Colleges & Coronavirus - Time to Be Proactive What a College - PowerPoint PPT Presentation

Colleges & Coronavirus - Time to Be Proactive What a College Should NOT Do During a Recession Virtual Discussion Series: Session #1 April 8, 2020 2:00-3:00 PM EST Supporting Analysis Slides Paul N. Friga, Ph.D. www.abc-sights.com

Overview Context Specific Objectives The Coronavirus (COVID-19) is causing significant economic and • societal changes throughout the world It is likely this will lead to a US and global recession beginning in 2020 • Address the most common myths • Higher education will be forced to dramatically change its academic and • organizations believe during economic models Change in higher education is generally slow, but this is a unique • recessions opportunity to make overdue changes Present a framework and The Chronicle of Higher Education is dedicated to leading this • • discussion through a series of articles and virtual discussions recommendations for immediate and ABC Insights has a sole mission of improving the sustainability of • strategic action on any campus higher education by helping universities become more efficient and effective Open the conversation with university • The purpose of this virtual discussion is to begin a dialogue on the new • leaders across the world to share economic reality and recommendations thereof – we know that many of ideas as we deal with this crisis you are dealing with immediate issues on your respective campuses, but we also realize that you need to continue your strategic financial planning 2 Proprietary and Confidential

Colleges & Coronavirus, Time to Be Proactive: Virtual Discussions March 26 2:00-3:00pm EST April 8 2:00-3:00pm EST April 22 2:00-3:00pm EST May 6 2:00-3:00pm EST Lessons Learned For What a College Should Preparing Your Budget Optimizing Academic Higher Education From NOT Do During A With Coronavirus in Programming in the Post the Great Recession Recession Mind Coronavirus Era We will review how the last major Explore the right mix of academic programs We will offer a framework on myths to We will explore ways to develop a recession in the US affected Higher and how colleges will need to examine both avoid doing during a recession and how reasonable budget emphasizing suggestions Education, how universities responded student and job-market needs, while universities should be planning for on how to strategically modify academic and and tips for how we may want to prepare considering the latest information on the strategic changes on their campus. administrative investments. for today's crisis. ongoing health emergency. Michael Drake, M.D. Lynn Pasquerella, Ph.D. Laura E. Hubbard Peter Stokes President, The Ohio State President, AAC&U Vice President for Finance and Managing Director, Huron University (led UC Irvine (Association of American Administration, University at Education Strategy & through the last recession) Colleges & Universities) Buffalo Operations (S&O) Group Each Session Paul Friga, Ph.D. Scott Carlson Clinical Assoc. Prof. UNC Senior Writer, Chronicle Hosted By: CH, Co-founder of ABC of Higher Education Insights 3 Proprietary and Confidential

Be cautious of the generic “recession mindset” Recession Tendencies Application to Higher Education Higher Ed Recommendations • Think long-term, not short-term Our work goal should Seek differentiation • Make long overdue changes to educational and economic model be to just survive • Seek ways to further differentiate and expand value-add • Cuts should be made in line with strategic positioning and priorities We should implement Cut in the right places • Use data in decision-making over anecdotal perceptions across-the-board cuts • Make bigger cuts in certain areas to strategically invest in key areas Significant layoffs are • Care is required in employee evaluations given education’s role as a key employer Restructure personnel • It takes 16-18 months to realize cost benefits from layoffs necessary • Focus should be on eliminating non-critical positions, especially transactional types • Decreasing resources on important value areas such as academics is risky Cutting R&D is a good Invest in core mission • This could be a great time to invest in key faculty for growing program needs idea • Again, prioritizing academic areas over other areas is an important step Decrease investment • Benchmarking IT spend against comparable institutions is a good first step Adopt continuous improvement • Note that higher ranked universities have higher IT needs in IT • Investments in IT can increase productivity and overall efficiencies Source: “The Crisis: Timing Strategic Moves.” The McKinsey Quarterly. April 2009.; “Learning to Love Recessions.” The McKinsey Quarterly. Special Edition 2002.; “Strategic Planning: Three tips for 2009.” The McKinsey Quarterly. April 2009; “Companies get into deal mode.” USA TODAY. April 21 2009.; “How to Market in a Downturn.” Harvard Business Review. April 2009.; “Managing IT in a downturn: Beyond cost cutting.” The McKinsey Quarterly. September 2008.; “R&D in the 4 Proprietary and Confidential downturn: McKinsey Global Survey Results.” The McKinsey Quarterly. April 2009.; Source: “The Layoff.” Harvard Business Review. March 2009.; “R&D in the downturn: McKinsey Global Survey Results.” The McKinsey Quarterly. April 2009.;

Presidents’ plans for handling the crisis Future Considerations in Dealing With COVID-19 • "I worry about cuts in state and county funding. … I worry that I won't 75.2% have the workforce resources to help 72.1% lead the economic recovery." • "Beyond the well-being of our 54.7% students and staff, which comes first, I am worried about the lack of sufficient 39.9% relief for higher education from state and federal governments." • "Sharply declining revenue due to loss 13.0% of paying students and a new ‘free college’ program in our state." • "All income streams are under stress Hunker Down Layoff Staff Across the Cut R&D Cut IT — tuition, development, endowment." Board Cuts Source: ABC Insights & rpk GROUP Survey of AAC&U 5 Presidents' Trust; April 1, 2020; n=142 Proprietary and Confidential

Recommendations to not only survive but thrive through the recession – “Seek differentiation” Higher Ed Recommendations Recession Tendencies Seek differentiation Our work goal should be to just survive Cut in the right places We should implement across-the-board cuts Restructure personnel Significant layoffs are necessary Invest in core mission Cutting R&D is a good idea Adopt continuous improvement Decrease investment in IT 6 Proprietary and Confidential

One of the most differentiated university mission statements is Arizona State University The number of ASU students more than doubled since 2003 from 57,000 to over 119,000 in 2019 Mission Statement ASU is a comprehensive public research university, measured not by whom it excludes, but by whom it includes and how they succeed; advancing research and discovery of public value; and assuming fundamental responsibility for the economic, social, cultural and overall health of the communities it serves. 7 Proprietary and Confidential

Recommendations to not only survive but thrive through the recession – “Cut in the right places” Higher Ed Recommendations Recession Tendencies Seek differentiation Our work goal should be to just survive Cut in the right places We should implement across-the-board cuts Restructure personnel Significant layoffs are necessary Invest in core mission Cutting R&D is a good idea Adopt continuous improvement Decrease investment in IT 8 Proprietary and Confidential

The starting point is to better understand your spend Example: Temple University 9 Source: ABC Insights Proprietary and Confidential

And then compare efficiency to other universities SAM Spend as a % of Total Labor Spend Benchmark 1 Benchmark 2 Benchmark 3 Benchmark 4 Benchmark 5 Benchmark 6 Benchmark 7 Benchmark 8 Benchmark 9 Benchmark 10 Benchmark 11 Temple University Example: Temple University 10 Source: ABC Insights Proprietary and Confidential

It is also important to track results over time SAM Spend as a % of Total Labor Spend (FY15-FY19) 40% Administrative Intensity Measure (AIM) 32.3% 31.5% 31.4% 31.2% 31.0% 30% 20% 10% 0% FY15 FY16 FY17 FY18 FY19 AIM Linear (AIM) Example: Temple University 11 Source: ABC Insights Proprietary and Confidential

Recommendations to not only survive but thrive through the recession – “Restructure personnel” Higher Ed Recommendations Recession Tendencies Seek differentiation Our work goal should be to just survive Cut in the right places We should implement across-the-board cuts Restructure personnel Significant layoffs are necessary Invest in core mission Cutting R&D is a good idea Adopt continuous improvement Decrease investment in IT 12 Proprietary and Confidential

Start with a clear understanding of your HR Investment Growth FTEs Spend (millions) FTEs Spend $3 48 5 3 5 + + % % 5 22 . 9 309 2 1 309 2 $22M + + $12 173 274 87 $7 17 Centralized Centralized Decentralized Decentralized Shared Services Shared Services FY14 FY17 FY14 FY17 Source: ABC Insights and CUPA-HR Example: UNC Chapel Hill 13 Presentation, October 21, 2019 Proprietary and Confidential