Administrators’ Homework
Mike Frantz, High Impact Practitioners LLC
The higher ed news lately has been concerning.
Institutions that have been in existence for, in some cases, a hundred years are announcing closure. There is an unsettled sense among many leaders about the future of their institution. If you’re a high-level administrator at a stressed institution, what should you be doing?
I have a summer assignment for you:
Starting the Monday following graduation you must begin contingency planning. Using the current year as a baseline, what will you do if your revenues fall 10%, 20%, 30%, etc., until you reach the point where viability is no longer possible. The luxury of waiting with the hope that fall revenues will be sufficient no longer exists. You have approximately four months to prepare. Will you be like your students and cram the night before the exam or will you keep up with your homework and study every day preparing for the future?
There are ways to maintain an institution’s legacy with grace and skill.
Unfortunately, there are also ways to leave a lasting legacy of cruelty and ineptitude. Colleges that announce post spring closure between now and September will have neither paid attention nor prepared. Your students chose you over hundreds of other institutions. You think just because you have teach-out agreements you’re doing them a favor, but you’re not; instead, you’re drastically limiting their options. For your faculty and staff, the hiring cycles in higher education have come and gone. Your late decision will sentence many to work outside higher education or face unemployment.
Let’s look at some of the more obvious indicators of financial stress:
Annual distributions from the endowment that are above the rate of return, thus shrinking the corpus.
Delayed bill payments forced by insufficient cashflow to meet your monthly costs.
Reduced employee benefits like decreases (or even elimination) of institutional contributions to retirement programs, reduction or elimination of professional development funding, cessation of annual salary increases, etc.
Multiple reduction in force (RIF) exercises.
Glaring examples of unattended deferred maintenance.
Successive years of falling revenue.
Frequent restructuring of debt.
Denied lines of credit from creditors previously friendly to the institution.
Reduction in your bond rating.
In today’s environment, it is imprudent to expect revenue to increase.
Why? Demographics alone should inform you but add to that the FAFSA fiasco that has a real chance to unilaterally decrease the number of college bound students this fall. An inflationary economy won’t allow families to pay more for a product that, in many cases, they already feel is inflated. The perception that a college education is necessary for well-paying employment has eroded.
The time to prepare is upon you.
What financial priorities did you have when a balanced budget was projected?
How do those financial priorities have to change when you learn you will have an unbalanced budget?
What are the first 5, 10, 20 positions that you will eliminate?
What budget lines will be reduced or eliminated and what is the collective “savings” from them?
What incentives will you implement to retain students from fall to spring?
What programs will you invest in to counter those from which you are divesting?
While you are crunching those numbers and making tough decisions, task your marketing communications team with the development of internal and external communications.
Your employees have a sense of the situation, (likely they know more than you give them credit for) but they need the details delivered in a compassionate manner, even if the news is dire. If planned appropriately, instead of secretively creating teach-out plans with chosen sister institutions, you have the opportunity to ask your students where they would attend if not your college and partner with those colleges. Give months of notice to those whose lives will be impacted by your decisions instead of weeks. For the external audiences the message can’t be, “We’re in trouble, send money.” Show them what your decision tree looks like and why you are making particular choices. Be as proactive as possible. Sadly, there are too many ostrich administrations right now hoping that somehow, they will win the lottery.
Talk to us. We’ve been in those meetings.
Learn how HIP can help your institution.
