Augsburg University in Minneapolis, shares the challenges common to many small colleges and universities. Increasing cost pressures and rising student expectations necessitate the most efficient use of resources. In 2015, Augsburg’s board passed a resolution to explore opportunities for sharing services—such as information technology, marketing, and business office operations—with a nearby higher education institution with noncompeting degree programs.
Creating a single integrated information technology team to serve both institutions was the first step in this successful partnership. New staff and an integrated team have provided lower operating costs, and at the same time raised the service level of IT at both institutions. The two institutions now also share business office and campus ministry services and have fully integrated the marketing and communications team.
“Since 2015, a deep and significant collaboration has been growing,” says Beth Reissenweber, vice president of finance and administration, and CFO at Augsburg. “It’s not easy, but it’s important in creating a sustainable economic future, especially with the challenges facing higher education.”
Reissenweber joined Stephen Schafer, vice president for finance and operations, Sarah Lawrence College, Yonkers, N.Y., on a panel for a NACUBO webcast, Emerging Business Models for Small Institutions: The Shifting Landscape in Higher Education. Both discussed how their institutions have reconsidered and are redesigning their traditional business models to meet the challenges facing smaller institutions today.
A Sustainable Future
A recent Gallup survey found that only 13 percent of private college presidents say they are confident that their institutions will be financially sustainable over the next 10 years. As price resistance increases, and parents and families become more selective about where and how they spend tuition dollars, many colleges are feeling the crunch.
An increasing number of small institutions are in distress, merging, or closing, says Larry Ladd, director, national higher education practice, Grant Thornton LLP, who moderated the panel. “For most institutions, change is necessary to ensure the future,” he says.
Because change can seem daunting, Reissenweber recommends thinking of the transformation in terms of innovation. “Even if a person doesn’t like change, [he or she] may relate to and accept innovation,” she says.
As part of promoting a more sustainable business model, Augsburg has established an innovation fund. Faculty and staff members can submit proposals and receive seed money for new projects that move the university forward. It’s one of the numerous ways that the institution is establishing a culture of positive change.
A Comprehensive Approach
In an effort to create an institution that is financially sustainable, Augsburg has been implementing changes for several years. In addition to sharing administrative resources and services with another institution, Augsburg wanted to find other ways to make changes to its business model. After a careful examination of its distinctive mission, it has pursued a few other operating strategies.
Business model changes don’t always have to be interinstitutional; changes can be made across departments or within service functions provided on campus. For instance, service learning is an important part of an Augsburg education, so the university instituted City Service Day, which happens each fall before classes begin. “It sets the stage for how service will support students’ learning,” Reissenweber says. “It’s important to create distinctiveness in your mission that will establish a sense of value.”
Further, the institution also has made changes to refocus its staff resources. For example, in prior years, managers were required to submit detailed monthly budgets. “Higher education spending is pretty cyclical, so we decided to just budget annually,” Reissenweber says. “It didn’t make sense to spend all that time budgeting every month, and now each department is better able to plan ahead and stick to its budget.”
Also important in improving financial sustainability is increasing enrollment, which promotes a more affordable Augsburg education. As an example, more recent annual tuition pricing increases have reached only 3 percent. Additionally, the Auggie Plan, Augsburg’s 2+2 partnership with four community colleges, offers Minnesotan students a clear, seamless—and more affordable—path to a four-year degree.
Reissenweber emphasizes the opportunities that may arise from institutions sharing academic resources. “Sharing a faculty member may allow for an institution to fulfill an instructional demand for students that does not rise to the full-time employee level and justify a full-time salary,” Reissenweber says. “This may be tricky because of shared governance and cultural differences between the institutions. It does, however, allow a tenured faculty member to instruct students in a field of study where the demand does not require a full-time employee. We have considered it with foreign languages, especially those that are less mainstream.”
Augsburg continues to collaborate academically with other institutions in the Minneapolis area through the Associated Colleges of the Twin Cities—a partnership that promotes collaboration and the sharing of academic services among five institutions. Cross-registration allows an Augsburg student to major in a field of study provided at another institution in the ACTC group. “Augsburg, for example, specializes in Native American studies,” Reissenweber says. “Students from other institutions can take courses, or even pursue a major, at Augsburg with the same ease of an Augsburg student.”
To start the process of reimagining the business model, institutions should “think big, start small, and move quickly,” Reissenweber says. “You don’t need to be transformative immediately. Start with a smaller project, and let it lead you to larger, more impactful opportunities.”
Sarah Lawrence had long been at the top of the list of most expensive U.S. colleges, creating an impression that the institution was unaffordable for many families. Three years ago, administrators made a deliberate decision to freeze the annual tuition increase for one year. As a result, “Sarah Lawrence is still one of the more expensive institutions, but it’s no longer at the top of the list,” Schafer says. “And we’ve seen an increase in the number of applications and an uptick in enrollment.”
After considering some of the concepts in the toolkit available from NACUBO’s Economic Models Project, the leadership at Sarah Lawrence developed a process that involved all members of the campus community to review the institution’s values and identify what makes it distinct. The institution is continuing to develop solutions for maximizing those strengths and available resources, adjusting the business model for a stronger future.
One of the changes that has been implemented as a result of this review process includes providing students with more flexibility in the number of credits that they can register for in a semester. Sarah Lawrence has traditionally offered five-credit courses, and most students take three five-credit courses per semester. However, recent changes in student demographics and needs mean that more students are seeking varied options. College leaders revisited their billing structure to better support students’ choices, offering one-, two-, and three-credit courses.
On the nonacademic side, administrators also reviewed all vendor contracts in an effort to lower overhead costs. “We started with the oldest contracts because with those we have more leeway to renegotiate or update the terms,” Schafer says. “With each one, we’ve asked, ‘Do we still need to outsource this?’ In some cases, we’ve stopped outsourcing and in others, we’ve renegotiated for better terms.”
Other cost-saving changes at Sarah Lawrence have included consolidating senior-level positions. Rather than hiring a vice president for human resources, the college’s HR staff now reports to Schafer. In addition, the college consolidated the once-separate positions of vice president of advancement and vice president of communications into a single position—vice president of advancement and external relations.
“Generally, smaller institutions have a leaner staff than large institutions, and we have more generalists than specialists,” Schafer says. “In addition, because smaller institutions usually have to deal with less bureaucracy than larger schools, it can be easier to decide what makes sense for our institutions.”
Like Augsburg, Sarah Lawrence is also looking into sharing services with other nearby institutions, and the options are wide-ranging, Schafer says. For instance, institutions considering shared services might investigate the possibilities for areas such as payroll processing, fringe benefit administration, technology support (e.g., help desk or cloud storage), enterprise resource planning systems, health insurance, health and mental health care, legal services, dining services, travel services, trash removal, and risk management services. “If an institution is willing and able to provide transportation, it can also consider sharing athletic facilities and programs, library privileges and resources, and housing,” Schafer says.
“Joining forces with others is worth investigating,” he notes. “Sometimes it’s easy to focus on the challenges, such as different locations or different institution types, but those can often be overcome, and there’s a far greater upside to collaborating and working together. Not only do you cut costs, but some intangible things happen as you connect the different support teams. Through those connections, leaders talk to each other and new ideas are formed.”
To successfully share services with other institutions, Schafer recommends identifying support from the top. Getting buy-in from the president of one or more institutions is a great start, “especially if they are willing to provide seed money directly, or through a grant, to fund the cost of a staff person dedicated to moving some of the ideas forward,” he says. Reiterating Reissenweber’s advice, Schafer says that “it might help to start small, with an item that might be easy to review, such as refuse removal, and then move on to more complex functions and opportunities once the shared services concept is in place among one or more institutions.”
NANCY MANN JACKSON, Birmingham, Ala., covers higher education business issues for Business Officer.