Is your college popular with the students it admits?

A nerdy term used in higher education is 'admissions yield'.  It effectively shows how popular a college is with students who are accepted to that college.  A higher admissions yield can indicate a college is more popular than one with a lower yield. 

This video shows a sample of regional, private colleges in the Midwest.  The important interpretation in this and other College Viabilty App reports is the comparison of one college to others.

The data shown in the 3':30" video is from the National Center for Education Statistics (2013-2018).

The sad part of the report is that the data is almost 2 years old.

Many higher education leaders will suggest that the data is too old.  It is certainly inexcusable that our government can't provide data in a timely manner.  However, the six-year trend for each college is  an accurate indicator of the direction that college is headed.  It is not reasonable to assume most colleges are going to be able to turn around a bad business in two years - especially with the financial hit associated with the pandemic.  

How many students and their families are considering a small to medium-sized private college whose current financial plight is hidden by delayed reporting by both the college and the federal government?   How many of those students will have to find another college if or when their first choice knowingly fails them.

That is why we encourage a focus on comparisons of colleges.  For example, if a college shows a 6 year decrease in enrollment or tuition revenue, it is the downward trend that is important, not necssarily the absolute number.  The trend in admissions yield is more important than the yearly value.

Students and their families should ask their college admissions rep to share the college's admissions yield for 2019 and 2020 as part of the process to make an informed college decision.

Here is the College Viability App

 Here is the College Viability App

 

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What if College Presidents Are Like General MacArthur (Korean War) and General Westmoreland (Vietnam War)?

Generals MacArthur and Westmoreland ignored the obvious.  Today, college leaders are too.

Our two children took my wife and I to New York City in 2019 to celebrate our 40th anniversary.  One of the many adventures we took was to New York's legendary Strand's bookstore on Broadway and East 12th Street.

I actually picked up two old-fashioned hardback books to take home.

The first was  David Halberstram's 2007 book about the Korean War, The Coldest Winter.  The second was Mark Bowden's Hue 1968 published in 2017.  Both books shared examples of stunning systemic and individual displays of ineptitude and ego -- along with stories of courage, tenacity, fire power, and heroism beyond my ability to envision.

The Halberstram book details how General MacArthur and many of his senior officers in Tokyo and Korea exhibited levels of bias and indifference to individual soldiers under their command.  Their inability to use information available to them to make better decisions cost the lives of many American and UN forces during that conflict.

General Westmoreland and too many of his military leaders in Vietnam and Washington D.C. refused to acknowledge what was obvious to those on the ground in Hue and other battles during the Vietnam War.  Those leaders also cost the livelihoods and lives of hundreds or more troops.

As I read these books, it brought to mind a logical and concerning connection to the leadership in today's American higher education system. It can be argued that too many college leaders only see the battle for survival in terms of their local biases, perceptions, and situations.  Like the generals before them, the information and intelligence available to them is either ignored or left without substantive action.

Certainly, this is not life and death -- like those of the soldiers and sailors in military conflicts.  This is, however, the livelihood of thousands of college students - both traditional and non-traditional.

As I read media reports and analyzed the audited financial statements of hundreds of private colleges over the past three years, I can make a case that too many college leaders are ignoring the same type of obvious intelligence ignored by these two past military leaders.

For example, the pressure to discount tuition has resulted in decreased net revenue since 2013 for too many.  Yet, these small to medium-sized private colleges have almost universally chosen to focus on their really small piece of the higher education world.  They ignore the benefits of scale.  They encourage only the parochial view.  They speak as if the inevitable consolidation of colleges will not happen to them.

Military leaders are quoted throughout history as suggesting that strategy is for amateurs, but logistics are for professionals.  It is reasonable to speculate that leaders of financially troubled colleges are doing just the opposite; they are focused on some grand enrollment, marketing, or new degrees strategy, while leaving the logistics of  scaling operations to drive down costs as unworthy of their time and efforts.

Their 'troops' in the form of faculty, staff, students, and others are at risk of becoming economic and education casualties of a battle whose outcome will not end well for those unwilling to recognize the higher education wars now being fought among struggling colleges.  Competition for students will continue to drive down tuition revenue needed to remain financially viable. 

Each college,whether it has a few hundred or few thousand students, has its own set of executives - along with the compensation for those leaders. Each has their own leaders for human resources, IT, marketing, institutional research, finance, and others.

Like the generals that were stuck in a biased mindset that did not take into account the actual intelligence available to them, these presidents, provosts, and trustees likewise maintain a local bias that defies the available intelligence that their actual financial viability is in question.

There is near-universal recognition that lower birth rates that started in 2008-2009 will result in a lower high school graduation numbers during the next decade.  Imagine the intense tuition discounting competition that will develop when there are even fewer traditional students available to fill classroom seats and dormitory beds. Tuition discounts will skyrocket even more.  Revenue will plummet.

The Halberstram and Bowden books both referenced examples of individual courage, tenacity, fire power, and heroism. In 2019 and beyond, what will courage, tenacity, fire power, and heroism look like from college leaders?

Courage: A recognition that the future of their students - not their faculty is their fiduciary responsibility.

Tenacity:  Identifying and sticking with a consolidation or closure plan -- in spite of the intense, vocal and passionate objection of faculty, students, and the community.

Fire Power:  Leveraging the scale of 15-20 colleges in partnership or merger to lower the cost basis while increasing academic offerings to a wider base of students.

Heroism:  See 'Courage' above.

No News Is Bad News for Struggling Colleges

 One of my Google Alerts searches for the term: 'freshman enrollment'.

As the new college year begins, I have seen many college PR machines crank out headlines like: "largest enrollment ever".  While some have clearly grown their numbers, reading between the lines suggests that there is some obfuscation taking place for some.

Knowing the intense pressure on tuition discounting in higher education today, I also wonder if these colleges with enrollment growth had to 'give away the store' with high tuition discounts to grow their enrollment.  Interestingly, none report on the discounts they had to offer to entice students to enroll.  I sincerely doubt that 'new marketing strategies' were a substantial factor - unless those new strategies were associated with high discounts.

What is even more important are the large number of colleges not reporting anything about their Fall 2020 enrollment.  This has to be bad news - especially for those small to medium-sized private colleges.  It is reasonable to assume that these colleges engaged in substantial tuition price discounting - and STILL did not grow their enrollment.

Sadly, there are no timely reporting mechanisms that provide this information to students and many other stakeholders.

As the process starts to enroll the freshman class of 2021, interested students and their parents should make sure to ask about the size of the class of 2020 and what the average tuition discount was.  While good for the students, tuition discounts that are too high put these colleges and universities at risk of not being financially viable.

Benefits of a large-scale private college alliance (2nd in a series)

Benefits of a large-scale private college alliance (2nd in a series)

(1st in the Series:  Framework for a multi-college alliance, merger, joint venture, or operating agreement)

2nd in the Series: Benefits of a Multi-College Alliance

In our first article, we proposed a 7-point framework to bring 10 or more private colleges into an alliance.  This alliance could take the form of an operating agreement, joint venture, merger, or other mechanism.  Ten or more private colleges and universities would initially consolidate support operations to be followed by academics.

The work to bring 10 or more private colleges into some form of alliance will be stunningly difficult.  The reaction from stakeholders will be mostly negative and the protests will be loud and the reaction rapid.  However, our work shows the economies of scale cannot be successfully achieved with consolidation of a smaller number of organizations.  

With all of the projected trials and tribulations, a large-scale alliance is still the right thing to do for small to medium-sized private colleges. Maintaining a parochial model substantially increases the risk of closure and/or forced liquidation of assets.  Our College Viability App reports provide higher education leaders with customized finance, enrollment, and outcome data for the last six years with data from the National Center for Education Statistics.

Here are some benefits of our proposed model.

Expenses can be scaled to provide better cost management than stand-alone entities.  This one has been shared often, but its economic truth remains.  The duplication of leadership and administrative functions are not economically viable for small to medium-sized private colleges.  Consolidation of these positions and functions will allow for increased resource for academic quality and delivery.

Academic sections can be combined with online and other technologies.  As a rapid reaction to the pandemic's impact on academic enrollment, colleges should start this right away.  Colleges can work with potential alliance partners to share low-enrollment online or remote sections of courses.  Instead of having one section with low enrollment, combine online sections across multiple campuses.   The net revenue will go up and the labor costs will not.  An operating agreement based on a colleges percentage of enrollment in a section can be used to determine net revenue sharing.  Labor costs would be allocated in the same manner.

'Piece of the Pie' revenue model.   In the current recruiting model, colleges engage in an 'all or nothing' battle for a each student's full tuition revenue.  A college either gets all of a student's tuition revenue or none of it.  In an alliance model, if a student chooses any of the participating colleges, some portion of that tuition revenue would be applied to the operations infrastructure of all. So, if 10 colleges participated in an alliance, some part of each and every student's tuition and fees would go to support all of those colleges.

The costs of marketing and recruiting student would be reduced considerably.  Consider the case of college fairs at high schools.  Currently, each college sends one representative to each high school.  In an alliance model, the 10 colleges in our example would be able to provide support for 10 times the marketing and recruiting as the parochial, stand-alone model.

1. An alliance recruiter would present each college in the alliance as a potential match for a high school student.
2. A student's interests could be matched to more than one college in the alliance to give more flexibility to their college decision.
3. The reps would also share the cost, cultural, and academic benefits of a student choosing an alliance member.

Pressure on tuition discounts would ease.  Tuition pricing across the alliance/merger/joint venture would be standardized to allow for student choices to be based on academic and career opportunities -not just cost.  Financial aid packaging would be centralized in order to present true academic and career options for students. 

It is probably too late for many small to medium-sized private colleges to take advantages of this consolidation model.  Their demise will be quick or delayed by the charity of alumni.  For those private college leaders willing to move beyond a parochial focus, this model is one that has worked across many other industries. It is one that will work in higher education also.

Next in the series:  Downsides of an Alliance of 10 or More Private Colleges
 

Merger (Alliance) Model for 10 or More Private Colleges

Merger (Alliance) Model for 10 or More Private Colleges (April 2020)

First in the series.

We are using 10 private colleges from Illinois and Missouri to create our business and financial model. These 10 colleges will be the foundation for a series of posts about a merger model that would bring 10 or more private colleges together. Included in this set of 10 colleges will be ones who are even now considering when they will announce their closure.

These 10 colleges lost more than 2,000 students in combined enrollment from 2013-2018.

• 8 of 10 lost FTE enrollment
• Only 3 of the 10 had lowered their expenses since 2013
• 8 of 10 had lower core revenues in 2017-18 than they did in 2012-2013.
• Endowment assets decrease in 4 of the 10. 3 others had their endowment increase only 7 figures in 6 years.

Here is the basic framework.

1. No college loses its identity. The college name remains. The mascot remains.
2. Endowments stay with the individual colleges.
3. Leave athletics alone. In each of these colleges, a substantive part of the enrollment is from those who compete in one or more sports. The opportunity for them to continue with their college athletic careers is an absolute requirement of the model. Athletic leadership could be consolidated - even across multiple levels of NCAA participation.
4. Target at least 50% of all courses offered by the merged organization to stay online. Merge those common courses to enroll a minimum of 15-20 students per course. This will provide higher margins mostly with lower labor costs. For example, one of the potential by-products of the pandemic reaction is a realization that online course sections with low enrollment could be consolidated into larger sections across different colleges. Teaching an upper level accounting or biology course with 20 students from 5 different colleges is more financially feasible than 5 different college sections with 4 students each.
5. Revenue and costs to each college would be allocated based on financial, enrollment, and outcome ratios.

The FTE enrollment number was positively supported by only one of the ten - which netted a reported increase of almost 3,000 students in the 6 year period. Over the same period, only 2 of the 10 colleges generated a tuition revenue to expense ratio that was greater than 1.00. Core expenses for the 10 went up over $60M with two-thirds of that from just two of the colleges. The total core revenues for the group was a negative $25M - with one of the colleges in the red over $27M and another in the black at almost $33M.

Next in the series. Upside. Downside. Consequences.

Go to www.collegeviability.com for more articles, information, and reports.

No News Is Bad News for Struggling Colleges

No News Is Bad News for Struggling Colleges

One of my Google Alerts searches for the term: 'freshman enrollment'.

As the new college year begins, I have seen many college PR machines crank out headlines like: "largest enrollment ever".  While some have clearly grown their numbers, reading between the lines suggests that there is some obfuscation taking place for some.

Knowing the intense pressure on tuition discounting in higher education today, I also wonder if these colleges with enrollment growth had to 'give away the store' with high tuition discounts to grow their enrollment.  Interestingly, none report on the discounts they had to offer to entice students to enroll.  I sincerely doubt that 'new marketing strategies' were a substantial factor - unless those new strategies were associated with high discounts.

What is even more important are the large number of colleges not reporting anything about their Fall 2019 enrollment.  This has to be bad news - especially for those small to medium-sized private colleges.  It is reasonable to assume that these colleges engaged in substantial tuition price discounting - and STILL did not grow their enrollment.

Sadly, there are no timely reporting mechanisms that provide this information to students and many other stakeholders.

As the process starts to enroll the freshman class of 2020, interested students and their parents should make sure to ask about the size of the class of 2019 and what the average tuition discount was.  While good for the students, tuition discounts that are too high put these colleges and universities at risk of not being financially viable.