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.
The Future
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!
