During the 1992–93 academic year, I was deep into work on my dissertation, focused on struggling colleges facing the potential of closure or merger and the information trustees used to support decision-making under extreme conditions.
After completing an extended onsite interview with the president of an institution struggling for survival, this seasoned college leader turned to me and asked, “Aren’t you afraid you will become known as the college coroner?”
It was a chilling question. Though I avoided such a morbid professional pathway, I never lost my interest in the dynamics of institutional decline and the risk of demise.
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I was grateful on my dissertation journey to have several thought partners along the way. One was Katharine Hanson, who served as the president of the Consortium on Financing Higher Education from 1976–2002.
She was generous with her time through a long phone conversation about my research. During the conversation, I asked Kay a simple question: “Why do colleges close?”
Her response was, “Three reasons: money, mismanagement and mattering.” As she delved into the topic, she noted the dimension of money took various forms, most commonly a decline in enrollment.
At the time we were speaking, the higher education enterprise had been experiencing the effects of the baby bust following the baby boom. The dimension of mismanagement also expressed itself in unique ways, but it was often associated with overextending the reach of ambition beyond an institution’s capacity.
At that time, the ignorance or denial of demographic realities was a common problem leading to unfortunate management decisions assuming more market strength than the reality supported.
Frenetic churn or positive change
The most interesting dimension she described was this intriguing concept of “mattering.” Kay described it as the conditions presented when a college or university no longer matters to the constituency that founded it.
Several obvious examples came to mind immediately. While colleges dedicated to serving gender-specific populations (i.e., colleges for men or women) still exist today, many moved to coeducational enrollment; some lacking sufficient enrollment (money) sought merger or acquisition opportunities; and others closed.
These institutions no longer mattered sufficiently to the constituency that founded them or for whom they were dedicated. Likewise, various religiously affiliated institutions were notably under stress during those years and faced challenges as church or denominational affiliations, rooted in the very distant past, were no longer as relevant in the contemporary society.
Now 30 years later, I am seeing the same dynamics at work in the current postsecondary universe. Money is tight across most sectors of higher education as participation from a shrinking demographic pool recedes.
Misguided management decisions increasingly are consequential given the broad-based financial stress in the industry. Once again, unrealistic enrollment and fundraising goals are a concern. Mattering remains a potent reality for both public and private institutions.
State appropriations have not kept pace with the expanding operational cost of public colleges and universities, to the point many in leadership of that sector ask, “Do we still matter to this state?” Private institutions with a dependency on a church affiliation, local community or specialized profession ask the same question, “Do we still matter?”
There are institutions today following the patterns identified decades ago. For some colleges and universities on the brink, there is little that can be done once inertia takes over. Institutions in sufficient distress cannot cut, borrow and discount their way to survival.
For those with remaining degrees of freedom to act, the choices made may either accelerate decline or arrest downward pressure. Such decisions weigh heavily.
In these circumstances there is benefit in taking a step back to see the broad patterns of the past, consider how they may be informing the present, and assess the extent to which the urgent interventions of the moment are a frenetic churn or a turn toward fundamental positive change.
‘We got on this too late’
As I watch the emerging patterns of institutional stress today across various sectors, I would advise colleges and universities to carefully examine the assets of the institution across the arc of time. The trustees serving the institutions I studied that eventually closed in the 1990s noted one thing in common, “We got on this too late.”
Many also were seeing data and information in isolation and without proper context for decision-making. Few truly understood the antecedents to the conditions before them and did not discern the underlying complexity inherent in the decisions they were making.
Unfortunately, assets were deployed without considering the downstream implications. It was rare to find evidence of a conversation about the board’s fiduciary duty to instead preserve the assets of the corporation.
Many defaulted to indecision, simply bleeding out assets through time. Few examined the fundamental misalignment of the institution’s physical and financial assets, its restricted and unrestricted assets, its liquid and ill-liquid assets, and above all its cash position.
Restructuring assets to preserve an institution’s assets takes time. It also takes courage. Institutions under stress with degrees of freedom remaining would do well to pause, step back and understand that to preserve a college, you must first preserve the assets of the corporation.
In the end, if the assets of the corporation are mismanaged, so is the college. Counting students is no longer as important as counting net tuition revenue for tuition-dependent institutions.
In turn, if revenue losses translate into asset losses, through time the corporation is compromised. It’s time to focus on assets.
