Jim Hundrieser, Ph.D. Managing Director – Business Strategy Consulting ENSURING FINANCIAL HEALTH FOR THE FUTURE: REAL-WORLD TIPS AND STRATEGIES
About AGB – Business Strategy • Focuses on issues affecting the fundamental economic model and competitive position of colleges and universities • Areas of focus include: • Revenue Growth and Diversification • Transformational fundraising • Public-Private Partnership (P3) Advisory Services • New delivery models and digital technology • Cost management • Partnerships, affiliations, mergers, and consolidations • Strategic planning with financial modeling • Methodologies include: • Diagnostic, Exploration and Implementation phases • Innovation and Creativity
Agenda • Prosperity Gap Diagnostics • Considerations for Your Institution • Revenue Growth Exploration • Manage Costs • Overcoming Common Challenges among institutions • Focus on prosperity Implementation • Ideas to application
The realities of the current state
5 Never been more important to build a Sustainable Business Model Revenue growth and Growing and diversifying diversification revenue is more difficult approaches have not than cutting expenses, been part of higher and requires an element education’s typical of operational execution response to budget that may challenge the challenges. capabilities of the institution.
Prosperity Gap An Institution with a $75 million budget identified an $11 million prosperity gap: This “Prosperity Gap” required real revenue growth and – Financial $3 million diversification. No amount of – Operational $6 million cost cutting would allow for a – Reserve long-term sustainable business $2 Million model. Total $11 Million You can’t cut your way to prosperity.
Why you 1. Align with your institutions strategic plan might be 2. Identify resources to build new programs 3. Shift your institution from thinking “growth” to “add and subtraction to grow margin and thinking minimize losses” 4. Investment in programs that align with market about trends 5. Better understand Return on Investment growing 6. Rebuild reserves or infrastructure based on program that produce larger ROI revenue?
8 Ability to respond to trends Higher Students/ Students Today: Education Learners • 1 in 5 is at least 30 • About half are Disrupted Industries: financially independent • Publishing • 1 in 4 is caring for a • Automotive child • Textile • 47 percent go to school • Music part time at some point • • Steel A quarter take a year • off before starting Trucking and school Logistics • 2 out of 5 attend a two- • Telecommunication year community college • Health Care • 44 percent have • Retail parents who never completed a bachelor's degree NCES, 2018
Revenue growth - Could be boiled down to: 1. Current Enrollment 2. Revenue – Expenses = Margin 3. Alignment to mission 4. Removal of “mission centric” programs 5. Analysis for change based on ROI
Revenue Growth
11 Transfer Students • Collectively, about 75% of students who are, or will be, entering four-year institution will have some transfer credits. • Most institutions are not providing equivalency for More than 1/3 of these credits students will transfer at least • Take AP for an example: • Over half of AP students have finished the once during their equivalent of English 1. time in college! • College Board, who owns AP, reports fewer institutions are accepting English 1 • 4 in 10 students use less than half of AP credits earned • Internal barriers are the reason for not accepting AP English 1. National Clearinghouse, 2018 College Board, 2017
12 Comparing Market Segments The market segment for adult degree completion is larger than the traditional high school segment • 37 - 42 million adults with college credit and no degree • Up to 5 million with high school diploma realize need (26 -34) • 3.3 million high school students graduating
Unbundling the Degree Need for • Dual Enrollment • CLEP / DANTES fewer • High School Summer Programs general • Enrichment programs that give college credit • Summer online education • For credit MOOCs • AP – Advanced Placement Courses (37% of High School courses Students took at AP Exam in 2017)
Certificates and Credentials Lumina The U.S. Census BMO Bureau Education and • Stacking of credentials as part of the college degree structure will become mainstream Training • Stacking three to four classes at a time • Non-Degree graduate and professional certificates Report • Badging and Bootcamps for competencies • Partially driven by major corporations
15 Partnerships • Program • Community College Degree 2 or 3+ Completion Service Credential with credit • Community • Corporation
Top Jobs of the Future Top Jobs - Drone Applications Employers are saying: - Augmented Virtual Reality - Drivers of change - 3D Print Design – High speed mobile internet – Artificial intelligence - Health Care – Adoption of Big Data analytics - Information Technology – Cloud technology - Alternative Energy - Geography - Content Creation – 59% expect to change their geographic location by 2025 - Robotics – 74% will consider skilled local - Cyber Security talent as a key consideration - Computer Game Design - Biometrics
Emerging Job Roles - Emerging Job Roles: - Emerging Skills: – Software and Applications Developers – Analytical thinking and innovation – Creativity, originality and initiative and Analysts – Data Analysts and Scientists – Active learning and learning strategies – Managing Directors and Chief – Technology design and programming – Complex problem-solving Executives – General and Operations Managers – Critical thinking and analysis – Sales and Marketing Professionals – Leadership and social influence – Sales Representatives, Wholesale and – Reasoning, problem-solving and Manufacturing, Technical and Scientific ideation – Emotional intelligence Products – Human Resources Specialists - Systems analysis and evaluation – Financial Analysts – Financial and Investment Advisers – Database and Network Professionals
New technologies - New revenue streams Artificial Intelligence (AI) — AI Machine learning — Virtual Chatbots — Chatbots can enhances business processes, teaching assistants can answer questions on research, and in-class provide data on student enrollment and class choices, teaching. It can identify areas performance and suggest and enhance the student where support is needed. future actions. experience. Adaptive learning — Adaptive Cloud — Reduces IT costs, Blockchain — Helps bring learning can deliver real-time, delivers simple data storage, legacy paper systems together value-added experiences and enables mobile learning, and in a single database. analyze student responses to harnesses the compute power Credentials can be checked provide unique feedback and for administration, research, and validated more effectively resources. and learning tools. than in a paper filing system. 18
19 Pathways and On-ramps Micro Apprentice Skill Certificate Master competenc y Associates Career Meta Majors Certificat Bachelor Career Competency ion Degree Credential Based Credits Career
Managing Costs
21 Faculty Development / Training Presentation Skills with embedded technologies Faculty Better Teaching Development connections Techniques with students Program Applying Research and Scholarship to the classroom
Faculty Productivity Lower Instruction Faculty Salary $60,000 $80,000 $125,000 $60,000 $80,000 $125,000 Costs through Benefits (30%) $18,000 $24,000 $37,500 $18,000 $24,000 $37,500 Higher Productivity Total Cost of Faculty Member $78,000 $104,000 $162,500 $78,000 $104,000 $162,500 Classes taught per year 8 8 8 8 8 8 Labor Cost per Class $9,750 $13,000 $20,313 $9,750 $13,000 $20,313 1. Disciplined Course Rotation Offering Average Class Size 15 15 15 12 12 12 2. Reduce frequency of low Net Tuition per FTE $12,000 $12,000 $12,000 $13,000 $13,000 $13,000 enrolled classes; work on the margins; classes below Net tuition Revenue per Class $18,000 $18,000 $18,000 $15,600 $15,600 $15,600 10 students 3. Transfer students marketing focus – enrollment into Labor Cost Ratio to Net Tuition 54.17% 72.22% 112.85% 62.50% 83.33% 130.21% upper division classes; naturally increases productivity Adjunct cost $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 Adjunct Cost per Net Tuition 19.44% 19.44% 19.44% 22.44% 22.44% 22.44% 75% FT Faculty Ratio 40.63% 54.17% 84.64% 46.88% 62.50% 97.66% 22 25% Adjunct Ratio 4.86% 4.86% 4.86% 5.61% 5.61% 5.61% Total Instructional Delivery Cost Ratio 45.49% 59.03% 89.50% 52.48% 68.11% 103.27%
Focus On Prosperity
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