Surviving Among Higher Ed’s Giants

Now and then, financial experts try to peg the minimum number of students that an average small college needs to survive comfortably. Is it 800, or 1,200? Fifteen hundred?

Certainly those numbers never dipped to 125 students, which is what Sterling College enrolls every year on a remote, 130-acre campus in northeast Vermont. But Matthew Derr, Sterling’s president, prefers to see the college’s attributes — particularly its size — as a strength in a time of economic uncertainty and sliding demographic trends. By staying small, controlling costs, and carving out a niche that appeals to donors — in this case, the pressing issues surrounding ecology, sustainable agriculture, and climate change — Sterling’s future will be more certain than those of bigger colleges with conventional aspirations for growth, Derr says.

“If you begin to reduce your dependence on tuition, you have a niche, and there are people who are willing to support you philanthropically,” Derr says, “you can come up with a different business model.” Donors now support half of the tiny college’s $5-million operating budget, taking pressure off of student tuition, which was 90 percent of Sterling’s revenue 10 years ago.

Sterling’s strategy is one of many approaches that are emerging among small private colleges — some of which go against a conventional notion of innovation in higher education, often focused on scaling up. “Scale” — to increase production and revenues relative to costs — comes from the vocabulary of business and Silicon Valley; it is tech-enabled, and it favors broad appeal and streamlined interactions with students. The lauded innovators in higher ed are often mega-universities like Southern New Hampshire University or Arizona State University, now setting sights on enrolling 300,000 students in the next several years, according to a trustee there.

A lot of institutions want to follow them. “Too often I’ve heard clients talk as though scale was a destination, like there is a particular moment when you achieve scale,” says Peter Stokes, a managing director in the higher-education practice at Huron Consulting. “Scale is relative.” Any discussion about growth at an institution “should provoke a conversation about what scale is appropriate for what kind of education.”

Searching for growth potential in untapped markets of adult, professional, or other nontraditional populations is universal among his clients. “All of that is in service of what they expect to be a declining market for the traditional undergraduate-student population — so tacitly, everyone’s acknowledging that the core business is going to get smaller,” he says. The question is how to control costs and attract high-pay students while maintaining access and student success — the three key factors that drive the higher-ed business model. “That’s not an easy thing.”

But not everyone can expand in the face of a long-term decline in traditional students, growing competition, and broad economic impacts from the pandemic. Besides, innovation isn’t just about getting bigger.

While the nation’s small colleges can be as hidebound as the rest of higher ed, they can also be among the sector’s leading innovators. Their size makes them nimble, which frequently allows them to test bold new directions that challenge conventional thinking about how institutions can offer education, draw in students, and be sustainable. But their smallness can also lead to fragility. Many of these institutions tend to find themselves in a perpetual cycle: They thrive for a time, but then acquire a poor leader or experience an unexpected crisis, and struggle again — or even close.

The pandemic may be the biggest unforeseen crisis yet. It will surely weaken a number of institutions and lead to closures in the coming years, despite a notion that higher education has largely dodged the worst of what could have happened. Financial experts say that many colleges have floated on stimulus money over the past year, but did not make the necessary cuts to sustain themselves when the money dries up.

“Certainly, many of the financial and demographic pressures that colleges were facing have been exacerbated,” says Marjorie Hass, the president of the Council of Independent Colleges. Amid the chaos and adaptation, administrators, trustees, and faculty members learned more about the financial operations and health of their institutions, and many became willing to have hard conversations and consider new directions.

“The problems are national, but the solutions are local,” says Hass. “In other words, each institution has to find its particular combination of business model, mission, and culture that’s sustainable.”

For many institutions, those solutions tend to be in pursuit of scale, and they often line up with a familiar playbook: Cut costs, start relevant new programs, roll out a lowered tuition price, push more programs online, and bring on more contingent faculty to make payroll flexible. After all, much of the conversation about achieving scale is about keeping up with increasing costs in personnel.

“All of our industry is labor-driven, and it’s high-priced labor,” says Eric LaMott, the provost and chief operating officer at Concordia University at St. Paul, a private college that has been unusually businesslike in starting and marketing academic programs. Health-care benefits alone can raise incremental costs 3 to 5 percent per year. “If I am static in my number” of students, he says, “I am not going to be able to command greater and greater revenue, and I would have to figure out how to make up that differential.”

The entire Twin Cities college market is under pressure, he says. While colleges like Carleton and Macalester can drive demand through reputation, other institutions are scrambling for other pieces of the student market. Hamline University, after some controversial leadership and financial troubles, is chasing a more diverse student body — a population that Augsburg University has served for some time. The University of St. Thomas continues an aggressive growth strategy, while sibling Catholic institutions like Saint John’s University and the College of Saint Benedict have started merging more of their administrative positions, in an effort to find efficiencies, LaMott says.

“The majority of institutions are like us: You don’t have a big endowment, you’re tied to your net revenues, and you either survive or you don’t,” LaMott says. The conventional response is to grow — to found hot, new undergraduate, graduate, and professional programs, and voraciously market them.

But growth often begets growth — and costs. A growing student body requires adding administrators, staff, and faculty members to serve them, along with structures to house new programs, colleges, and offices, which add debt that needs to be covered and space that must be maintained. Once buildings and bodies are added, colleges tend to hang on to them, forcing an institution to go looking for yet more students to support the new girth.

It’s not for everyone — or every place. “If you scale up, usually you’re scaling up into federal dollars and state dollars — and a much more complex business model than a small place like Sterling would be able to manage,” Derr says.

Besides, scaling requires mass appeal, and the strength of the small private-college sector lies in its biodiversity. In nature, we value biodiversity not just because it preserves nature’s vibrant beauty, but also because it serves to strengthen the whole system. So, too, in higher education, where small institutions can serve unique populations or test ideas.

Differentiation from competitors is one of the pillars of strategy in the business world, says Paul Friga, a clinical associate professor of strategy at the University of North Carolina at Chapel Hill and consultant for Association of Governing Boards. “For many reasons, higher ed operates differently,” says Friga, who has also been a small-college trustee. “Colleges historically moved more toward isomorphism, where you do your best to look like others. And to a certain extent, the incentives in our industry are more aligned with keeping things the same than changing routines and long-term reputations.”

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Tyler Comrie for The Chronicle

Sterling College doesn’t look like anything else in higher education — a federally designated “work college” where students labor to support the operations of the institution while studying “environmental humanities” or working with draft animals in a sustainable-agriculture program or climbing mountains to train for outdoor industries.

Clearly, that kind of institution isn’t for most people, but it might be the best destination for some. Sterling’s unusual mission is paired with an unorthodox business model. Instead of focusing on isomorphism and growth, Sterling’s strategy has been to stay small, keep the college focused on distinctive environmental programs, and find donors who can float the college’s tiny operating budget to significantly reduce or eliminate tuition.

Derr thinks the model can be replicated to preserve other unique institutions: Imagine a moderately selective Midwest college with about a thousand students, a $500-million endowment, and some distinctive programs or a compelling mission, along with concerns about long-term viability.

“Take some part of what you have, either in unrestricted or restricted funding, and help people to retire — downsize your faculty methodically and intentionally — and find a new niche for yourself,” Derr says. “Getting small for those nonelite Midwestern and eastern colleges that have endowments is probably the smartest thing they could do, from my perspective. You know, just decide to be 500 students and be tuition free.”

Berea College — a work college with 1,500 students, a $1.2-billion endowment, and no tuition for students — already represents a version of this approach. A place like Earlham College, which had struggled with debt and finances prior to the pandemic, might be able to do this, Derr suggests. “What if Oberlin decided to take its endowment and just be 1,500 students?” — about half its current size — he asks. “They could be much more selective and have the ability to sort of find a place for themselves, instead of trying to compete with Amherst and Wesleyan.”

“In that group of colleges in the Midwest, with those endowments, you could come up with 10 Bereas,” Derr says. They just have to resist the urge to hit a certain number of students just above what they have now. Certainly, Antioch College and Sweet Briar College — two small institutions that closed and reopened with a much smaller student body in recent years — could adopt this approach, instead of trying to return to a larger size, he says. Maybe Marlboro College or Mills College — which announced permanent closures in recent years — could have tried something like this, he adds.

Of course, this is all hypothetical. There would be numerous challenges to shrinking even an institution of 1,000 students. Beyond the headaches of phasing out dozens or hundreds of employees and shifting the workload to fewer people, shrinking could dampen an institution’s reputation and limit its program offerings. And any college with significant debt might find it difficult to get out of the growth paradigm.

Still, it’s the kind of uncommon thinking that can come out of the small-college sector — one that has long played on distinctive identities and fund raising. Derr was elected to the New England Commission of Higher Education last year, where members are debating the role of fund raising as a revenue base in the future. “The presumption has always been that fund-raising dollars were more vulnerable or more volatile than enrollment-tuition revenue,” Derr says. “I think that’s absolutely backward now. More nationally, a certain ilk of colleges are going to focus on mission-centric messages and expand the role philanthropy plays.”

Bard College, long known for its programs in the arts and humanities, is on its way to raising $1 billion for its endowment, following a $500-million challenge grant from George Soros. Leon Botstein, the president of Bard, says the gifts result from years of experimentation, leading to lauded programs and innovations — among them, a prison-education initiative and a college program for underserved high-school students. (Steady leadership also helps. Botstein has been president of Bard since 1975.)

The money will secure the future of Bard, allowing the college to underwrite part of the tuition of incoming students. But Botstein worries that financial security could make Bard complacent, rather than leading the college to take more of the risks that defined it. “Too many institutions in the United States — the well-endowed institutions — see their primary purpose as the preservation of their endowment,” he says. Institutions shouldn’t see themselves as permanent just because they have been around for a while. “Permanence is the reward for excellence.”

Hope College, a Christian institution, wants to join that billion-dollar club, too, by appealing to Christian generosity. The college currently has 22 students on full scholarship to graduation, and will have another two dozen in next year’s class — numbers that will grow as the college raises more money from donors. Matthew Scogin, Hope’s president, says that colleges’ relationships with students have become too transactional and that student debt dissuades graduates from pursuing “careers of impact” rather than chasing money. But he also thinks that money, in a society with widening class divisions, is out there to support them.

“Whether it’s housing, whether it’s equity, whether it’s wine, whether it’s art — every single asset has gone up over the last couple of years. So that means the wealthy have gotten wealthier,” he says “I believe they’re looking for ways to invest that money in things that solve social problems.”

Shrinking is not in Hope’s plan. “I don’t think shrinking is a strategy for greatness,” says Scogin. To many trustee boards, presidents, and important segments of alumni and the public, getting smaller could seem like a form of decline and failure.

Carve out your niche and name, find your tribe, hope they can sustain you indefinitely. It might be a good model for preserving unique institutions, but it’s likely available only to certain types of colleges. For every prominent, well-endowed private college in the Midwest, there are scores of modest institutions named for a saint, a Protestant thinker, or the very towns they sit in.

Observers and analysts of higher education have said for years that institutions like those could create their own scale by banding together. The most typical example is the purchasing consortia, in which colleges buy toiletries or office supplies in bulk, but it has rarely happened effectively where it is likely to have the greatest impact: on the academic side. The academic impulse in higher education tends toward competition and insularity.

The pressures on the higher-education business model are changing those attitudes. The Council of Independent Colleges’ fastest-growing initiative is the Online Course Sharing Consortium, which allows small colleges to offer certain courses to students at other institutions. Currently, there are 2,200 enrollments among almost 6,000 courses on the platform.

Adrian College — one of those institutions that shares a name with its town, just like Albion, Alma, Kalamazoo, Olivet, and other private colleges surrounding it in Michigan — is trying to start a similar project on its campus. Adrian has been under financial pressure, and in the past year, conflicts between the administration and the faculty blew up when the administration proposed cutting programs like history, philosophy, religion, and theater — programs that have been in the crosshairs at many small institutions.

“The higher-ed business model is broken,” says Jeffrey R. Docking, who has been president of Adrian College for 16 years. “But where it’s most broken — and the first ones that are going to walk the plank — are the small private institutions. The numbers just don’t work.” Combining some backroom functions or arranging consortial purchases is just “dabbling around the edges” — and won’t get close to driving down the cost of tuition by 30 to 40 percent over the next several years, which is what Docking believes is necessary.

“Shared toilet-paper purchases across 50 institutions is not going to get the job done,” he says. You have to figure out how to scale the core function of the college: the academic programs.

Four years ago, Michael B. Alexander, the president of Lasell University, gathered Docking and about a dozen other small-college presidents at the Lumina Foundation’s headquarters, in Indianapolis, to discuss how to address the converging problems in cost and demand facing their institutions. Alexander, Docking, and others became focused on how to use the internet to collaborate with other institutions on majors and other academic programs.

Out of that meeting came the Lower Cost Models Consortium, starting with 19 colleges. Today, the consortium has more than 100 member institutions, representing about 185,000 students. Members of the consortium have created nearly 200 new academic programs within the network. Students from one institution can enroll in courses at other institutions to add or fill out courses in a major or minor — about 750 students are doing so this fall across 40 institutions, with a projection of enrolling 2,000 students by spring. Those majors are vetted by both the campuses offering them and those where students are enrolling from a distance. Conceivably, institutions that participate in the consortium offer their students access to far more major choices, which allows those institutions to attract and retain students they might otherwise lose to more-comprehensive institutions.

“Our competition are the big publics,” Docking says. “If I’m fighting over five kids that might go to Lasell or Albion or Hope or Alma, we’re all in trouble. When we lose kids — and we do a cross-reference every year — we lose them to Eastern Michigan.” Until recently, Adrian had only about 50 majors, Docking says, compared with hundreds at Eastern Michigan University.

In 2019, Docking invited a start-up company called Rize to operate in Adrian’s business incubator, acting as a kind of online-program manager, helping colleges in the network coordinate their offerings and set up majors, taking a small piece of tuition as revenue. Kevin Harrington, the CEO of Rize, breaks down the financial benefit to Adrian as an example of what other colleges could do: In the spring-2020 semester, Adrian added 21 new academic programs, 12 of which were fully established in time to market to students in fall 2021. Courses needed to fill out those programs came from other institutions in the LCMC — faculty members at Adrian merely reviewed the course contents and approved them as part of their governance process, and added them to department websites.

Typically, each new academic program, started from scratch, can cost colleges anywhere from $500,000 to $1 million, Harrington points out. But he estimates that adding courses from the consortium cost Adrian $100,000 in all, because it did not need to hire new faculty members or spend time developing new curricula. The payoff, however, could be considerable: The college’s research indicates that at least 49 students enrolled at Adrian this fall because of those new programs, which could yield $3.7 million to $4.5 million per year in tuition and room and board fees over the course of four years. As Adrian’s involvement in the consortium grows, he predicts, the college can add more students, competing with the breadth of a big state university while offering a small-college experience.

But consortial arrangements have an uncomfortable facet: They are designed to save money, and at any institution, the primary cost is personnel. If a college has access to departments of philosophy or history through a consortium, that college might not need to support such programs on its own campus.

That has been a primary fear among faculty members at Adrian. Last year, when history, philosophy, and other programs were put on the chopping block, professors cast a vote of no confidence in Docking, raising questions about the financial management of the college, the purpose of Rize (and who profits from it), and what they saw as a culture of intimidation at the college. (Docking retained the support of the board and some faculty.)

“Our faculty members are very aware that Adrian and nearly all small private colleges and universities are tuition-driven,” Antonis Coumoundouros, a professor of philosophy and president of the faculty at Adrian, wrote in an email to The Chronicle. Being replaced with an online alternative is clearly a concern among the faculty, but the consortium “may very well save jobs if we continue to grow as a college.”

In August, Rize posted a job ad for an “ambitious young person” with a background in finance to perform financial analyses of academic departments and sell college presidents and CFOs on the consortium. “Following this analysis and your sales pitch to them, you will ultimately be the one constructing their adjusted academic departments with them. This will involve not just academic restructuring but also some PR and political advising that ensures this strategic move goes smoothly for them.”

The ad noted that Rize’s “collaborative programming model” allowed colleges “to not just add new majors, but to supplement or replace existing programs at much lower cost. In the years ahead, it will enable hundreds of colleges to lower their costs by 20 percent or more without having to close departments like history, math, or physics.”

You can read that ad two different ways. One would focus on the phrase, “replace existing programs.” Colleges and their leaders typically resist discussing those kinds of calculations, because they acknowledge the institution’s role as a community economic engine — and fear the anger that would erupt with the specter of layoffs.

Another reading would focus on “supplement.” Docking insists the consortium could actually preserve jobs, by allowing small, vulnerable departments to add students to majors they offer. “If we do this stuff collaboratively now, we can save the classes, save the departments, save the majors.”

“For so many years,” Docking says, “all of these really smart people in Silicon Valley, at the University of Phoenix, at for-profits were saying, We’re going to do it better” — and they came around with their “solutions” in the form MOOCs, or massive open online courses, and other scaling plans. Small colleges didn’t want to hear it, and, Docking says, maybe it was to their peril.

Elders in the town of Unity, Me., founded Unity College in 1965 as a local economic-development effort, to make up for the decline of the chicken industry and the arrival of I-95, which allowed people to bypass the town on the way from Augusta to Bangor. At the time, baby boomers were heading to college in droves. But as Maine’s population has declined over the years, Unity has struggled with its traditional model, says its president, Melik Peter Khoury. Institutions around it have grown, changed, and challenged the territory of small private colleges like Unity. Look at community colleges, building residential halls and starting four-year programs, he says. A small residential college, like Unity, focused on outdoor recreation and environmental programs, situated in a state with a stagnant population, can’t compete by trying to imitate them.


Tyler Comrie for The Chronicle

If the population of students is changing, and if those students want education in different formats to serve their needs, a small college should be able to follow those trends, says Khoury. “What if we were neither a large institution nor a small institution, but our own private affiliation, where economies of scale can be held, supporting different kinds of students in different locations, including online?”

The pandemic accelerated a plan that had been underway at Unity for years. In 2017, the college shifted to an “enterprise model.” Various “Sustainable Education Business Units” operate as skunkworks arms of the college, each seeking different student “audiences” with a specific format. The units are started with an intention of filling a hole in the market, with specific performance goals laid out from the beginning. Khoury says they are expected to operate in the black within three years.

The idea was to try to capture various kinds of students by adopting elements of the structural, pedagogical, and marketing styles of sector leaders — like Western Governors University or Saint Leo University — that most closely resemble the approach of the unit. Unity has a distance-education unit specializing in certificate, baccalaureate, and master’s programs in environmental and animal sciences, as well as a hybrid unit with various bachelor’s degrees in career-oriented environmental programs. The college has hired instructional designers and specialists in augmented and virtual reality to build out the online programs in those arms. The unit in sustainable business runs hands-on courses at a Maine lodge and an organic farm, both acquired by the college in the past eight years. A new unit will be a technical institute, focused on green jobs and sustainable technologies and offering competency-based certificates, two-year degrees, and continuing education for professionals.

In a move last year that seemed to defy its roots, Unity signaled that it would permanently close its on-campus program and replace it with the hybrid unit, and that it could possibly sell off the main campus. That move led to an outcry from faculty members, alumni, and some locals, who said the college has lost its identity in the transformation — and that Khoury’s top-down management style contrasted with the countercultural tradition there.

“People were mad,” says Penny Picard Sampson, chair of the local select committee, a lifelong resident, and a graduate of the college. “People thought the town would roll up and die.”

A local bar and a cafe have felt the absence of the students, but for the most part, she says, the town’s great decline hasn’t happened yet. The college has since abandoned its plans to sell the campus.

Now, Sampson says, locals are working with the college to market the town and attract businesses to occupy the college’s empty spaces. The more Sampson reads about crises at colleges across the country, the more she believes that her alma mater had to evolve.

“Obviously, I would rather see Unity College survive in some form than go away completely,” she says. “We have to move on. It’s not going back to where it was in 1990.”

Khoury, who worked in the business sector and uses a business vocabulary when talking about higher education, says the changes at the college merely reflect realities of the way that the sector is changing. The governance structure in higher ed “was never really designed for revenue generation,” he says, and the academic world is a “caste system.” The individual units give the college’s faculty new ways to teach and pursue ideas that were not possible under the old structure.

In the end, he simply points to the numbers: Unity had 800 students at its peak in 2019, and today it has 2,000 students, with 1,800 of them full time. Over the past two years, the percentage of nonwhite students went from 8 percent to more than 20 percent, and the average age from 19 to 28. The college now draws students from all 50 states, when the college could only draw from about half the states before.

Among small colleges, “most of us want to be Harvard,” or some micro version of it, Khoury says. “We tried to mass produce a model that only works for a few, we never trained the academics or administrators in the principles of economics, and then we stopped funding it. Now we’re in chaos.”

The only way forward is to keep experimenting. He looks at education as a form of storytelling, which started around the fire and now happens over Netflix. “Storytelling hasn’t changed; the medium has changed,” he says. Unity’s approach probably wouldn’t work for an elite place like Bowdoin College, and that’s part of the point.

“Over time, we have tried to make the same model work across all institutions,” he says. “That is leading to some of these colleges closing.”

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