Have We Reached an Inflection Point?*

Depending on the circumstances, a critical question institutional leaders might need to ask themselves is, “have we reached an inflection point?” The ultimate challenge for the governing board, president, and chief financial officer is when the stress testing and benchmark data show significant variance from plan and signal material underlying business risk. AGB’s resource, “Unlocking the Power of Long-Term Strategic Alternatives,” offers a “situational awareness” assessment that board members and leadership might need to consider when evaluating their institution’s current operating environment.¹

The template is intended to offer governing boards and senior leadership the ability to ask critical questions to better comprehend the competitive positioning of an institution in times of disruption. It should help them identify which of their operating procedures and policies do not align with their existing market demographics and future trends. Moreover, the situational awareness matrix may help to facilitate internal discussions that can inform whether alternative actions are required to address the challenges the institution might be facing. Contingent upon the conclusions drawn from these discussions, the data and underlying results can help boards and senior leadership “formulate strategies, set goals, identify next steps, and establish timelines” to overcome the traditional institutional predisposition of maintaining the status quo.² Furthermore, depending which quadrant institutional leadership finds themselves in, following a prescriptive business continuity planning process might have real utility for successfully implementing the chosen path forward.

The value of following a business continuity planning process is not that it will stop bad things from happening, but rather it is the knowledge that an institution inevitably will face unexpected risks and the reassurance that it has taken proactive steps to put in place corrective actions to prepare for them. It is about building a culture of resiliency with the capacity to overcome adversity and having the institutional confidence to identify a credible path forward. It is particularly valuable in today’s higher education environment if and when leadership determines that staying the course is no longer a viable option. It provides a framework for management to work seamlessly to protect the long-term sustainability of the college or university. It provides the institution with a structure to engage stakeholders and build a collective understanding of the challenges and solutions that can move the organization forward. This process offers a step-by-step approach to guiding institutional stakeholders into building a simple, but effective, plan to minimize long-term damage to the institution with the urgency necessary to return to “normal” operations after the risks are mitigated.³ A planning process that will nominally inform the college leadership’s discussions will take them through four major planning steps:

• Identification and assessment of institutional risks or threats;
• An understanding of the organizational impacts;
• Creating a multidimensional business continuity plan that responds to evolving market conditions; and
• Leadership training, testing, and plan maintenance to ensure relevance.⁴

If appropriately resourced and utilized successfully, a business continuity planning process will address each of the ten points (see list below) outlined in EDUCAUSE’s Business Continuity and Disaster Recovery, which was drafted to help facilitate the organizational risk management conversation institutional leadership should have.⁵ Once a situational awareness assessment has identified and quantified the business risks facing the institution, the next challenge for governing boards and executive leadership when considering alternative strategies in periods of economic or operational crises is assessing when and how much risk to assume—that is, determining the institution’s “risk tolerance,” which is its own process.

As part of a business continuity planning process, when evaluating alternative program or project risk, institutional leadership must collectively consider both the “advantages” of pursuing a strategy or undertaking an activity (or not) and any embedded risk with the “disadvantages” of negative consequences that pursuing that strategy or activity (or not) might have on the institution’s long-term operational capabilities. Leadership, furthermore, will need to assess whether a proposed action (or inaction—that is, staying the course) offers a true competitive advantage—for instance, “intelligent risk taking”—or if its projected impact is more than outweighed by its potential downside.

This assessment is essential for leadership to find the necessary balance between the need to encourage the business innovation necessary for moving the institution forward juxtaposed with the need to mitigate or limit institutional risk exposure. By creating an environment that supports high-performing management teams, the governing board and senior leadership offer their institution a higher probability of success when promoting a culture of intelligent risk taking and innovation when the underlying business fundamentals supported by the data are signaling that change or transformation might be required.⁶

Business Continuity Planning Process

1. Know when to acknowledge that the issues are real;
2. Have the capacity to understand and assess the root causes for deviations from course;
3. Understand when to consider a midcourse correction;
4. Know when an incremental approach is not an option and be prepared to take decisive action;
5. Have the expertise to evaluate all options available to the college;
6. Be prepared to establish realistic remediation goals and objectives;
7. Communicate effectively and be transparent to keep stakeholders informed;
8. Honestly assess if alternative approaches are working in appropriate time frames;
9. Know when traditional solutions are no longer viable and extraordinary measures are required; and
10. Have prepared the college to acknowledge and accept extraordinary measures are required.⁷

*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), 27-30, with special thanks to Stephen T. Golding, AGB subject matter specialist.

Notes