When Steve Thorsett crunched the numbers, things looked grim.
Business was flagging. His flow of customers had fallen to a 10-year low, down nearly 20 percent since 2015. By the year after that, annual expenses were outpacing operating revenues by $14 million.
In an increasingly unforgiving market, Mr. Thorsett needed to do more than chip away at the margins of this problem. He could make cuts, but that was complicated in his industry, and would likely only speed the downward spiral. To differentiate himself from his competitors, this chief executive determined that his operation needed to grow bigger, not smaller.
So Mr. Thorsett took a classic shortcut to expansion. He found a partner that was on even shakier ground. The resulting acquisition will bring with it several hundred new consumers, allowing efficiencies of scale that can lower costs.
Now Mr. Thorsett radiates optimism about the future — something rare these days among his counterparts, many of whom face challenges as bad as or worse than he did.
Mr. Thorsett is the president of Willamette University, part of a higher education sector grappling with a sharp decline in enrollment and financial challenges that cry out not for incremental change, but for radical solutions. Colleges and universities that fail to adapt risk joining the average of 11 per year that the bond-rating firm Moody’s says have shut down in the last three years.
Thanks, among other reasons, to a decline in the number of 18-year-olds and low unemployment luring potential students straight into the work force, enrollment is down by more than 2.9 million since the last peak, in the fall of 2011, according to the National Student Clearinghouse Research Center. More than 400 colleges and universities still had seats available for freshmen and transfer students after the traditional May 1 deadline to enroll for this fall, the National Association for College Admission Counseling reports.
More are likely to go under; Moody’s projects that the pace of closings will soon reach 15 per year. Yet when asked what steps they are taking to avoid this fate, some campus leaders responded like the president of one small private liberal arts college in Pennsylvania. It would, he said, “continue to graduate students who will make a tangible and constructive difference in the world.”
The crisis has advanced beyond the point where those sorts of good intentions are enough, Mr. Thorsett said. He and others in higher education have been actively searching for concrete new ways to rebuild enrollment and produce much-needed revenue.
“This is a business,” Mr. Thorsett said. “It’s not for profit, but we have to keep the lights on. We have to build a model that’s sustainable.”
One way is through acquisitions like the one his university has made of the Claremont School of Theology in California, or C.S.T., which is being moved to the Salem, Ore., campus of Willamette, just as private companies might do to increase their size and cost-effectiveness.
The pace of mergers and acquisitions is predicted to pick up so quickly that the self-described first full-service university and college merger consulting firm, Higher Ed Consolidation Solutions, hung out its shingle in August. “Will there be more? Yeah, we’re betting on it,” said Brian Weinblatt, the firm’s founder.
Colleges are also working to reduce the number of dropouts, on the principle that it’s cheaper to provide the support required to keep tuition-paying students than to recruit more. A few are pushing job and on-time graduation guarantees as selling points. Several are getting into the business of corporate training, which is lucrative because employers foot the bill for workers who don’t need financial aid or fitness centers.
Many institutions are adding programs tied to real-time workplace demand, including online courses that appeal to people who are balancing their educations with families and work. Some are even squeezing small amounts of money from such things as renting out their dorm rooms in the summers on Airbnb, catering weddings and licensing their logos for products including (in the case of 48 universities and colleges) caskets and urns.
“You have to be thinking beyond the current business model, whoever you are,” said Stephen Spinelli Jr., president of Babson College, whose Academy for the Advancement of Global Entrepreneurial Learning makes money for the business university by training educators worldwide how to teach entrepreneurship. “That’s what higher education is going to have to do if it’s going to survive.”
Distinguishing itself is also part of Willamette’s even more aggressive strategy in acquiring the 134-year-old C.S.T., which was suffering multimillion-dollar annual shortfalls that, unlike Willamette, it could not make up from its endowment.
Among the institutions Willamette considers its competitors are small liberal-arts colleges such as Reed and Whitman. But it has something they don’t: several graduate divisions (Reed offers one master’s degree in liberal studies) and a goal of increasing its enrollment from the current 2,700 to 4,000 over the next 10 years, starting with about 400 from the theology school.
“‘Midsize university’ is a sweet spot,” said Mr. Thorsett, who is working to position his school as small enough to promise personal attention but big enough to offer lots of choice, while not coincidentally lowering per-unit costs by serving a larger study body. “The university nature of our institution lets us do things our competitors can’t do.”
[ed. Tip: The NY Times paywall seems to have gotten tighter lately, so if you're having trouble accessing articles I'd recommend Cookie Remover (Chrome extension). Another tip for articles that require disabling your ad-blocker: just cut and paste the url in Outline.]
Business was flagging. His flow of customers had fallen to a 10-year low, down nearly 20 percent since 2015. By the year after that, annual expenses were outpacing operating revenues by $14 million.
In an increasingly unforgiving market, Mr. Thorsett needed to do more than chip away at the margins of this problem. He could make cuts, but that was complicated in his industry, and would likely only speed the downward spiral. To differentiate himself from his competitors, this chief executive determined that his operation needed to grow bigger, not smaller.
So Mr. Thorsett took a classic shortcut to expansion. He found a partner that was on even shakier ground. The resulting acquisition will bring with it several hundred new consumers, allowing efficiencies of scale that can lower costs.Now Mr. Thorsett radiates optimism about the future — something rare these days among his counterparts, many of whom face challenges as bad as or worse than he did.
Mr. Thorsett is the president of Willamette University, part of a higher education sector grappling with a sharp decline in enrollment and financial challenges that cry out not for incremental change, but for radical solutions. Colleges and universities that fail to adapt risk joining the average of 11 per year that the bond-rating firm Moody’s says have shut down in the last three years.
Thanks, among other reasons, to a decline in the number of 18-year-olds and low unemployment luring potential students straight into the work force, enrollment is down by more than 2.9 million since the last peak, in the fall of 2011, according to the National Student Clearinghouse Research Center. More than 400 colleges and universities still had seats available for freshmen and transfer students after the traditional May 1 deadline to enroll for this fall, the National Association for College Admission Counseling reports.
More are likely to go under; Moody’s projects that the pace of closings will soon reach 15 per year. Yet when asked what steps they are taking to avoid this fate, some campus leaders responded like the president of one small private liberal arts college in Pennsylvania. It would, he said, “continue to graduate students who will make a tangible and constructive difference in the world.”
The crisis has advanced beyond the point where those sorts of good intentions are enough, Mr. Thorsett said. He and others in higher education have been actively searching for concrete new ways to rebuild enrollment and produce much-needed revenue.
“This is a business,” Mr. Thorsett said. “It’s not for profit, but we have to keep the lights on. We have to build a model that’s sustainable.”
One way is through acquisitions like the one his university has made of the Claremont School of Theology in California, or C.S.T., which is being moved to the Salem, Ore., campus of Willamette, just as private companies might do to increase their size and cost-effectiveness.
The pace of mergers and acquisitions is predicted to pick up so quickly that the self-described first full-service university and college merger consulting firm, Higher Ed Consolidation Solutions, hung out its shingle in August. “Will there be more? Yeah, we’re betting on it,” said Brian Weinblatt, the firm’s founder.
Colleges are also working to reduce the number of dropouts, on the principle that it’s cheaper to provide the support required to keep tuition-paying students than to recruit more. A few are pushing job and on-time graduation guarantees as selling points. Several are getting into the business of corporate training, which is lucrative because employers foot the bill for workers who don’t need financial aid or fitness centers.
Many institutions are adding programs tied to real-time workplace demand, including online courses that appeal to people who are balancing their educations with families and work. Some are even squeezing small amounts of money from such things as renting out their dorm rooms in the summers on Airbnb, catering weddings and licensing their logos for products including (in the case of 48 universities and colleges) caskets and urns.
“You have to be thinking beyond the current business model, whoever you are,” said Stephen Spinelli Jr., president of Babson College, whose Academy for the Advancement of Global Entrepreneurial Learning makes money for the business university by training educators worldwide how to teach entrepreneurship. “That’s what higher education is going to have to do if it’s going to survive.”
Distinguishing itself is also part of Willamette’s even more aggressive strategy in acquiring the 134-year-old C.S.T., which was suffering multimillion-dollar annual shortfalls that, unlike Willamette, it could not make up from its endowment.
Among the institutions Willamette considers its competitors are small liberal-arts colleges such as Reed and Whitman. But it has something they don’t: several graduate divisions (Reed offers one master’s degree in liberal studies) and a goal of increasing its enrollment from the current 2,700 to 4,000 over the next 10 years, starting with about 400 from the theology school.
“‘Midsize university’ is a sweet spot,” said Mr. Thorsett, who is working to position his school as small enough to promise personal attention but big enough to offer lots of choice, while not coincidentally lowering per-unit costs by serving a larger study body. “The university nature of our institution lets us do things our competitors can’t do.”
by Jon Marcus, NY Times | Read more:
Image: Ashlee Culverhouse/Chattanooga Times Free Press, via Associated Press[ed. Tip: The NY Times paywall seems to have gotten tighter lately, so if you're having trouble accessing articles I'd recommend Cookie Remover (Chrome extension). Another tip for articles that require disabling your ad-blocker: just cut and paste the url in Outline.]
