Making the grade 2011 A study of the top 10 issues facing higher education institutions

Making the grade 2011A study of the top 10 issues facing higher education institutions

March 2012

Introduction

• Responsible for the higher education and K-12 education in Canada, and co-leads the US Higher Education practice

• More than 100 projects with education clients in the last 12 years, including:‒ Queen’s University‒ College of the North Atlantic (NL and Qatar)‒ Dalhousie University‒ McMaster University‒ Memorial University‒ Mayo Clinic College of Medicine‒ University of North Carolina‒ Florida State University‒ Pennsylvania State System of Higher Education‒ Cornell University

Louise Upton, Partner Deloitte

Making the Grade 2011 - A study of the top 10 trends in higher education2

About Deloitte

3 Making the Grade 2011 - A study of the top 10 trends in higher education

• Serving education clients for more than 50 years.

• More than 200 higher education institutions in Canada and the U.S.

• Recognized for quality and collaboration

• Spanning business planning, process improvement and technology delivery

• Author and owner of the Total Campus™ Methodology developed specifically for Higher Education transformation projects

• Delivering pragmatic solutions

About ‘Making the Grade’

• Idea for the study was generated in 2010; we conducted the interviews in 2011

• 10 countries/regions were interviewed, including:

‒ Canada - US‒ UK - Australia‒ Middle East - India‒ Spain - Netherlands‒ New Zealand - France

What are the top 10 issues facing higher education in your country?

Most countries identified the same/similar 10 issues, with a few exceptions


“As funding dries up, some universities are heading into debt for the first time….”

- Brian McKenna, Partner, Deloitte Canada


Institutions are over-budget and underfundedAs funding declines, cost management is key

• Global financial crisis affected schools:• Value of endowment funds decreased • Donors began to be more cautious with

their money• Governments around the world are

cutting dollars for higher education• Many countries/provinces/states have

limited tuition increases• Governments are also taking a more

hands-on approach in the funding approval process (e.g. MOU and school innovation fund in NS).

As operating margins shrink, higher education institutions must find new ways to cut costs without sacrificing

services


1

• Cuts in 43 US states

• Decline of 80% funding over next four years in UK

• Decline in federal funding levels in Canada:

• From 80% of operating revenues in early 90’s – to 57% in 2007-2008

Decreases in Funding


The rivalry intensifies Competition to attract the best students heats up2

The number of students around the world enrolled in post-secondary

education is forecasted to double to 262 million by 2025*

Nearly all of this growth will be in the developing world, with more than half

in India and China alone.

The number of students seeking study abroad could

increase to 8 million – almost 3 times more than today

?Should you play “globally”?

*As reported by the University World News

Although a global strategy makes sense for some

institutions,

it is not rightfor every school

The top five reasons for going global*

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1. Improve student preparedness

2. Internationalize the curriculum

3. Enhance the institution’s international profile

4. Diversify faculty and staff

5. Strengthen research and knowledge production

The rivalry intensifies (cont’d)Competition to attract the best students heats up2

Making the Grade 2011 - A study of the top 10 trends in higher education

According to a report by the International Association of Universities



“To avoid brand erosion, higher education institutions must get very clear on their strengths and weaknesses.

They need to assess if they play on a global, regional, national or local stage. They need to decide if they plan to specialize in specific degrees or student segments.

Rather than offering a bit of everything, organizations must identify the key areas of expertise that can best support future growth.”

Loic Jouenne, Partner, Deloitte France

Align regional offeringsand meet stakeholder needs



Articulate a global strategy to attract studentsand extend educational offerings

Two strategies for consideration:

Setting prioritiesThe danger of making decisions in the dark

• Old habits are hard to change - tough new realities challenge democratic decision-making:


3

Challenges• Internal environment is often not

conducive to stark business approaches

• Consensus decision-making• Slow to react• Need for innovation, difficulty

implementing it• Complex governance structures• Top-down accountability is

problematic• Conflicting stakeholder

demands

Potential Solutions• Incorporate operational aspects

into strategic planning• Invest in data mining, financial

analysis and IT systems to develop optimal service delivery models

• Rationalize redundant programs and discontinue costly ones

• Update curricula and align with market needs

• Enhance core competencies – look at options to outsource others

• Consider shared services and consolidation

Moving at the speed of cyberspace Technology upgrades are needed across the board

• IT as a service on campus

• Upgraded systems are still not being leveraged to their full potential

• Need to embrace social media and engage students in relevant dialogues


4

Benefits to Upgrading/Leveraging Technology

• Attracts students and meets needs of disparate student groups

• Supports online learning and includes remote communities

• Reduces infrastructure demands and offers programs to higher volumes of students

• Recruiting and retention

• Aging technology systems challenge institutions ability to manage rising demands from students and staff

Moving at the speed of cyberspace (con’t)Technology upgrades are needed across the board

• Disruptive innovation can change the way the world learns


4

• Reforms need to address the differences in how students learn – none have managed to do this so far

• Demand for student-centric learning is on the rise – perfect opportunity for disruptive innovation

• Disruptive technologies drive:‒ Accessibility‒ Affordability‒ Capability‒ Responsiveness

• No need to boil the ocean – start small and go around the system

Disruptive innovationsin education

• Online learning networks

• Modular system to allow customized delivery of education to individual student learning needs

• Administrators taking the view of “educating children in their district” versus responsibility for schools in a district

Rethinking infrastructureA renewed focus on asset optimization

• With looming financial insecurity, many institutions have adjusted their operations to:


5

Monetizing existing assets

Disposing of surplus assets

Partnering with Private

Sector

Deferred Maintenance

FinancialInsecurity

Fees and Revenues

Scaling back or halting plans

o Maximize existing sources of revenue (fees, parking)

o Reduce costso Slow spending and

defer decisions

Linking programs to outcomesWhere training and market demand intersect

• Colleges are starting or have surpassed universities on post-graduate employment

• Projected growth in jobs with vocational training

• Workforce gaps and illiteracy in developing nations that lack a focus on vocational training


6

Current Workforce Challenges

“Institutions must ensure their educational agendas are in sync with forecast marketplace demands.”

Arsh Maini, Senior Consultant, Deloitte India

• Institutions should look to:

‒ Continue to design programs that align with labour needs

‒ Apply common KPIs

‒ Be open to link outcomes to funding

Need for renewed focus on vocational training

The best and the brightestAttracting and retaining talented faculty


7

Faculty recruiting and retention

Enhance teaching quality

Measuring performance

Strategic priorities

• Like other organizations, performance hinges on the talent of staff• For higher education institutions, attracting and retaining the right faculty

can spell the difference between success and failure

• Aging workforce• Low retirement rates• Difficulty in remaining

relevant to rapidly evolving student expectations

• International competition for same candidates

• Competitiveness of private sector and higher-profile academic jobs

Potential Barriers

• Institutions around the world are responding to (and in some cases, driving) evolving environmental awareness

• Higher education institutions are seeking new and better ways to reduce, reuse and recycle

• Environmental consciousness appears to cross organizational lines


A sustainable futureEnhancing environmental performance8

Energy-efficient facilities

IT e

nerg

y re

duct

ion

‘Green Cleaning’ and maintenance

practices

‘Gre

enin

g’

inst

itutio

nal p

olic

y

Environmental Responses

“Schools also need to enhance their environment-related programs to provide students with the educational credentials they need to drive this agenda in the community at large.”

Michael Pentland, Associate Partner, Deloitte Canada

Education for allTackling diversity, accessibility and affordability

• Access to education crosses social, cultural and geographic lines• Governments struggle to educate hard-to-reach students:


9

Income Disparity

Disabilities Minority Groups

Remote Areas

• Online programs• Video streaming• Other forms of digital

education• Financial aid programs

targeted to unique student populations

• Diverse faculty• Cultural diversity

Education for All

Potential Strategies

Regulations and reportingNew responsibilities require better disclosure

• Governments around the world are increasing industry oversight:


10

• Allocation of research funds• Student success rates• Sustainability• Outcomes• Standards• Rankings

Increasing need for transparency

Tighter Lending Standards

Regulatory Complexity

Cost Containment

Funding Constraints

Need for information management approaches/systems

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Responding to Challenges


Colleges and universities can manipulate four key drivers of educational institution value to improve performance

• Wide variety of funding models, geographic reach, educational focus, student constituency and faculty talent - industry challenges affects every institution differently.

• Response to industry changes must be specific to the institution, but take into account best practices and four key drivers of performance:

Funding and revenue growthThe ‘top line’ of institutional profitability - how much institutions receive from public and private sources, in addition to monies they collect from tuition and other income.

Operating marginsA key driver of institutional profitability and how they can improve value captured between funding sources and their expenses.

Asset efficiency

How effectively institutions use their capital assets, such as IT, facilities and fleet, and whether they can squeeze additional revenue or cost savings from existing investments.

Expectations and strengthsBy leveraging true institutional capabilities and differentiators, institutions can compete for students at a lower cost than competitors

21 Making the Grade 2011 - A study of the top 10 trends in higher education

Many higher education institutions are seeking ways to attract additional funding and uncover new sources of revenue

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Funding &Revenue Growth

• Incorporate an operational element into strategic planning to ensure a focus on the highest priority issues

• Streamline the governance process to empower stakeholders to quickly make informed budgetary and research allocation decisions

• Clearly define roles, responsibilities and accountabilities

• Improve information tracking to better measure and report on program outcomes

• Explore innovative public-private partnership opportunities

• Enhance institutional brands in an effort to attract additional private investment

• Leverage social media and other online forms of ongoing communication to establish and maintain relationships with students, parents and alumni

• Improve tracking of research dollars• Consider globalization strategies

Higher education institutions must continue reducing their costs to widen operating margins

23


Operating Margins

• Implement and/or leverage technologies designed to streamline core business processes, such as:

• Student services• Finance• Administration• Human resources and • Procurement

• Engage in more sophisticated planning and forecasting

• Pinpoint opportunities to share services and outsource non-core functions

• Eliminate program redundancies and inefficient processes.

Higher education institutions can also optimize the use of existing assets to improve performance

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Asset Efficiency

• Engage in talent management strategies to attract and retain the highest calibre faculty

• Streamline procurement and sourcing to optimize the supply chain

• Review regional delivery models to eliminate program duplication and pursue consolidation where it makes sense

• Extend access to programs through distance learning and online education

• Identify and target optimal student populations

• Engage in sustainability initiatives to improve energy utilization, reduce waste and identify ancillary opportunities to cut costs and improve performance

• Rationalize IT and real estate portfolios.

Higher education institutions can also enhance institutional brands to build on existing strengths

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Expectations & Strengths

• Improve information management and data analytics to identify areas of competitive differentiation

• Solicit opinions from outside the education sector

• Leverage technological innovation to better engage students and improve services

• Revisit existing strategies and processes with an eye towards identifying areas for improvement

• Benchmark against competitive institutions• Share best practices

Closing Remarks

• Innovation in the higher education sector is limited only by the imagination

• Institutions must step up and find new ways to meet the changing needs of their stakeholders, despite limited funding


Innovate and evolve,

do more with less, and

ensure individuals contribute to global competitiveness

Making the grade 2011 A study of the top 10 issues facing higher education institutions

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