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Higher ed disruption underway — don’t get caught off-guard

Leaders need to understand markets, history and culture to respond to coming changes
University Business, April 2016
Jon McGee, vice president for planning and public affairs at the College of Saint Benedict and Saint John’s University, says many colleges and universities are too focused on the present to prepare for the changes ahead.
Jon McGee, vice president for planning and public affairs at the College of Saint Benedict and Saint John’s University, says many colleges and universities are too focused on the present to prepare for the changes ahead.

In his book, Breakpoint: The Changing Marketplace for Higher Education (Johns Hopkins Press, 2015), Jon McGee says higher education is in the midst of an extraordinary transitional period that has significant implications for how colleges understand their mission, their market and their management.

McGee, vice president for planning and public affairs at the College of Saint Benedict and Saint John’s University in Minnesota, says many schools can’t see the forest for the trees. They are—by necessity—too focused on the present to prepare for changes that we know will come.

After more than two decades studying demographic and economic trends, McGee paints a narrative of three disrupters—demographic, economic and cultural—that will force higher education institutions to “think different” to remain competitive.

“They are really not three independent disrupters—they are triangulated,” McGee says. “Ultimately, they reshape people’s perceptions of both need and value, and of public institutions in particular.”

You write about demographic trends that “could have been and should have been anticipated.” Why did many colleges fall short?

Here’s why they should have been anticipated. First, no one is born 18 years old. It’s not like colleges didn’t have a long period of time to see this coming. We have the luxury of places like Western Interstate Commission for Higher Education or the Department of Education that do projections of high school graduates so, at any given moment, we really have some sense of what’s going on.

And a lot of colleges did know what was coming. But for those that didn’t pay attention, I suspect one reason might be complacency. When the arrows are going in one direction for a long period of time, it is easy to fall into the trap that they will always be pointed in that direction.

A lot of institutions get caught up in the present—because they have to be. While we should be thinking long-term, our budgets and what we experience is annual. We have to enroll a new class every single fall. So a lot of energy and attention goes to the immediate rather than what will or might happen five years or 10 years from now.

So people become used to a growing marketplace and fail to see trends?

Right. I describe it as the illusion of demand. If you see your applications going up and if you’ve engineered an increase in applications, a lot of people, especially outside of the admissions office, are inclined to believe, “Well, this demographic trend is somebody else’s issue, not mine.”

Look, the U.S. birth rate rose consistently between 1997 and 2007, then stopped with the recession and declined every year from 2007 to 2013, picking up again in 2014. But we don’t know if that will continue.

With high school grads, we reached a peak in 2011 and the nadir in 2014-15. And then we’ll crawl back to 2011 levels by the mid-2020s. As soon as we reach that point, we’re going to go back down again. We already know eight years from now what’s going to happen. The question is, are we prepared for that?

There are other disrupters, such as economic, that can’t be planned for.

Right. I can’t plan the precise date of a recession, though we know there’s going to be one. The last one ended in 2009 and it’s now 2016. You can bet that at some point in the next 18 to 36 months the probability of a recession will rise. We know that because we know that there are economic cycles. We just don’t know the precise timing of it, nor do we know the precipitating events or how deep it will be.

What we can be tracking, however, is what’s happening with family incomes in the U.S. That way you can begin to ask what it means for your institution.

First, you have to separate Wall Street and the macroeconomy from Main Street and the personal economy. Wall Street is just fine, thank you. GDP is up by 14 percent since the end of the recession. Consumer inflation has risen by less than 3 percent since 2012, though there are signs that it may be bumping up a bit. The unemployment rate is 5 percent now—half its 2009 peak. Corporate profits are up almost four times since 2000.

But it doesn’t look so good from the perspective of Main Street and the personal economy. A real inflation-adjusted household income is 5 percent less than it was in 1999. Earnings have been flat.

And, while unemployment is down, the labor force participation rate is the lowest it’s been since 1997. Personal savings bumped up after the recession but then went back down, and they are now at about 5.5 percent, which is considerably less than the average from 1960 to 2000. And income inequality has grown.

So has the inability to pay for college.

If you just isolate families with kids, in 2014 their real median family income was 9 percent less than it was in 2000. These are the kids in the pipeline. They are in kindergarten through senior year in high school.

And if you add race and ethnicity to the mix, the median family income for, say, white and Asian families is nearly double the median family income for Black and Hispanic families.

What does that mean for higher ed?

Well, the fastest growth in the United States in population is Hispanics. So I may not be able to peg a recession, but I can look at what’s happening in the economy and get a better sense of the students who might be applying to my institution—and what might that mean in terms of the way my price is perceived and experienced, and what I need to do in terms of financial aid and so on.

And what’s happening on campus? Do we see more income inequality on campus or bifurcation of income as we enroll more higher-income and more lower-income students? What’s happening in the middle? What do we know about the way families are paying for college and how is that changing? All of that can be known and, in fact, needs to be known, because otherwise you are guessing.

It pays to be able to interpret data.

If you’ve seen the movie The Incredibles, the character Edna Mode has a great line: “Luck favors the prepared.” Luck might not be the right word, but success does favor the prepared. I don’t think the future belongs to the lucky. The stakes are too high. There are too many uncertainties.

From 1993 to 2010, during which we had two of the longest economic expansions in U.S. history and the number of high school graduates rose sharply, you could make a lot of mistakes and still succeed. You can’t make those same mistakes now. You’ve got to know more. Colleges have to pay closer attention than ever.

There are other forces affecting education that couldn’t have been predicted, such as technology and online education. But there are 1,000 more degree-granting institutions now than there were in 1996. The shift has gone from the seller to the buyer, and schools are struggling to make sense of that.

They are. And they’re asking what is their place in the world. It’s not going to be the way it has always been—though I think you could argue it’s never been the way it’s always been.

For example, look how technology has continuously influenced pedagogy. Technology has always been a force of change.

But when it comes to online courses, flipped classes and so on, if those are approached simply as a sort of technical or mechanical adjustment to the way we deliver courses, a lot of institutions are going to swing and miss on that.

You have to ask, “Why are we doing this? What do we value about the kinds of experience our students need to have?”

Not every school has to take that technology route—and some don’t. My institution does very little of it because we have chosen to say, “This is the kind of institution we are. This is our place in the market. This is what we value.” I always go back to: Who are you? What are your values? What are your aspirations?

Now, having said all of that, when you are no longer willing to adjust your operations to meet your aspirations, you have to change your aspirations. And yet, that is not as self-evident as it would seem to be. Continuing to run on aspiration with no intention of changing operations is not a very good way to go.

Tim Goral is senior editor of UB.

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