Partnerships can prevent school closures

A new book offers tips on forming higher ed alliances
By: | Issue: May, 2017
April 13, 2017

The “perfect storm” of a weak economy, the expansion of for-profit schools and greater competition for fewer students has forced many colleges to become more strategic about their survival, and to avoid previously unthinkable options, including closing their doors for good.

In Consolidating Colleges and Merging Universities (2017, Johns Hopkins University Press), James Martin and James Samels bring together higher education leaders to discuss how institutions might cooperate with their competitors to survive.

In a collection of essays, the book offers specific guidelines and actions institutions have used to create multiple forms of successful partnerships.

The authors of UB’s online “Future Shock” column, Martin is a professor of English at Mount Ida College in Massachusetts. Samels is the CEO and president of The Education Alliance and the founder of Samels & Associates, a law firm concentrating in higher education law.

You wrote another book on this topic some years ago. What has changed?

Samels: That earlier book dealt with different types of consolidations. There were a number of historic consolidations but they were structural mega-consolidations.

Now we’re talking about transactions, we’re talking about transferring programs. This book is about identifying mission-complementary, mutual profitable ways, without extinguishing the other guy’s mission. In fact, it would strengthen their mission.

Martin: I would add that in the years since the first book, Jim and I didn’t see colleges that were ready to merge. They were ready to do other things—what they called unification—but what they didn’t want to get into was a partnership, where one president had to be edged out and one provost wasn’t going to make it.

That started us talking with these schools to find a format that works best for them, whether it is a partnership, a co-venture, a strategic alliance or something like that.

You devote a lot of space to discussing strategic alliances. Is that your preferred solution?

Samels: It depends. If you’re a small, Catholic, single-sex school, you know you’re not that nimble. You have a high fixed cost and are 90 percent tuition dependent, your tuition discount rates are 63 percent and your debt service is at 17 percent. In those cases, a lot of people would say, “death with dignity” rather than a strategic alliance.

You don’t know how many colleges we’ve helped close over the last 30 years, and there’s going to be more. There are too many of these colleges and too few students. Nobody wants to deal with that. Our closure business is going to pick up in this year.

Martin: I think that’s true. But to answer your question, the start of the conversation is between two institutions partnering, co-venturing, and the book is mainly about how to begin that kind of conversation.

Many people think of consolidation and merger as the same thing. Explain the difference.

Samels: In a merger, A goes into B and B is the surviving entity. For example, years ago Newton College of the Sacred Heart was merged into Boston College. You never heard of Sacred Heart again. That was a merger.

In a consolidation, A and B together become C. So, Western Reserve University and the Case Institute of Technology consolidate to become Case Western Reserve University. There are plenty of examples like that—Carnegie Mellon, and Hobart and William Smith Colleges, to name two.

The thing we’re not doing enough of is public-private collaboration, and we’re especially not doing enough in terms of non-duplication of courses and services.

Martin: When people hear the word merger, they will often assume, erroneously, that it’s a merger of equals. But as Jim said, a true merger is really one in which one of the schools will go away.

So consolidation has become, along with strategic alliance in the last 20 years or so, a vehicle that allows the institutions to start talking. Sometimes we will quickly see they’re really talking about merger or, in the worst cases, they’re really talking about closure.

There has been a marked increase in the number of school closings and mergers in the last decade. What brought us to this point?

Samels: We didn’t pay attention. We didn’t anticipate certain things that happened. We didn’t pay much attention to dashboard indicators, the key performance and agility indicators. Things got way out of hand.

We didn’t pay attention to pricing. We let our private colleges and universities raise prices 4 percent to 6 percent per year, in a 2 percent or 3 percent economy. We should have kept a closer eye on tuition discount rates, and a closer eye on family debt burden. We also didn’t see the changes in student demographics.

Martin: Another thing we began to see was administrative bloat—the rise in the numbers of administrators. What we saw was an aging populace of presidents who increasingly didn’t want closure to occur on their watch. They didn’t feel they needed mergers or even partnerships.

These presidents would surround themselves with people whose jobs depended on the continuation of the institution. The faculty’s voices would be, if not drowned out, certainly given less authority.

That results in a drive to keep institutions as they are—we don’t want a partner. We certainly don’t want to close, so we’ll add another office or another person to study this.

So we find colleges sort of plugging and chugging along, but they’re headed toward closure, and it will sometimes come with the retirement of a long-standing president. That’s when a new board or a new president says, “This isn’t sustainable anymore.”

Is there another component here with the increase in education outlets, including online? Are there more colleges than we need?

Samels: Not only are there more colleges than we need, but, interestingly enough, there’s a bunch of students who are still being underserved.

Martin: I think we do have too many small to medium residential colleges that are high-maintenance, tuition-dependent, and are suffocating themselves.

There’s a reason for the rise in for-profits and nighttime classes, 24-hour libraries and so on. There’s a need for access and affordability, but there’s not as much need for traditional, “old-fashioned,” residential-based campuses with high cost and maintenance. That’s why they’re going out of business.

And as Jim said earlier, if they are single-sex, or religiously affiliated institutions, their market is significantly smaller than what it once was.

What about the flip side? Is there a growth market in higher ed?

Samels: Yes. Not everything is a negative. Not everything is desperation. Every so often there’s a market opportunity where timing is everything.

One great example is agriculture. Any investment in the food system right now is going to receive an outstanding return on investment in higher education. Colleges that start to build greenhouses and innovation centers or “green incubators” in agriculture will come out ahead.

Rowan University did something really cool. Instead of merging, they created partnerships at other schools.

For example Rowan University partnered with Burlington County College to create Rowan College at Burlington County. They got together with Gloucester County College to create Rowan College at Gloucester County. They completely co-branded the product.

Martin: And it’s not always a partnership between higher ed institutions. Emmanuel College in Boston leased its land to Merck pharmaceuticals, which built a research facility on the campus and all they wanted was use of the Emmanuel library and gymnasium.

With mergers, partnerships and closures continuing, what does the future of higher education look like?

Martin: I don’t think the for-profit sector is going to go away. I think it will endure. That’s number one.

Number two, I think we’re going to start to see an increasing number of partnering between for-profit and a nonprofit institutions. I think we’re also going to see that online education and competency-based education—which perplexes people now—is going to endure.

When it comes to the traditional, standalone schools we discussed earlier, are they going to close and blow away like dust? Maybe not, because if we can meet with those people, we’ll say you don’t have to do that. You can partner with a school like Rowan, or with some corporation or a for-profit institution and you can live on.

Tim Goral is senior editor of UB.