Higher Education of today is much like the American auto makers during the 1980s and 1990s and since.
Beginning in the 1980s the Big Three automakers in Detroit saw a continuous decline in sales and loss of market share to foreign competition. But since their original share of the US market was so large, they felt no urgency to change their mode of operation. They had always done things a certain way and it worked. They were world leaders and their size alone was proof that their approach was the best. Why worry about these upstart foreign manufacturers? They would soon be gone. The market would return to the way it had always been, they just needed to wait it out.
Since about 1970, the price of autos had risen much faster than the rate of inflation, yet the American auto was no more reliable than before (it still needed to be replaced every 3-4 years.) Foreign autos were the same or lower price than American cars, were lasting much longer and ran more efficiently. The Big Three ignored what was happening and did not make any systemic changes to their operations – why change something that had worked for decades. Their primary strategy was to change their marketing approach. I remember meeting with a marketing consultant for GM in 1989 and he described how they were going to regain young buyers by simply changing their advertising. “We just need to make our marketing appeal to younger people” he told me. He also told me how they needed to urge customers to “buy American” which implied buying a foreign built car was unpatriotic. In other words, don’t change what you do; just change how you advertise it. They believed that advertising was all that was needed. They ignored changing technology, rising energy costs and, most importantly, a change in customer expectations of quality. But customers were no longer going to pay more and more for a product of the same quality.
Unfortunately, I think higher education is today in much the same situation. Before I explain why, let me make one qualifying statement. I am speaking about the “average” public and private university, who happen to account for the vast majority of college graduates. The “elite” schools (Harvard, Yale, Princeton, Stanford, Duke, etc.) are not in immediate danger because they all have large endowment funds and huge numbers of applicants compared to the number of students they can accept. Those elite colleges and universities will continue to be financially sound. But the rest of the four year colleges and universities are closer to the brink of disaster than they are either aware of or willing to admit.
Problem One – Staffing Patterns
Benjamin Ginsberg in the Washington Monthly stated,”Between 1975 and 2005, total spending by American higher educational institutions, stated in constant dollars, tripled, to more than $325 billion per year. Over the same period, the faculty-to-student ratio remained fairly constant, at approximately fifteen or sixteen students per instructor. One thing that changed, dramatically, is the administrator-per-student ratio. In 1975, colleges employed one administrator for every eighty-four students and one professional staffer—admissions officers, information technology specialists, and the like—for every fifty students. By 2005, the administrator-to-student ratio had dropped to one administrator for every sixty-eight students while the ratio of professional staffers had dropped to one for every twenty-one students.”
Mr. Ginsberg goes on to say, “Forty years ago, America’s colleges employed more professors than administrators. The efforts of 446,830 professors were supported by 268,952 administrators and staffers. Over the past four decades, though, the number of full-time professors or “full-time equivalents”—that is, slots filled by two or more part-time faculty members whose combined hours equal those of a full-timer—increased slightly more than 50 percent. That percentage is comparable to the growth in student enrollments during the same time period. But the number of administrators and administrative staffers employed by those schools increased by an astonishing 85 percent and 240 percent, respectively. Today, administrators and staffers safely outnumber full-time faculty members on campus.”
Problem Two – A Stagnant or Shrinking Pool of Students
There is a projected decrease in the number of high school graduates in many parts of the country, but primarily in the Midwest and Northeastern states. Growth in the number of high school graduates will slow in other parts of the country. And since universities are primarily funded by tuition, even a small decrease in enrollment can have a devastating affect on their ability to operate without a deficit. And since universities are labor intensive operations it is more difficult to quickly cut costs.
Problem Three – Rising Tuition Costs
According to a 2014 report by the University of Denver, over the last thirty years median family income has increased by 16 percent while tuition at private, non-profit universities has increased by 167 percent and by 257 percent at public universities. This disparity between family income and tuition has resulted in students funding their college education with larger and larger student loans. We are now at the point where students (and families) can no longer justify the size of the loans required to fund a four-year college degree. It is finally at the breaking point for many families. This is very similar to the auto industry where buyers were paying more and more for the same quality product.
Problem Four – Community Colleges
Community colleges charge much lower tuition rates than four-year schools. Why? Part of the reason is that they are often partially funded locally by property taxes. Community colleges also focus on general classes taught in the first two years of college which can be delivered in larger classrooms and therefore more cost effectively. Since they do not offer four-year or graduate degrees, they do not need to have quite as highly educated a faculty. And their faculty primarily teaches and does little if any academic research. These all lower their teaching personnel costs dramatically.
In addition, most community colleges have not invested in large housing and dining complexes, or expensive athletic programs, all of which increase the overall cost of the institution. Community colleges primarily stick to teaching subject matter, again, lowering overall cost to deliver education.
Since community college tuition is usually much lower than the tuition of four year institutions, this creates strong competition for the new high school graduate who is considering college. Forty years ago most students who wanted a four year degree went directly to a four year institution. Now many students spend their first two years of college at a community college due to the lower tuition and the fact that community college courses usually can be easily transferred to a four year institution later.
Problem Five – Decision Making Methods and Leadership
Much like the Big Three auto companies of the 1980s, universities have cumbersome decision making systems. Like the Big Three they have not faced competition is decades, if ever. Most have never had to face a crisis in the past. In addition, they are saddled with committee after committee who often meet to discuss ideas but not implementation of change. At many universities it is can easily take a year or more to add a single new class to the curriculum. So, making major changes to the institution can take much longer. In the academic area, universities have tenured faculty, so layoffs are difficult, if not impossible. And while corporate American has shrunk the size if its management ranks over the past 20 years, the management ranks of higher education have grown significantly, further slowing the decision making process and increasing personnel costs.
In addition, universities are much like the Big Three of the 1980s in that virtually all leadership comes from within higher education. They are all “home grown” leaders who pretty much all lead the same way, with no sense of urgency. They have all trained under leaders who never had to face a financial crisis and whose biggest decisions involved who was granted tenure or what new courses should be added to the curriculum. Rarely have universities had to face large revenue shortfalls like many organizations have in the private sector. Let’s face it; how higher education is managed has really not changed in over 100 years.
Problem Six – Technology as the Solution
Some have said that the solution to delivering higher education more efficiently is through the use of technology…often in the way of online college courses. But as more universities attempt to use online courses they learn several things. First, a well designed online course is much more expensive than expected. Teaching online is a very labor intensive process. Second, not all subject matter lends itself to online teaching (how does one conduct a chemistry experiment or learn interactive skills or teach critical thinking in an online course?) Some fields of study are more suited to online coursework than other fields. Third, and perhaps most importantly, not all students learn well in an online course environment or even want to take online courses. I have yet to find any data that shows what percentage of students are willing to take all or most of their college coursework online. The research that has been done primarily surveys current online students, not potential online students.
Problem Seven – Societal Doubts about College Degrees
Every day more and more prominent people in society (reporters, politicians, business leaders) raise doubts about the cost effectiveness of a college degree and whether it is truly worth the money spent on it. In addition, students and parents of students have the same doubts. They look at the costs and wonder if having $60,000 to $80,000 or more of student loan debt upon graduation is worth it. This is especially true when the total student loan debt for the US is now more than a trillion dollars and rising. On top of that the media constantly points out the highly successful people in our society who never obtained a college degree.
As someone who spent a large part of my professional career consulting with and advising organizations, I am not optimistic about the future of higher education. The seven areas outlined above would be difficult for excellent leaders and organizations to handle. Higher education is anything but nimble. After more than 20 years under the gun the Big Three auto companies are still struggling. I hope I am wrong, but I don’t see four-year universities and colleges as being any more innovative or flexible than the still struggling American auto industry.
It is clearly not a pretty picture!