Last fall the board of the University of Charleston voted to reduce undergraduate tuition by 22 percent. The decision was made quickly, but the preparation for it took much longer. Ideally, a strategic decision is a process, not an event. The decision to reduce tuition began many years ago.
At each meeting, this board invests time in its own education. Sessions on tuition pricing, discounting, net price, marketing strategies, and financial aid prepared the board for its final decision. Trustees continually supported the university’s strategy of high price and high financial aid. They approved price increases to obtain more revenue from returning students but then negated them to recruit new students. Thus, a high discount rate had become acceptable even though they knew that the university’s net revenue trailed behind comparison institutions.
This board is also experienced in visioning and strategic planning. Every five or six years, it develops a visioning process to identify planning priorities. In September 2010, that process included a thorough environmental review of institutional strengths, challenges, and opportunities. An extensive list of possible initiatives was considered.
And finally, the board is intentionally focused on its oversight responsibilities. It recently restructured to improve its capacity to oversee the desired and actual outcomes of the university. Traditional committees were replaced with highly focused ones to oversee the student experience (quality committee), the health of the university (vitality committee), relationships with external constituencies (outreach committee), and operational effectiveness (governance committee).
At an informal board discussion, the president first raised the possibility of a tuition reduction. Trustees were given articles about the changing landscape in higher education. They knew the history of increasing unfunded discounts and the negligible changes in net revenue per student. They also had August’s negative news about the American economy ringing in their ears.
In response to their interest, the administration provided trustees with information on the net revenue per student by $1,000 increments, peer data on discount rates and net revenue, the reasons for the surprising number of registered and deposited new students who cancelled after August 1st, and future enrollment and revenue projections. The vitality committee members then considered the likely consequences of a tuition reduction on enrollment and revenue before choosing to recommend the reduction to the entire board. At the annual board retreat, the question loomed large: Was the board prepared to approve such a reduction?
Conversation was wide-ranging. Was the August student melt a one-time phenomenon or the declaration of increasing cost sensitivity? Had we passed the tipping point when the cachet of high price and the appeal of high aid were outweighed by a focus on real cost? Do high price tags keep middle-income students from looking at private institutions? If few students pay the high price, why advertise it? Would a tuition reduction be seen as a desperation move, even though the university had experienced 10 years of growth before one year of decline in new students? Would the reduction inappropriately distract attention from the expansion and efficiency strategies also being approved? Could the decision be explained adequately to returning students, who weren’t getting a reduction, so that they wouldn’t expect lower fees?
In finally deciding to adopt the reduction, the board took three significant steps. It changed the reduction from 20 percent to 22 percent because it felt that a cap of $19,500 was more marketable than a cap of $20,000. It revised the administration’s suggestion that tuition for returning students be frozen and adopted a 2 percent increase with the provision that each returning student would be guaranteed $6,000 in institutional aid, so as not to exceed the cap. Finally, board members were led by a trustee who is president of a public-relations firm in sketching out a strategy for announcing the tuition reduction.
In the end, board members exemplified how superior boards operate: (a) They were familiar with the issues, (b) they expected and were given contextual information and scenario forecasts, (c) they were accustomed to being highly engaged in issues, and (d) their deliberations were candid, wide-ranging, and intensive.
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