Your college may not be facing bankruptcy right now, but is it following a path that will put it there in a few years? Rapid change is taking place in the college world. Unfortunately, many colleges are not able to make the changes that are necessary to survive.
Reasons Your College May Fail
1. A Failure of Leadership – Some colleges have strayed from their core values. They may have spent money on Buildings and Programs that have not paid off. Others may have failed to differentiate the college in ways that students and their parents can appreciate and value. Still others have been unable to develop and sustain additional sources of revenue or failed to act in time to take advantage of the opportunities that presented themselves. More than likely, these leaders have also ignored the changing needs and expectations of their students.
2. The Cost to Students – Many students are unable or unwilling to take on the debt that comes with a college education. They are seeking lower cost alternatives to a college education that is rapidly approaching an average of $200,000 for a Bachelor’s Degree. Because a higher education has become unaffordable for many middle class families with more than one child, fewer students will be seeking a traditional college education.
3. Inability to Change – Too many colleges resist change. Instead of moving into the future, some colleges work very hard to maintain the status quo. Bureaucracy, Tenure, Unions, Self Interests, Dwindling Finances, Fear, Not willing to See and Listen to the Competition, Inability to Anticipate the Future and Lack of Leadership all contribute to their “feet of clay” and stubborn opposition to the changes that are necessary to survive.
4. Failure to Meet Student Needs – Some students attend a college simply because it is close. However, more distant students consider other factors: Costs, Majors, Reputation, Professors, Placement Rates, Online options, Opinions of Former Students, Newspaper and Magazine Articles and Ratings, Financial Stability and the Activities of College Leaders. When colleges fail to address the issues that matter most to students, those students will look elsewhere.
5. A Decline in Revenue – Colleges that are solely dependent on tuition income are directly affected by their ability to recruit students who can cover their expenses. When colleges do not have several robust streams of revenue, they are subject to income fluctuations and financial difficulties. These colleges have no income producing football or basketball teams, little financial support from alumni, declining financial support from the federal and/or state governments, few endowments, limited assets and properties, no prestigious research grants, few Investments, no secondary and no other income producing educational activities.
6. Overhead Costs – Some colleges have tried to do too much with too little. They spent money they didn’t have, hoping that their revenue streams would improve. These colleges added buildings, property, people and programs. However, their ability to anticipate and predict the future was faulty. Like any business, when expenses and debt exceed revenue and assets something has to give. Wise students and parents ask about and investigate the financial health of the institutions they are considering.
7. States Not Able To Sustain Public Colleges – We all know that states have been kicking their financial problems down the road for years. Now, for many colleges, “The chickens are coming home to roost.” States that are in financial trouble themselves have been cutting back everywhere, even when it comes to their University Systems.
Now is the time for colleges to take action, if they are to survive. Many college leaders already know the financial health of their institutions. If they are not sure, a good forensic auditor can give them a quick assessment.
A negative audit can be a two edged sword. When parents and students learn that a college is in trouble, they will think twice about attending. At the same time, colleges must maintain or improve their revenue streams. Just like Detroit and other cities, as the population dwindles, additional stress is placed on everyone who remains.
Wise college leaders pay close attention to what their competitors are doing. With that information, they can: 1) Follow in the footsteps of competitors, 2) Ignore what has been learned, or 3) Go off in their own direction. Leaders are supposed to lead the organizations that they head up. In difficult times, good leaders assess the problems, take action to address the most important issues and take full responsibility for the results, good or bad.
Will your college end up like Detroit?