In this, the fifth in our series of articles with insights from Robert Scott, President Emeritus of Adelphi University and senior advisor to Grant Thornton’s Higher Education practice, we describe seven areas that can help you assess your institution’s vitality — and its vulnerability.
Vitality — and, often, survival — for every higher education institution depends on the viability of its numerous components. To most effectively ensure your institution’s long-term vitality, monitor seven metrics with special care.
1. Engaged board governance and planning
The board’s role is to protect the institution of the future from the actions of the present. This starts with strategic plans.
Are goals, assumptions, alternatives and forms of assessment clearly stated? Are those goals mission-focused, student-centered, market-smart and data-based?
After goals are articulated and evaluated, align them with the mission, strategies, resource allocations, rewards and results — then compare them to relevant peer and aspirational benchmarks.
Although the board has a specific charge to advance the mission as defined in the charter, governance is shared with the administration and the faculty.
Specifically, the board and the president should have an annual calendar indicating the meetings when items such as these will be considered for decision, discussion or information-only.
2. Robust academic programming and quality controls
The core of the campus mission is teaching and learning. To further that mission, monitor the academic plan including library and laboratory operations.
The faculty embodies the mission. Faculty hiring, promotion, tenure and rewards — including the percentage of courses taught by part-time faculty — are significant to fulfilling the mission and goals. Routinely review academic program results, as well as retention and graduation, over time and in comparison to select institutions.
Stay on top of nuts-and-bolts issues such as regional and programmatic accreditations, the adequacy of IT for program support and planning, and the number of credits required for earning a degree relative to norms and competition.
The Academic Affairs Committee should maintain a calendar of important decisions and topics.
3. Aggressive enrollment management
Most colleges and universities rely on tuition for the majority of their income.
At a high level, look to the enrollment management plan (recruitment, re-engagement, retention and financial aid). Study the admissions funnel for the year, with five-year comparisons, to glean useful information including the number of high school graduates who:
- Are in the catchment area
- Inquire and ask for information
- Apply for admission
- Are admitted
- Receive financial aid, both need-based and merit-based, by applicant type
- Register for the start of classes
The net tuition revenue from the incoming class will help measure tuition discounting and institutional attractiveness.
In addition, examine admission standards for freshmen and transfers relative to the mission, goals and peer institutions; and sources of financial aid, including government, by type — endowed, expendable and institutional (merit- and need-based).
The committee concerned with enrollment management should routinely monitor recruitment and retention statistics, as well as forecasts.
4. Knowledgeable finance management
To ensure financial viability, form a finance committee with members knowledgeable about higher education finance, a separate audit committee, and, if needed, an investment committee. Investment or Finance should look at the allocation of invested funds and the status of operating cash accounts.
Monitor the status of the financial plan, including both operating and capital budgets, forecasts, and revenue and expense plans; gross and net tuition revenues; accounts receivable by student year, including bad debt and receivable “write-off” trends; and cash flows from operations.
Don’t neglect variable items such as construction delays, contract issues and consultant usage.
Look at financial ratios over time and in comparison to select institutions. Relevant ratios include revenue diversity; expense ratios (separating out instruction, research and public service, academic support, student services, institutional administrative support, and auxiliary operations); debt ratios including debt service burden and average age of plant in years; liquidity ratios, especially in relation to operations and debt; and full-time-equivalent student ratios as related to revenues and expenses by category.
Not all metrics are created equal. For example, as noted above, net tuition revenue is key. The tuition discount rate can be a slippery slope to bankruptcy.
Make use of the annual external audit and management letter, and a budget report, for comparing actual expenditures to budgeted amounts.
5. Measurable student success
Low graduation rates suggest that mission, goals, resource use and results are not aligned and that resources may not be optimally deployed.
Besides monitoring retention and graduation rates, keep an eye on the status of the student life plan; financial indicators such as average student debt and default rate; psychological indicators such as counseling services usage including career, mental and physical health; and indicators of positive engagement such as extracurricular participations, internships, and employer recruiting on campus.
The challenge is to make campus life as fulfilling for part-time students as it is for full-time students.
6. Active risk management and supportive administration
As a baseline, the administration must be cognizant of laws, regulations and risks.
The audit committee, especially, should consider both external and internal audit topics as well as a risk management matrix. Examine insurance claims related to medical, workers’ compensation and general liability issues. Generate internal audit reports on administrative unit reviews. Survey risk management indicators including those in the financial, legal (including Title IX), reputational, regulatory and technological areas.
But administration goes beyond managing risk. A successful college relies on strong backroom support.
With that in mind, consider the status of the operations plan with an eye to reduce turnover. Look at benefits and compensation, especially in comparison to peer and aspirational institutions; collective bargaining agreements, grievances and lawsuits; and leadership development for staff and executive officers.
Ensure the computer center and IT department have adequate staffing, equipment and security. Recognize the value of facilities and grounds management, housekeeping, food services, and bookstore operations.
Finally, seek external validations of quality such as arboretum status, museum status and LEED certifications.
7. Mission-driven institutional advancement
Donors don’t support institutions they don’t believe in. And belief flows from information and involvement.
It follows that it’s vital to nurture relationships with students and parents, alumni, and community and neighborhood groups; and to cultivate solid connections with state and federal agencies.
To determine the success of these efforts, look at the plan for alumni relations and fundraising, with historical data and forecasts; levels of alumni participation; the amount of unrestricted funds donated; the amount of capital funds donated; and the amount of restricted funds donated. All these should be reviewed annually and viewed both over time and against the goal and peers.
Also look to alumni and friends for student support beyond the financial contributions they make.
While acknowledging that not everything of value can be measured, this inventory of metrics can be useful to trustees and campus leaders including among the faculty. Board members must be educated for their role, presidents must be encouraged to serve as chief mission officer as well as CEO, and faculty preparation for involvement in governance must follow a commitment to the institutional mission above all other interests.
In this series, Robert Scott mobilizes his expertise and insider understanding of higher education to help boards be better equipped to face new challenges. In the next article, Scott will discuss the metrics needed to measure an institution’s vitality and vulnerability, in order to help them identify and navigate current and future obstacles.
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Contact:
Dennis J. Morrone
National Managing Principal, Not-for-Profit & Higher Education Industries
Grant Thornton Advisors LLC
Partner, Audit Services, Grant Thornton LLP
Dennis Morrone is the National Managing Partner of Grant Thornton's Not-for-Profit & Higher Education Practices.
Iselin, New Jersey
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