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Future Shock

Shaky Ground in Troubled Times

It's a perplexing paradigm-that of fragile American colleges and universities.
University Business, Oct 2006

It's the summer of 1987, and the scene is the venerable Tam Bar and Restaurant on Beacon Street in Brookline, Mass. In walk Drs. Martin and Samels for an evening of banter, ideation, and reinvention of higher education.

First thing, Martin brings in a Chronicle snippet announcing another small, single-sex-affiliated, tuition-dependent (yada, yada, yada) institution has bitten the dust. So we think to ourselves, there's something going on here-not yet palpable, but discernable in subtle ways. Sure enough, since that fateful night at the Tam, scores of small private colleges have met their untimely economic demise.

Fast-forward to today. Just about anybody who knows anything about higher ed knows that over the past 20 years private higher education has averaged nearly 6 percent annual tuition increases. Meanwhile, our economy seems to have reached a 3 percent plateau. Clearly, the differential grows significantly as tuition pricing outstrips inflation and for-profit competition infringes with value-added career connections to the workforce.

Students and parents wonder if their school of choice might meet its end before commencement day.

For its part, the middle class is being squeezed out of private choice and into the public system. Indeed, of the nation's approximately 4,000 institutions, there are close to 1,200 technical, community, and county colleges. In 2007 Americans will increasingly flock to state and community colleges in big numbers, as small, private liberal arts colleges discontinue, merge, or consolidate.

For those who doubt the existence of a merger and consolidation megatrend, take a look at the list of colleges and universities that have closed, merged, or changed names that's maintained by Ray Brown (, director of institutional research at Westminster College (Mo.). Over the past 20 years, more than 200 colleges and universities have closed or merged.

A correlation analysis of these closures and consolidations indicates a median frequency profile that looks like a small, single-sex, religiously affiliated, tuition-dependent, modest-endowment-ratio, heavy-depreciation, high-default, poor-retention, low-conversion-yield, junior or liberal arts college having underleveraged, nonperforming assets. These challenges create a cloud of deferred maintenance that detracts from curb appeal-and that turns off prospective and current students and parents who are left wondering if their institution of choice might meet its end before their appointed commencement day.

When we predicted the higher ed merger mania of the '80s and '90s, we were wrong-well, perhaps not totally wrong. For sure we had the American college merger model figured out. But we had not anticipated in our earlier writings-which included our November 1989 article in The Chronicle of Higher Education titled "College Mergers Have Become Creative Effective Means of Achieving Excellence," and our book Merging Colleges For Mutual Growth (Johns Hopkins University Press, 1994)-that college mergers could occur through far less intrusive means: soft, gentle takeovers vertically integrating (and sometimes distinguishing) diverse campus cultures, programs, and market shares.

Over time, we learned that, through strategic alliances (i.e., affiliations, out-sourcing, co-developing, co-branding, and co-programming), institutions could effectuate economies of scale, efficiencies in operation, and non-duplication of program effort. Thus, the contemporary notion that remaining institutions would not so much play out the scenario of "the meek shall inherit the earth," but rather transform into collaborators through mission-complementary partnerships.

Now, you ask, how does one determine whether an institution is fragile from a fiscal perspective? Inevitably, we observe that when good institutions go bad (or at least financially fail), the answer often lies in a lack of leadership talent, resources, and entrepreneurial zeal.

When we started in the higher ed business three decades ago, we would encounter presidents with tenures of 15, 20, and 25 years. Today, consider the fast honeymoon, lightning turnover, and paucity of experienced leadership in the pipeline for American college and university presidencies. Given the dire lack of experience and talent, it's no wonder institutions are left to the politically correct whim of the moment rather than rock-steady vision and focus.

Here are a few indisputable facts to ponder as we undertake our voyage over the troubled waters of institutional fragility, merger, and consolidation:

There were approximately 330 junior colleges in 1955; there are now fewer than 75. Call it degree inflation or fast-shifting workforce needs, the fact remains that America's colleges, abundant and robust in the 1950s, have conflated to form a web of fragile institutions facing daunting challenges of scale, tuition dependence, ferocious competition, and the insatiable appetite of educational consumers. These choosy consumers want programs when they want them, where they want them, how they want them-a high-touch, high-tech knowledge transfer network with real-time classroom environments where students value learning from other adult students as much as from their professors.

Over the last 50 years, the fastest growing segment of American higher education has been community colleges. It's a young system, yet it has grown from 100 to 1,200.

The fastest growing segment of American higher education over the past decade is clearly the for-profit sector. If you think for-profit market competition has made no difference, look at the meteoric rise of mergers and takeovers by such mega for-profit higher ed vendors like the Apollo Group (parent of the University of Phoenix), Kaplan, Career Education, ITT Educational Services, Corinthian Colleges, and DeVry University. On a retail basis, the University of Phoenix has defied critics by moving several hundred thousand students through its network-a tribute to Phoenix's efficient admission model.

When good institutions go bad, a lack of leadership talent, resources, and entrepreneurial zeal are likely to blame.

If only we had a universal fragility indicator back in 1970. We might have prescribed some commonly understood warning signs. Although it may seem quite a dose at first, institutions will benefit by candidly addressing certain indicators early on (see "Dashboard Fagility Indicators").

So, here they come, the Class of 2010, carrying Kevlar kayaks and rock-climbing grappling hooks along with their ThinkPads in backpacks hooked up to their iPod Nanos while multitasking wearing virtual classroom sunglasses displaying the results of last night's quickie quiz in the Soft Skills for Nanotechies boot camp that is part of freshman orientation.

With helicopter parents demanding bigger tuition discounts, and with students wanting (and justifiably expecting) value-added, wireless internet environments, U.S. colleges and universities have placed themselves between a rock and a hard place. In some ways, we in the higher ed community can all take responsibility for letting matters spin slightly out of control.

America's small, tuition-dependent colleges and universities face a dour picture, growing darker every day as another institution bites the proverbial dust. The sad part of the American higher education story is that those with all the assets are often the least entrepreneurial, and those who live on the edge are almost forced to adventure in pushing the envelope and taking advantage of just-in-time solutions.

Yet we sense a shared optimism as we peer over the higher ed horizon. We can now conceive of a day when public and private institutions strike up mission-complementary partnerships, such as library and learning resource sharing, co-curricular program development, and dual-degree/joint-degree transfer articulation and baccalaureate completion options available at sites within the campus and beyond.

We can now envision a transparent network of high-touch, high-tech modalities, including videostreaming on PCs, ThinkPads, SmartBooks, and even cellular phones.

Beyond these near-term measures, we have observed that little, if any, advancement on the economic front will be made until we face up to the inefficiencies of program effort duplication. The high-risk taxonomy will unlikely change in the foreseeable future if public and private higher education doesn't encourage mutual-growth partnerships over zero-sum, winner-take-all competition. Through regulatory amendment and financial incentivization, institutions can be encouraged to partner for the benefit of their students and the communities that they serve.

James Martin is a professor at Mount Ida College (Mass.). James E. Samels is president and CEO of The Education Alliance. Their book is Presidential Transition in Higher Education: Managing Leadership Change (Johns Hopkins University Press, 2004).

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