Business issues

To lure research and avoid regulations, some universities turn away from tax-exempt bonds

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To avoid regulations and attract private research dollars, universities may be turning away from tax-exempt bonds.

Starbucks announces it will pay for employees to take junior and senior years at Arizona State online

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Coffee giant announces it will pay for junior and senior years of any of its employees admitted to Arizona State's online program.

Essay on the impact of applying corporate values to higher education

America's public research universities face a challenging economic environment characterized by rising operating costs and dwindling state resources. In response, institutions across the country have looked toward the corporate sector for cost-cutting models. The hope is that implementing these “real-world” strategies will centralize redundant tasks (allowing some to be eliminated), stimulate greater efficiency, and ensure long-term fiscal solvency.

Recent events at the University of Michigan (suggest that faculty should be proactive in the face of such “corporatization” schemes, which typically are packaged and presented as necessary and consistent with a commitment to continued excellence. The wholesale application of such strategies can upend core academic values of transparency, and shared governance, and strike at the heart of workplace equity.

Early this month our university administration rolled out the “Workforce Transition” phase of its “Administrative Services Transformation” (AST) plan. From far on high, with virtually no faculty leadership input, 50 to 100 staff members in the College of Literature, Science, and the Arts (LS&A) departments were informed that their positions in HR and finances (out of an anticipated total of 325) would be eliminated by early 2014. Outside consultants, none of whom actually visited individual departments for any serious length of time, reduced these positions to what they imagined as their “basic” functions: transactional accounting and personnel paperwork.

It became clear that many of those impacted constitute a specific demographic: women, generally over 40 years of age, many of whom have served for multiple decades in low- to mid-level jobs without moving up the ranks. A university previously committed to gender equity placed the burden of job cuts on the backs of loyal and proven female employees.

These laid-off employees found little comfort in learning that they would be free to apply for one of 275 new positions in HR or finance that will be contained at an off-campus “shared services” center disconnected from the intellectually vital campus life.

The resulting plan reveals no awareness of how departments function on an everyday basis. Such “shared services” models start with the presumption that every staff member is interchangeable and every department’s needs are the same. They frame departments as “customers” of centralized services, perpetuating the illusion that the university can and should function like a market. This premise devalues the local knowledge and organic interactions that make our units thrive. Indeed, it dismisses any attribute that cannot be quantitatively measured or “benchmarked.” Faculty members who reject these models quickly become characterized as “change resisters”: backward, tradition-bound, and incapable of comprehending budgetary complexities.

The absence of consultation with regard to the plan is particularly galling given that academic departments previously have worked well with the administration to keep the university in the black. Faculty members are keenly aware of our institution’s fiscal challenges and accordingly have put in place cost-cutting and consolidating measures at the micro level for the greater good.

Worries about departmental discontentment with AST and shared services resulted in increasing secrecy around the planned layoffs. In an unprecedented move, department chairs and administrators were sworn to silence by “gag orders” prohibiting them from discussing the shared services plan even with each other. Perturbed, close to 20 department chairs wrote a joint letter to top university executives expressing their dismay. As one department chair said, "The staff don't know if they can trust the faculty, the faculty don't know if they trust the administration.”

Within a few days, at least five LS&A departments had written collective letters of protest, signed by hundreds of faculty members and graduate students.  Over the past few weeks, that chorus of opposition has only intensified as faculty members from all corners of our campus have challenged AST. Some have called for a one- to two-year moratorium and others for an outright suspension of the program.

The outcry against the planned transition itself reflects the growing rift between departmental units and the central administration at the University of Michigan. Championed as an astute financial fix by a cadre hidden away in the upper-level bureaucracy, the shared-services model is the brainchild of Accenture, an outside consulting firm which our university has also contracted for a multimillion-dollar IT rationalization project.

Caught off-guard by the strong pushback, the administration has issued several messages admitting that their communication strategies around these changes were inadequate, stating that for now layoffs will be avoided, and assuring us that there will be greater consultation and transparency going forward. 

While these definitely are hopeful signs, important questions about institutional priorities and accountability have arisen.

Initially, the university’s consultants claimed that AST would render a savings of $17 million. Over time that figure shrunk to $5 million, and by some accounts now is reputed to be as low as $2 million. Yet the university has already reportedly spent at least $3 million on this effort with even more spending on the horizon.

Where are the cost savings? How much more will the university spend on Accenture and other outside consultants? How will replacing or shifting valued employees, even at lower numbers and salaries, from their departmental homes to what essentially is a glorified offsite “call center” actually enhance efficiency? How can a university ostensibly committed to gender equity justify making long-serving and superb female employees pay the price of AST? What credible proof is there that centralized management will provide any budgetary or administrative benefits to the specialized needs of individual departments?

The implications of these questions are thrown into starker relief when considering that almost to the day of the announced layoffs, the university launched its most ambitious capital campaign, “Victors for Michigan,” with festivities costing more than $750,000 and a goal of raising $4 billion.

Whether or not the collective protest initiated by a critical mass of faculty will result in change or reversal remains to be seen. Nevertheless, the past few weeks have been a wake-up call. Faculty must educate themselves about the basic fiscal operations of the institution in these changing times and reassert their leadership. Gardens, after all, require frequent tending.

Otherwise, we remain vulnerable to opportunistic management consultants seeking to use fiscal crisis as a source of profit. Public institutions that remain under the spell of misleading corporate promises will ultimately save little and lose a great deal.

 

Anthony Mora is associate professor of American culture and history at the University of Michigan. Alexandra Minna Stern is professor of American culture and history, and a professor of obstetrics and gynecology at the University of Michigan.

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Tuition revenue not keeping pace with inflation at 4 in 10 four-year universities

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Net revenue from tuition is no longer keeping pace with inflation at about 4 in 10 American universities. Without the money, what will be lost?

U. of Arizona's foundation had stake in offshore tax shelter, is suing donor's financial advisers

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The University of Arizona's foundation had a stake in an offshore tax shelter and is now joining with a major donor to sue his financial advisers.

Even healthy universities make big changes to free up funds for priorities

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CFOs at large (and generally healthy) universities nonetheless feel pressure to change their ways and cut costs, to support strategic priorities.

Outsourcing and new revenue are dominant themes at annual business officers' meeting

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A dominant theme at this year’s annual meeting of college business officers is finding creative sources of capital or revenue that institutions can use to invest -- often by outsourcing existing functions.

Loyola New Orleans enrollment shortfall will mean large budget cuts

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Loyola University New Orleans becomes the second selective college this summer to announce a major enrollment and budget shortfall. Is it a harbinger of things to come, or just a case of bad enrollment strategy?

A lawsuit filed against two labs founded by UT-Austin professor raises questions of conflict of interest and academic freedom

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Eastman Chemical's lawsuit raises issues about academic and corporate research and conflicts of interest.

Colleges can't wait for systemic reform, must make changes now (essay)

The world still comes to the United States for higher education. Our elite institutions are the best in the world. Historically, we have done a better job of providing quality education to tens of millions of people than almost any other country on earth.

Yet we’re slipping. Simply put, our graduation rates are too low, our costs are too high, and too many students are slipping through the cracks. Reformers -- and universities themselves -- grasp these realities and want wholesale changes that will fundamentally alter how we think about higher education.

Those long-term battles are important, even necessary. New innovations in distance learning and nontraditional degrees may provide new pathways for students. But such changes may take decades. In the meantime, we have millions of college students taking on ever-higher debt loads for a long, winding road to a degree.  We need to make immediate changes to affirmatively lower costs – not just “increase affordability” – while we raise graduation rates.  We need to work within the existing framework to do what we’re already doing, but do it better and cheaper.

The good news is we have proven methods to improve our efficiency and outcomes at our postsecondary institutions.

Take student costs. Conventional wisdom focuses on high tuition costs, but there’s a related problem that’s often overlooked. Graduating from college takes most students five or even six years, while they are planning for four. That ends up an extra 25 to 50 percent in tuition costs alone, not to mention college-related fees and the opportunity cost of not working.

Institutions can directly reduce time to degree. Recent data show that “bottleneck courses,” i.e., courses where student demand outstrips available seats, play a big role in delaying degree completion.

To put it in human terms, a student who needs Biology 201 to graduate – when a seat in Biology 201 isn’t available until next year – is wasting time and money.  That dynamic is why “access to courses” consistently ranks as the biggest student complaint about higher education, according to the Noel-Levitz annual student satisfaction survey (subscription required).

The fix is relatively straightforward: offer those bottleneck courses more often. Just 5 to 10 percent of courses are responsible for the vast majority of bottlenecks, so colleges and universities can address the shortages quickly. For instance, they can ensure that their most valuable resources -- professors -- are teaching the right mix of courses to prevent bottlenecks, rather than spending limited resources on course offerings that are not needed (15-20 percent of a typical school’s schedule). Similarly, colleges can better align schedules so students don’t have to choose between two required courses, and can make sure room size is aligned to corresponding course demand.

“Quickly” is the key concept in this fix – we can save students hundreds of millions of dollars every year starting immediately.  We don’t need to wait a decade, or even a year.

Addressing bottleneck courses is one of the clearest examples of changes we can make to address the problems in higher education immediately, but it is far from the only one.  The two below, for instance, lead to real savings right away, but are easy to overlook:

  • Extensive data show that better allocation of academic space – i.e., which courses are scheduled in which classrooms at which times – is an overlooked yet vital cost issue. Better allocation of classroom resources – identifying and addressing primetime bottlenecks by focusing on room ownership, meeting pattern efficiency and last-minute cancellation, etc. – can postpone or even cancel entire expensive classroom construction projects.  (Full disclosure: Ad Astra Information Systems, where Tom Shaver serves as CEO, are providing university leaders with data-based solutions that help them make these important resource allocation decisions.)
  • College bookstores can adopt software enabling students to take advantage of economies of scale and get their expensive textbooks for vastly reduced costs (One of us wrote an op-ed on this subject in The Hill).

There are, of course, hundreds of other solutions we can adopt right away. These solutions represent just a few ideas that directly address the nuts and bolts of providing courses to thousands of students on a single campus. These solutions aren’t glamorous. They’ll never make the front page of The New York Times or be the subject of a TED talk. 

Yet they are key operational concerns that save real money. One large community college in the Northeast better aligned its faculty and classroom resources to offer more of the most oversubscribed courses, allowing it to enroll hundreds more students without committing new funding.  All told, it improved its balance sheet by over $1.7 million in a single year. A community college system in the Midwest took a similar approach and has improved its fiscal outlook by almost $3 million in just three years. Multiply those figures by the approximately 3,000 institutions of higher education in this country, and you are looking at tremendous savings for students – and for institutions.

Will these changes singlehandedly fix the deep-seated and complicated fiscal issues afflicting our higher education system? Probably not. But can these solutions -- and others like them -- vastly improve the higher education experience for both students and institutions?  There is no question they can.

In an era defined by a $16 trillion federal debt and states across the country struggling with multibillion-dollar shortfalls, we are going to see an unfortunate but inevitable reduction in government funding for higher education.  Colleges are facing this reality today.  They cannot afford to wait for next-generation solutions. They need this-generation solutions. Millions of students’ futures depend on it.

Gene Hickok is the former deputy U.S. secretary of education and a senior adviser at Whiteboard Advisors; Tom Shaver is CEO of Ad Astra Information Systems, a company using data mining technology to help colleges and universities improve student access and lower costs.

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