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Laying the Groundwork for Strategic Growth

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Jason Sussman, Gaby Hawat, Larenda Mielke, and Erik Kahill

Colleges and universities are approaching the demographic cliff: the number of high school graduates is expected to peak in 2025 or 2026, and then begin a pattern of slow decline.

Higher education is already seeing an increasing number of closures; a recent article in the Wall Street Journal noted that more than 500 not-for-profit institutions have closed over the past 10 years.

Given these demographic trends, many colleges and universities face two choices: they either whittle away their offerings to accommodate smaller classes, or they pursue growth in an increasingly competitive marketplace. It is our belief that those institutions that actively pursue the latter option have the best chance of ensuring their long-term sustainability.

While it may seem counterintuitive to pursue growth in a shrinking market, that is what most colleges and universities must do. They must define and assert where they have a competitive advantage, and they must ensure that they are reaching their full market of potential enrollees. They should also identify opportunities for inorganic growth, combining forces with other institutions that can complement and enhance their own program offerings. The ultimate goal of these efforts is to maintain and enhance the institution’s “market essentiality.”

Critical questions

Institutions should begin with an honest assessment of their place in the market. This assessment begins with answering some fundamental, but critical, questions:

  • Is there a market for what we are offering? If there is not, a radical rethinking of the institution’s academic portfolio may be required.
  • If there is a market for what we offer, are we an essential player in that market? If not, it will be necessary to think about how to build program offerings to increase market essentiality.
  • What could differentiate us from our competitors? Focusing on our institution’s core strengths, what innovations could set our program offerings apart from our competitors? Where else in higher education have innovations occurred, and how could those be translated to our own institution’s program offerings? Innovation does not need to be unique; there are lessons to be learned from other institutions that have spearheaded new program offerings.

The outcome of this assessment should result in an understanding of which programs are struggling, which are holding their own weight, and which have opportunities for growth. It should also result in a better understanding and definition of the appropriate market(s) for the institution’s current and potential new offerings.

Defining the levers to pull

The answers to the questions described above will help leadership identify the levers it can pull as it prepares the groundwork for its growth strategy. These include:

  • Academic portfolio. Institutions should not be afraid to cut programs for which there is a declining or marginal market. But, as our colleagues on the healthcare side of our practice recently noted, you cannot cut your way to growth. Cost containment efforts focused on underperforming academic programs can help drive financial improvement but are insufficient on their own to create long-term sustainability. it is important that the savings derived from cost management efforts be reinvested in programs that have strong growth potential to enhance their market essentiality.
  • Redefining the market. Where and to whom does our institution currently market its programs? Are there opportunities to broaden the market geographically or demographically? What program enhancements might support broadening the market?
  • Monetization opportunities. Are there business opportunities that would relate to, but could operate separate from, the institution’s academic units? These opportunities might exist across a range of programs: life sciences, hospitality, agricultural or environmental studies, and more.
  • Partnership opportunities. What is the current competitive landscape for our institution? Are there other institutions that have program offerings that could complement existing programs and contribute to an inorganic growth strategy? If a choice comes down to consolidation or closure, most institutions prefer the former to perpetuate their legacy.

Governance considerations

Institutions preparing for growth must also assess the composition of their boards of trustees. Boards at most institutions are understandably populated by major donors. But donor-driven boards have certain limitations. For all of the obvious benefits of endowment gifts from major donors, such gifts can also impede change, depending on the restrictions that accompany the endowment. And donors—typically alumni—may be invested in having their own campus experiences (as they remember them) perpetuated.

Altering the composition of the board of trustees is unlikely for most colleges and universities and is a long-term project at best. Instead, in the short-term, institutions should focus on the committees that drive decision-making for the board: typically, the executive, finance, and investment committees. While donor relationships will always remain important, assignments to these committees should also consider other capabilities that trustees can bring to support an institutional growth strategy.

Two paths forward for growth

In laying the groundwork for growth, institutions should be focused on two main goals. First, they should identify where they have a competitive advantage (i.e., market essentiality) and where they are struggling. To the extent that struggling programs are taking away resources that could support future organic growth, they should be reduced or eliminated from the academic portfolio. In this era of scarce resources, most of those resources should be directed toward support of organic growth opportunities, including academic-adjacent monetization opportunities, within or in addition to the existing academic portfolio.

Second, institutions should be constantly alert to opportunities where they can partner with other institutions, organizations, or companies to grow their programs or diversify their revenues. As industries come under pressure, opportunities for consolidation and inorganic growth emerge. Higher education as a sector is likely near or at that tipping point.

In our next two blogs, we will look at both organic and inorganic growth opportunities for colleges and universities. We welcome the opportunity to discuss your institution’s options for growth.

Jason Sussman headshot
Jason Sussman has provided planning and financial advisory services for healthcare providers and higher education institutions nationwide for more than 35 years. He is a leader in Kaufman Hall’s Strategic and Financial Planning practice.
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Larenda Mielke
Larenda Mielke is a Senior Vice President in the Higher Education division of Kaufman Hall’s Strategic and Financial Planning practice. She has extensive leadership experience in higher education in the areas of strategy, curriculum and program development, and more.
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Erik Kahill headshot
Erik Kahill is a Vice President with Kaufman Hall and a member of the firm’s Higher Education practice. Erik brings a detailed understanding of higher education and expertise in enrollment and retention, institutional expenditures, and the use of data and dashboards to drive sustainable growth and strategy.
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