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As the Rich Get Richer, What's a 'Poor' College to Do?

04/20/2015 09:05 am ET | Updated Jun 20, 2015

Drawing upon a study by Moody's Investors Service, Nick Anderson reported in the Washington Post last week that "the ten richest universities in America hold nearly a third of the total wealth, in cash and investments, amassed by about 500 public and private institutions. The 40 richest hold almost two-thirds of the total wealth." He noted further that this financial gap is widening, with their assets growing at a far faster rate from 2009 to 2014 than the portfolios of schools below them.

In addition, Moody's found that nearly 60 percent of gifts last year of the schools that Moody's reviewed flowed into the endowments of forty institutions. Moody's summarized that "this growing gap will pose increasingly competitive challenges for institutions that do not have the resources to invest in facilities, financial aid, and other strategic initiatives at the same level as their wealthier counterparts."

The Moody's report is significant because it demonstrates the growing wealth inequality gap that cuts across America at all levels. It raises a practical question for most American colleges and universities including some of the most revered, if not best financed, among them: "What's a 'poor' college to do?"

One possibility is for their higher education leadership to throw in the towel, at least over the term that corresponds to their service to the institution. A number of my colleagues who have or still serve as presidents answer the question on what to do with the word: "retire." It is the most distressing and irresponsible of all possible answers because it presumes that the can gets kicked down the road to be picked up by their successors. It's impossible to imagine what colleges might face in this murky future. Will it be possible to catch up?

A second possibility is for a new administration to arrive on campus as a change agent to set an institution on a more ambitious trajectory. While this is arguably a better and more enlightened option, this approach assumes that there are sufficient tools to succeed in this effort. And it presumes that the campus culture understands the pressing need to adapt and is willing to work toward a future that is less incremental and more intentional. If the governance structure is weak, then all bets are off.

Yet while arguably a few might envy the wealthiest institutions for their good fortune, almost no one would responsibly argue that the Harvards of the world should shut down their philanthropic machines. They are what they are. The largest public and private universities are predominantly research facilities with large graduate and professional school programs and expensive and recurring capital investments. They educate few American undergraduates.

For the rest of higher education who educate most college-bound students, here are a few simple options to consider:

  • The factors affecting post-recession American higher education suggest strongly that an incremental approach to building a stronger college will no longer work. Is change coming? It is possible to be both worried and optimistic about the future of higher education simultaneously? It may even be a good thing for a college's stakeholders. Be sure not to shoot the messenger.

  • If the debt load, declining net tuition revenue, softening enrollments, depreciating assets and other factors support an unsustainable financial model, modify the mix of revenue. What are the core assets that must be protected and which are underperforming? How can the college's next strategic plan focus less on laundry wish lists, abstract principles, and consumer "Star Wars" facilities? A college may need to own the residential life experience, but does it have to own the dorms in which the residential experience is housed?
  • Keep your commitments to your core values. If you want to attract a more diverse demographic group of students to an institution, for example, what are you prepared to give up? Do you really need more athletic scholarships in tight economic times? It's time to make the case for even harder choices.
  • Don't confuse tactics and strategy. What is that one "eye on the prize" moment that best defines who you are and where you are headed?
  • Face the music on shared governance. It's a defining tradition within American higher education and an incredibly valuable tool when building toward a shared future. Is your governance model balanced, appropriately defined, and respectful of shareholder leadership, especially faculty? Are you prepared to act? Will the Board stand behind the president?
  • Misery loves company. Without touching the college's beating, educational teaching heart, what administrative expenses can be shared with sister institutions, which programs can be offered consortially, and how can you run more efficiently?
  • Argue the case. An important lesson from the projected Sweet Briar closure may be that a college's stakeholders do not like surprises.
  • Most of us who work both sides of the higher education continuum -- the philosophical and the practical -- believe with passion and commitment that higher education has a bright future that will continue to define the promise and potential of America. The future will be different but there will be opportunity. Maybe it's time to figure out what's ahead for our grandchildren.