If there were ever a time and circumstance in which the old saying about the Chinese character for “crisis”—consisting of “danger” and “opportunity”—were applicable, this is it.
Higher education now faces the greatest—perhaps existential—challenges in its history.
Even before the Covid-19 pandemic, higher education, particularly at public and/or smaller institutions, faced serious challenges, including declining enrollments, increased costs, expanding alternatives, and decreasing confidence in the value of investing in current higher education models. The pandemic and accompanying economic depression have only exacerbated these threats, striking at traditional colleges’ core operating model, making higher education less affordable for the record number of families sinking into economic distress, decimating state budgets and thereby threatening necessary continued public support for higher education institutions, all while further driving families and individuals toward alternative service-delivery models and providers.
There are then, in fact, two simultaneous crises engulfing public higher education: a sudden and catastrophic disaster, and a longer-term, chronic but just as existential challenge. And yet, this situation also presents unique opportunities to reimagine higher education delivery.
Further information on the topic can be found below.
Our firm has conducted comprehensive efficiency reviews of individual agencies, local governments, or entire state bureaucracies in about a dozen states—as well as educational institutions and systems in many more. Such reviews routinely identify annually recurring savings totaling roughly 5 percent of total operating spending. (By “annually recurring,” I mean that cheap gimmicks and one-time savings like selling the administration building or state capitol—yes, some have tried this!—don’t count.)
Let me give a few favorite examples: By unscrewing the tiny light bulb behind the big plastic display that covers almost the entire front of most soda machines—which serves no purpose but to make the can of Coke look more delicious—Texas saved about $200,000 a year in energy costs. (There are a lot of soda machines!) And West Virginia had never properly calibrated the salt-spreaders on its snowplows, so that whenever it snowed it was dumping far more salt on the highways than needed. Simply adjusting these devices saved the state about $3 million a year. None of these make a significant dent in structural deficits—but put together 100 small changes like that and, as the saying goes, pretty soon you’re talking real money.
So there are many places to look to reduce costs without threatening the quality of service. One cardinal rule: Look for how to do better rather than simply how to cut. Cuts are easy to find—but they don’t necessarily save money. Reducing costs doesn’t necessarily involve doing less; usually, it involves doing better.
The biggest impediment to “doing better” is thinking about the problem in terms of programs and functions that can, or might have to be, cut. This view of how to trim costs is reminiscent of an old New Yorker cartoon, in which a father tells his family, gathered around the kitchen table, “Because of the recession, we’re going to have to let one of you go.” No family, of course, would really approach a tight budget that way, but that’s pretty much how most discussions of savings proceed—cutting budget “line items” wholesale. There is no line item in most budgets for electricity for Coke machines (or, in most cases, for the electric bill, period), or intra-office mail delivery, or purchase of road salt. It’s an old adage: What gets measured gets done. And most budgets don’t identify, track, and measure wasteful practices. That’s why the waste occurs. What should be cut, in short, is what’s not in the budget.
Another rule of thumb is that the real savings come in enterprise-wide functions that affect all departments and, as a result, tend to be budgeted by none. Personnel and procurement functions are always good places to look for improvements to save money (remember Rule No.1: improve performance, savings will follow); utility costs like energy and phones also tend to be neither well-monitored nor cheap. These are not what most people think of when they think of waste and inefficiencies—but they are where most of the money disappears, just like in most organizations and probably your own household budget.
In addition to these general concepts, there are several specific issues to think about in the higher education context today:
- Can we identify efficiency gains and improvements in service? This could potentially include closing programs that are not cost-effective, coordinating and consolidating back office operations, academic programs, and regional universities.
- Can we better leverage existing resources? For example, Are there specialties/strengths of each school that can be developed or emphasized?
- Can we improve linkages between institutions?
- Can we “right-size” institutions to create a sustainable operating model?
- Can we develop an innovative new approach to blending distance and on-site education?
- Can we identify new opportunities and priorities for existing resources such as dorms, labs, event spaces, health services, other capital investments and real estate) that can be repurposed to create either synergies of public services or educational mission, or provide new revenue sources?
In this webinar, we will discuss how to start thinking about these issues—and the value of a comprehensive approach to all of them. To register for this webinar, view the panelist profiles and schedule for upcoming webinars in the series, click here.
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