The COVID-19 pandemic and ensuing recession have put enormous financial strain on higher education institutions. A recent survey of more than 120 chief business officers (CBOs) found that public and private nonprofit institutions reported combined losses ranging up to 45 percent of their operating budget in the current fiscal year, with the median at 20 percent.
In response, the federal government has, in the last 14 months, provided historic levels of funding -- more than $77 billion -- through coronavirus relief measures and the American Rescue Plan Act, and more may be on the way through the Biden administration’s American Jobs Plan and American Families Plan. But nearly a third of those same CBOs reported that their total federal relief packages were insufficient to cover their losses.
The federal funds may, however, act as a bridge and a lifeline to a stronger, more resilient future -- if institutions use the funding to drive innovation and invest strategically, rather than plug holes and return to “business as usual.” Coming out of the pandemic, higher education institutions have an opportunity to make meaningful changes to their business models and to reinvent how they deliver education, what kinds of experiences and engagement they create with their students, and how they bring the workforce -- faculty and staff -- back to campus in the “next normal.”
As one university president put it during a recent roundtable discussion co-hosted by EY-Parthenon and Inside Higher Ed, “The funds did not solve the problems that existed pre-pandemic, but they bought us time. It’s up to us how we use that time.”
In the survey, CBOs expressed interest in fundamental transformation through several avenues, including reimagining ways of learning; rethinking how to engage students, faculty and staff; considering cost optimization opportunities through focusing on the core higher education mission; and increasing outsourcing and public-private partnerships.
For many institutions, the nearly overnight shift to online instruction in March 2020 was their first exposure to digital instruction at scale. CBOs expect to lean into this medium on a permanent basis: more than half of respondents reported that adding or expanding online programs is the most significant area of change at their institutions over the next one to three years.
More than one-third of survey respondents anticipate increasing enrollments in hybrid programs, and more than one-fourth anticipate increasing enrollments in fully online programs. In order to support this shift to hybrid and online learning, more than 90 percent of CBOs indicated that their institutions increased budget allocation to classroom technology and digital instruction tools in the current fiscal year, and they expect to continue increasing these budgets over the next three to five years.
As higher education institutions expand hybrid and online learning opportunities, there will likely be new challenges around supporting students, particularly low-income and first-generation students. While online or remote interactions may not be intended to displace all in-person interactions, one key lesson learned is that they can be leveraged to enhance the experience.
As one president at a small, private nonprofit institution with a highly diverse student body remarked, “My institution has seen an increase in retention rates for first-generation students since moving courses and student services online.”
The pandemic also precipitated a major transition in college and university employees’ ways of working. On average, CBOs reported that more than half of their institution’s faculty and staff worked remotely during the past year -- a major shift for workforces that have traditionally been almost fully in person. Looking forward, CBOs expect that roughly one-quarter of their institutions’ faculty and staff will work remotely on a permanent basis.
With such a significant shift in ways of working, nearly all CBOs expressed concerns about managing a remote or hybrid workforce, particularly around supporting employee well-being and sustainability in a remote work environment. Managing a successful remote workforce will likely also require institutions to provide effective productivity tools, find new ways to support employee engagement and potentially revise existing HR policies.
An important consideration of the shift toward remote faculty and staff workforces is the change in student service delivery, such as orientation, advising or mental health. A president at a large, public, four-year institution noted that the institution is “discussing which virtual service disruptions during the pandemic were positive and which were harmful, all around the framework of responding to student needs.”
In order to gain efficiencies and transform their business models, institutions of all types are expressing newfound interest in outsourcing and partnership, both in areas that have traditionally been contracted out, such as dining services or bookstores, and in new areas, such as instructional design and mental health counseling. A significant portion of institutions have also already initiated, or are considering, new public-private partnerships, particularly for the development of commercial space.
The past 16 months have been particularly difficult for institutions of higher education, but, in many cases, the difficult circumstances have provided a once-in-a-lifetime opportunity to spur change on campuses. The institutions that have quickly pivoted and made difficult decisions will likely be in a stronger position coming out of the pandemic. The key is to now continue to transform to face the future.
Institution leaders who were able to take advantage of opportunities during the pandemic are now grappling with the question of how they can maintain momentum coming out of the pandemic. As a president at a large, private institution shared, “We developed a management style during the pandemic to act more nimbly and try innovative structures, but how do we maintain that agility and speed of change without driving everyone to exhaustion?”
Maintaining the appetite for strategic change can be critical moving forward because institutions that do not take the opportunity to transform during this period will be especially vulnerable to the challenges ahead.
Federal relief funding provides a bridge for the next two or so years. But decreased birth rates during and after the Great Recession are still expected to result in a demographic decline of high school graduates from 2025 through 2037, meaning that competition for students will continue.
The federal funding postponed the day of reckoning for sure. Will it spur institutions into reimagining themselves in a highly competitive setting, or will institutions take the reprieve and return to business as usual? Time will tell.