Flex or Fail

Paul Jansen and Debby Bielak, consultants at McKinsey & Company, published an article in the June 2008 Business Officer publication of NACUBO which summarizes the five key trends in higher education.  In conducting their research, McKinsey engaged with institutions affiliated with the Forum for the Future of Higher Education in Cambridge, Massachusetts.  The authors maintain that the five trends have the potential to be disrupters that could affect the status quo at many institutions.  The trends are:  1) growth of digital and other non-traditional students, 2) price-productivity squeeze, 3) new paradigm competitors, 4) globalization, and 5) answering to accountability.

Trend 1 has the potential to be a positive impact as the writers predict that the nation could see a 100 percent increase in college enrollments over the next 20 years.  Part of this trend is fueled by the forecasted growth in non-traditional students, currently estimated to be 48 percent of overall college enrollments.  However, today’s high school students, digital natives, are learning with different methodologies than in the past and will challenge traditional notions of learning, leading to more studying at a distance.

The price-productivity squeeze reflects data that demonstrates that while tuitions have increased 32 percent over the past 10 years, the average discount has increased to 22 percent reflecting a 10 percent net increase to cover more than that rate of increase in costs of education.  Nationally, revenue comprises only 59 percent of costs according to the authors.  Institutions “focused on the vast middle” will be forced to address this issue sooner rather than later as the elite institutions have the brand and financial resources and the lower cost institutions have the pricing power.

The University of Phoenix is cited as a new paradigm competitor whose cost per student declined from $7,200 to $4,800 when its student population grew from 67,000 to 233,000.  The authors maintain that the incremental costs of adding students for traditional universities is high when considering the costs of physical classrooms, dormitories, and dining halls among other expenses.

Globalization is an increasing challenge, but primarily for institutions searching for top faculty or students.  As the economies in China and India continue to grow, those countries continue to create educational institutions to keep their students and faculty in country.  Previously, many chose to attend or teach at U.S. institutions.

The questions asked by the Spelling’s Commission won’t go away.  Lawmakers are asking for accountability for the subsidies provided.  Fortunately, many accrediting bodies including the Higher Learning Commission of the North Central Association are encouraging their institutions to publish their outcomes as well as to become more transparent.

Business Officer asked several constituent groups to provide case studies that address these trends and they are published in the June issue as well.  As the authors state, “while the institution with resources or a reputation will be able to ride out its legacy position for some time, the majority of institutions will enjoy no such luxury.”

Subjects of Interest

EdTech

Higher Education

Independent Schools

K-12

Student Persistence

Workforce