the thinking process—GEM—keeping attention focused on the issue at hand, helping to tease out intelligent understandings, and choosing which ones are most likely to be valuable and actionable.

Herding cats. This is a common description of the attempt to facili-tate intelligent and creative people—often the case in university settings. Through effective facilitation, they can increase the scope and complexity of an issue. Data points, possibilities, and nuances expand as the group engages the undertaking. Initially, the strategic planning facilitation task is to stay in the experiential realm and remain focused on the issue at hand. There is the tendency to prematurely leap to the understanding level, developing what the data (experiences) mean before all of the data are explored.

Creative individuals tend to come alive in the second level when they develop alternative understandings and solutions. Radically differ-ent interpretations are helpful in outlining the complexity of the issue being addressed. Sorting and collating different solutions (understand-ings) often sends the team back to the experiential level to gather more information when the nature of the problem expands or becomes more multifaceted.

BIASES Judging is much more diffi cult. Determining whose judgment is more correct and what it is based upon can be ensnared in bias. Lonergan out-lines four possible biases. 8

1. Dramatic Bias is the fl ight from the drama of everyday living—a refusal or inability to engage experiential data. A group member with this bias tries to sabotage the process from the very beginning, hoping it all will go away.

STRATEGIC THINKING FOR TRANSFORMATION 109

2. Individual Bias is egoism . This can cause someone to dominate the group. Self-interest is the subtext of this person’s participation at every level, especially when it comes to judgment and decision-mak-ing. Not all egoists are ill-intentioned. Some egoists are simply not self-aware. They are unable to see beyond their own worldview.

3. Group Bias comes from coalitions of group self-interest. Universities are made up of many such groups: individual departments, schools or colleges, faculty as a whole, students, and so forth. A university-wide problem requires a breakdown of group bias for the sake of the whole university.

4. General Bias is uncritically believing the common sense of society and culture. There is common sense in the culture of higher educa-tion, things that are taken for granted—what constitutes academic quality, ideal structure, effective teaching–learning experiences, and so forth. The common sense of US culture in general is also at play. Many people believe that only the traditional college experience is of high value. Other forms of higher education are inferior by nature. These assumptions need to be teased out and critically examined at every step of the process.

Biases can be signifi cant roadblocks. Insightful leadership helps minimize their effects. The elimination of bias is almost impossible; making the university community aware of their existence is a necessity. Setting aside bias for the good of the whole university must be the constant mantra throughout the whole strategic planning process.

Deciding is a natural outcome of the fi rst three levels of strategic thinking (GEM). Once a reasonable insight (a preferred future for the university) has been fashioned through the process, trust can be placed upon taking appropriate action. In a group setting, it is important for all members to understand how they got to the decision point. One of the strengths of this method of thinking and acting is its transparency.

RADICAL UNINTELLIGIBILITY Knowing and acting are not one in the same. There is the possibility of what Lonergan terms as Radical Unintelligibility. 9 Knowing the right thing to do does not mean that an individual or organization will actually do it. For Lonergan, unintelligibility means that some people authenti-cally arrive at knowing what should be done, but they refuse to do it.

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This refusal turns the clarity of intelligibility (knowledge) into unintelligi-bility (ineffectual knowledge). It does not refute the truth of the insight. Rather, it creates personal or organizational incoherence, which makes it a radical negation of the search for truth. Lonergan is using the word radical in a philosophical sense, meaning—getting to the root of the problem. In other words, Radical Unintelligibility refers to a fundamental decision to not act upon what we really know to be true.

In a university setting, examples of Radical Unintelligibility include: the refusal to remove dysfunctional faculty, staff, and administrators after thorough investigations; inaction on documented unethical student or employee behavior; and the continuance of unproductive academic depart-ments and administrative units despite years of ineffectual operation. In effect, inaction on anything that knowingly harms the institution falls into this category of Radical Unintelligibility—organizational irrationality.

The most striking example of Radical Unintelligibility is inaction on institutional fi nancial sustainability. Knowing that the university cannot continue to operate the way it has over time and not taking corrective action is a radical negation of truth. This is different from organizational scotosis (self-imposed blindness). Universities caught up in Radical Unintelligibility know that action must be taken, but refuse to do it. Institutions ensnared in scotosis have not even begun to recognize the severity of their vulner-able situation. This difference makes universities that knowingly refuse to act upon their at-risk status radically culpable for their own demise. There is a way, however, to avoid this and all of the other dysfunctional organiza-tional syndromes—strategic thinking for transformation.

STRATEGIC THINKING FOR TRANSFORMATION The adult-learner-centered university innovation outlined in previ-ous chapters probably occurred without an intentional application of GEM. Nevertheless, the elements of the process that created this innova-tion can be traced through the methodology. Dissecting another institu-tion’s innovation is useful. It sparks motivation for change.

Enabling strategic thinking is like building organizational muscle. It makes the institution stronger and healthier. Universities need this type of thinking now more than ever. In some cases, it is a matter of engaging in innovative change or facing dire consequences.

Organizational strategic thinking requires leaders who are able to help the organization work through a sound methodology. Universities, in

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particular, need skilled, courageous leaders who understand higher educa-tion from the inside out, and, at the same time, are creative enough not to be ensnared in traditional university biases.

A NOTE ABOUT TERMINOLOGY The terms—change, innovation, and transformation—have been used interchangeably throughout this book. The contexts in which they are used make them readily understandable. But to add clarity to the thrust of this chapter, it is useful to make some distinctions.

The etymology of the terms can help explain their usage. 10 For instance, change comes from the Latin verb cambiare to exchange, barter. To change, therefore, means to exchange one thing for another, or to trade an existing state of a system for another.

To innovate comes from the Latin verb innovare , to renew or restore. So, to innovate means to take what exists and to signifi cantly change it for the better, or to creatively use it for other purposes.

To transform comes from the Latin verb transformare , to change in shape, metamorphose. Transformation, then, is a radical innovation. To morph something into something else is an all-encompassing change.

We then can think of innovation and transformation as ways of imple-menting change. Greek Philosopher Heraclitus viewed change as funda-mental to the human condition. He sums it up in his famous quotation: “Nothing is permanent except change.” 11 When analyzed, the monotony of everyday life is hardly true for anyone, despite the perception of being “in a rut.” As Heraclitus famously points out, if you stand still in a river, you are continually experiencing a new river as the water fl ows past your feet. Likewise, universities are always changing despite the perception of being bound by tradition.

If change is constant, then it is imperative to guide it in ways that ben-efi t individuals and organizations. A compelling case can be made that Lonergan’s GEM is a fundamental way of making sense out of our ever- changing experience.

PLANNING FOR TRANSFORMATIONAL CHANGE It might be said that GEM is the cognitive method that underlies “criti-cal thinking.” And when people or organizations use critical thinking to direct change, it can be termed “strategic thinking.” Strategic thinking

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then directs strategic planning. The following table depicts the process (Table 8.3 ).

This table shows how strategic thinking actions emanate from a reli-able thinking process (GEM) and, therefore, generate the most reliable way of planning for transformation. In other words, strategic thinking is directional. It builds from the ground up, starting with a thorough assess-ment of the current situation and culminates with an exciting path toward a sustainable future.

This type of thinking deals with change in the most comprehensive way. In Chap. 7 , examples were given about two types of strategic change—incremental and transformational. The incremental changes made by the seven small colleges were innovations that provided additional academic

Table 8.3 Strategic thinking for transformation

Column 1 Column 2 Column 3 Column 4

GENERALIZEDEMPIRICAL

METHOD

STRATEGIC PLANNING PROCESS

STRATEGIC THINKING ACTIONS

DESIRED RESULTS

Being responsible in action

Strategic action Deciding upon future directions

Creating and communicating an

exciting future(what will be)

Being reasonable in judgment

Reliable judgment

Creating scenarios

Choosing the best of all alternative

futures(what should be)

Being intelligent in understanding

Coherent data interpretation

Intelligent assessment of

sustainable options

Developing credible

possibilities for transformation(what could be)

Being attentive to experience

Focused data collection

Internal and external

environmental scanning

A clear picture of the institution’s sustainability

(what is)

STRATEGIC THINKING FOR TRANSFORMATION 113

programs and extended student services. Whether it is study abroad in Paris, leadership programs, non-traditional graduate programs, creative science facilities, or even decreased tuition rates, these modifi cations make the college experience more attractive but keeps the overall organizational framework intact.

The four examples of transformative change presented ways that those universities morphed into new systems and structures. The CBE programs at SNHU and Brandman altered how higher education is delivered and credentialed. Moving from a credit hour and seat time framework to demonstration of educational competencies created an individualized and streamlined approach to higher education. St. Leo University reinvented itself by moving forcefully into online degree programming at the early stages of that movement without abandoning its on-campus traditional- age student constituency. Arizona State University recreated itself into the New American Research University by embracing accessibility in under-graduate programs, while greatly enhancing its graduate programs and research activities. All four universities reshaped their institutional struc-ture to give freedom for innovatively reaching out to different student populations. In other words, these universities transformed the traditional concept of higher education. And governmental and regulatory agencies authenticated and approved it.

The situation of each university determines whether incremental or trans-formative change is appropriate. The Ivy League and other highly endowed universities are positioned for incremental change—making the traditional college experience evermore comprehensive and rewarding. Many other universities, at some point, must transform in order to progress, or even survive. SNHU, Brandman, St. Leo, and Arizona State, each embarked on their own direction. Many, if not most, universities need to use strategic thinking to create the transformative future that makes sense for them.

STRATEGY IMPLICATIONS 1. The Golden Age Syndrome. Despite the appearance of intractable

tradition in US higher education, a lot has changed over the past three centuries. For most people, however, they identify the ideal college experience with a particular time period—a sort of golden age. Typically, this was the era in which they (or their loved ones) attended college. The recognition of the existence of this syndrome

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sets the stage for dealing with change in an informed way. The real-ization that an idealized era is just a small part of a long and broad history makes it less likely to be a blindly followed model.

2. Critical Thinking as an Individual Necessity. Intentional living is a noble and lifelong goal. Methods of refl ection, like GEM, assist us with this ongoing task. Often, it is a tragic event or major turning point that tears the fabric of the worldview we have created for our-selves. The ability to use a trusted methodology to critically assess our situation is indeed a necessity, which gives direction to life itself. Individuals who can regularly be attentive to their experience, intel-ligent in understanding, and reasonable in their judgment are more likely to live life with a greater sense of self-understanding. Often, critically refl ective members of a university are recognized as respected leaders, no matter what position they hold.

3. From Critical Thinking to Strategic Thinking . Universities, like individuals, need to be thoughtfully self-directed instead of inatten-tively reacting to changing circumstances. Critical thinking becomes strategic thinking when it is directional. The purpose of strategic thinking is to intentionally direct change. The type (direction) of change is determined by focused environmental scanning and intel-ligent assessment of options—the fi rst two steps in the process. This assessment determines whether incremental change or transforma-tional change is the desired outcome. Deciding on the desired type of change seems very straightforward, but universities often fall into the trap of incremental change as an unrefl ective default position—an avoidance of strategic thinking.

* * *

Organizations are composed of people. The character of its members determines the health of an organization. A university, as a particular type of organization, can be only as self-aware as its constituent members. In other words, individuals who operate as critical thinkers form the basis for organizational self-awareness—knowing its strengths and weakness. And this type of self-awareness allows the use of strategic thinking as the most productive way of dealing with change, both internally and externally. But this organizational way of being requires self-aware leaders, especially if transformational change is needed.

STRATEGIC THINKING FOR TRANSFORMATION 115

NOTES 1. Walter Issacson, The Innovators : How a Group of Hackers , Geniuses , and

Geeks Created the Digital Revolution , (New York: Simon & Schuster, 2014).

2. Bernard J.F.  Lonergan, Insight : A Study of Human Understanding , (Toronto: University of Toronto Press, 1992). First published (London: Longmans Green & Company, 1957).

3. See “Religion: The Question Is the Answer,” Time Magazine , April 20, 1970, accessed May 3, 2015, http://content.time.com/time/magazine/article/0,9171,944048,00.html

4. See Lonergan’s continued refi nement of Generalized Empirical Method in Method in Theology (Seabury paperback edition, 1979). p. 4.

5. Lonergan, Insight , p. 243. 6. See The Collected Works of Bernard Lonergan , a 25 volume series, in process.

(Toronto: University of Toronto Press, 2016). http://www.utppublishing.com/indexSP.php?sectionID=1&subsectionID=1&page=1 Also see Bernard Lonergan institutes at Boston College, accessed May 4, 2015, http://bclo-nergan.org/ ; Seton Hall University, accessed May 4, 2015, https://www.shu.edu/catholic-mission/lonergan/ ; Regis College, Toronto, accessed May 4, 2015, http://www.lonerganresearch.org/ ; Concordia University, Montreal, CA, accessed May 4, 2015, http://lonergan.concordia.ca/ ; Loyola Marymount University, Los Angeles, accessed May 4, 2015 http://www2.lmu.edu/lonergan/about/about.html

7. Bernard J.F.  Lonergan, Method In Theology , (New York: Seabury Press, 1972). p. 43.

8. Lonergan, Insight , pp. 191–226. 9. Tad Dunne, “Bernard Lonergan,” Internet Encyclopedia of Philosophy ,

accessed May 10, 2015, http://www.iep.utm.edu/lonergan/ 10. The etymology of the terms come from the Online Etymology Dictionary ,

accessed May 11, 2015, http://www.etymonline.com/index.php?allowed_in_frame=0&search=change&searchmode=none

11. See Heraclitus entry in the Internet Encyclopedia of Philosophy , accessed May 13, 2015, http://www.iep.utm.edu/heraclit/

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117© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_9

CHAPTER 9

Abstract This chapter presents the origins of different management styles and leader-ship theories that currently exist in higher education. Connections are made between incremental change and transactional leadership as differentiated from transforma-tional change and transformational leadership. Traits of the transformational leader are discussed as necessary elements of the strategic change process. The product of an interview with transformational leaders is featured in this chapter. They talk about the greatest threats to higher education today, leadership, innovation, and what it means to be an administrator in troubled times.

Keywords University leadership • Management theories in higher education • Leadership theories in higher education • Qualities of transformational leaders

Organizational leadership has been a topic of interest for most of the past century. The exploration of leadership dynamics has uncovered dis-tinctions between leadership and management. Leadership requires an expansive view of organizational dynamics. Management is more narrowly focused on how best to motivate people to get the job done; and manage-rial styles can greatly vary according to conceptions about human nature.

The management of everyday affairs occurs in universities, just as it does in other organizations that employ a highly educated workforce. No doubt, the type of institution determines dominant management styles. But it is fairly easy to run into situations where a manager seems out of step with the needs of employees and the organization as a whole. A pri-mary reason for this incongruity can be found in a manager’s conception of employee motivation and the nature of the workplace.

Transformational Leadership

TYPES OF MANAGEMENT STYLES Good management is crucial for organizations. Perceptions about how best to manage have evolved over time. But the core purpose of management has not changed. Managers must insure that the organization is delivering what it promises to its customers in the most effi cient way and with the highest quality possible. How best to do this has been an open question.

Three classic management theories were popularized in the second half of the last century. Douglas McGregor advanced the fi rst two, theories X and Y, in the 1960s. 1 These concepts are based upon beliefs about the nature of human behavior. While it is rare that a manager would conform solely to a single theory, it is good to understand the dynamics of each one.

THEORY X Theory X managers assume that, above all, workers need structure and direc-tion to accomplish their jobs. And fear of being fi red is a powerful motivator for employees to get assigned tasks done. Pride of work is doing the job cor-rectly, as instructed. But one should not expect to fi nd overall life fulfi llment in the workplace. This style of management developed with the industrial revolution and remained dominant into the fi rst half of the twentieth century.

Micro-management , as form of authoritarianism, is a hallmark of the Theory X manager. They assume that supervisory direction is needed in most every step of the work process. This management style can easily exist outside of the monotony of the assembly line. Offi ce jobs oriented toward routine tasks that do not allow for employee latitude and lack upward mobility can lead managers to believe that only micro- management can assure good productivity.

Managers also might adopt a Theory X style if they are insecure in their position. A manager can become threatened by creative and motivated employees, seeing them as rivals for the manager’s position. The Theory X manager would rather see talented people leave the organization rather than face the prospect of actually having to report to them sometime in the future.

THEORY Y Theory Y managers use more positive motivation practices to encourage good performance. While fear is a powerful motivator, it is insuffi cient for advancing productivity in meaningful ways, especially in jobs that require

118 M.J. DUMESTRE

higher order thinking skills. These managers understand that workers do not leave their creativity and intellectual abilities outside of the workplace. Theory Y managers have a more sanguine view of human nature. They encourage active participation in the workplace, such that it contributes to a sense of employee self-fulfi llment.

The Theory Y manager believes that workers can be naturally self- directed if goals are made clear to them. Micro-management is the antithesis of the Theory Y style. Giving personnel latitude for productive decision-making engenders trust—and feeling trusted is a powerful moti-vator. Employees in positions that require ingenuity and creativity fl ourish under Theory Y management.

While not all Theory Y managers are confi dent and self-assured, they can easily give that impression by rewarding achievement. Positive rein-forcement fosters creativity and trust. Encouraging employee initiative fosters an atmosphere of success and job satisfaction.

THEORY Z In the 1980s, William Ouchi popularized a third approach to manage-ment, Theory Z . 2 This theory came out of Ouchi’s observations about the tremendous success of the Japanese economy in the 1980s. Following upon the extensive work that W. Edwards Deming did with the Japanese, Ouchi observed the unique management style that combined American individualism (Type A) and Japanese collectivism (Type J). 3

Theory Z emphasizes a long-term view of the organization, including the importance of individual responsibility as a mark of honor for both the employee and the organization, not the product of standardized per-formance measures; concern about the overall well-being of employees; emphasis on continuous quality improvement; and a system of promotion from within the organization that rewards employees who have a long track record of loyalty and good performance.

The Theory Z manager has a dual concern for the well-being of employees and the organization as a whole. This concept is familiar to mission-oriented universities. These types of managers tend to embody organizational values, which accounts for the relatively long tenure of managers in the institution.

These three approaches to management make very different assump-tions about the nature of work and human motivation. Theory X uti-lizes an authoritarian approach; Theory Y is humanistic; and Theory Z

TRANSFORMATIONAL LEADERSHIP 119

views management from a sociological perspective. At times, all three of these types of management styles might exist within an organization. Direction and coordination of these very different conceptions about human nature is one of the reasons why organizations need good leaders.

TYPES OF LEADERSHIP While good management is absolutely necessary, it does not ensure orga-nizational progress. That is the realm of leadership. Good leaders focus more on organizational culture, strategy, systems, and most importantly, change. But there is not a widely accepted unifi ed theory of leadership.

Leadership theories abound. Some emphasize inborn personal traits of leaders. Others focus on organizational dynamics such as participative lead-ership, situational leadership, contingency leadership, and so forth. While all of these views are lenses into different facets of leadership, it is useful to review two classic theories developed by James MacGregor Burns . His seminal book Leadership utilizes the fi elds of humanistic psychology and political theory to analyze leadership as a power relationship between the leader and followers. 4 His exploration of leadership focuses primarily on the political arena, but implications for organizations are all too evident—espe-cially for higher education. Anyone who has held a university administrative position knows the powerful political dynamics at play in the institution.

Burns views leadership as a comprehensive concept. His conception of leadership emphasizes the reciprocal relationship between leaders and fol-lowers, the importance of motives, the inevitability of confl ict, and a goal orientation. 5 Obviously, this is not a simplistic view of leadership that is often found in contemporary media. Burns’ description portrays deep personal and social dynamics that must be navigated in order to successfully lead.

FOUR ELEMENTS Utilizing Burns’ description, it is possible to articulate four important ele-ments that are relevant to university leadership.

1. Leadership Is Reciprocal. Leadership is not a one-way relationship, from leader to follower. If leaders do not listen to followers or recog-nize the impact they have on them, leaders blindly operate in a cocoon of denial. Both leaders and followers operate with motives and values that can be similar or very different. Leaders must recognize that the

120 M.J. DUMESTRE

basic needs of followers must be met—fair wages, good working con-ditions, job security, and so forth. But higher order needs should be satisfi ed as well—feeling valued and part of something important.

Good leaders are aware of their own desires. For example, in higher education, senior university leaders want to feel like they are being fairly compensated for their position. Also, feeling respected and even liked by faculty and employees can greatly affect working relationships and decision-making. For deans and people in other administrative positions, these needs can be very diffi cult to satisfy because of directives coming from above (provosts and presidents) that are at odds with the desires of faculty and staff. Good university leaders navigate these reciprocal relationships with self-awareness as well as with sensitivity to the needs of others. In the fi nal analysis, the task is to make sure that the organization stays true to its strate-gic path, and this takes intentional collaboration.

2. Leadership Requires the Negotiation of Power and Confl ict . Both power and confl ict are organizational realities. Good leaders exercise their own power and harness the power of followers toward goals that make sense for the whole organization. This use of power is relational, as opposed to unilateral despotic power.

Confl ict arises when there is disagreement about operational pro-cedures and goals. Unanimity of opinion is almost impossible to achieve. The proper exercise of power in resolving confl ict deter-mines whether or not the organization progresses or dissolves into dysfunction. Confl ict also lays bare disagreements about the type and amount of power leaders have in the organization.

In higher education, arguments about the nature of shared gov-ernance often graphically demonstrate disparate perceptions of power. Should the faculty solely make determinations about aca-demic affairs: curricula, instructional technology and delivery sys-tems, assessment of teaching, tenure and promotion, and so forth? Faculty members typically deem these areas to be their province—their locus of power. Administrators see things differently. They often fi nd themselves in a diffi cult position because they typically hold tenured faculty status in addition to their administrative duties. Senior academic administrators need to balance faculty needs with the needs of the whole university, not just with academic affairs.

The university tradition of shared governance demonstrates the interwoven (relational) power bases at play in the institution.

TRANSFORMATIONAL LEADERSHIP 121

Good leaders need to know the motives and ideals of faculty and staff in order to mobilize them toward common goals—principally, what is best for students and other university constituencies.

Authentic leadership is purposeful. The task is to gain the confi -dence of all power bases in the university in order to attain institu-tional goals. But not everyone’s desires can be met, and compromise cannot always be attained. Good leaders have to say no at times to some groups in order for the university to progress. This type of lead-ership engenders a sense of community in which disagreements are acknowledged, but the fundamental work of university still thrives.

3. Leadership Is Value-Laden. Given the necessity for dealing with power and confl ict, good leaders must embody values that guide relationship building and decision-making. Good leaders need to have a moral compass.

In the university setting, all of the different power bases claim moral authority. Faculty often consider themselves to be the heart of the university. In their view, teaching expertise determines the institution’s reputation. Administrators see themselves as guardians of the entire institution, insuring a healthy organizational atmo-sphere and stable future. The values articulated by both of these groups can clash, which often occurs in the formulation of budgets. This is a complicated value proposition, but an indicator of princi-ples nonetheless. Good leaders determine which values fundamen-tally support academic excellence, fi nancial sustainability, and, most importantly, what is best for students and society at large.

4. Leadership Requires Courageous Action. Burns’ description of leadership emphasizes the mobilization of people to realize organi-zational goals. Burns does not indicate that those goals must be mutually held by leaders and followers. That is the ideal situation; but it is not always possible, especially when those goals are transfor-mational in nature. Some members of an organization can be signifi -cantly impacted by that type of change.

Resistance is inevitable. It is for this reason that leadership requires courage. But more importantly, it necessitates action. The now worn out phrase, “Analysis Paralysis,” can be a reality, especially in a university. Mobilization comes after analysis. Good leaders know when to take action, and how to do it decisively.

Leaders in at-risk institutions, in particular, have serious challenges to overcome. They are expected to have a collaborative leadership

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style, which can be at odds with what is needed to address fundamen-tal problems in traditionalist institutions. For example, it takes a deci-sive leader to move a college to embrace new instructional technologies and alternative ways of teaching and learning. University administra-tors who appropriately push for substantive change are often unfairly branded as despotic and egocentric. It takes courage of conviction to overcome severe criticism and to take action.

Burns’ description of leadership describes the complicated mix of motives and values that leaders and followers hold amid inevitable competition and confl ict in organizational life. But in the fi nal analysis, leadership is about reaching goals: But what kind of goals? Some goals are basic to the operation of an organization, others are more substantive. The type of goal desired determines the type of leadership that is needed. In this vein, Burns identifi es two types of leaders: transactional and transforming. 6

TRANSACTIONAL LEADERSHIP Transactional leadership involves a value exchange of one thing for another. In the political arena, in exchange for votes, politicians promise economic prosperity, societal security, and other straightforward assur-ances. In organizational life, transactional leadership involves hiring qual-ifi ed people for the right jobs, assuring that wages are commensurate with the quality of work, producing quality goods and services, and setting strategic directions for the benefi t of stakeholders. Burns describes these as modal values, a reliable and responsible honoring of commitments.

In a university setting, transactional leaders work within the existing sys-tem. They make sure that policies and procedures are optimally followed. They exercise creativity within established boundaries. These leaders pro-mote the mission and values of the institution in innovative ways. They fi nd a means to support faculty, staff, and students. As loyal members of the institution, transactional leaders are not likely to move away from an established way of leading the institution.

TRANSFORMATIONAL LEADERSHIP Transforming leadership deals with end-values such as justice, equality, and human dignity. This type of leadership presupposes elements of transac-tional leadership. Practical needs must be ethically met, but transforming

TRANSFORMATIONAL LEADERSHIP 123

leadership occurs when leaders and followers mutually move to a higher level of morality. These types of leaders model ethical decision-making and foster it throughout the organization. Likewise, followers hold the leader to the high ethical standards that the leader espouses.

There is a teaching element in transforming leadership. These leaders pass on authentic knowledge to others. There is the ability to assess the current situation and lead through an evaluative process on the way to shaping a stra-tegically enhanced future. Followers need to gain the same insights that com-pel the leader to make bold decisions on behalf of the whole organization.

Bernard M. Bass furthered Burns’ conception of transforming leader-ship in his book Leadership and Performance Beyond Expectations . 7 Even though Bass changes the term slightly from transforming to transforma-tional leadership, the core concept remains the same. While Burns focuses primarily on political leaders, Bass is thoroughly concerned with organiza-tional leaders writ large.

Like Burns, Bass contrasts transactional leadership with transforma-tional leaders. The transactional leader engages in an exchange of values and actions that meet the self-interest of both parties. This is a traditional conception of leadership where superiors motivate employees to get the job done. Bass saw the workplace signifi cantly changing in the last few decades of the twentieth century. Organizational hierarchies started to fl atten due to evolving and sophisticated industries with a more educated workforce. He saw transformational leadership as the primary means of accomplishing organizational change. 8

Bass describes this type of leadership in much the same vein as Burns, but Bass developed measurement tools to determine the extent in which leaders might be considered either transactional or transformational. He also affi rms that small groups within an organization might exhibit transformational behaviors—a type of empowerment that comes from a leader’s stimulation and encouragement.

TRANSFORMATIONAL LEADERSHIP AND STRATEGIC THINKING

This review of management and leadership theories indicates the complexity of organizational life. They also demonstrate how leaders need to be aware of their own basic needs as well as the needs of employees. Both Burns and Bass emphasize the moral element of transformational leadership as well as

124 M.J. DUMESTRE

its teaching function. The needs of an organization determine what should be taught and morally acted upon, which leads to questions about how to determine which organizational necessities should be addressed. This is where organizational leadership and strategic thinking intersect.

Higher education today is in need of transformational leaders. But by defi nition this type of leadership is not a solitary endeavor. It requires people who can develop other leaders in the university to forge a trans-formative path. The following table depicts the interrelationship between strategic thinking and transformational leadership (Table 9.1 ).

Reading the table from left to right, the columns depict how Generalized Empirical Method (Column 1) underlies the strategic plan-ning process (Column 2), which is implemented by strategic actions (Column 3), that lead to desired results (Column 4). The leadership qualities (Column 5) listed in each level are required of those who direct the whole process.

Table 9.1 Strategic thinking leadership STRATEGIC THINKING LEADERSHIP

Column 1 Column 2 Column 3 Column 4 Column 5

GENERALIZEDEMPIRICAL

METHOD

STRATEGIC PLANNING PROCESS

STRATEGIC THINKING ACTIONS

DESIRED RESULTS

LEADERSHIP QUALITIES

Being Responsible in Action

Strategic Action Deciding upon future directions

Creating and communicating an

exciting future(what will be)

Courage

(leading change)

Being Reasonable in Judgment

Reliable Judgment

Creating Scenarios

Choosing the best of all alternative

futures(what should be)

Wisdom

(judicious power sharing)

Being Intelligent in Understanding

Coherent Data Interpretation

Intelligent Assessment of

Sustainable Options

Developing credible

possibilities for transformation(what could be)

Creativity

(fosteringinnovation)

Being Attentive to Experience

Focused Data Collection

Internal and External

Environmental Scanning

A clear picture of the institution’s sustainability

(what is)

Trust

(community building)

TRANSFORMATIONAL LEADERSHIP 125

When viewed from bottom to top, the rows indicate how the four levels of GEM (experiencing, understanding, judging, and deciding) build upon each other. First, everything begins with attention being paid to institu-tional experience. That is why strategic thinking and planning rely upon a clear presentation of the institution’s current situation. Second, intel-ligent interpretation of the data generates credible possibilities for positive change. Third, reasonable judgment of those possibilities determines the best alternative that results in sustainable transformation. Fourth, there is the need for communicating a path to an exciting future, and then deci-sively acting upon it.

This strategic thinking methodology is nothing but an intellectual exer-cise unless there are competent people who can direct it. In the case of at-risk institutions, transformational leaders are best positioned to direct this process. They need to engender a sense of trust: institutional assump-tions need to be challenged, intelligent assessment of the current situation must be kept at the forefront of communication, and the whole insti-tutional community must be inspired to move from self-centeredness to community-centeredness.

QUALITIES OF TRANSFORMATIONAL LEADERS The last column of the table illustrates the transformational leadership qualities that are needed at each level in the process. A senior leader most often models these attributes; but unless others in the university mirror these traits, substantive progress is much less likely to occur. The follow-ing maxims enable university leaders to operationalize a strategic thinking methodology in a transformational way.

1. Good Leaders Enable Community Building ( Trust ). The term “ community ” has become a catchphrase in organizational life, meaning different things to different people. Lonergan ’s philosophy can be helpful in this regard. For him, a group of people, an organi-zation, becomes a community when it attains common meaning. 9 In other words, a university is a community only when there is a common understanding and assent to the university’s core mission and values.

Common understanding does not mean unanimity of opinion. But it does mean that the purpose and direction of the university is clear, so that people can buy into it in their own way. Communities

126 M.J. DUMESTRE

are built upon trust, and trust comes from transparency. It is for this reason that university leadership can call the community’s attention to what is its current situation, even if that is not good news.

2. Good Leaders Foster Innovation ( Creativity ). Innovation is not a sin-gular endeavor. It is dependent upon cumulative and progressive cre-ativity. A spark of an idea by an individual can either be extinguished easily or ignited by colleagues in the early stages of an innovation.

A central task is to determine how innovation groups can be organized in the community. Universities are hierarchical by nature. It is natural to think of innovation groups as organized by school or college in the university. But this also invites a silo (group bias) men-tality. Creative university leaders fi nd ways of organizing innovation groups that move the entire university community forward. For instance, if university fi nancial sustainability requires innovative solutions, then cross-college, cross-administrative division groups need to be organized. Only respected and trusted leadership can keep the university community together during a time of potential divisiveness. Innovation for what could be a transformation must be kept in the forefront of deliberations.

3. Good Leaders Judiciously Share Power ( Wisdom ). Egalitarian lead-ership in a hierarchical community is diffi cult, if not impossible. Shared leadership in the university is possible if there is a corre-sponding sense of shared responsibility. The president has her cabi-net; the provost has his council of deans; and the deans have their department chairs. And so it goes. But good leaders recognize vari-ous types of leadership within the university community and fi nd ways to involve them. Shared responsibility can informally fl atten the hierarchical chart if there is a corresponding sense of knowledge and dedication to university mission and values.

Shared leadership requires a type of organizational wisdom, one borne of lessons learned (with the scars to prove it). A respected university leader has the sensitive gravitas to encourage the univer-sity community to become what it should be after thoughtful and shared deliberation.

4. Good Leaders Inspire Change ( Courage ). Once the university com-munity has determined the innovative changes that make the most sense for them, good leaders inspire decisive action. Universities are notoriously adverse to change—especially a radical change in direction.

TRANSFORMATIONAL LEADERSHIP 127

A good leader coalesces the entire university around the thought-ful, bold, innovative journey they set out for themselves. It takes an inspirational leader to be a catalyst for innovative change, communi-cating an exciting vision of what will be .

TALKING WITH TRANSFORMATIONAL LEADERS I recently had an interesting and extensive conversation over lunch with retired leaders from a university that entered the adult learner market in the late 1970s, early on in the adult learner movement. They also were pioneers in the creation of totally online degrees, starting in the mid-1990s.

It was through their leadership that a very traditional, but fi nancially at-risk institution, was transformed into a model for innovation in higher education. With the urging and support from a remarkably insightful pres-ident, they helped save the university from collapse. These administrators had to challenge a traditional university structure and mindset in order to become a more open educational system.

When asked about the greatest threats to higher education today, the following answers clearly came out of their experience:

• Holding on to the past with traditionalist thinking; • Free (or almost free) tuition to state schools, without fi nancial assis-

tance for private higher education, will actually limit access to a uni-versity education because of the lack of capacity;

• Rising costs of operation make it even harder to hold on to the tra-ditional college model;

• Helping people understand the university fi nancial system and how decisions affect the “bottom line” is a challenge and a threat to insti-tutional sustainability;

• The level of preparedness of incoming students is still a problem (or worse), making the cost of remedial classes a diffi culty for the institu-tion and the students;

• Political correctness sensibilities seem to be an increasingly diffi cult problem (particularly with students) because of unrefl ective moti-vations, a type of narrow-mindedness ironically at play in institu-tions dedicated to critical thinking and open discussion;

• US higher education is at risk if government does not value it as an integral investment in the common good.

128 M.J. DUMESTRE

I asked them how university leaders could design an ideal organizational structure for today’s social and cultural environment. The following answers demonstrate the interplay of university culture and structure:

• Autonomy must be given to individual units (colleges and schools) in the university to serve the needs of their particular student constituencies;

• Separation of universities into a system of colleges and schools ori-ented to different types of students is a necessity, much like the way medical schools and law schools have operated within a university system for a long time;

• Conversations about structure cannot be separated from the people and leadership within a particular university culture, which is the reason why each university must go about change in different ways.

It was interesting asking these innovators about how innovation can be fostered in universities. They responded:

• Finding ways of moving people beyond traditionalism in a tradition- bound institution is a primary task that takes as much creativity as it does innovative intellectual acumen;

• Most faculty members and administrators have spent their profes-sional lives studying the foundations and traditions of their academic disciplines (a lot of time “looking back”), which makes forward thinking beyond their discipline a diffi cult change in orientation;

• One very succinct response—“Bring in innovators and allow them to run their enterprise.”

When asked about what gives these seasoned administrators hope about the future of higher education, and conversely, what makes them pessimis-tic, the answers were thought-provoking:

• Important aspects of hope for the future are that American higher education has been growing and improving for centuries; that it has weathered previous/worse challenges; that it is still growing and successfully serving millions of students; and that going to college is still a crucial part of realizing the American Dream;

• There is much more creativity in the world of higher education than ever before, with new modalities increasingly being developed;

TRANSFORMATIONAL LEADERSHIP 129

• Advances in learning psychology and technology make possible even greater change in the future;

• Higher education still is the best hope for socio/cultural progress by providing graduates with expanded worldviews and preparation for the professions;

• It is easy for change agents to become pessimistic because the forces against change in higher education (at all levels) are still powerful and entrenched;

• The student debt load is the new mortgage crisis; • It is a sad reality that many colleges would rather close than change

the way they do business.

The group’s answers to what exactly makes someone a transformational leader in higher education included the following:

• A consummate educator who has learned the most effective models of the business world;

• Has the ability to balance good management and leadership with quality learning;

• Transformational leaders do not fi t the mold of traditional career ladders in the university;

• A leader with the ability to “keep everyone rowing in the same direction.”

• Too often, transformational leaders are not understood by the trust-ees of the university, particularly when these leaders are not the presi-dent of the institution;

• Transformational leaders recognize and encourage others throughout the university who can help change an entrenched system;

• Tolerance of ambiguity and the ability to wisely take risks are impor-tant attributes these leaders possess;

• Transformational leaders have the ability to span institutional and system boundaries.

During our lunch conversation, our server overheard our discussion. At one point, she looked at us and proudly announced that she had just graduated with her bachelor’s degree (at age 34) from the adult learner- oriented college of a local university. She received hearty congratulations from all of us. A great big smile was given in return.

130 M.J. DUMESTRE

While much of this lunch conversation focused upon the practical and theoretical aspects of serving adult learners in the university, the person serving us embodied what we were talking about. Just as adult learners tend to be the “invisible student” in the university, attending only at night, here she was—still the “invisible student” waiting tables during the day. She worked hard on her degree, and she was determined to change her life for the better. Her quiet presence enriched the whole experience for me.

I talked with her after the lunch. She had been working on her degree for fi ve years in the evening, worrying the whole time that her day work hours would remain the same. If they did not, she changed jobs. That was the level of her commitment to her education. Her career aspirations were in Human Resources, and she was determined to get into the fi eld as soon as possible.

Transformational leadership comes in many forms. We most often hear about the transformative experience of traditional-age students as their “com-ing-of-age” in the university. Agents of transformation also are found in uni-versity administrative offi ces, making sure that students of all varieties have this type of experience. And sometimes these types of leaders are teaching classes in the evening, helping adult learners make dreams happen. A trans-formation also occurs when a 34-year-old completes her degree against all odds and walks across the commencement ceremony stage into a better life.

STRATEGY IMPLICATIONS 1. The Transactional/Transformational Dilemma . Both management

and leadership are needed in university administration. If an institu-tion is in a stable condition and has an appropriate organizational structure, an enlightened style of management (Theory Y or Theory Z) suffi ces. Even secure institutions, however, are in need of good leadership. A well-functioning university’s leaders initiate and direct incremental change with a transactional leadership style that advances the institution. There is no need for substantive change in mission and core operations.

A dilemma occurs when university enrollment goals are continu-ally not met and fi nancial problems arise. There is a tendency to continue with a transactional leadership style that tries to utilize incremental change as a way of addressing the institution’s prob-lems. There is a resistance to view the traditional organizational sys-tem as a fundamental problem. It is thought that these diffi culties

TRANSFORMATIONAL LEADERSHIP 131

can be solved by better marketing, increases in the tuition discount rate, upgraded facilities, and other enhancements to the current sys-tem. Deciding when to move from transactional to transformational leadership is diffi cult because of the inertia of traditionalism—the heart of the dilemma.

2. Strategic Thinking in Higher Education Leadership. Successful leaders in higher education have the ability to assess the needs of a university and to determine the type of leadership that is needed at a particular time in the life of the institution. This ability is grounded in strategic thinking. Good leaders are critical thinkers. Great leaders are strategic thinkers. They are attentive to problematic aspects of the university environment and intelligently assess options for improvement. Their judgment about accessible alternatives is reli-able, and they have the ability to act decisively.

Great leaders know when and how to advocate for transforma-tion. In essence, transformational leadership in higher education requires the use of strategic thinking to address multifaceted prob-lems and opportunities with a compelling, ethical, and transparent communication style that animates community involvement in a shared vision of the future.

NOTES 1. Douglas McGregor, The Human Side of Management , (New York: McGraw

Hill, 1960, cited in “Theories X and Y,” Idea series, The Economist , October 6, 2008, accessed May 24, 2015, http://www.economist.com/node/12370445

2. William Ouchi, Theory Z : How American Business Can Meet the Japanese Challenge. (Reading, MA: Addison-Wesley, 1981), cited in “Theory Z,” Encyclopedia of Management , accessed May 24, 2015, http://www.refer-enceforbusiness.com/management/Str-Ti/Theory-Z.html

3. See the W. Edwards Deming Institute website for his contributions to the recovery of Japan’s industries after World War II and his development of a 14-point management theory that helped spawn the total quality manage-ment movement. https://www.deming.org , accessed May 29, 2015.

4. James MacGregor Burns, Leadership (New York: Harper & Row, 1978). 5. Burns, Leadership , p. 425. 6. Burns, Leadership , pp. 425–432. 7. Bernard M. Bass. Leadership and Performance Beyond Expectations. (New

York: The Free Press, 1985).

132 M.J. DUMESTRE

8. This description of transformational leadership comes from a good sum-mary of his work in: Bernard M.  Bass, “Two Decades of Research and Development in Transformational Leadership,” European Journal of Work And Organizational Psychology , 1999, 8 (1), 9–32, p 11.

9. Bernard Lonergan, Method in Theology, (Toronto: University of Toronto Press, 1990), p. 79.

TRANSFORMATIONAL LEADERSHIP 133

135© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_10

CHAPTER 10

Abstract This chapter presents a realistic scenario of a fi ctional university that fi nds itself in a fi nancially unsustainable situation. This narrative is a composite of events I have witnessed at many institutions over the past 30 years as well as what colleagues have told me about their own personal struggles and successes. Administrators and faculty members will readily recognize the dynamics of organizational dysfunction in the case study. An interesting wrinkle is that, according to current thinking, Bon Sens made all of the right changes by adopting online graduate programs and opening extension campuses. Yet, it still fi nds itself in a downward fi nancial spiral.

Keywords University at-risk case study • Higher education case study • Financial unsustainability case study

This case study presents the dilemma that a fi ctional university faces as it attends to its fi nancial diffi culties. While every aspect of this case is fi ctitious , including all of the characters in the story , the institutional dilemmas and fi nancial sustainability problems are very real for many institutions .

Bon Sens University was planning the celebration of its 125th year of operation alongside of the Mississippi River just south of Baton Rouge, Louisiana. It had survived hurricanes and fl oods over the years on a 75-acre campus. But the current crisis did not come from Mother Nature; it was self-infl icted.

The Case of Bon Sens University

THE BACKGROUND French nuns who traveled to Louisiana to offer education for disadvan-taged young women founded Bon Sens in 1889. Over the next 25 years, it became a highly regarded academic alternative to a fi nishing school. Eventually, a full high school curriculum was offered, followed by the opening of a college. The high school’s reputation increased rapidly, and it eventually separated from the college. Land was donated to move the high school into the city, which left a lot of room for the college to expand.

Just a few of the nuns stayed to run the college. It was not until 1935 that the college came into its own, with the help of a $5 million donation from the widow of a wealthy philanthropist. Bon Sens became identifi ed as a normal school, primarily dedicated to producing elementary and sec-ondary school teachers. Degree programs and faculty increased over the years and enrollment stabilized at about 400 women.

In 1999, the college experienced its third consecutive year of falling enrollment. By then, Bon Sens was tied to the religious order simply by way of its founding history. Only one nun remained at the college, Sr. Regina, the president. She had led the institution for 30 years. It was at her urging that the all-female Board of Trustees conduct a search for a new president. The next year, Stuart Benoit, provost of a highly regarded liberal arts university, was selected as the fi rst male president of Bon Sens. The college was in crisis mode, and the new president’s job was to save it.

President Benoit spent his fi rst month in offi ce listening to faculty, staff, and alumnae about how the institution could move forward. He put together a strategic planning committee, and they went to work. The centerpiece of their fi ve-year strategic plan was to become co-educational in order to reliably expand enrollments. Over the next two months, he listened to furious alumnae (and some Board of Trustees members) who labeled him as a misogynist and betrayer of Bon Sens’ mission.

Benoit survived the attacks, and Bon Sens College became co- educational the following year. The college’s mission was repositioned from being a teacher’s college to a liberal arts college dedicated to moral development, equality, and the advancement of a just society. Over the next few years, majors in psychology, business, and communications were added. The sciences soon followed, and a nationally accredited nursing school was formed. Bon Sens was in the middle of a turnaround.

For the fi rst time in many years, decrepit buildings were torn down and replaced by attractive new ones. The small intercollegiate athletics

136 M.J. DUMESTRE

program blossomed with donor fi nancing. Bon Sens eventually moved into NCAA Division III, fi nanced by a large donation that created an athletics booster organization. Enrollment was stable at 700, with nearly 25% of the student population involved in athletics. Benoit was convinced that athletics would further diversify the student population.

After a national search in 2003, Wilson Prescott was hired as Dean of the College. President Benoit made it clear to Prescott that he wanted Bon Sens to transition to university status. Benoit wanted to create a new type of university dedicated to the liberal arts, but also with equal empha-sis on graduate and online degree programs. Because of advances in inter-net accessibility, Benoit thought that Bon Sens could launch academically credible online programs that offered working adults an alternative to for- profi t universities.

It would be Prescott’s job to get the college faculty on board. Prescott agreed so long as graduate and online programs would have a separate identity, but academically controlled by the faculty. The deal was struck.

The Board of Trustees had turned over completely with the exception of one nun from the founding religious order. It was composed primarily of handpicked alumnae and a few prominent Louisiana business execu-tives. President Benoit was in control.

An aggressive 2005–10 strategic plan was presented to the Board. The centerpiece was the transition to university status. A case was made that the university designation better fi t the institution’s aspirations and the needs of the State of Louisiana. After a protracted discussion about mis-sion and college identity, the Board agreed to the plan.

The transition took longer than expected and cost more than was antic-ipated. Nevertheless, the fi rst professional graduate program, a MEd in teaching and learning, was launched in 2008, followed by other focus areas in Education. In 2010, the student population reached 900. A build-ing campaign was underway to accommodate them, plus an additional 20% capacity for future growth. Over 60% of students now lived on cam-pus in new residence halls, with a state-of-the-art recreational complex and full amenities expected of an elite institution.

The move to university status precipitated the ambition to move up in the rankings. But that came with a steep price. The university’s cost of attendance continued to rise. Benoit emphasized to the Board the neces-sity of promoting the Bon Sens transformation in their business, social, and political circles, as well as to the media. Bon Sens University began to look like the successful liberal arts university that President Benoit desired.

THE CASE OF BON SENS UNIVERSITY 137

The 2010–15 strategic plan was more ambitious than the previous one. Titled “A New 21st Century University: Innovation Grounded in Traditional Values,” the plan’s primary goal was to attract students beyond Louisiana and focus on the entire South. The performance metrics refl ected those aspirational goals.

Susan Aucoin, the Chief Financial Offi cer, was worried about Bon Sens’ escalating tuition and even faster rising university expenses. The endow-ment had increased, but it still was just under $25 million, with the major-ity of it dedicated to facilities. The Bon Sens athletics foundation that promised to cover the cost of NCAA programs was falling short of fund- raising goals.

The CFO met with the president to explain the depth of her concern. But Benoit was not to be deterred. It now was time to start lucrative online degree programs. If the endowment could not keep up with rising costs, then the net revenue from those programs would fi ll the gap.

After a contentious set of discussions with the Faculty Council, President Benoit and Dean Prescott were able to fast track the formation of a College for Professional Studies (CPS) at Bon Sens. Benoit empha-sized the creation of adult learner evening programs and the establishment of extension campuses, but judiciously sidestepped the issue of entirely online degree programs. Board approval came shortly thereafter. Bon Sens’ previous accomplishments gave everyone confi dence that the presi-dent’s innovations would be a success.

Rick Kingman, who was recruited to become dean of newly formed CPS, knew what he was getting into when he arrived on the Bon Sens cam-pus. He was accustomed to university politics and had the scars to prove it. At his previous university, Rick helped set up three extension campuses oriented toward adult learners, along with fully online degree programs.

Benoit knew about Kingman’s success. But more importantly, he trusted the process Rick used to get them started. Rick used an outside vendor to help launch the online programs at his previous university because internal funds were simply not available, nor was there a willing-ness to obtain them.

Given the current fi nancial situation, President Benoit told Rick he would have the same problem at Bon Sens. Rick understood, and with the support of Benoit, he went to work forming a committee to select an OPM provider to fi nance the start-up. Overcoming the skepticism of faculty, an agreement was signed with an OPM, and, within a few months, one academic department agreed to put its graduate program in an online

138 M.J. DUMESTRE

format. Despite a hefty tuition share going to the OPM, the program was tremendously successful.

Within three years, other degree programs were launched and the net revenue generated by the university’s online programs was quickly ris-ing. The Bon Sens admissions and marketing departments were less than thrilled about the increasing profi le of online programming. To some eyes, the academic status of Bon Sens was losing its luster.

After the online programs were underway, Rick opened a Shreveport, LA extension campus in an offi ce park. Market research indicated that three bachelor’s degree completion programs would be in demand there. The academic departments agreed, and the campus opened with full sup-port from the local Chamber of Commerce.

Over its 125-year history, Bon Sens went from a young women’s fi nish-ing school to a full university with nearly 2000 students enrolled, includ-ing 900 adult learners. Benoit decided to move Wilson Prescott from his Dean of the College position to be University Provost. Prescott’s assistant dean became interim dean. Much to his disappointment, Rick Kingman was appointed as Assistant Provost for Professional Studies. It seemed clear to Rick that he should have been promoted to Provost because of his innovations and successes. Rick was qualifi ed academically, but it was clear that the weight of tradition was in Prescott’s favor.

The Faculty Senate and the Board liked the move. It preserved Bon Sens’ academic aspirations. The undergraduate college would always be the heart of Bon Sens, despite the success of the adult learner pro-grams. The admissions and marketing departments were pleased, but not totally satisfi ed with the move. They wanted a share of the substan-tial online marketing funds to promote the university to the traditional-age student base. But that could not happen because of the contract with the OPM.

Stuart Benoit became featured in national publications as a one of the most progressive Southern university presidents. There was talk about him moving to the political arena. Accolades poured in, but trouble was brew-ing on the bayou.

THE PROBLEM President Benoit had just come from a somewhat contentious cabinet meeting in which he confronted his senior staff with what was now becom-ing a looming crisis at Bon Sens. In preparation for the fall Board meeting,

THE CASE OF BON SENS UNIVERSITY 139

the fi nal year strategic plan performance metrics looked challenging, at best. The following issues stood out:

1. The $32,000 tuition rate, plus $11,000 for room and board, was proving to be a problem for the undergraduate college. The dis-count rate had to move to 50% in order to attract new students. State university tuition rates were one-fourth that of Bon Sens, and private university competition was fi erce.

2. Tuition had increased by 6% in each of the last three years to match the perceived rising reputation.

3. Despite the discount rate, this was the second year in a row that the university failed to reach undergraduate college enrollment goals.

4. The admission to enrollment yield rate was 24%, about 10% below the national average.

5. The freshman to sophomore retention rate was 74%, nearly 10% under target.

6. Gross revenue in the traditional college was a little under $35 mil-lion, about 5% below forecast.

7. The endowment spend was 10%, about 6% more than is acceptable.

8. NCAA D-III programs were costing about a million dollars per year because of Booster foundation shortfalls.

9. Financial liquidity was becoming a problem. 10. Moody’s Investor Services requested a meeting to discuss the insti-

tution’s fi nancial ratios. 11. Campus maintenance expenses had to be deferred in each of the

past three years.

The graduate and online program performance was the only positive result to report. Tuition revenue from CPS was close to $10 million in the pre-vious year, with increased enrollment expected for the coming year. Net revenue was a little over $4 million due to the high effi ciency of the pro-grams. This CPS success, however, was not suffi cient enough to outweigh overall fi nancial problems.

The upcoming Board meeting would be diffi cult. Results from the past three years of the strategic plan were not good, but efforts had been put in place to remediate problems. They were not working fast enough to turn things around. This year’s Board report was entering the danger zone. President Benoit needed advice, and he knew where to fi nd it.

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* * *

The Board Chairperson, Christine St. Clair, was respected both by Stuart and the other Board members. She attended Bon Sens in the late 1960s. Christine and her husband were signifi cant donors. But more importantly, Stuart appreciated her business acumen. She and her husband had turned a small South Louisiana company into a multinational corporation.

Rita Barrett ushered Christine into President Benoit’s offi ce. Stuart greeted her and ushered her over to his conference table.

“Thanks for coming, Christine,” he said as they sat down. Christine looked at Stuart over her glasses and said, “I received the initial

draft of the annual report, and it looks like we have some real problems.” “Yes. We could approach these as micro issues and address them one

by one, but I think that would be a mistake. I suspect they are all part of a larger problem.”

She quickly responded, “I agree, but I hope you’re not suggesting that we abandon Bon Sens’ mission.”

“No, not at all. I believe our problems have to do with structure and strategy.”

“So, what are we going to do about it?

THE QUESTION How should President Stuart Benoit respond, and how can Bon Sens’ at- risk situation be remediated?

THE CASE OF BON SENS UNIVERSITY 141

143© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_11

CHAPTER 11

Abstract This chapter outlines the details of a strategic planning process that addresses the Bon Sens case study. This chapter demonstrates how strategic thinking can concretely be used to create a transformational planning process. A signifi -cant aspect of the methodology used to address Bon Sens’ problems is its compre-hensiveness. All too often, solutions for fi nancially at-risk institutions concentrate on cost cutting and streamlining operational procedures at the periphery of root causes. Every aspect of this university’s structure and operation are examined.

Keywords University at-risk case study answers • Financial unsustainability case study answers • Transformational strategy • Strategic planning

The Bon Sens University case in Chap. 10 is emblematic of fundamental problems that many universities face today. Questions raised at the end of the case are very real for many small-to-mid-sized institutions: How should a president respond to an institution’s at-risk status, and how can it be remediated?

The reliability of approaches to remediating Bon Sens’ diffi culties is contingent upon sound analysis. Utilizing the Strategy Implications of previous chapters, the following contextual issues need to be raised in order to address Bon Sens’ vulnerable status.

Transformational Strategy in Action

STRATEGY IMPLICATIONS 1. The Fragility of the Traditional University Model. The evolution of

Bon Sens University fi ts the traditional university model. Moving from a religiously affi liated normal school to a liberal arts college and eventually to university status over the course of the twentieth century would be the typical progression of many institutions. President Benoit’s goal was for the university to move up the rank-ings ladder, but this was not consistent with his desire to fashion a new type of university for the twenty-fi rst century.

Benoit assumed that the introduction of extension campuses and online programs constituted the new model. These adult learner- oriented innovations were simply adjustments to the existing orga-nizational structure. They did not fundamentally change it. The cost of maintaining the campus with all of its amenities continued to anchor the institution to its traditional model. In effect, the new programs were cash cows that were expected to cover losses—not building blocks for a new type of university.

2. Organizational Blindness . A quick reading of the Bon Sens situation makes one wonder how the president could not see the beginnings of a downward spiral years earlier; but this is not unusual. Universities tend to have self-protective mechanisms that position problems as temporary or cyclical. A fast-changing external environment exacer-bates this diffi culty. A typical response to a decline in enrollment is to increase funding for promotion and recruitment in order to expand the candidate pool. This conventional tactic is insuffi cient both in terms of addressing root problems and facing the possibility of a prolonged downturn. Moreover, many universities tend to be mired in inaction because of the weight of tradition. It is very easy for even intelligent people to become entrapped in the assumptive world of an institution they highly value.

3. An Insuffi cient Value Proposition. The timing of Bon Sens’ move to university status and its enhancement of the student experience coin-cided with the end of cost-push infl ation. Students no longer were willing to enroll in relatively expensive private institutions in the same numbers as earlier decades. The Bon Sens tuition rate was rising by necessity, but student willingness to pay was beginning to wane. Even the 50% discount rate was not enticing enough to meet enrollment goals. Bon Sens was not able to make a compelling value proposition for potential students. The twenty-fi rst century preference for many

144 M.J. DUMESTRE

students is a lower-cost public institution. An ethically-based mission, personal attention, excellent campus amenities, and the perception of a safe environment are now insuffi cient reasons to justify a high cost of attendance. Many private institutions basically offer the same value proposition, which makes them all look very similar. Bon Sens would need to be clear about why their particular approach to higher educa-tion is a superior value compared to other private universities and lower-cost alternatives.

4. The Transactional/Transformational Leadership Dilemma. Good leaders know when to use the type of leadership style that best fi ts the needs of an organization at a given point of time. In the Bon Sens case, President Benoit was articulating transformational change with his vision to become a “New Twenty-First Century University.” But his leadership actions were more incrementally-oriented than transformative. The adult learner innovations occurred because of a transactional agreement made with the Dean of the College.

Fashioning a new type of university would have required transfor-mational leadership. Benoit was on the right track in calling for fun-damental change, but the actual process of bringing that about would have required a lot of work with internal and external constituencies. The natural tendency is to protect the status quo of the current sys-tem. That type of inertia would need to be countered with a vision for the future that stimulates action for the good of the whole university. The need for fundamental change would have to be clearly articu-lated. Transformational change requires transformational leadership.

These contextual issues constitute challenges that Bon Sens must deal with in order to address its fi nancial fragility. This case study depicts problems that all but the most secure US universities face today. The question remains: “How can an institution move from at-risk status to fi nancial sustainability?”

ANSWERS The Bon Sens Board Chair’s question was very straightforward: “So, what are we going to do about it?” Christine St. Clair’s use of the pro-noun “we” rather than “you” was about as positive a question that President Benoit could hope for; therefore, his response should be one of appreciation. She would be his best ally in fashioning a process to remediate Bon Sens’ problems. Board support is crucial for any type of fundamental change.

TRANSFORMATIONAL STRATEGY IN ACTION 145

In response to what should be done, the president’s answer should be straightforward. Indecision or duplicity could have disastrous consequences. An evaluation and revision of the current strategic plan are obvious needs. How to accomplish them is another matter.

President Benoit, along with the Board Chair, should announce to the Board that the current situation calls for a remediation of the existing stra-tegic plan. The goal would be to return to the plan’s original purpose—transformational change. The immediate fi nancial situation would have to be addressed; but that need is tactical, not strategic.

STRATEGIC THINKING FOR TRANSFORMATION The failure of the current Bon Sens strategic plan requires rethinking, in other words—strategic thinking. Even if the planning process Bon Sens used to construct its current plan had all of the elements necessary for institutional buy-in, the underlying strategic thinking methodology was lacking. That fundamental problem could be addressed with objective facilitation of a transformative process.

The following four movements of the Strategic Thinking Leadership methodology outlined in Chap. 8 (see Table 8.1) could address Bon Sens University’s at-risk situation. While reference is made to specifi c issues outlined in the case study, emphasis is placed on a demonstration of the methodology rather than a specifi c solution for Bon Sens. Authentic use of the process should determine actions that are appropriate and unique for each institution that undertakes it.

1. Focused Data Collection. This fi rst movement provides clarity about Bon Sens University’s current situation. The goal of this stage is to develop a clear picture of institutional health. In order to do so, there are three primary areas that need examination.

(a) Focus. The most important element of this fi rst movement is the identifi cation of the primary goal of the plan—the focus. In the case of Bon Sens, its planning focus is organizational transfor-mation that leads to fi nancial sustainability. Other institutions might have a less comprehensive goal. In any case, the goal directs attention to the data that must be collected.

(b) Financials. Bon Sens’ dire fi nancial situation compels the univer-sity to examine the state of its fi scal health. There are two key aspects of this type of analysis. First, ratios give the best picture

146 M.J. DUMESTRE

of how well an institution is performing on key aspects of fi nan-cial viability. Second, performance should be tracked over time and compared to national benchmarks.

A good example of ratio analysis is the Financial Indicators Tool (FIT) that the Council of Independent Colleges (CIC) makes available to its member institutions. 1 The FIT tool uti-lizes the US DOE’s IPEDS , IRS Form 990s, and the Composite Financial Index (CFI) to provide a comprehensive gauge of an institution’s fi nancial health. Four important fi nancial indicators are measured: (1) Primary Reserve Ratio—a measure of the level of fi nancial fl exibility; (2) Net Operating Revenues Ratio—a measure of operating performance; (3) Return on Net Assets Ratio—a measure of overall asset return and performance; (4) Viability Ratio—a measure of the ability to cover debt with available resources. The CIC tool provides a composite score of 1 to 10 that indicates the institution’s fi scal condition. A mini-mum score of 3 signifi es adequate fi nancial viability. Higher scores indicate opportunities for strategic investment in institu-tional operations. Particularly at-risk institutions might have a score even lower than zero.

Had Bon Sens been using such a tool, fi nancial warning signs would have been emerging as the institution made its strategic moves. It would be imperative for Bon Sens to use such a tool as part of its current data gathering. These ratios provide a valuable picture of institutional fi nancial performance.

(c) Internal and External Environmental Scanning . A typical scan-ning scenario is for the university to engage in a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis . As diligent as a planning committee might be in undertaking this exercise, even with outside stakeholder input, results tend to refl ect the existing worldviews of participants. Even when directed to think outside of the box, there are presumptions about what constitutes the box. It is for this reason that expert help is needed.

In addition to many higher education consulting fi rms that focus on strategic planning, there are non-profi t higher educa-tion service companies like the National Center of Higher Education Management Systems ( NCHEMS ) that can provide environmental scanning assistance. Their expertise can be par-ticularly useful because of their involvement in a wide spectrum

TRANSFORMATIONAL STRATEGY IN ACTION 147

of post-secondary education. Also, associations like the National Association of College and University Offi cers ( NACUBO ) and federal agencies like the NCES can be helpful as well.

It is imperative that this fi rst movement be as comprehensive as pos-sible, especially in terms of external environmental scanning. Too many university strategic plans fall short because the conception of the external environment tends to be limited to academic reputation, demographics, peer and aspirational university performance, trends in higher education, and other factors that are deemed to directly affect the institution

The university does not exist simply within a constellation of ivory towers. The US socio-economic environment affects the institution as well. The art of environmental scanning is determining what factors in a vast amount of data should be considered. Trend analysis can be helpful in this regard. Rather than looking at a snapshot of discrete data, looking at public opinion trends about what constitutes personal and societal suc-cess, economic workforce needs, social justice sensibilities, the political and governmental environment, and other macro factors provide a multi-faceted representation of the world in which the university must not only survive, but thrive. The more help Bon Sens can get in collecting these data, the more informed it will be in analyzing how it can meet the needs of a twenty-fi rst- century student constituency that makes sense for them.

2. Coherent Data Interpretation. An overwhelmingly large amount of data is collected in the fi rst movement of the process. The goal of this second phase is to develop credible possibilities for transforma-tion. In order to do so, there must be intelligent assessment of sus-tainable options. Vigilant facilitation is crucial. All too often, the planning committee’s interpretation of data gravitates toward what looks familiar.

The mission of the university must take center stage at this point. As indicated above, true openness to transformational change must include the possibility of interpreting its mission according to con-temporary needs. According to the case study, the Bon Sens mission is to be “a liberal arts university dedicated to moral development, equality, and the advancement of a just society.” The benefi t of this mission statement is that it still fi ts the societal needs. The liability is that it parallels the mission of many liberal arts institutions in the USA. It is not a differentiator. Bon Sens’ task, therefore, is to distin-guish itself by the way it interprets its mission.

148 M.J. DUMESTRE

In essence, Bon Sens should develop alternative futures that dis-tinguish it from the competition. These transformations, fi rst and foremost, need to be grounded in how the university’s mission can be accomplished. The following areas need to be explored in order to develop different models.

(a) The Needs of the Ideal Bon Sens Student Population (b) An Appropriate Educational Philosophy (c) Complementary Structure and Operation (d) A Sound Financial Model (e) Effective Promotion and Recruiting

It is important to note that the fi rst and primary determination is focused on identifying the Bon Sens ideal student population and, most signifi -cantly, their educational needs.

Bon Sens, like many universities, took the approach that their job was to provide a time-tested higher education curriculum in the most attrac-tive university atmosphere. It was the potential student’s job to make themselves acceptable for admission. If they were fortunate enough to be selected for enrollment, the cost of attendance was viewed undeniably as an investment in a bright future. When institutions were at or near capac-ity, that mode of operation was unquestioned.

In the hypercompetitive atmosphere of US higher education today, that approach works only for the most secure and desirable institutions. Many universities fi nd themselves in the position of having to sell themselves to potential students. That was Bon Sens’ situation, and it was not working.

Whether termed as market segmentation or data analytics, it is increas-ingly necessary for universities to determine their optimal student market. No doubt, Bon Sens would have found that the analytical data on poten-tial new students presents a very diverse population in terms of age distri-bution, educational goals, and social/emotional needs.

Which market segments should Bon Sens orient itself for future sus-tainability? Increasingly, universities need to think in terms of multiple market segments, not just one primary student profi le. Many universities have the institutional platform to provide higher education for very differ-ent student populations, as opposed to the limitations of a small college structure. But even institutions with a large campus footprint(s), need to reconsider how their facilities are used.

Part of Bon Sens’ determination of preferred student populations is the assessment of educational goals. For instance, adult learner needs are

TRANSFORMATIONAL STRATEGY IN ACTION 149

oriented toward professional enhancement, career transition, and self-fulfi llment. Traditional campus life and amenities are not meaningful to them, but the academic reputation of the university is important. Their educational needs are oriented around the knowledge and skills that can help them advance in their professional life. In the second decade of the twenty-fi rst century, the size of that student segment is large compared to the traditional-age student market.

Traditional-age students can be further segmented by their educational needs. Indeed, there are students who want a highly selective elite col-lege experience. If they are not successful in gaining admission to such an institution, they might gravitate to their second or third choice—an elite lookalike. There are others who are searching for educational and social guidance, others who want to be part of a creative and innovative environ-ment, others who want a specifi c professional career path (pre-med, engi-neering, computer science, etc.), and yet others who are oriented toward service professions. Bon Sens thought it could meet the needs of all of those students. But that is impossible to do well and to be known for excellence in all of those areas.

When student markets and educational needs are identifi ed, then the other transformational elements should be optimized to meet those stu-dent needs. An institution’s educational philosophy must be aligned with those needs. Many, if not most, universities have avoided this discussion because of academic freedom issues. If a learner-centered philosophy is adopted—as it should—it does not mean that instructional strategies need to be the same. No doubt, different disciplines have specifi c meth-odologies that students need to master as part of their major. The way they are taught makes a big difference to students, and to the university’s reputation. If a university faculty, as a whole, is able to give assent to an overall educational philosophy; that, in and of itself, is a very positive differentiator.

Traditional university structure and operations are not likely to be aligned with potential new student populations. The analysis of what it means to optimally service student needs involves a cost analysis of struc-tural realignment. If Bon Sens is realistic about selecting its preferred stu-dent populations (non-elite aspirations), then the cost of buildings and operations will need to be less than current expenses.

Decreasing operating costs and enhancing the student experience are possible with the appropriate use of technology. Whether it is optimiza-tion of electrical power usage, technological optimization of laboratories,

150 M.J. DUMESTRE

or grounds maintenance, effi ciencies can be found through the proper use of emerging technologies.

Embracing the ongoing revolution in instructional technology can make the signifi cant difference in operating a quality university in the most effi cient way. It is now not only possible, but also preferable for students to receive lectures and other didactics in an online modality. Students should never go to class just to hear a lecture. They should watch it online and react to it. When they go to class, professors can then add clarifi ca-tion, answer questions, and provide perspective. In this way, students can experience the deep contextual expertise a faculty member can provide.

This mode of instruction makes three sessions per week (Monday, Wednesday, and Friday), or two-session per week (Tuesday and Thursday) class schedules anachronistic. Class sessions can easily be transformed into one longer session per week, with much of the classwork done in an online format, including group and project work. Students now live in a thor-oughly online world. Blending online and personal interactions (with the professor and other students) can be a powerful educational experience.

Moving most, if not all, classes to one day per week reduces the need for the size and type of classroom buildings on the traditional campus. Additionally, it becomes more possible to have distributed mini-campuses connected through numerous types of technologies.

A partnership structure with educational services providers can also reduce operating costs. Classic examples are partnerships with Apple or Microsoft that provide students with tablets loaded with university-spe-cifi c software, or laptops from other technology companies, or enhanced LMSs, or even companies that provide students with academic coaching that enhance retention rates. Increasingly, universities are becoming plat-forms for integrated educational partnerships that are all oriented toward institutional mission and an enriched student experience.

The fi nancial model is a fundamental element of identifying Bon Sens’ preferred student populations. The institution must provide an attractive value proposition. Given Bon Sens’ current fi nancial situation, it is likely that the current model will need to be substantially altered—lower cost of attendance that is in line with reduced institutional expenses.

When all of these elements are formulated, it becomes possible to artic-ulate promotion and recruitment plans. Marketing can be more focused because of effi ciencies gained by targeting student market segments. The value proposition for each sector would need to be articulated in compel-ling ways.

TRANSFORMATIONAL STRATEGY IN ACTION 151

The Bon Sens marketing department suffered from the perception that resources needed to be distributed equally between the traditional col-lege and the CPS. The reality is that some student recruiting takes more resources in order to be effective. The senior university leaders must be able to handle these issues in order to promote a unifi ed institutional culture.

* * *

The above examples of various student markets and alternative delivery systems simply demonstrate the use of the method. They are not meant to be panaceas for Bon Sens or models for other institutions. There are myriad ways in which universities can reinvent themselves if data are col-lected in a comprehensive way and interpreted creatively.

The fi rst movement of the process results in a clear picture of exactly what is Bon Sens’ at-risk situation. The product of the second movement is the best thinking about what Bon Sens could be . What Bon Sens should be is the result of the next movement.

3. Reliable Judgment. The previous movement of the methodology produces conceptual models of how Bon Sens can transform itself. Transformational leadership is paramount at this point. The intel-lectual and moral aspects of this type of leader come to the forefront. Change is discomforting; transformational change is disorienting.

Helping a university adopt a new operational model responds to the trust that has been placed in university leaders at the beginning of the process. A creative solution is an expectation, whether articu-lated or assumed. Choosing the model and direction of what Bon Sens should be requires reasonable judgment. The model that is cho-sen should be deemed the wisest alternative possible, which means more than what leads to fi nancial viability. It also should be a path that faithfully and creatively carries out Bon Sens’ mission and con-tributes to the health of society and culture.

Selecting the model that is right for Bon Sens is the product of a high stakes deliberative process in which bias is at play. Bias is part of the human condition, and it can derail sound strategic planning. Recognizing and dealing with the counterproductive biases of indi-viduals, groups, or the common sense of higher education culture, take forthright and judicious leadership.

Bon Sens’ leadership team also must guard against the dangers of biased thinking for the entire planning committee. Identifying the

152 M.J. DUMESTRE

existence of biases will not eliminate them but it will help everyone involved to focus on the good of the whole university, the antidote to organizational biases.

The Bon Sens community should be kept informed about the progress of the planning process, without getting into the details of deliberations. If the planning committee is truly representative of the Bon Sens community, it should be able to vet all of the potential new models with knowledge that informs decision-making from varied perspectives for the good of the whole.

To vote or not to vote, that is the question. At this stage of the process, a decision has to be made. Some institutions might require a consensus of the planning committee to make a fi nal recommendation to the Board of Trustees. This might be an ideal, but consensus is a tricky proposition. It means different things to different people. A more reliable way of proceeding is to vote. In this way, committee members are compelled to support their sense of the best model. Should a vote not go their way, this challenges dissenting committee members to make things work for the good of whole or to move on to an institution that is more to their liking. As harsh as this may sound, it is the responsibility of all university employees to be loyal to the mis-sion and vision of the university, even if it adversely affects them. All community members should fulfi ll their responsibilities in ways that are creative and advance the quality of a Bon Sens education.

The role of presidential leadership is crucial. The president has to enthusiastically lead the institution in this new direction. Equivocation is not an option. It is for this reason that active participation by the president is necessary at every stage of the process. If the president is part of the strategic thinking process from the very beginning, it is highly unlikely that the planning committee’s recommendation will be at odds with the president’s preferences. The ethical, intellectual, and visionary traits of the transformational leader stimulate sound decision- making for the good of the whole university.

Communication of the recommendation to the Board of Trustees facilitates transparency. It also gives ample opportunity for university community members to register their support or opposition. The Board is the only truly deliberative body in the university. University committees make decisions about aspects of university affairs, including hiring and fi ring. But the Board can override all of those decisions.

TRANSFORMATIONAL STRATEGY IN ACTION 153

A transformative change in Bon Sens’ model is the most impor-tant decision the Board of Trustees will face. The president’s com-munication of the new strategic plan (a fi nancially sustainable new direction for the university) can be grounded in an articulation of both the planning process that produced it, but also the strategic thinking methodology that underlies it.

4. Strategic Action. The structural and organizational model chosen by Bon Sens is merely a conceptual framework until it is operational-ized. Great leadership makes things happen. There is the need to animate the university community into decisive action.

A thorough implementation plan makes a new Bon Sens University possible. Appropriate notifi cations to accrediting agencies are initiated early on in the process. Care is taken to ensure an excellent experience for current students, with opportunities to complete their program of study or to seamlessly transfer to new programs, if necessary.

Marketing, public relations, and communication with alumnae(i) must be consistent in their messaging. The new plan must not be positioned as a way to save Bon Sens. Rather, it is the transformation of the university into its next iteration, thereby making a Bon Sens degree even more valuable.

University leaders must keep the faculty and staff as informed as possible. Bon Sens community members should not hear things in the media that are news to them. Transformational leaders are trans-parent and courageous. They do not back away from internal con-troversy. They remain confi dent in decisions that have been made to initiate transformation, and they confi dently communicate them with enthusiasm.

Strategic action is the culmination of strategic thinking, which generates transformative results. If entered into with authenticity and integrity, this planning process will help create the successful university that Bon Sens will be in the future.

FINAL NOTES Just as the fi ctional case of Bon Sens University is illustrative of sys-temic problems in much of US higher education, the strategic thinking methodology solution presented in this chapter could also be a model for

154 M.J. DUMESTRE

what will be . The following issues are particularly important in developing a transformational strategic plan.

1. Strategic Thinking Powers Strategic Planning . Strategic thinking is based upon sound epistemology. Just as knowledge emanates from refl ected-upon experience, authentic strategic planning is the result of critical judgment about an organization’s current state of affairs. In the Bon Sens case, environmental scanning determined what is —the details of its at-risk situation. Intelligent assessment of transfor-mative possibilities outlined what could be —possible alternatives. Judgment was arrived at about the best alternative to choose what should be . This type of planning does not depend upon adopting organizational models that have been successful elsewhere. Strategic thinking creates what is best for the university that uses it, which could be a model that is not found elsewhere.

2. At-Risk Universities Need Transformational Leadership . Transactional leadership cannot generate substantive change. This type of leader works within the current organizational system. An at-risk university needs transformational leadership. The university community must be able to trust in the creativity of their leadership to wisely and cou-rageously guide them through the transformation process. The intel-lectual and moral aspects of this type of leadership are paramount for universities that need substantive change.

3. The Practicality of Strategic Thinking . Social psychologist Kurt Lewin famously wrote, “There is nothing so practical as a good the-ory.” 2 This is certainly true about Lonergan’s GEM. While seem-ingly an esoteric epistemological construct of Critical Realism, GEM is a practical way of approaching problems we encounter in our everyday world. It also is particularly useful for organizational life. When used to create solutions to strategic problems, GEM becomes the basis for strategic thinking. The practicality of this way of think-ing is grounded in actual experience, not some idealized theory of what is a proper for higher education.

Innovation expert Clayton Christensen often writes about the importance of determining exactly what is “the job to be done” for students. 3 This is his way of expressing that universities exist for the education of students, not the other way around. The purpose of a student population is not to support the university.

TRANSFORMATIONAL STRATEGY IN ACTION 155

There has been an unfortunate tendency to view higher educa-tion as a take it or leave it situation. This view emanates from a combination of traditionalism and an ample supply of applicants who thought their job was to gain entrance to the institution and to do what they were told. The world of higher education has radically changed except for elite, highly selective universities. As the heyday of twentieth- century US higher education fades into the harsh reali-ties of a new century, universities increasingly will need to be clear about the value of the education they offer—outcomes that students need and value most.

NOTES 1. “Financial Indicators Tool (FIT),” The Council of Independent Colleges,

accessed February 5, 2016. http://www.cic.edu/Research-and- Data/Bench marking-Tools-and-Services/Pages/Financial-Indicators-Tool-(FIT).aspx

2. Kurt Lewin. Field theory in social science ; selected theoretical papers. D. Cartwright (ed.). (New York: Harper & Row, 1951). p. 169.

3. “Jobs to Be Done,” Clayton Christensen Institute for Disruptive Innovation , http://www.christenseninstitute.org/key-concepts/jobs-to- be-done/ Accessed July 10, 2015.

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157© The Author(s) 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0_12

CHAPTER 12

Abstract This chapter focuses on how institutions can engage in transformational change. It is easy to conceptualize a change process, but implementing it is quite another matter. Institutional focus is the primary theme of this chapter. The identifi -cation of a core student population and the educational outcomes they need give direc-tion to institutional change. But in order to carry out this daunting organizational task, universities need to have a sense of community that is grounded in institutional mission. When a president and senior leaders are viewed fi rst and foremost as com-munity leaders, not simply as administrators, transformational change can not only occur, but it can happen expeditiously.

Keywords University leadership • University focus • Higher education call to action • University community leadership

Throughout this book, we have explored myriad reasons why many institu-tions face the prospect of moving into a fi nancially at-risk status. Examples of ways in which some universities have transformed themselves were explored. And a strategic thinking methodology that can be used by almost any institution was outlined in detail. What remains is a call to action.

As one former university CFO put it, “Laying out the factors that demonstrate an institution’s fi nancial problems is one thing, but get-ting the major players to make necessary changes is quite another.” We have seen that three endemic problems keep higher education mired in inaction: (1) the intransigence of tradition; (2) insuffi cient reform; and

A Call to Action

(3) organizational blindness. These obstacles to change are interrelated because they compel a university to reimagine the unimaginable.

Throughout many generations and multiple administrations, colleges typically have tried to increase the quality of their institution by adher-ing to traditional academic standards. Hallmarks of a high-quality col-lege education include: small class sizes, increasing admission selectivity, nationally renowned faculty, research, constant upgrading of facilities, enhanced student services, alumni(ae) networks, and other ways to pro-vide an excellent intellectual and emotional coming-of-age experience for students. These standards of excellence have not solely been the product of insular thinking. University rating systems and publications have not only supported this conception of higher education, they promoted it to the public. Indeed, it would be unimaginable to opt out of a system that is valued by both the academic community and society in general.

As we have seen, the types of governmental support that helped create the substrate of traditional higher education have radically changed. That type of an investment in the future of the country was at its height in the last half of the twentieth century. The fi rst 15 years of the twenty-fi rst cen-tury have been marked by economic recessions and a change in mindset about post-secondary education.

There are countervailing forces in politics and government that on the one hand propose free public higher education, at least to some degree, and on the other hand oppose governmental assistance. This second opin-ion supports the notion that a college degree primarily benefi ts individuals (a private good), and only potentially benefi ts the country (a social good). Individuals, therefore, should pay for it. Proponents and opponents, how-ever, tend to agree that colleges and universities need to become more effi cient and less expensive.

This call for a more cost-effective system rejects the traditional college model. Yet, traditional college rankings remain as popular as ever. Lawmakers, and the public in general, are compelling colleges to be more reasonably priced, but they still want the traditional college experience. This conundrum is another reason for the resistance to change in higher education.

There are exceptions. Basically, the top quartile of institutions in all of the Carnegie categories will remain essentially the same because of the combination of a very high endowment and the ability to maintain optimal enrollments despite having a very selective admissions policies. By virtue of perceived elite status, students will continue to pay for a high cost of attendance. But the majority of colleges and universities fi nd themselves in a very different situation.

158 M.J. DUMESTRE

AN IDEAL STUDENT POPULATION If there is openness to fundamental change, there are ways in which a college education might become more cost effective. As articulated in Chap. 11 , a necessary step in transforming an institution is to determine its ideal student constituency (market). The era of being all things to all people is over.

Private institutions, in particular, need to examine their mission, and its relevancy to the contemporary situation, and conduct research into the segment of the student population that it can serve best. When the ideal student profi le has been determined, then very diffi cult decisions need to be made about what programs and services need to be eliminated because they do not align with the institution’s decision to put all of its resources into educating its core constituency.

The identifi cation of an institution’s primary student population is a crucial element of transformational change. Everything else fl ows from it. The educational needs of these students become the fi rst and foremost concern that directs structure and operation.

AN OUTCOMES ORIENTATION A response to the call for greater effi ciency and lower cost compels univer-sities to place more emphasis on higher education outcomes rather than inputs (structure, organization, and personnel). Overwhelmingly, people still enter a university to prepare for a career and a better quality of life. The increased lifetime earnings of college graduates compared to people with a high school diploma or less is undeniable. Despite critiques about the lack of enhancements in critical thinking, complex reasoning, and writing during the college experience, forgoing college completely cer-tainly will not guarantee the acquisition of those skills.

An outcomes orientation becomes more possible if universities embrace the reality that the current socio-economic environment will not change in the foreseeable future. Realistic alternatives to the traditional model are necessary for institutional stability. The type and quality of educational outcomes increasingly will be institutional differentiators.

An emphasis on outcomes does not equate with an overwhelming focus on career education. Curricular change does not mean an abandonment of a liberal arts foundation. The question should be: what competencies can students depend on obtaining with a liberal arts education? Likewise, what knowledge, skills, and sensibilities can students expect to acquire in

A CALL TO ACTION 159

their chosen major? Answers to these questions will greatly determine the character of a university. The degree to which students can demonstrate these outcomes will determine the quality of the institution.

INSPIRING A  COMMUNITY OF CHANGE A recurring theme throughout this book is the value of strategic thinking as means of carrying out transformational change. Community-building is a crucial fi rst step in stimulating a university to engage the process. The following leadership actions enable the formation of the type of commu-nity that is willing to participate in substantive change.

1. Fostering Institutional Mission as Common Meaning. As noted in Chap. 9 , organizations become communities when they coalesce around common meaning. In universities, institutional mission is the source of common meaning. It provides the binding force that keeps an institution invigorated—common meaning animating a sense of community. Good leaders foster commitment to mission by promot-ing community-building events and systems. For instance, all new hires should not only understand the mission of the university, they should be able to articulate how they can contribute to it from the perspective of their position. Ongoing seminars and social events, conducted by both senior leadership and others in the university community, should provide opportunities for deepening a sense of belonging. Being part of something greater than oneself is a powerful motivator.

2. Promoting Mission as an Animating Force. There can be a tendency to understand mission in an inert way. Some universities become trapped in a static sense of what mission means and how it is carried out. This understanding turns institutional tradition into tradition-alism—resistance to almost any type of change. A university’s mis-sion should be just the opposite. Good leaders promote a dynamic interpretation of mission. It provides a compelling reason for the institution to meet contemporary challenges in light of core values. Institutions that view mission as an animating force try to imple-ment it in ways that meet the needs of contemporary culture.

3. Recognizing Threats to Sustainability. When mission constitutes a common bond (meaning) in the university and is viewed as an ani-mating force for progress, threats to an institution’s survival become a vital cause for concern. A true sense of community helps outweigh

160 M.J. DUMESTRE

individual and group biases. It becomes more possible to focus on how to save the university as a whole rather than its constituent parts—everyone for themselves. If an institution fi nds itself in an at-risk situation, it is incumbent upon a president and senior adminis-trators to be good community leaders and communicate the nature and depth of threats to the life of the university. Transparency deep-ens trust, a crucial ingredient in a substantive change process.

4. Stimulating Action. Universities with a deep, mission-based sense of community have a substantial advantage in actualizing a transforma-tional change process. Just as importantly, a president and senior leadership need to be viewed as community leaders, not just occu-pants of administrative positions. Communal leadership is not a function of longevity. A new president can come into an institution and immediately fi t into the community by demonstrating a deep understanding of its mission and its people. A president who dem-onstrates this type of leadership can passionately call for transforma-tional change because of a deep desire to keep the mission alive and vibrant. Ethically oriented, mission-based leadership can spur a uni-versity community into action with a sense of urgency. When this occurs, it fi nally becomes possible to reimagine the unimaginable.

* * *

A primary purpose of this book is to outline why many US universities fi nd themselves in troubled times. But the principle thesis is that it would be a mistake for these institutions to give in to what seems to be inescap-able failure. At-risk institutions owe it to themselves and their constitutive communities to immediately address their problems in order to avoid a downward spiral toward closure.

Presidential leadership is a critical factor in determining whether or not a university will undergo the hard work of forging a sustainable future that makes sense for them. Inspiring strategic change is not only the hall-mark of a great leader, but also emblematic of a university community that is willing to live up to its noblest aspirations and values—a model for a nation dealing with unprecedented change in a new century.

A CALL TO ACTION 161

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171© The Author 2016M.J. Dumestre, Financial Sustainability in US Higher Education, DOI 10.1057/978-1-349-94983-0

INDEX

A Academically Adrift , 29 Academic Impressions , 46 accelerated course format , 64 ACE certifi cations , 63 ACE College Recommendation

Service , 63 The Adult Learner: A Neglected

Species , 57 American Council on Education

(ACE) , 26 America’s Promise Alliance , 11 A Nation At Risk , 11 Andragogy , 4, 18, 55, 58, 68, 82 Arizona State University , 83, 91, 113 Arizona University System , 31, 83, 91,

113 Arum, Richard , 29

B Bain & Company , 43 Bass, Bernard M. , 125

The Bennett Hypothesis , 26 Bennett, William , 25 Berners-Lee, Tim , 72 Biases , 109–11, 152, 161 Biemiller, Lawrence , 84, 95 Bon Sens University , 5, 135, 137, 143,

144, 146, 154 Boyer Commission , 85, 86, 91 Brahm, Gary , 90 Brandman University , 83, 90 Burns, James Macgregor , 121

C Carnegie, Andrew , 14 Carnegie classifi cation

system , 16, 21 Cash Cow Syndrome , 81 Center for American Enterprise , 56 Center on Budget and Policy

Priorities , 30 Change, , 2, 10, 33, 37, 57, 72, 84–93,

99, 118, 144, 158

Page numbers with ‘n’ denotes notes.

172 INDEX

Chapman University System , 90 Christensen, Clayton , 17, 33, 56, 87,

155 The Chronicle of Higher Education ,

84, 87 Coherent data interpretation , 106 College attendance costs , 49 College closings , 41, 94 College For America (CfA) , 88 College Level Exam Program

(CLEP) , 63 College value proposition , 49 Collegiate Learning Assessment Tool ,

29 Colonial colleges , 12, 13 Common Core State Standards

Initiative , 12 Common good , 22, 48, 129 Common school movement , 10, 11 Community , 6, 16, 21, 27, 31, 57, 59,

73, 85, 86, 89, 93, 107, 108, 110, 123, 126–8, 132, 1535, 158, 160, 161

Competency-based Education (CBE) , 88

Competitive intelligence , 106 Core constituencies , 44 Cost-push Infl ation , 27, 47, 144 Cost-value proposition , 47 Council of Independent Colleges

(CIC) , 147 Courage , 3, 4, 94, 95, 111, 123, 124,

154, 155 Creativity , 81, 102, 103, 119, 120,

124, 127, 129, 130, 155 Credentialing , 36 Credit for prior learning , 62, 69, 78 Critical Realism , 2 Critical Thinking , 11, 26, 29, 49, 112,

114, 129, 159 Crow, Michael , 91, 96n475 CSU-Global , 81 Curricular development , 21

D Deming, W Edwards , 120 Denial bubble , 46 Department of Education (DOE)

meta-study , 30 Digital revolution , 102,

103, 115 Disrupting College , 56 Disruptive innovation , 5, 17, 18, 22,

56, 57, 156 Does Federal Financial Aid Drive Up

College Prices? , 26

E Egoism , 109 Elementary and Secondary Education

Act (ESEA) , 12 Elementary and secondary education

feeder systems , 20 Endowments , 43, 50 Environmental scanning , 101, 106,

115, 147, 148, 155

F 1963 Facilities Expansion Act , 16 Federal and State support , 15 Federal fi nancial aid , 25–7, 32 50% Rule , 32, 74 Financial Indicators Tool

(FIT) , 147 Financial transparency , 82, 127 focused data collection , 106, 146 Forbes , 30 For Profi t Higher Education: The

Failure to Safeguard the Federal Investment and Ensure Student Success , 19

For-profi t universities , 17–20, 22, 28, 29, 68, 72, 73, 75, 87, 137

The Founding College Syndrome , 84, 86, 87

INDEX 173

G Generalized Empirical Method , 5,

103, 104, 115, 126 Germany , 36

H Harvard University , 33 Heller, Donald , 26 Henry Eyring , 33 Heraclitus , 112 1965 Higher Education Act , 16 Higher Education Compliance

Alliance , 31 Higher Learning Commission of the

North Central Association , 18 High school movement , 11

I Identity crisis , 79 Increasing student debt load , 30 Incremental change , 5, 84, 86, 87, 94,

100, 113–15, 132 Index of Terms , 147 Individual good , 22 The Innovative University , 33, 56, 69 The Innovators , 103 Insight: A Study of Human

Understanding , 103 Institutional differentiation , 48 Institutional fragility indicators , 45 Instructional design , 74, 94 Intellectual property rights , 74 Intractability of identity , 37 intransigence of tradition , 2, 158 IPEDS , 43 Isaacson, Water , 102 Is College Worth It? , 1, 26

J Jobs, Steve , 56

K Kirk, Arthur , 89

L Land grant universities , 15 Leadership

transactional , 5, 124, 125, 131, 132, 145, 155

transformational , 5, 124, 125, 126, 132, 145, 152, 155

LeBlanc, Paul J. , 87 Levels of human consciousness , 103,

105 Lewin, Kurt , 155 Liberal Arts , 1, 13, 14, 16, 22, 49, 50,

85, 91, 136, 137, 144, 148, 149, 160

Liquidity crisis , 43, 48 Lonergan, Bernard , 5, 99, 103, 115,

116 Lucas, Christopher J. , 13

M Malcolm Knowles , 57, 61, 68 Management theories

Theory X , 119 Theory Y , 119, 120, 131 Theory Z , 120, 131

Marketing , 19, 28, 44, 57, 69, 75, 77, 78, 81, 84, 87, 90, 91, 94, 132, 139, 151, 154

Market segments , 149, 151 Martin, James , 44 McGregor, Douglas , 118, 132 Micro-credentials , 47, 49 Micro-management , 119, 120 Mission confusion , 101 Moody’s Investor Services , 41, 140 Morrill Acts of 1862 and 1890 , 15 Motivis Learning , 89 Mrig, Amit , 46

174 INDEX

N National Association of College and

University Business Offi cers (NACUBO) , 27

National Center for Education Statistics (NCES) , 17

National Center for Higher Education Management Systems (NCHEMS) , 147, 148

National Council for State Authorization Reciprocity Agreements , 33

Near term viability , 47 New American Research University ,

91, 93, 113 New delivery systems , 64 No Child Left Behind Act , 12

O Online blended format , 66 Online Program Management

provider (OPM) , 76 Online programs , 18, 32, 33, 72, 73,

75–7, 84, 87, 88, 93, 94, 137–9, 144

Organizational blindness , 2, 144, 158

Organizational inertia , 2 The Other Higher Education

Bubble , 46 Ouchi, William , 120

P Pedagogical prejudice , 59, 61 President Barack Obama , 30 Prior Learning Assessment , 63

Q Quadrivium , 21

R Radical Unintelligibility , 110, 111 Regulation complexity , 36 Reinventing undergraduate

education , 85, 91 Reliable judgment , 107 Remedial courses , 21 Roksa, Josipa , 29

S St. Leo University , 89, 113 Samels, James E. , 44 Scotosis , 2, 101, 111 Secretary of State Colin

Powell , 11 Senator Tom Harkin , 18 1944 Servicemen’s Readjustment

Act , 15 Shrinking State Financial

Support , 30 Silo structure , 100 Snyder & Dillow , 27 Southern New Hampshire

University , 87, 88 Strategic action , 3, 107, 126, 154 Strategic planning , 3, 5, 6, 50, 90,

101, 102, 105, 106–10, 112, 126, 136, 147, 152, 155

Strategic thinking , 2, 3, 5, 6, 99–115, 118, 125, 126, 132, 146, 153–5, 157, 160

The “Studies” Compromise , 61 1944 Surplus Property Act , 15 SWOT analysis , 147

T Traditional College DNA , 33, 37 Transactional/Transformational

dilemma , 131 Transcendental imperatives , 103

INDEX 175

Transformational change , 3, 5, 6, 37, 84, 86–8, 93, 94, 102, 103, 115, 145, 146, 148, 152, 159–61

Transformational leadership , 5, 117–32, 145, 152, 155

Trust , 46, 79, 82, 89, 94, 100, 101, 104, 110, 114, 120, 126, 127, 130, 136, 137, 138, 152, 153, 155, 161

Turnaround: Leading Stressed Colleges and Universities to Excellence , 44

U University access , 92 University business model , 57 University of California , 31

University of Colorado , 31 University System of

Louisiana , 31 US Department of Education (DOE) ,

32, 147 US Offi ce of Postsecondary

Education , 43

V Value preservation , 3

W Waning public confi dence , 29 Wilezol, David , 26 Wisdom , 72, 127, 128 World Wide Web , 72