Digital transformation and the rising tide of alternatives to traditional higher education are not the only threats. The following are just a few of the most recent indicators of the urgent need to respond.
An investment advisory like Moody’s reports that a rising number of institutions will not be able to meet their enrollment revenue targets. An international consultancy like Ernst & Young hypothesizes that most of Australia’s colleges will not be viable in 10 years. Another study shows that more than a third of US colleges are in declining fiscal health.
It is a better than even bet that some will not survive the decade intact. That is unless they take action to address the inherent weaknesses of their business models, and soon.
This circumstance is the result of many factors. Some of them have to do with costs:
- The cost of competing for profitable students
- The cost of mission creep
- The cost of underutilized capacity
- The costs of unfunded non-teaching programs
Some have to do with revenues:
- Declining state funding
- Declining federal funding
- Unsustainable tuition increases
- Declining share of higher education revenues
The long-term prospects will be influenced by the quality of traditional methods. These are already being seen.
- Increasing question of the costs and benefits of traditional higher education
- Digital teaching methods producing equivalent or superior outcomes
- Rapidly increasing quality of digital education
- Increasing political call for simplistic “solutions”
Any of these conditions would be serious. Together these factors will be more than many institutions will be able to bear, and will require adaptations that are beyond the cultural and financial reach of most.
Many of these trends have been building for 10 to 15 years. However, the seriousness of impact on higher education has been masked by several tactics.
- Increasing dependence on out-of-state students paying full tuition
- Increasing dependence on international students paying full tuition
- Increasing reliance on low cost/part-time instructors
- Outsourcing staff services to save on the cost of benefits
These tactics have worked well, so well that they have disguised the underlying weaknesses of the typical higher education institution. A point of diminishing returns has been reached.
- With every institution competing for the same wealthy, out-of-state and international students, the return on recruitment investments is declining.
- With international students making up more than 10% of some freshman classes there is doubt that the ratio can go much higher.
- Nationally more than 60% of higher education faculty members are part-time or without tenure. As recently as 1990 more than 60% of faculty members were tenured or full-time. How much lower can tenured ranks go?
- The easy outsourcing of bookstores, foodservice, and custodial services has already been done.
If there is a lack of urgency in some quarters to address these matters, it may be explained by the shared knowledge that the college form has survived for hundreds of years. The thing is, the growing digital transformation has not caused or much influenced any of these business issues. Those impacts are yet to come.
For all these reasons, it is reasonable to believe that a tipping point has been reached. The low hanging fruit has been harvested. The value of short-term business tactics has been exhausted. Higher education faces what Terry Brown of the University of Wisconsin System has called “an existential choice: adapt or die.”
Time to choose. It is that important and that urgent.
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