ENSURING FINANCIAL HEALTH FOR THE FUTURE: REAL-WORLD TIPS AND - - PowerPoint PPT Presentation

ENSURING FINANCIAL HEALTH FOR THE FUTURE: REAL-WORLD TIPS AND STRATEGIES

Jim Hundrieser, Ph.D. Managing Director – Business Strategy Consulting

About AGB – Business Strategy

• Focuses on issues affecting the fundamental economic model and

competitive position of colleges and universities

• Areas of focus include:
• Revenue Growth and Diversification
• Transformational fundraising
• Public-Private Partnership (P3) Advisory Services
• New delivery models and digital technology
• Cost management
• Partnerships, affiliations, mergers, and consolidations
• Strategic planning with financial modeling
• Methodologies include:
• Diagnostic, Exploration and Implementation phases
• Innovation and Creativity

Agenda

• Prosperity Gap
• Considerations for Your Institution

Diagnostics

• Revenue Growth
• Manage Costs
• Overcoming Common Challenges among institutions

Exploration

• Focus on prosperity
• Ideas to application

Implementation

The realities of the current state

Never been more important to build a Sustainable Business Model

Revenue growth and diversification approaches have not been part of higher education’s typical response to budget challenges. Growing and diversifying revenue is more difficult than cutting expenses, and requires an element

• f operational execution

that may challenge the capabilities of the institution.

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Prosperity Gap

An Institution with a $75 million budget identified an $11 million prosperity gap:

– Financial $3 million – Operational $6 million – Reserve $2 Million Total $11 Million

This “Prosperity Gap” required real revenue growth and

• diversification. No amount of

cost cutting would allow for a long-term sustainable business model. You can’t cut your way to prosperity.

Why you might be thinking about growing revenue?

• 1. Align with your institutions strategic plan
• 2. Identify resources to build new programs
• 3. Shift your institution from thinking “growth” to

“add and subtraction to grow margin and minimize losses”

• 4. Investment in programs that align with market

trends

• 5. Better understand Return on Investment
• 6. Rebuild reserves or infrastructure based on

program that produce larger ROI

Ability to respond to trends

Higher Education Students/ Learners

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NCES, 2018

Disrupted Industries:

• Publishing
• Automotive
• Textile
• Music
• Steel
• Trucking and

Logistics

• Telecommunication
• Health Care
• Retail

Students Today:

• 1 in 5 is at least 30
• About half are

financially independent

• 1 in 4 is caring for a

child

• 47 percent go to school

part time at some point

• A quarter take a year
• ff before starting

school

• 2 out of 5 attend a two-

year community college

• 44 percent have

parents who never completed a bachelor's degree

Revenue growth - Could be boiled down to:

• 1. Current Enrollment
• 2. Revenue – Expenses = Margin
• 3. Alignment to mission
• 4. Removal of “mission centric” programs
• 5. Analysis for change based on ROI

Revenue Growth

Transfer Students

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More than 1/3 of students will transfer at least

• nce during their

time in college!

• Collectively, about 75% of students who are, or will be,

entering four-year institution will have some transfer credits.

• Most institutions are not providing equivalency for

these credits

• Take AP for an example:
• Over half of AP students have finished the

equivalent of English 1.

• College Board, who owns AP, reports fewer

institutions are accepting English 1

• 4 in 10 students use less than half of AP credits

earned

• Internal barriers are the reason for not

accepting AP English 1.

National Clearinghouse, 2018 College Board, 2017

Comparing Market Segments

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The market segment for adult degree completion is larger than the traditional high school segment

• 37 - 42 million adults with college credit and no

degree

• Up to 5 million with high school diploma realize

need (26 -34)

• 3.3 million high school students graduating

Unbundling the Degree

• Dual Enrollment
• CLEP / DANTES
• High School Summer Programs
• Enrichment programs that give college credit
• Summer online
• For credit MOOCs
• AP – Advanced Placement Courses (37% of High School

Students took at AP Exam in 2017)

Need for fewer general education courses

BMO Education and Training Report The U.S. Census Bureau Lumina

• Stacking of credentials as part of the college degree

structure will become mainstream

• Stacking three to four classes at a time
• Non-Degree graduate and professional certificates
• Badging and Bootcamps for competencies
• Partially driven by major corporations

Certificates and Credentials

Partnerships

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• Corporation
• Community
• Community

College

• Program

2 or 3+ Degree Completion Credential Service with credit

Top Jobs of the Future

Employers are saying:

• Drivers of change

– High speed mobile internet – Artificial intelligence – Adoption of Big Data analytics – Cloud technology

• Geography

– 59% expect to change their geographic location by 2025 – 74% will consider skilled local talent as a key consideration

Top Jobs

• Drone Applications
• Augmented Virtual Reality
• 3D Print Design
• Health Care
• Information Technology
• Alternative Energy
• Content Creation
• Robotics
• Cyber Security
• Computer Game Design
• Biometrics

Emerging Job Roles

• Emerging Job Roles:

– Software and Applications Developers and Analysts – Data Analysts and Scientists – Managing Directors and Chief Executives – General and Operations Managers – Sales and Marketing Professionals – Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products – Human Resources Specialists – Financial Analysts – Financial and Investment Advisers – Database and Network Professionals

• Emerging Skills:

– Analytical thinking and innovation – Creativity, originality and initiative – Active learning and learning strategies – Technology design and programming – Complex problem-solving – Critical thinking and analysis – Leadership and social influence – Reasoning, problem-solving and ideation – Emotional intelligence

• Systems analysis and evaluation

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New technologies - New revenue streams

Artificial Intelligence (AI)—AI enhances business processes, research, and in-class

• teaching. It can identify areas

where support is needed. Machine learning—Virtual teaching assistants can provide data on student performance and suggest future actions. Chatbots—Chatbots can answer questions on enrollment and class choices, and enhance the student experience. Adaptive learning—Adaptive learning can deliver real-time, value-added experiences and analyze student responses to provide unique feedback and resources. Cloud—Reduces IT costs, delivers simple data storage, enables mobile learning, and harnesses the compute power for administration, research, and learning tools. Blockchain—Helps bring legacy paper systems together in a single database. Credentials can be checked and validated more effectively than in a paper filing system.

Pathways and On-ramps

Associates

Credential

Competency Based Credits

Certificate

Apprentice Certificat ion

Bachelor Degree Micro Master

Skill competency

Career

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Meta Majors Career Career

Managing Costs

Faculty Development / Training

Faculty Development Program

Presentation Skills with embedded technologies Teaching Techniques Applying Research and Scholarship to the classroom Better connections with students

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Lower Instruction Costs through Higher Productivity

• 1. Disciplined Course Rotation

Offering

• 2. Reduce frequency of low

enrolled classes; work on the margins; classes below 10 students

• 3. Transfer students marketing

focus – enrollment into upper division classes; naturally increases productivity

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Faculty Productivity Faculty Salary $60,000 $80,000 $125,000 $60,000 $80,000 $125,000 Benefits (30%) $18,000 $24,000 $37,500 $18,000 $24,000 $37,500 Total Cost of Faculty Member $78,000 $104,000 $162,500 $78,000 $104,000 $162,500 Classes taught per year 8 8 8 8 8 8 Labor Cost per Class $9,750 $13,000 $20,313 $9,750 $13,000 $20,313 Average Class Size 15 15 15 12 12 12 Net Tuition per FTE $12,000 $12,000 $12,000 $13,000 $13,000 $13,000 Net tuition Revenue per Class $18,000 $18,000 $18,000 $15,600 $15,600 $15,600 Labor Cost Ratio to Net Tuition 54.17% 72.22% 112.85% 62.50% 83.33% 130.21% Adjunct cost $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 Adjunct Cost per Net Tuition 19.44% 19.44% 19.44% 22.44% 22.44% 22.44% 75% FT Faculty Ratio 40.63% 54.17% 84.64% 46.88% 62.50% 97.66% 25% Adjunct Ratio 4.86% 4.86% 4.86% 5.61% 5.61% 5.61% Total Instructional Delivery Cost Ratio 45.49% 59.03% 89.50% 52.48% 68.11% 103.27%

Focus On Prosperity

Focus on Prosperity

Situational assessment for your own institution (Diagnostics)

• Which includes the

financial quantification

• Collaboration and

consensus on the diagnostic assessment

Macro trends shaping higher education (Exploration)

• Alignment of mission

and strengths

• Creativity and

innovation will be required, along with institutional resolve

• Developing growth

building blocks

Develop tactical execution plans (Implementation)

• Key assumptions,

internal obstacles, leadership accountability, required measurement metrics, financial modeling, risks, investments, milestones, and timelines

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Building Blocks with Financial Plans

1. Transfer Student Enhancement 2. Online Programming 3. Collaborations on Public, Private, and Community Partnerships 4. Enrollment Management Integration 5. Retention Programs 6. Technology Support and Infrastructure 7. New First-Year Programs 8. Targeted Academic Programs 9. Succession Planning

Focused Approach

Added Net Revenue Year 1 Year 2 Year 3 Year 4 Year 5 Total FY2019 FY2020 FY2021 FY2022 FY2023 Initiative 1 $553,995 $1,431,523 $2,459,206 $3,017,907 $3,278,152 $10,740,783 Initiative 2 $468,000 $1,029,600 $1,521,000 $1,825,200 $2,223,000 $7,066,800 Initiative 3 $483,600 $1,392,768 $2,301,936 $3,443,232 $4,681,248 $12,302,784 Initiative 4 $193,440 $619,008 $1,160,640 $1,760,304 $2,514,720 $6,248,112 Initiative 5 $110,000 $330,000 $480,000 $480,000 $480,000 $1,880,000 Housing $170,000 $408,000 $680,000 $748,000 $748,000 $2,754,000 Total New Revenue $1,979,035 $5,210,899 $8,602,782 $11,274,643 $13,925,120 $40,992,479

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