Collaborative Leadership for Higher Education Business Model Vitality*

In this highly disruptive and uncertain period for higher education, though governing boards and the senior leadership of colleges and universities might be fulfilling their roles conscientiously, their efforts may not be enough to ensure the long-term viability of their institution’s business model. Pre-COVID-19 market forces presented significant headwinds for many higher education institutions, and in the post-COVID-19 period these economic and competitive pressures continue to mount.

Industry professionals believe less selective small private colleges and universities with limited financial resources are especially vulnerable. They face greater financial challenges than more selective institutions, and these challenges often afford their leaders little time to react. For those institutions that have been able to institute sound business practices, however, a higher probability of future success might be the reward. And for those with more work to do to strengthen or revitalize the business model, there are many positive examples of business model adaptation or transformation from which to learn.

Those institutions that embark upon the honest and constructive leadership conversations outlined in the report Collaborative Leadership for Higher Education Business Model Vitality: Strategic Conversations for Small College and University Governing Boards and Administrative Leaders (AGB, 2023) will be ready for the timely and decisive action required to secure their futures.

Strategic Conversations

Although it is not possible for most institutions to completely immunize the business model from the array of disruptive market forces,¹ there are policies and processes that governing boards and senior leadership can put in place to mitigate these risks. The Collaborative Leadership for Higher Education Business Model Vitality report presents these business model risk mitigation steps as a series of collaborative leadership conversations. Through such dialogue institutional leadership can define expectations, clarify business goals and objectives, and prioritize the steps necessary to position the institution to weather the economic headwinds currently facing many colleges and universities today. These conversations can further promote institutional transparency and instill confidence among stakeholders by demonstrating an awareness of those critical factors that promote the success of an institution’s business model.

Some of the report’s guidance includes:

• Laying the Foundation for Essential Leadership Conversations—To be effective strategic thought partners for their institution’s leaders, higher education governing board members need a working knowledge of the current business model for their institution as well as have confidence in the institutional levers presidents and chief financial officers (CFOs) (among others) can use to initiate the adjustments or even the transformational change that might be required.
• Do We Have a Working Knowledge of Our Business Model?—Although judging the resiliency of an institution’s governance structure to deal with economic and political dislocation is a prerequisite in today’s higher education climate, comprehending the properties of its business model and how it may need to evolve in the face of changing market conditions is essential to not only leading an institution, but also managing successful institutional transformation when that is required.
• Does Our Institution Have an Effective Strategic Planning Process?—A key to any successful strategic planning process is the ability to operationalize the agreed-to and differentiated strategy into the college’s operations.
• What Are Our Dashboard Indicators and Benchmarks?—This conversation about how to measure performance via metrics and benchmarks is a crucial step to ensure organizational alignment with the institution’s strategic goals and objectives.
• How Do We Develop Situational Awareness?—A high-performing college or university following this roadmap will have reached stakeholder consensus regarding the institution’s strategic direction and competitive market position when achievable business goals and objectives within the resources available have been collaboratively established, and effectively communicated to relevant campus stakeholders.
• Have We Reached an Inflection Point?—The ultimate challenge for the governing board, president, and CFO is when stress testing and benchmark data show significant variance from plan and signal material underlying business risk.
• What Are Our Options?—If the institutional assessment and underlying data confirm that an inflection point has been reached, the reality for leadership of a small college or university is that they have one of three choices. The first is to stay the course and if that is the path chosen then it is incumbent on management to ensure they have put in place a resilient and effective business infrastructure. A second path calls for material changes in, or transformation of, the traditional institutional business model with multiple options. While a third path, based on a distinct set of factors, may be to seek an affiliation, partnership, consolidation, or merger.

Due to the multidimensional complexity of organizational transformation, governing boards and senior leadership must develop a situational awareness of the business risk confronting the institution. They must have knowledge of the portfolio of tools available to mitigate those risks. Moreover, they must appreciate that organizational transformation cannot happen in just one business unit; transformative change takes time and must take place across an entire organization. The dialogue among governing boards, presidents, and CFOs required to develop this level of knowledge is essential in developing confidence that any proposed changes to the business model will work, have the necessary shared urgency, and achieve the desired outcome.

*This blog post is adapted from Association of Governing Boards of Universities and Colleges, Baker Tilly, the Council of Independent Colleges, and the National Association of College and University Business Officers, Collaborative Leadership for Higher Education Business Model Vitality: Strategic Conversations for Small College and University Governing Boards and Administrative Leaders, (Washington, D.C.: AGB, 2023), v-vi, 3, 14, 19, 21, 25, 27, 31, with special thanks to Stephen T. Golding, AGB subject matter specialist.

Notes