'Breakpoint' in Higher Ed

Author discusses his new book on "the changing marketplace" facing colleges and universities.

February 16, 2016

How much does higher education need to change to preserve the qualities of colleges and universities that are important to students, faculty members and society? That's the question Jon McGee asks and answers in his new book, Breakpoint: The Changing Marketplace for Higher Education (Johns Hopkins University Press). He argues for the importance of developing plans collaboratively but also being willing to execute those plans. McGee, vice president for planning and public affairs at the College of Saint Benedict and Saint John’s University, responded to questions about the book in an email interview.

Q: You write that “colleges and universities today must be understood for what they are: large-scale business enterprises.” This is a notion that many in academe, especially faculty members, resist. How do you suggest academics begin understanding and embracing this paradigm?

A: The paradigm is not new. Colleges often enroll thousands of students, employ hundreds and sometimes thousands of faculty and staff, and provide an array of services that equal or exceed those available in small or even medium-size cities. The days of informal structures and casual leadership have long since passed. Scale and complexity are not synonymous with soullessness, however. And the acknowledgment that colleges must serve many constituent groups with numerous, and sometimes competing interests does not require that we sell out our values. High-functioning institutions hew to their mission, values and founding purposes. At the same time, though, the scale and complexity of operations at most colleges and universities today demands much greater emphasis on strong decision-making leadership skills. The speed of change has accelerated, the needs and expectations of our students have grown, and the pressure to satisfy a remarkable array of interests has increased. As a result, we have to be more attentive than ever to the ways in which we make decisions and the trade-offs those decisions demand. That does not require that we become linear command-and-control enterprises -- that has not proven to work well in American higher education. But it does demand that we adapt our shared governance and decision-making practices to different conditions to ensure that we continue to advance our values and serve students and a common good.

Q: You criticize rankings in the book, saying that because of popular ranking systems, “each of us is actively working to behave and look just like the other.” Why do you take issue with the rankings, and how does a university rise above competing with its peers based on the metrics of popular rankings?

A: Let me be clear: rankings are here to stay. We live in a culture that loves ranked lists. As it turns out, colleges and universities like them, too. In spite of complaints each year when rankings are released, most institutions like being on those lists, especially when they are on or near the top. The various organizations that rank colleges are trying to capture some audience’s attention. Though they increasingly look more and more alike, none measures or values exactly the same thing. They have become important to the college choice process because they seem to provide information objectively, they feature data easily counted and measured (even if not well understood), and they purport to condense or convey otherwise complicated or undifferentiated information. What likely attracts so much interest, though, is that rankings produce the ultimate sound bite in a sound-bite culture. Higher education’s own desire to flood the marketplace with competing and too often vague or unsupported claims provides fertile ground for their creation and consumption. Rather than simply turning the rankings into a winner-takes-all quest built on unattainable emulation, I think colleges and universities should present the lists selectively, not like a state fair ribbon, but rather as tools to help students understand what is most important and least important about what they do or don’t do. That surely will improve the quality of information students receive and help colleges to better define their point of distinction in an otherwise crowded and too often undifferentiated marketplace.

Q: You talk about the importance of distinctiveness for universities and colleges. A lot of colleges struggle with developing a distinct niche. What are some of the biggest roadblocks in this area?

A: Higher education is remarkably self-referential. We look to other institutions, peers and competitors alike, not only to validate our sense of self but also for purposes of emulation. In the end, we too often all look and sound the same: friendly, caring learning communities dedicated to academic excellence and the development of the whole person. On top of that, we all share a huge portion of an organizational genome that has developed over hundreds of years: similar missions, administrative structures, market practices, financial practices and pedagogical practices. The combination of those two conditions can blind us to a real understanding of comparative advantage. We often cannot see meaningful difference and may even be afraid to step out of what is considered normal. We need to break out of that box. If, say, 98 percent of our organizational DNA is shared with peers or competitors, then the two percentage points of difference had better make a real difference. They must be known, valued, convey value and [be] cultivated. The starting point for identifying distinction requires college leaders -- administration, faculty and staff -- to resist the temptation to be all things to all people, the lure to be “pretty good” at everything. A marketplace defined by intense competition and disruption of all sorts demand an institutional commitment to distinction and difference as a prerequisite for success. Leaders must continuously ask the question: What makes us different or better than our peers or competitors? That is knowable.

Q: How does the pricing structure of colleges today make things difficult for families and institutions, and how exactly can it be reimagined?

A: Price, pricing and financing a college education are among the most vexing challenges we face. Though they are related, each presents its own set of challenges. The only price that universally satisfies everyone is zero, an untenable option. Instead, students at any given college or university pay hundreds, sometimes thousands, of different prices after financial aid, a pricing practice that represents our attempt to meet students and families where they are. It’s ultimately a very sophisticated form of one-at-a-time pricing. And when done well, it works well for both students and institutions. Unfortunately, the leap from sticker price to post-financial aid net price is not intuitive, is often complex and is not well understood either by students and families or by people outside of the financial aid or admission office on most campuses. Irrespective of their means, families most often seek the best price possible in relation to both their ability to pay and their sense of the value of a particular college. For their part, colleges seek to manage scarce resources while also addressing ability to pay and willingness to pay. It’s a remarkably complex and angst-producing process, akin to dancing on the head of a pin. The complexity is compounded because there are not standard or even clear benchmarks and guidelines to help families prepare and plan for financing a college education when their children are young.

The Lumina Foundation’s recent paper “A Benchmark for Making College Affordable: The Rule of 10,” is a really interesting attempt to rethink college financial planning and the notion of affordability. It suggests a broader and more integrated way of thinking about financing college beyond the just-in-time issue of paying for college as the expense occurs. It ought to spur a better conversation about financial benchmarks by which families can plan and prepare over a much longer period of time. As for college pricing and pricing practice, in the coming years I think we will see a much stronger push for simplification of the financial aid process. The recent change to the use of prior-prior year income on the FAFSA is the first of what likely will be additional moves to financial aid simplification. I also believe that more colleges will experiment with price through multiyear price setting, price reductions, price freezes and program-based price differentiation as they try to improve or sustain their market position. Lastly, I’m certain we will continue to see greater efforts on campus to more tightly manage the relationship of price and cost and the rate of increase in both. The economic conditions creating pressure on campus now show no sign of changing soon and will continue to demand better fiscal management. Having said all of that, I don’t believe there is a magic elixir that will work for all institutions. As it always has, context -- including mission and values, economic circumstances, and market position -- will continue to shape challenges and opportunities and drive choices at particular institutions. One of the key messages I tried to convey in Breakpoint is “Know thyself very well.”

Q: Moody's Credit Rating Agency has predicted an uptick in college closures in coming years. Based on your understanding of the industry, what is the biggest mistake struggling colleges can avoid as they seek to remain viable?

A: I’m not convinced we will experience a significant increase in the number of college closures in the coming years. Since 2005, the number of four-year colleges that have closed their doors has averaged fewer than five per year. The net number of public and private not-for-profit four-year colleges actually increased by 68 between 2005 and 2013. Closure is rarely a sudden event. It typically plays out over a number of years, accelerating as problems grow worse and remedies fail. Over many decades, though, most colleges and universities have shown remarkable resiliency and adaptability as their operating circumstances have changed. I think the more immediate danger than closing for many colleges is the slippage toward a kind of sustained weakness, trapping the institution into an annual process akin to disease management that closes off the ability to think beyond the challenges of the present. It remains possible to stay open and afloat, but it sucks the energy and vitality out of the institution. The tyranny of the immediate rarely results in anything good. The best way to avoid that condition, which is a step toward the abyss, is to remain absolutely vigilant about changing market conditions -- demographic, economic and cultural -- and to take assertive steps either to head off problems or identify points of opportunity. Complex times require that colleges and universities continuously take their own market pulse and evaluate their course. Bad things happen when we take our eyes off the ball.


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