Maurits van Rooijen: A way out for struggling small colleges

Times are tough for institutions that do not have access to substantial endowment funds or benefit from a top-ranking position. Whether with a rural or metropolitan setting, a large number of colleges are discovering that there is a limit to raising tuition prices. Prospective students no longer automatically queue up. And once the “at risk” notice is up, the perceived deficiency becomes self-fulfilling.

The popular strategy of spending one's way out of a crisis by major investments in the campus or star professors has proven not to be the answer. It looks like the fate of many small colleges is closure, “merger” (meaning effectively being swallowed up by a stronger institution) or even—subject to regulatory complexities—acquisition. And that is not good news for the colleges, their staff, students, alumni, surrounding communities—nor for the higher education sector as a whole.

Small-sized colleges—many enrolling just a few-hundred up to a few-thousand students—really enrich the overall education ecosystem. They offer a perfect option for a certain category of student, have an important social-economic function locally, and mostly represent a high-quality provision with an outstanding student experience and often a valuable focus on personal development to match.

A mere survival of the fittest will result in a seriously impoverished sector. But one does not need to be a defeatist; there is an alternative.

The Pavlovian reaction to external pressures—such as ruthlessly cutting costs, increasing steeply marketing and fundraising budgets and/or bringing in new senior management—is unlikely to resolve the underlying issues.

My alternative option: Create what I call “co-operatives.”

I have argued the case for setting up "systems" of boutique universities, whereby institutions start sharing—and hence substantially reducing—costs for administrative and academic operations, while sharing the bigger investments such as in promotion, international marketing and online delivery. Such cooperatives are not only more cost-effective; they also gain strength by size when it comes to contract negotiations with third parties. Moreover, these consortia can make themselves much more visible in the crowded market, nationally and even internationally.

The idea of various colleges working in a cooperative manner also underpins my own organization Global University Systems, which brings together, at a global level, more than 10 institutions (from vocational colleges to leading business schools), each with a different target group of students or specific portfolio of activities or different physical locations. The group shares marketing, recruitment channels, academic expertise and real estate in major cities globally. This enables us to deliver courses internationally, help our university partners to tap into new markets and meet the demand of students globally via online and on campus courses. This cooperative structure can, in principle, be created anywhere. In fact, institutions united in a co-operative system would in many ways become more cost-effective and hence more attractive to invest in than a lone college struggling to survive.

There is a risk associated with creating co-operatives  that  needs to be carefully mitigated: the issue of organizational complexity. My suggestion is that it would be worth designing a cooperative structure for boutique universities, creating a system that could work for everyone, while explicitly making sure one avoids ineffective decision-making processes. When designing a cooperative, it is essential to create governance and management systems that focus on the need for efficient operations rather than safeguarding vested interests.

Some institutions, whether at governance or managerial level, will have problems understanding the difference between narrow and broad interests, but of course those colleges will not join, nor should they. They will continue their own battle and one can only wish them luck, though I am not necessarily optimistic about their chances. For the interest of the sector as a whole, I hope many institutions will prosper, possibly within the alternative of a co-operative framework.

One way of dealing with the governance and management issue is to create a separate legal entity for defined shared services and operations, possibly together with a third (investment) partner. This will help to keep some of the politics away from the business side of shared activities. But of course with some level of creativity one could develop some further options; I am not pretending this is the only way forward. In any case, as always, one should adjust a basic model to local circumstances.

Maurits van Rooijen is chief academic officer of Global University Systems, CEO and rector of the London School of Business and Finance, and acting rector of Hannover-based GISMA Business School. This originated  on the Web site of the New England Board of Higher Education.