Exploring the Value Proposition of Higher Education

By August 10, 2015 March 7th, 2019 Trusteeship Article

Headlines show that, for many people, higher education isn’t measuring up. There is pressure to perform and better quantify results, but the demands vary: Colleges should produce more graduates; the workforce needs better workers; quality learning is the ultimate goal.

At a session at AGB’s National Conference on Trusteeship, a panel of top higher education leaders explored the main issues behind the growing question of value in higher education and what, if anything, institutional leaders can do to address it. The moderator, Jane Wellman, senior adviser to College Futures Foundation and staff director of AGB’s National Commission on College and University Board Governance, spoke with Heather Carter, representative of the 7th District, Arizona State Legislature; Thomas W. Ross, president of the University of North Carolina; Alex Shumate, vice chair of the board of The Ohio State University; and Eileen Wilson-Oyelaran, president of Kalamazoo College.

Jane Wellman: Everyone can agree that there’s a value proposition problem in higher education, but we have very different perspectives about what that means. The report of the National Commission on College and University Board Governance, “Consequential Boards: Adding Value Where It Matters Most,” concluded that the value of higher education was eroding, and that governance itself contributes to that erosion of value. Do you agree?

Heather Carter: In conversations with my constituents as an elected official, I find that people still think a college degree is important, but they are genuinely concerned about how they will be able to afford to send their children to college. I’ve worked with people from other districts, and it’s a common theme across the state and, I would venture to say, the nation.

Wellman: What’s behind rising tuitions? In almost every state in the country, public institutions are receiving fewer resources per student, and that trend is very likely to continue. Private institutions are in no better shape. Enrollments are soft, and resources are not growing commensurate with costs. Alex, you’ve seen this at Ohio State.

Alex Shumate: Yes, we have definitely seen financial support for higher education decrease. Our general assembly is, in fact, quite supportive of higher education, but there are many other demands on the state budget today. And even though we don’t like to hear that many people believe that higher education doesn’t have the same value that it once did, we have to accept the fact that the public thinks we need to do a better job with the funds we have.

For example, our president recently directed Ohio State’s senior staff to find $400 million in efficiencies over the next five years. That money will go to support student aid, particularly need-based aid, our faculty initiatives, and centers of excellence. We are committed to being more efficient, and we are investing that money in the value proposition that we possess as a land-grant university.

Wellman: Is part of the problem that we’ve overvalued the economic aspect of higher education?

Thomas W. Ross: I think we have to separate the reputation of the value of higher education from the real value of higher education. We’ve heard the narrative for the last five or six years that after you graduate from college, you will end up working at Starbucks or some other similar job that’s not in your field and doesn’t require a college education. Yet, according to Bloomberg Business, unemployment among American college graduates today is down to 2.8 percent, and we’re at real risk of not having enough college graduates to meet our country’s workforce demands in the next decade. So, if you want America to be competitive, then you have to care about education—and higher education, in particular. We sometimes lose sight of this fact.

We also know from history that, yes, times are tough in a recession for people graduating from college. I carry around with me a slide of a Newsweek magazine cover that shows three students in their caps and gowns—one with a shovel, one with a pickaxe, and one with a jackhammer—and the title of the article is, Is College Worth It? That cover hit newsstands in 1976. So, we’ve had this discussion in America before. Yet recently we seem to have lost sight of how vitally important higher education is to our future as a nation, partly because it is such an integral driver of our economy.

We just conducted a state-wide economic impact analysis of the UNC system and found that it contributes $27.9 billion net added value to our state every year. That’s the equivalent of 6.4 percent of North Carolina’s GDP. Even the day-to-day operations of the university have a significant economic impact.

But then we should add in the discoveries that universities make that help start up new businesses or solve life-threatening problems, not to mention the benefits that universities provide to our communities— benefits that can’t be counted simply by the number of students who graduate and walk across the stage. We contribute through agricultural extension, through health education programs, and in all sorts of other ways. Enhanced civic involvement, increased volunteerism, lower welfare costs—all of those things correlate pretty directly with educational attainment.

So higher education has a huge value, but as a society we’ve accepted the narratives that say, “You can’t get a job,” or “It’s too expensive,” or “You’re not going to get your return on investment.” We know those narratives are not true. The data show, for instance, that you will earn $1 million more on average over your lifetime if you have a college degree than you would if you had only a high-school degree.

Further, to quote New York Times columnist Frank Bruni, “It’s impossible to put a dollar value on a nimble, adaptable intellect, which isn’t the fruit of any specific course of study and may be the best tool for an economy and job market that change unpredictably.” Higher education is not just about what it does for a person’s ability to get his or her first job, but also about how it prepares that individual for his or her last job.

As leaders of higher education, however, we have failed to step up and talk about what is really going on. We know that we’re investing far less in higher education in America than we did 25 years ago, when accounting for inflation and enrollment growth. So, as a country, we’re not heading in a good direction, and that’s something about which we all should be speaking out.

Wellman: Eileen, one of the narratives I hear is that legislatures have lost sight of the public benefit of higher education and are treating it increasingly as a private good that should be priced as such. But if we could explain the public benefit better, people would see things differently. Is that a winning argument?

Eileen Wilson-Oyelaran: I agree with everything that Tom just said, and I’m also aware that we live at a time when evidence doesn’t change people’s perceptions. We’re caught in a conundrum because the facts don’t support the perception.

Higher education has lost considerable state support. In Michigan, the amount of financial support for a student in the state who elects to go to a private college has been cut in half over the last 10 years. The financial-aid budget at Kalamazoo College has increased 26 percent in the last five years because we’ve made a commitment to retain the students who were already enrolled when they lost such support from the state. We have to meet the financial needs of our students at a time when income inequality is getting worse, and, given the changing demographics, many families don’t have the capacity to pay at all.

In some ways, trustees actually have more power than presidents do to tell the true stories to legislators and other people in their communities. Recently one of our trustees undertook just such a task. He worked with our director of admissions to make sure that he understood as much as possible about financial aid and actual cost of attendance. He then gave a presentation about college costs and financial aid at his child’s private secondary school. He did a good job of explaining this issue and was seen as much more credible than I would have been if I were speaking at that school.

Shumate: I believe that we as trustees can take more of a leadership role in telling higher ed’s story more effectively. Our relationships with other leaders in business, government, and the nonprofit sector provide us with a great platform both to listen to concerns and to share the higher education story.

Wellman: One of the major themes in the commission report was that, in this time of change, we must rethink what we ask and expect of boards, which requires different types of structures and leadership, as well as for people inside the institution to expect their boards to play a somewhat different role. Tom, you have had a lot of changes on your board. Tell us how public system boards work in this environment.

Ross: Having served both on a private board and a public board, and as president of a private institution and a public system, I do believe that public boards and private boards differ significantly. Private boards are most often made up of people who have close ties to the institution as alumni or parents or the like. In contrast, people become public board members most often through political connections. Some of them come to the position with little commitment to a particular institution or experience in higher education.

Yet, in today’s world, I think we need to reel in the politics in higher education, particularly in the board selection process. We’re losing our ability to keep our focus on our fiduciary responsibility to institutions. I find that discussions are much more political and concerned about, “What does the legislature think?” or, “What does the governor think about this particular decision?” It’s not true everywhere, but it’s increasingly true in boards around the country that I observe, and we’ve got to pay attention to that issue.

Shumate: Ten years ago, our board chair, Les Wexner, saw the potential for greater politicization of boards and appointments. He convened a group of business leaders to talk with our governor about the fact that it’s vitally important—particularly with the challenges that higher education now faces—to appoint board members who understand what it means to govern a complex organization.

So, over time with our governors, we’ve been able to identify the qualities, characteristics, and experiences that we need. And even though we don’t suggest specific board members, we’ve been fortunate that over the past 10 years, the governor has appointed people who take the job seriously, understand their fiduciary responsibility, and are willing to be educated about the issues. The governor, as well as the members of our general assembly, share our belief that it’s in the best interest of the state for the flagship institution to have excellent board members willing to do the things necessary to make sure that we’re accomplishing our goals of access, affordability, and quality.

Wellman: Heather, have you been successful in Arizona in maintaining highquality boards and good relationships with the legislature?

Carter: Many times, people seem to want to figure out how to work around the politics. But it’s not about working around the politics; it’s about working with the politics and explaining the value proposition of higher education to legislators, other elected officials, and the taxpayers.

We find ourselves often talking to other people who share the same mindset that we do in higher education. But it is important to have such conversations with people who don’t believe in the value of education. Colleges and universities need to share their story with a broader audience and not get caught in an echo chamber of people who already agree with what they’re saying.

When I go out and talk to constituents, I need to have the facts and the figures broken down into very concrete information that’s easily digestible, so I can say, “Look, here is why it’s important to support higher education.” Higher education has to find champions. It could be governing board members; it could be influential alumni.

Wellman: Part of the challenge that we all have is that this isn’t just a matter of persuading people that colleges and universities are doing good work. The business model of higher education is in question. Our boards must tackle decision making about money in different ways than in the past. Alex, tell us a little bit about how you’re trying to do that at Ohio State.

Shumate: As I mentioned earlier, we are focused on how we can be more efficient. We are working with our president and other senior executives at the university and asking ourselves: “Are there things that we can do better, like bulk purchasing? Are there items for which we can save money by having better negotiations with preferred providers—and then invest that money in the academy?”

In addition, our governor has announced that he’s creating a statewide task force encouraging efficiencies in higher education institutions. We’ve volunteered to partner with him to demonstrate our commitment to working together to secure the future of higher education in the state.

Wellman: Tom, you had a huge amount taken out of your budget and have had to struggle with this.

Ross: We have. It’s important to segregate what your costs are and understand what’s happening to them. Some of our costs are not things that we can easily control, like healthcare or utility costs. And some of the costs to our students are those that they’d bear whether they attended our institution or not. In fact, we can feed and house students generally a little less expensively than they could be fed and housed in a community.

But efficiency is important. We’ve cut our cost per degree by 15 percent over the past five years while, at the same time, increasing the number of degrees we’re producing. And when I talk to business groups, I always ask them: “How many of you have increased your production by 18 percent while cutting your costs by 15 percent? Everybody raise your hand.” No one ever raises their hand because it’s hard to do, and we’re proud of what we’ve accomplished.

We’re at a point now, however, where although we can be more efficient— because you can always be more efficient— we could also erode the quality of our educational product. We have to be careful in education that, with this drive to be more like a business, we’re not impairing our ability to do the quality work that we must do to prepare our students for the future.

We have to work with the state to try to find ways that we can do our business smarter. We’re avoiding $100 million a year in energy costs, for example, by being smarter about how we operate our campuses. So, there are a lot of savings to be had if you focus on it—but we also have to be careful about what we do.

Wilson-Oyelaran: We also have to balance cost efficiency with what I call “educational-effectiveness efficiency.” For instance, we have many more adjunct faculty members, which may be a cost saving. But if we’re making commitments to students who may not enter our institutions as well prepared as they need to be to complete college and graduate, we have to have the faculty and staff to make sure those students are successful. During the 2007–08 recession, just to survive, many of us cut costs that did not directly involve teaching and learning. But we have choices now that must be carefully made so that they don’t impact the outcomes that we as a nation claim we’re trying to achieve.

Shumate: It’s not just cost cutting, but also looking at creative ways to raise revenues. For example, through a creative financing mechanism, we were able to privatize parking on the campus and receive an upfront payment of $483 million or more of revenue to invest in our endowment. The revenue earned from that investment is being used to provide funding to our centers of excellence and scholarships. We need to identify such new sources of revenue in ways that are consistent with the mission, purpose, and objectives of the academy.

Carter: Many times, we just cut to make the balance sheet look balanced at the end of a certain timeframe. Instead, we need to ask ourselves: “What are the outcomes we want? Do we want increased enrollment of a particular population? Do we want a greater number of graduates in a particular field to satisfy a need in the community?” And then, “How do we figure out the strategy that we can take to meet those goals?”

So, over the last four years, we have focused in Arizona on performance funding. And that’s where a governing board becomes an important partner in this because, as a legislator, I need to hear from board members on how we can make legislative decisions more strategically and pursue the goals that we want for our economy— not only in Arizona, but also across the United States.

Ross: Part of the narrative that came out of the recession was, “We’ve got tight budgets.” That’s always true in a recession. But the economy is growing pretty robustly right now in many states, yet what’s happening with that additional revenue? Some states are cutting taxes as opposed to reinvesting. We need to have a larger conversation about what’s important to the future of our nation and whether taxpayers should invest more in higher education.

The idea that we would ask a university with a mission of teaching, learning, research, and service to generate revenue to pay for itself is not the solution to providing this public good—one so vital to our future as a country. The conversation needs to shift back to what it once was: What is the appropriate level of public investment in higher education? That discussion fell off the table during the recession, and we need to put it back on.

Wellman: Some of the criticism of higher education is a critique about faculty. How do we think about the next model of governance so that it protects the appropriate role for faculty, while recognizing the different financial challenges that colleges and universities now confront?

Ross: At its core, a university is its faculty. Faculty members make the discoveries that change people’s lives and also are key economic drivers for the state. Our system brings $1.2 billion in outside research funding into North Carolina annually, which creates 22,000 to 25,000 jobs every year.

In addition, this country went through a shift about 25 or 30 years ago when companies began to realize they could depend on universities to do research less expensively than they could do it themselves. It’s also been better for the country, so we as a nation have to invest in university- based research and the nurturing and training of high-quality faculty. It’s not going to happen simply by our hoping and wishing it will.

That’s also true in the classroom. If you want students to be engaged and to learn, they need an engaged teacher. We demand that in K–12, and we should demand it in higher education. We’re not going to keep the best and the brightest on our faculties if we don’t invest in them.

In terms of governance, we need to move to a model of shared leadership whereby the faculty takes a leadership role in talkingabout higher education and why it’s important. They also have to play a part in helping figure out how higher education can become more efficient while maintaining excellence. We need them to be leaders along with administrators and policy makers.

Wellman: Eileen, what’s your perception of how ready faculty members are to think about governance and shared governance differently?

Wilson-Oyelaran: I don’t think we have invested enough in preparing faculty members for institutional leadership. One of the most important things is ensuring that everybody has the same information. To encourage faculties to move toward evidence-based decision making about educational effectiveness, we have to tell them, “Here is the context in which you have to work. Here are the resource constraints in which you have to operate.”

Wellman: Alex, you’ve got a strong faculty governance system at Ohio State. Have faculty members come along with you as you have rebuilt the board?

Shumate: Yes, they have, and I’m a firm believer that a strong faculty is key to a strong university. Our staff in the board office has been organizing small group discussions among trustees and faculty members so that they can better understand the issues that we face, and we can better understand and be further educated by them on what their needs are. Those meetings have been very effective.

Carter: As a faculty member who lived through the administrative decisions made during the recession, I believe it is vital to involve and engage faculty—and not only in the curriculum. Because if you don’t, you’re not going to be able to be successful as an institution. Faculty members may not agree with 100 percent of everything that the board or administration decides to do, but if they at least understand it, you can have real change.