By: Michael Horowitz, Ph.D.
This article originally appeared in the Chronicle of Higher Education on October 21, 2018
In a higher-education landscape marked by an increase in college closures and an uncertain future for some of those able to keep their doors open in the short term, institutional mergers are top of mind for many. It’s imperative, however, to weigh options for institutional survival beyond just cost-cutting and program expansion. Drawn from nearly 10 years of experience gleaned at the front line of the college-closure crisis through more than a hundred conversations with officials of struggling colleges and universities, TCS Education System President Dr. Michael Horowitz recommends five key considerations as these opportunities are entertained.
Do our institutions have mission alignment? Consider whether the merger you’re exploring supports or dilutes your colleges’ missions and identities, whether college names or institutional traditions. This is crucial to creating successful academic pairings. When examining alignment, collaboratively decide what’s important by identifying how the institutions complement each other, what your college offers a potential partner, and what institutional deficits each college helps to resolve. Mergers that fall short of equal, collaborative partnerships can quickly result in fractured culture and control inequities that cause everything to disintegrate. There is no shortage of deals gone south as a result of disproportionate control.
What is my institution’s financial reality? This fundamental question will help distinguish between 11th-hour financial dire straits and potential opportunities for a strategic turnaround. In higher education, the two best qualifiers of relative financial health are operating results and the balance sheet.
Take a hard, comprehensive look at your financials for the past five years and what you expect for the next five. Will you conceivably have the assets to deal with infrastructure, buildings, and bond expenses? Are you positioned to keep up with lender covenants on revolving debt? What are the surplus and loss positions in your operating budget?
If you’re unable to run a surplus for the five-year period ahead, you are at serious risk. In every case, an unbiased, external examination of your financial state, with involvement by the governing board’s finance committee, is recommended to reveal your current reality.
How might existing institutional assets be leveraged for growth? In this tumultuous higher-education climate, many colleges are operating on the assumption that a break-even financial state is the goal. However, to survive — if not thrive — requires consistent investments in innovation to drive enrollment and growth.
Rarely can sizable investments to launch a groundbreaking academic program or meaningfully upgrade a digital platform to attract more students be viably financed by scrimping, saving, and cobbling funds together from already tight operating budgets. More often than not, they require universities to make creative use of their institutional assets.
Evaluating how your assets can be maximized for growth requires you to get past previously conceived notions. Do you have aging campus real estate that you’re emotionally beholden to, based solely on its storied history and connection to your community? Can those beliefs be overcome for the asset’s sale to finance your college turnaround through debt elimination and academic innovation?
Are there options besides merging? Mergers can be an attractive option for financially struggling small to midsize colleges. But before making the commitment, consider alternative resources and partnership opportunities that are available in the form of outside service providers, college consortia, and college systems. Whether IT management, group health-insurance plans, marketing services, or retirement funds, merger alternatives exist with varying degrees of structural and cultural change.
For some colleges, collaborations can be the best option. Some benefits are that institutions can preserve their autonomy, including maintaining their distinct mission, history, board of trustees, and important, their brand, which engenders loyalty and long-term support. Collaboration also creates a spirit of generosity instead of competition, and an environment of academic community in which opportunities for innovation are central. Instead of lobbying to advance legacy academic programs in a merger scenario and vying for funds to do so, the focus of collaborative partnerships is on what can be done together using common platforms, like shared courses and dual degrees.
What is my institution’s current capacity for academic innovation? Are the necessary resources to drive enrollment or student success through programmatic innovation in place? If not, are they within reach? Fueled largely by your standing partnerships and relative financial health, answering this question can help identify the best strategic option for your institution in the long term.
Unfortunately, where there is a will, there is not always a way. A candid evaluation of the steps toward academic innovation available to you — whether from academic deans or instructional-design teams or online platforms — and the affordability of acquiring what you don’t have can quickly narrow down your options and clarify how attractive a merger may be for your institution.
As higher education evolves at an accelerating pace, few institutions will maintain the extended luxury of operating as islands, without the benefit of others’ resources. The most successful players on tomorrow’s playing field will be those that evaluate the alternative institutional models available to them, and make distinctions between the merits and viability of mergers and cooperatively banding together with others. While this process is, of course, different for every institution, one thing remains constant: A broader view is needed to realize a more promising future.