The Alternative to Closing/Merging Higher Ed – Networking!

This is a reposting of a blog I wrote quite a few years ago after reading an article by Jeff Selingo on Networked Universities. In light of the growing number of colleges facing financial challenges and seeking alternatives to closure or mergers, these institutions could consider collaborating with similar entities. This collaboration could extend beyond sharing back-office services to include core academic teaching activities as well.

In my last post I identified that 14% of presidents think their college will close or merge in the next five years. With over 4,000 degree-granting institutions in the US, this could potentially mean that more than 400 colleges are at risk of closure or merging. In this post, Andrew Faulkner and I dig into a concept provided by Jeff Selingo on the Networked University.

In the article titled “Networked U.’s: This is what will save Higher Ed”, Jeff describes the continuing situation where universities are under increasing financial pressure. To address this issue most institutions focus on the revenue side of the equation by increasing tuition discount rates, increasing endowments, fighting for more public funds, and/or recruiting students who can afford to pay more. But he suggests that by focusing on revenue they fail to get to the root cause of the institution’s financial crisis – the costs! He suggests one way of controlling cost is to share cost across multiple institutions, that is, true collaboration with other universities.

In the article Jeff suggests four steps to success:

1) Boards and Presidents must decide that going it alone no longer suffices.

2) Colleges should identify peers with common goals

3) Colleges should share administrative services, and

4) Colleges should share courses across programs with low enrollments

So how could this work in practice, and can we model it?

Sharing of teaching is something that happens already. Students in one school are taught by lecturers in another school. This would be the easiest to implement and track in a model. However, it is really only economically worthwhile doing for small irregular classes. The most logical way to progress would be for the institution to continue teaching what they are already teaching but allow students to take subjects that are not available at their institution. Students could select from a wide variety of subjects available from the collaborative and institutions with very popular courses could end up being centers of excellence for the network. This allows the curriculum to be expanded without growing the individual institution.

A prerequisite to sharing courses is that the institutions need to know how much it actually costs to run these courses, so they know how much to charge other universities. In Australia, institutions could use the existing per course CGS rates as their starting point. However, in the US these types of variable per course credit hour rates are not natively available. While an institution may have flat per credit hour rate they charge part-time students this is not specifically related to the cost of teaching those credit hours, particularly where those costs vary on a course-by-course basis. Institutions need to make sure they are covering their own costs by not undercharging. They also need to ensure that they don’t charge a fee that is so high that it actually becomes more cost effective for the other institution to run the course themselves. For this to be effective the charge-out fee needs to be in that sweet spot which makes it of economic benefit to everyone.

For shared administrative services, the most logical starting point would be common software platforms for Finance, HR and Student Enrollment. The network could move to common systems and primarily use professionally managed external cloud providers. This means that individual institutions can reduce the amount of hardware and software systems that require constant maintenance, allowing the IT departments to focus on internal customer support and specialized computing requirements.

This shared platform/service model is something smaller institutions could really benefit from. As we have discovered from our modelling and something that is readily apparent, the smaller the institution the higher the percentage of overall central services costs. So, the objective is to share this overhead across multiple institutions.

Outsourcing is all about offloading low value tasks so that internal staff (IT, HR, Finance, and Facilities) can focus on higher value services to the institution and the entire network. The benefits of these common central services are not just financial, they can also allow for improved efficiencies and student experience.

So overall the Networked Universities concept seems sound, as with all these things the devil is in the detail. If the overall objective is to manage and save costs across the entire network, then it is essential that there is a comprehensive and transparent cost model supporting it.