No Margin, No Mission

No Margin, No Mission

We bear a responsibility to the families and students investing money in their hope for the future to steward their dollars with care. College and university leaders must explicitly, unequivocally embrace an entrepreneurial business mind-set, educating their campuses about the financial realities and complexities of institutional revenues, expenses, and discount rates. Without nurturing a level of financial health and sustainability that allows for strategic, ongoing reinvestment in the core of our work, institutional mission will not be achieved.

The vast majority of universities and colleges are designated as not-for-profits. Over the decades, that designation infused the culture of higher education in such a way that leadership often avoided basic business principles. If you talked about higher education as a business using terms like “margin,” “customer,” “market price,” and so forth, the academy generally viewed you with disdain and suspicion, rejecting such terms as incompatible with education. In our careers, we have heard variations of the following statements hundreds of times from across the landscape:

  • “Money will take the heart out of higher education forever.”
  • “This compromises the liberal arts.”
  • “A business demands autocratic management, and we have shared governance.”
  • “Decisions made for revenue reasons take away faculty academic freedom.”
  • “Money is not a motivator for us.”
  • “The programs that we offer should not be based on revenue.”

Behind challenges to the cost of higher education lies the fundamental question of value—the relative worth, utility, or necessity—of the educational product. If students don’t choose to attend our institutions, the core of the problem is with the value students perceive that they will get from the learning experience, not with institutional marketing or the admissions staff. If we choose to simply offset enrollment shortfalls with endowment funds or a push for increased giving, we ignore the underlying value proposition issue that must be solved. We live in a world where we charge money for an educational product, and our families have a choice of where to go. In this free-market business, we must constantly prove our value.

The key is always rethinking what we offer, the way we offer it, and the value proposition behind it. As a liberal arts university, if your enrollment is declining, ask yourself the following question: Are we delivering the liberal arts in a manner that is compelling to students? If the answer is that you are teaching them as you always have, then it’s likely time to pivot. A critical part of every liberal arts institution’s business strategy must be to make the relevance of the liberal arts clear and compelling. That is not the job of marketing and admissions, but the role and responsibility of leadership, vision, and strategic execution.

As the new university tackles its value proposition, it must also reexamine its core assumptions about budgeting and administer their finances like a business in order to create stability through good and bad times.


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