U.S. Colleges & Universities Are Surviving Without Government Assistance

U.S. Colleges & Universities Are Surviving Without Government Assistance

By

Mel Brown

Some college presidents cringe when their college or university is referred to as a business. Despite the distasteful attitude toward the corporate world, colleges and universities have business-like tendencies. Private institutions such as Heald College, University of Phoenix, and Walden University are tuition driven institutions that have frequent advertising spots on print, television, radio, and Internet media. Though colleges and university official do not wish compare their schools to businesses, when faced with financial difficulties both are mirror images of one another. Both colleges and businesses will implement layoffs, reduce spending, and re-organize functions to lessen the impact of financial problems. This essay will analyze the internal tactics of two colleges that overcame financial difficulties by utilizing various theories and explanations presented in Association of the Study of Higher Education Reader on Finance.

Causes

Certain higher-education institutions are at risk of financial difficulties due geography, ambitious spending plans, and competition from other colleges. Aspects within finance theory could also give us answers. Resource Diversion is the view that people will pursue their own interest at the expense of the organization at every opportunity. Organizational goals are replaced by laziness and allocating resources for personal use (Yeager et al, p.319, 2001). Though this is a pessimistic view of organizational behavior, one can see these tendencies within Regis College and the Florida AM examples.

Examples

            When an institution is suffering deep financial distress, fixing the budget problems must come first. Regis College, located  in suburban Boston was a women's college and it illustrates that difficult financial choices and progressive thinking can coexist. In 2001, Mary Jane England returned to her alma mater as president to find a college with declining enrollment, aged buildings, and a $6-million dollar budget deficit (MacTaggart 2007). Admitting men to the undergraduate program was the first important step to fix the finances.

            She persuaded the trustees to declare a financial state of emergency, and implemented the following; personnel was drastically cut; payroll was reduced by a third; 26 departments were reduced to six "centers"; and certain majors were eliminated (MacTaggart 2007). The president and trustees ultimately made the difficult financial decisions, but a campus discussion group was created  to discuss and follow up in these difficult choices. Opening the undergraduate program to men has shown signs of being successful, as applications and revenues steadily increased. 

            Regis is turning itself around through a balanced approach of cutting costs, increasing enrollment, and sustaining a culture that places importance on dialog in reaching difficult decisions (MacTaggart 2007). The self destruction of colleges and universities can be compared to the thermodynamic concept of entropy in that in a state of lowest potential, any closed system will run down or reduce (Yeager et al, p.319, 2001). The only way to counter this tendency is to introduce new energy  (Yeager et al, p.319, 2001). At Regis' lowest point, Mary England introduced new modes of thinking and instilled much needed changes, and this introduction of new energy is producing positive results (319).

            When James H. Ammons arrived at his alma mater as president of Florida A&M University, he confronted an embarrassing mess. The school's accreditor, the Southern Association of Colleges and Schools, announced that it had placed the university on six months' probation for financial and managerial problems (Fischer, 2007). A review of the public institution's 2006 budget by the state's auditor placed into view a large list of accounting irregularities, including undocumented expenditures, no-bid contracts, and missing property (Fischer, 2007). Faculty and staff members consistently complained of unpaid salaries.  Angered by the audit's findings, legislators threatened to strip Florida A&M of financial control, and  some lawmakers called for a criminal investigation of the university's financial mis-management (Fischer, 2007). It was also suggested to convert Florida A&M and five other universities into state colleges, with a primary focus on producing bachelor's degrees (Fischer, 2007).

            Even the choice of Mr. Ammons as the new president drew some controversy due to his past affiliation with the university. Opponents of his selection argued that, as a former provost and professor at Florida A&M, he was too attached to old ways of doing business (Fischer, 2007). But despite that, the president and the board of trustees placed a freeze on new spending, purged the payroll employees, and fired top administrators, including the coach of the football team, several athletics teams facing National Collegiate Athletic Association sanctions (Fischer, 2007).  Florida A&M's relationship with the National Science Foundation was also restored which had threatened to suspend more than a dozen grants to the university over possible misuse of funds. The only negative aspect of the changes was the lack of faculty involvement. According to the faculty, there was an absolute breakdown in shared governance that contributed to morale problems (Fischer, 2007).

            Mr. Ammons established a special commission resolve financial and operating deficiencies identified in the audit and later cited by the accrediting group in its probation notice. And in response to faculty outcries, Mr. Ammons has named a 17-person transition team, which includes faculty members, alumni, and community leaders, to advise him (Fischer, 2007).  He also planned a 500-day plan that will lay the foundation  for dealing with the university's financial and management problems and for rebuilding its reputation and relationships with the community.

Regis University

Florida A&M University

Analyzing the Solutions

One of the solutions that was consistently present in both examples was instilling a collaborative effort in financial recovery. Having full engagement of the faculty in discussing problems and creating solutions as well as sustaining a sense of community with the entire campus during the downsizing could lead to financial recovery. Money is important to any financial recovery, but obtaining additional funds is one of the step in turning around a financially troubled institution. There are three phases to financial recovery; balancing the budget in hopes of creating an effective business model, marketing programs and building or rebuilding the college's reputation or brand, and academic reorganization (MacTaggart, 2007). Another effective tactic as well as preventative measure is accrediting bodies creating financial workshops for small college. Since 2004, the Southern Association of Colleges and Schools created an annual workshop where college presidents learn budget balancing strategies, leadership training, and network with other presidents (Fischer, 2007).

Final Word

Prioritizing profits over student success, looking at students as a revenue stream, and emphasizing programs that attract the most revenue are the examples of the fears that university officials have of combining collegial atmosphere of higher education to the “sometime cutthroat” arena of business. As one could see that when overcoming financial distress, higher education has no other choice but to implement business tactic. The reasoning behind the negative perception of businesses by higher education is quite frankly unwarranted. In the literature one always see that one of the disagreements with businesses is that they solely emphasize money and profits with no other regard and that higher education is simply above such thinking. This maybe true in some cases, but I would argue that colleges are looking to make money as well. There are number of highly regarded and regionally accredited on line colleges and universities that are in existence due to tuition rather than the endowments and state money that traditional colleges receive. Business and capitalism is not always bad.

References

Bollag, Burton.(2006). Trying prevention before punishment.. Retrieved February 10, 2008, from http://chronicle.com 

Fischer, Karen. (2007).  With a new leader, Florida A&M hopes to put old problems behind it. Retrieved February 10, 2008, http://chronicle.com/article/Newly-Independent-New-College/12781

MacTaggart, Terrence.(2007). The realities of rescuing colleges in distress. Retrieved February 10, 2008, from http://chronicle.com 

Yeager, J. L., Nelson, G., Potter, E., Weidman, J., & Zullo, T. (Eds.) (2001) ASHE reader on finance in higher education Boston, MA Pearson Custom Publishing.

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