The commercial realities that are pivotal to the survival of universities are particularly evident in publically traded and privately held for-profit institutions. Such institutions are rapidly becoming recognized as an expanding force around the world. In some countries, publically traded for-profit universities are gathering accolades for the quality of their education programs and their operational efficiency when compared with traditional entities. Internationally, non-government universities and professional schools, often established by private capital, are emerging rapidly, especially in professional disciplines. Some of these are also achieving higher recognition as accreditation spreads, academic standards improve and their graduates become successful at home and abroad. However, all such institutions are challenged along with traditional universities to do more with less. Unlike traditional universities which are buffered by extensive cross-subsidies from governments, indirect research funds etc., for-profit universities succeed or fail at the thorny junction between operational leanness and preservation of academic outcomes.
The real challenge for all universities is to achieve high academic standards while at the same time keeping costs down – this is especially true for the for-profit universities.
Among many issues, three important questions arise:
- Why is academic quality important? Students and their families care about the long-term impact their degree will have on employability and personal success.
- Why is sustainability important? Students expect that their university will be around for at least their entire professional career, to attest to their credentials for licensing.
- What can be done to meld academic quality and financial sustainability? This brief commentary focuses upon this question and provides practical tips about implementation.
Converging academic and business planning
!n 1997, the successful and then recently retired executive chairman of agrochemical giant, Monsanto Corporation, Richard Mahoney wrote in the Chronicle of Higher Education – “I had a dream the other night — a nightmare. I dreamed that once again I was the chief executive officer of the Monsanto Company. What made the dream a nightmare was that I was supposed to run the corporation like a university. In my dream, Monsanto had two parallel and often unwieldy organizations — the academic side and the administration — ….” . These words have echoed around the higher education sector and can be paraphrased to state the fundamental conundrum – while universities were never created as businesses, they have to increasingly operate just like businesses.
A part of the solution to the issue posed by Mahoney lies in a process of rigorous academic planning linked to tools for prioritizing resource allocation and tracking progress of spend against academic milestones achieved. Without this, at an institutional level, it is easy for academic programs to become divergent silos separate from the thrust of the parent university. Conversely, it is equally easy for resources to be applied to initiatives that are not of core importance to the stability, sustainability or growth of the institution.
For-profit universities especially need to combine strong academic and business planning approaches when new branch campuses or mergers / acquisitions are contemplated. In this case, the expansion or M&A due diligence processes should prepare the organization well to launch into convergent planning immediately after the deal is closed. Often, it does not because the due diligence process focuses on financial considerations with inadequate emphasis on complex and idiosyncratic academic issues.
Linking academic and business planning tightly does more than just assure desired outcomes such as financial return. This process a) establishes more predictable and sustainable growth in quality of programs and business success, b) supports the organization through difficult times, enhancing its capacity to respond to unpredicted external events quickly, and c) introduces rigor into plans for expansion with new programs or acquisition of new entities.
In considering the process of planning, the following are some of the elements needed:
- A system of academic planning that includes elaboration not only of traditional enrolment data but also understanding areas of academic strength, staffing profiles, market awareness of trends in pedagogy, competition for student recruitment etc.
- A formalized and structured method of prioritizing allocation of resources across the various components of the university;
- Management accounting reports for academic leaders/managers
While the advantages of introducing a disciplined system of integrated academic and business planning are clear, many organizations have difficulty in getting it right. There is often a mismatch between the academic and business cultures of the entity with entrenched beliefs around what defines “value”, dysfunctional organizational politics, inflexible planning systems and senior leaders who do not have the experience needed to manage such an implementation.
Hence, the need for an experienced and neutral third party (either in-house or consulting), to assist in identifying the institution’s unique pathway to integrating academic and business planning approaches. Institutions willing to invest in development and implementation of the systems required for their unique culture and context will reap great results.