Simpson University: Anatomy of a spiritual and financial turnaround

How one small Christian university brought itself back from the brink of financial failure.
By: and | May 3, 2022
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Like other tuition-dependent institutions of higher learning, small-scale Christian colleges and universities face a daunting horizon. Indeed, the American higher education ecosystem finds itself in free fall. Simply put, there are just too many colleges, fewer students, increased competition, and spiraling incremental costs in a war of upscale campus amenities.

James E. Samels and Arlene Lieberman, The Education Alliance

James E. Samels is president and CEO of The Education Alliance and senior partner in the law firm Samels Associates. Arlene Lieberman is senior consultant of The Education Alliance and senior associate, Samels Associates.

This perfect storm of unfortunate circumstances has been compounded by the after-effects of the pandemic. Campus shutdowns drained tuition and auxiliary revenue streams and, significantly disrupted the perennial ebb and flow of the recruitment, admissions, and cash flow process.

These irreversible demographic, market competition and public health megatrends have caused a big-time enrollment shortfall. In the big picture, these challenging conditions have taken place in a sometimes fickle economy that values specialized career pathways over liberal arts and humanities – qualities at the core of the Christian Evangelical higher learning mission and purpose.

Paradoxically, well-endowed research universities and highly selective, liberal arts colleges are typically risk-averse while unfortunately, small, tuition-dependent Christian Colleges are forced to live on the edge of risk. The reality is that a number of small Christian colleges and universities have to sweat out making spring semester payroll and, therefore, consider short-term credit enhancements to bridge structural deficits. These days, Christian college entrepreneurs seek new joint venture partners willing to take on shared risk and shared return on investment.

In our recent investigation, we reviewed a wide and varied range of peer institutions – i.e., scale, demographics, diversity, academic ranking, admissions selectivity, enrollment conversion yield, operating budget, assets and endowment, debt service, and tuition discount rate.

What we learned from several case studies was a pleasant surprise. We discovered a group of like-minded, faith-based institutions that have intentionally redesigned their business models without surrendering their evangelical core values and enduring religious faith.

Like a phoenix rising from the ashes of surrounding small Christian College failures, Simpson University experienced a game-changing economic and academic turnaround. With a major leadership shift, Simpson succeeded through the creative collaboration of a dedicated group of trustees, students, faculty, staff, alumni, friends, and benefactors.

Just five years ago, Simpson was on accreditation probation and show cause in the face of budget deficits; under-enrolled majors; and under-leveraged campus assets. Through stringent fiscal discipline, these warning signs of institutional atrophy went into remission and, amazingly, Simpson is now thriving – with a growing endowment and unencumbered assets to collateralize the future. Auspiciously, Simpson’s 100th Anniversary celebration sparked a significant increase in fund and friend-raising.

Simpson intuited early on that “if their ship did not come in, they would need to swim out to it.” So, new outreach into the surrounding Redding Community rekindled colleagueships with business and civic leaders. These champions of faith have also provided support for Simpson’s turnaround.

From a boots-on-the-ground perspective, the most impactful solutions required a shift to zero-based budgeting, continuous expense reduction, and future cost avoidance. This kind of stringent discipline brought the operating balance out of deficit – and is now leading to actual cash reserves.

Beyond fiscal restraint, the new leadership team took time and effort to improve and beautify campus infrastructure — in order to attract and retain students who were the “right fit” for Simpson.

At the end of the day, the university’s right-sizing decisions strengthened accountability and created available capital for investing in new high-demand academic programs including engineering, computer information systems, digital media, and kinesiology as well as new sports programs including swimming and bass fishing. These resources also supported student academic success and coincided with a decline in student loan default.  Over time, the University has contributed to increasing graduates’ career compensation, licensing exam pass rates, and further graduate and professional school admissions.

President Norman Hall put it nicely this way:

“At a time when most educational entities are focused on transactional education, Simpson is blowing out the margins on transformational education, the stuff of deep change. This is a world-changing place with excellent faculty in deep relationship with students. I’m thrilled to be a part of it.”

Simpson’s programs are aligned with market needs. These include the university’s nursing program and outdoor education, among others.

There’s room for growth, too.

I have notions in mind that bring new revenue through curricular and co-curricular programs. We need to know what our niche is: Unapologetic Christian influences.”

At the close of our investigation, we are reminded of our shared experience in Turnaround: Leading Stressed Institutions to Excellence, Johns Hopkins University Press, Martin and Samels. The typical mistake is waiting too long to initiate change management. Naturally, some campus stakeholders typically think new administrations are moving too fast – and others wonder why it takes so long for the clarion call to action. The trick is to phase, sequence, and harmonize succession, transition, and change management.

James E. Samels is President and CEO of The Education Alliance and Senior Partner in the law firm of Samels Associates, Attorneys at Law. Arlene Lieberman is Senior Consultant of The Education Alliance and Senior Associate, Samels Associates, Attorneys at Law.

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