How to transform higher education institutions for the long term

Higher-education institutions in the United States are facing unprecedented challenges. Even before the COVID-19 pandemic, higher-education operating models were under tremendous pressure. Many institutions, experiencing declining enrollment, watched expenses outpace revenues and tapped into their endowments to cover shortfalls.

The COVID-19 pandemic has exacerbated the pressures that higher-education institutions face. Even some of the most notable and stable institutions are experiencing significant declines in tuition and auxiliary revenues as well as increasing budget shortfalls. Our analysis suggests that, before any government or philanthropic intervention, up to 57 percent of public four-year institutions and up to 77 percent of private not-for-profit four-year institutions could suffer budgetary shortfalls of more than 5 percent. The more than $35 billion provided by the federal government to higher education in relief acts to date has helped institutions and students address some of the near-term challenges, but the enrollment headwinds will likely affect university budgets for years to come. Indeed, according to the National Student Clearinghouse data, declines in first-time college enrollment in fall 2020 were stark, with greater than 10 percent declines in public four-year institutions and 8 percent declines in private not-for-profit four-year institutions, significantly affecting most universities’ top revenue source. While fundraising remained flat in academic year 2020, institutions are projecting steep fundraising declines in 2021, meaning fiscal challenges won’t be easing anytime soon.

A transformation approach that enables institutions to operate more flexibly and resiliently in the long term can help institutions emerge on a stronger footing from today’s challenges and brace for those of the future. A true transformation often improves operating surplus by 20 percent or more money that can then be reinvested into an institution’s mission. But such a transformation requires an intense, operations-wide program focused on improving student outcomes and boosting organizational health and performance. In our experience, there are five common features of the most successful transformation efforts. While many leaders are aware of such efforts, implementation success has varied. We provide five inspiring case examples that prove a transformation approach is not only possible but also essential for the long-term success of institutions.

Higher-education institutions are under tremendous pressure and time constraints as they work to keep their students, faculty, and staff safe while they deliver on their missions to educate, conduct research, and contribute to their communities, society, and the public good. In a sector that is already feeling stretched, the prospects of a comprehensive transformation might sound overwhelming to leaders and the communities they lead. But the effort will be worth it.

Leaders can inspire their communities with a more resilient future state that allows them to see beyond the pandemic to focus on improving the well-being of individuals and society through inspired learning, growth, and change. By implementing an ambitious set of projects to inspire the entire team, foster new areas of growth, and change the university’s trajectory, these institutions can continue to influence and impact generations of learners and their communities.