CHICAGO, IL / ACCESSWIRE / January 14, 2025 / Baker Tilly
Baker Tilly's insights on unlocking agility, innovation and cost efficiency
Authored by Daniel Greenstein
I promised solutions to help higher education navigate tremendous headwinds, so let's get started. And why not start big with the advantages of scale?
Scale matters in higher education as it does in other industries. It matters a lot. By expanding their operating scale, universities and colleges (hereafter higher education institutions or HEIs) can:
Improve student affordability, access, retention, and graduation rates
Introduce agility in educational programming and innovation because faculty and staff have greater breadth and depth of expertise that can be assembled in new ways to address new and emerging needs and problems;
Spin up intimate student learning opportunities and living experiences, mimicking and possibly improving upon distinctive educational experiences offered by small-scale liberal arts colleges;
Collect and mine data to improve performance in everything from enrollment and graduation rates to efficient facilities and human resource management, alumni and donor giving; and
Drivedown unit costs of business and educational functions, investing savings in improving student access, affordability, and outcomes.
There is no single pathway to scale. Some are well-known; others are just now emerging.
Organic enrollment growth is the most well-known. Think of the tremendous growth from 1990-2010 at public institutions like UCLA and the University of Central Florida among others. It reflected demographic trends (the rapid expansion in the size of the college-ready, high-school-leaving population associated with the baby boomers and their children), relatively low prices, and, in many cases, locational advantages. Outside of a handful of states like Tennessee and Texas, where the high-school-leaving population continues to expand, the only reliable path to enrollment growth will require transformative change in education and business models.
Shared services took off in the 1990s by borrowing technology from the corporate sector that systematized routine business processes and enabled them to be offered once for multiple HEIs. By scaling back-office functions (e.g., payroll, HR, procurement, IT infrastructure and enterprise applications), shared services captured efficiencies and were typically found in "systems" - HEIs responsible to a single governing authority.
Early front-office shared services may have introduced cost savings but were more appealing because they expanded academic opportunities. Research centers provided researchers access to equipment their home institutions could not afford (e.g., particle accelerators and telescopes). Smaller-scale, less capital-intensive efforts materialized in digital libraries (procurement, shared online catalogs, digital archives), HEI systems' admissions and academic computing centers.
Today, back-office shared services are commonplace in systems and pursued by stand-alone HEIs through voluntary consortia and/or on third-party subscription or revenue-sharing bases. More interesting and more innovative is the action in the front office where shared educational programs are coming into fashion. By sharing programs, HEIs expand the number of degrees, majors and minors they can offer their students and enhance their competitive advantage (think of the Georgia System's eCore, HBCUv, and the Pennsylvania State System's aspirations after shared programming).
New educational models. The most obvious example is the early online universities that grew rapidly through the 2000s (at its peak, the University of Phoenix claimed some 400,000 enrollments). Mobilizing significant investment from private markets, they leveraged technology to support remote instruction and reach historically underserved, notably adult students, using federal student aid. Efficiency gains achieved through the intensive division of student-facing labor were critical. In a fully online university program and course development, instructional design, instructional delivery, student coaching, and academic advising were performed by different people (extensively assisted by technology) and paid at different rates. Similar shifts were apparent in enrollment management and student support, where massive call centers replaced office visits, and student touchpoints with support staff were tracked and coordinated with CRM applications.
As for-profit enrollments shrank in part thanks to severe regulatory pressure, their command in adult student markets was taken over by so-called "mega universities" (think Western Governors, Southern New Hampshire, Liberty, and Arizona State), which at least partly adopted the for-profits' educational delivery and student support models. Other institutions adopted online too, some building out necessary capability, others acquiring it outright (think of Purdue and Kaplan) or in partnership with third-party service providers (think early growth amongst online program managers - OPMs - like Academic Partnerships).
In a post-COVID world, online learning is a normalized and expected part of the fabric of US higher education. But like organic enrollment growth, it is no longer a reliable pathway to scale. Few can mobilize the capital investment required to enter and compete successfully in a sophisticated, mature marketplace, and even fewer are willing to introduce intensive divisions into student-facing labor.
Networked universities (so-called by Jeff Selingo in 2017) are the most recent additions to the scaler's toolkit, combining approaches that have come before (e.g., in instructional models and shared services) while contributing wholly new ones. They rest on mergers, acquisitions, joint ventures, public-private partnerships, and other purposeful partnerships of hitherto independent entities.
The trend became apparent in the 2010s in university mergers driven by demographic shifts that depressed enrollments in rural-serving institutions. Consolidations within the University System of Georgia were early examples, followed by public systems in California, Connecticut, Maine, Pennsylvania, and Vermont, to name only a few. They aren't unknown among private HEIs (think Mt Ida and UMass Amherst). It is too soon to know how such consolidations will impact student outcomes and institutional viability. Three things are certain.
They will preserve or at least prolong educational opportunities in places and for niche student markets that are too small to produce sustaining enrollments.
The trend will increase due to stiffening demographic, political, and financial headwinds.
They will be more pronounced among public HEIs where closure is politically a challenging, if not entirely impossible, option.
Networked universities formed to pursue opportunity are more interesting than those formed as an act of salvation, even where they involve institutions in duress.
They may include non-educational as well as educational institutions. From the mid-2010s, Paul Quinn College formed partnerships with employers that provide students with paid, for-credit work-based learning experiences that contribute to degree completion, and career launch. The model has been tremendously successful in reducing (by half) the total cost of a degree, growing enrollments, improving graduation rates, lifting the college up from the brink of its own demise, and perhaps most critically providing students from marginalized communities a reliable path out of poverty. From the late 2010s and building on its successes, Paul Quinn began to build a network of campuses - all in urban locations, each with its own employer partnerships - to scale the work-college model.
The University of Wisconsin's partnership with the Mayo Clinic is another university-employer partnership example. In this instance the partners are addressing real regional economic development needs with new majors and delivery approaches designed to serve and support rural healthcare. Work includes a combined social work/physician assistant degree program, exploration telehealth models, and use of AI and advanced technology.
They may involve significant shifts in educational models. Unity Environmental University in Maine is expanding into new student markets, moving beyond traditional (high-school-leaving, residential) students to include fully online and non-degree students, to name but a few. Unity's approach is novel. It recognizes that effectively engaging traditional, entirely online and non-degree students requires fundamentally different approaches to instruction, student support, marketing, recruitment, financial advising and almost every student-facing (and many administrative) function. Higher education is not a water hose - turn it on the next person who gets as wet as the last. But Unity, uniquely in my experience, does not require faculty and staff to constantly upskill and evolve their practice so they can work well in different student markets. Instead, it establishes different business units, enabling each to specialize in serving its distinct market with specific academic programs, policies and practices tailored to that market. The business units are supported units with a range of central shared services that drive cost efficiency while enabling them to concentrate on qualities that ensure market fit and effectiveness.
They may add partners strategically to achieve an organization's vision. Excelsior University is developing a "constellation" - a system of partners that will affordably provide life-long learning opportunities to students pursuing careers in high-demand fields such as health care and business. Prospective partners may be considered to advance aspects of the vision: offering a beachhead into a regionally significant market, expanding the breadth or depth of educational programs and pathways, providing a unique or additive set of work-based learning opportunities for student support, or having distinctive, high-performing technologies.
They take what others would consider extraordinary risks. In 2010, Southern New Hampshire University was a small, traditional college. It used most of what was left in its endowment to launch a fully online division, reaching historically underserved student markets and providing affordable pathways to successful careers.
"They will learn, as others have, that scale is not a matter of doing more of the same. It is a matter of doing virtually everything differently." - Dan Greenstein
These opportunistic networks aren't concentrated in a single sector. There are examples amongst private, public, large and small, urban and rural, fully online, and traditionally residential.
With the opportunistic network-building crowd, size, resource base, and tax status matter less than leadership and courage.
What is most compelling is that networks built to advance opportunity are driven by the desire to serve more students better. That mission orientation underpins a willingness to constantly renew and revise historic practices, even when that action is painful. In his book Broken, SNHU's then-president Paul LeBlanc describes how the university transformed countless educational and business functions and leveraged technology and data so it could scale a student-centric, deeply human, and highly personalized approach to education. Unity's president, Melik Peter Khoury, speaks powerfully about his experience redefining faculty-shared governance, enabling growth into underserved student markets. And Paul Quinn's president, Michael Sorrell, speaks passionately about the work college as a full-frontal attack on poverty.
As a trained historian, I am more comfortable interpreting the past than predicting the future. Still, the industry is about to see significant growth in the number of institutions pursuing scale by every means possible. They will adopt the playbooks developed by those before them (well-developed for back-office shared services and in various draft stages for front-office shared services, shifted educational models, and networks). They will learn, as others have, that scale is not a matter of doing more of the same. It is a matter of doing virtually everything differently. Organizations operating at scale require significant shifts in governance, talent and cost-center management, basic business processes, systems architecture, and everything in between. They make new and fundamentally different demands on their leaders, whose roles change dramatically, requiring coaching, support, and transition.
Not all institutions that attempt to scale will succeed in serving more students sustainably and better. Still, given the industry's headwinds, the risks involved in scaling are lower for many HEIs than those involved in staying the current course. And those that do succeed will leap-frog forward in terms of their brand recognition and reputation, re-stacking the industry's hierarchy, which, never fixed, is still rigid. More importantly, they will establish a foundation for US higher education to drive workforce development and social mobility and contribute to our nation's health and well-being.
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