How to Keep a University Alive

University bubble chart
University bubble chart

Several years back, we had the opportunity to work with a small, niche university.  The big question that they were trying to answer was about sustainability – what could they do to establish a more sustainable model for themselves? If they didn't resolve this question, they feared they would have to close.

As a part of their beliefs, they highly valued small class sizes, which was integral to the learning experience that they offered.  So, while increasing class size might have been an obvious first lever to pull, such cost efficiency through class size wasn't the answer for them.

To understand their positioning, we conducted some peer research, specifically of colleges and universities that prided themselves on small class sizes.  We looked at ones who were financially sound and sustainable and then looked for markers of their success.  All of the successful, sustainable  peers with small class sizes varied from our client on one (or more) of three key levers:  average tuition, overall student population, or endowment.  Our client didn't have a strong position in any of these levers, and thus was living in a no-man's land (see diagram above). The successful institutions didn't all have the same model, but they were all finding a way to support the costs of maintaining small class sizes by pulling one or more of these key levers.

What did this mean for our client?  It turned out they couldn't easily pull any single one of those levers strongly enough in short order to close their financial gap and stay open.  They valued providing access to college to a larger breadth of household incomes and couldn't jack their realized tuition way up. They couldn't dramatically increase their endowment in the short run given the fundraising challenges, and their overall student population could only grow incrementally over time.  As a result – they needed to pull all three of the levers – in smaller amounts and gradually. And that's what they did. By paying close attention to increasing tuition where they could, growing their endowment through well-planned fundraising, and increasing their student population while maintaining small class sizes, they were able to establish their sustainability. The thus moved from the no-man's land into a zone of success.

To state all of this in simple terms: if your organization is struggling to achieve financial sustainability it can be useful to look at peers (especially those with similar values) to see if you are operating in a “no-man’s land.”  And if you are – what combination of levers can you pull to get yourself out?