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Declining by degree

| October 5, 2010

by Jim Bruce

Today’s reading, suggested by Chris Paquette, Senior Consultant for Survey Services at MOR Associates, comes to us from the September 2, 2010 issue of the Economist – “Declining by degree”.  The author is an anonymous Economist consultant, Schumpeter, who generally writes on individuals and ideas behind the latest trends in business and management.  (Presumably the pseudonym refers to Joseph Schumpeter [1883-1950], an Austrian economist and political scientist who popularized the term “creative destruction” in economics.)

The thesis in this essay is simple:  “If colleges were businesses, they would be ripe for hostile take-overs complete with serious cost-cutting and painful reorganizations.”  Schumpeter makes several well-stated points:

1.  College fees at state colleges have increased by a factor of 15 (for in-state students) and at private colleges by a factor of more than 13 in the past 40 years while the household income increased by only 6.5.

2.  Over roughly the same period of time, hours spent per week studying by full-time students has dropped by about half, from 24 hours to 14.  And, only 40% of the students graduate in four years.

3.  Spending for administrative staff has grown faster than spending for teaching faculty.

4.  Competition between universities is based on neither cost nor student performance.  Rather, the essay argues competition is based on academic reputation (i.e., “star faculty”) and bling (luxurious dorms and larger sports venues).  In his view, value delivered for money paid seems to have gotten lost.

Schumpeter argues that this “luxury model” is unlikely to survive in a prolonged economic downturn.  Parents are reluctant to take on debt and will look for a better deal.  And, there’s also the threat of e-learning.  He concludes “America’s universities lost their way badly in the era of easy money.  If they do not find it again, they may go the way of GM.”

I think the signs are everywhere that change, big change, is afoot.  Budgets are eing cut, staffs reduce, and building projects stopped, slowed down, or not started.  And, many, particularly smaller liberal arts colleges are having problems meeting their class-size goals.

While going the way of GM may not be what is experienced, we are likely moving to a different era, one where demonstrating value is of paramount importance.  I think that we each have to stop and reflect and then act.  What can I, my team, my organization do to increase the value we deliver and better align with our university’s goals?


.  .  .  .  .     jim