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Redesigning Higher Education … from the Inside Out

Jamie P. Merisotis, President & CEO, Lumina Foundation
Keynote Address, NACUBO Annual Meeting, Indianapolis, July 15, 2013

Thank you, John, and good morning, everyone. I know today is Day 2 of this year’s conference, so the official time for “welcomes” is past. Still, as Indianapolis is my home and the headquarters of Lumina Foundation, I want to add my own words of welcome to the others you’ve heard already this week. We’re very glad to have you in Indy, and I hope you’re enjoying your time here.

I also want to thank my longtime friend and colleague Matt Hamill for inviting me to join you this morning. I’ve learned a lot from Matt over the years, and I continue to be impressed with the steadfast leadership he has provided in your world—a world that is changing and evolving with greater speed each day.

I want to use the theme of this year’s meeting ― “Driving Innovation”—to shape my own remarks this morning. First of all, I’m going to talk a lot today about innovation in postsecondary education … about the new thinking and fresh approaches that can spark a much-needed redesign of the higher-ed system. Second, I hope to emphasize the fact that you, as financial leaders of your institutions, are in a crucial position to shape this redesign project. In short, I believe you are in a position to truly drive the innovation that is so sorely needed.

The demand for college-educated people is driving demand for higher education from students to record levels

Let me begin by talking about why we are using the term “redesign” to describe the scale of changes facing the higher education system. We all know this is a time of great challenge for higher education on both the demand and supply sides. The demand for college-educated people has never been greater, and it will only grow. This is driving demand for higher education from students to record levels. This is no surprise to us. As I’m sure you all know, all of Lumina’s work aims to achieve what we call Goal 2025: By the year 2025, we want 60 percent of Americans to hold high-quality degrees, certificates or other postsecondary credentials.

We see Goal 2025 as a necessary response to an urgent national need … the overwhelming need for talent. Simply put, our nation needs far more college-educated citizens than are now being produced. Experts agree that some measure of postsecondary education will be necessary for anyone who hopes to maintain a middle-class lifestyle in the coming decades. There are powerful economic, social, and equity rationales for dramatically increasing attainment, but I won’t take time here today to restate them. Suffice it to say that increasing attainment is a priority now for all states, communities and regions around the country, and the nation at large. Higher education institutions and systems throughout the nation are responding to this urgent need.

Again, none of this will come as news to any of you. At Lumina our message has shifted from the “what”—the need to increase degree attainment ― to the “how.” With more and more segments of society recognizing the tremendous value of increasing college attainment, the more pressing question has become: “How do we get there?”

I’d like to suggest two paths for getting there, two key imperatives as we strive, as one national organization among many, to help the nation achieve that ambitious goal.

The first imperative is to mobilize all of the relevant stakeholders to join this effort. And the range of stakeholders is wide. It includes policymakers at the federal, state and local levels; higher education administrators, faculty and boards in every state; K-12 systems and teachers; employers, workforce groups and economic-development organizations; metropolitan areas and regions; philanthropic and social-service organizations, students and families. In essence, we want everyone to commit to achieving this 60 percent college-attainment goal … and of course that includes NACUBO and its members.

The second imperative—the one I want to focus on for the rest of my time with you today—is to actually design the 21st century higher education system that can get us where we need to be. This is the redesign project that I just mentioned earlier—the one in which you can play a critical role.

We all know colleges and universities are under incredible pressure to keep the price of college affordable and find greater business efficiencies. You know these challenges better than I do.

We also know that higher education has a reputation for being resistant to change, even though the field is so ripe for it. Last year, analysts at Moody’s Investors Service reported that most colleges and universities could no longer rely on diversified revenue streams and time-honored business models to shield them from economic turmoil. The ability to raise tuition has eroded across all but the most elite institutions; and, of course, public support is less stable than ever.

Moody’s predicted that the potential for affordability-driven enrollment declines could jeopardize business as usual on many college campuses, and that cutting business-side costs won’t be enough. Their analysts asserted that colleges and universities instead will have to dramatically alter their cost structures. This might include a large-scale expansion of new forms of lower-cost academic delivery, but doing so while assuring high quality of student outcomes. It could include competency-based approaches, MOOCs and the creation of multiple pathways into and through postsecondary education.

All of these changes in higher education, and many others that I think you are already familiar with, aren’t mere tweaks to the existing system. They are truly changing the way students are educated, in fundamental ways. In fact, I think it’s fair to say that the number and the scale of the challenges we face demand that redesign of the higher-ed system take place with a real sense of urgency.

We can’t reach an ambitious goal like Goal 2025 by any well-worn path. We need new routes, new ideas, new approaches to serve much larger numbers of students. In particular, we need to concentrate on the students who, for decades, have been on the wrong side of the growing attainment gaps in higher education: low-income and first-generation students, racial and ethnic minorities, immigrants and adults. To close those gaps and to meet the full range of societal and workforce needs, we need an integrated, fully linked system for developing human capital.

This redesigned system must be flexible, affordable, and relentlessly focused on quality. Perhaps the best way to describe it is to compare it with the current one. In other words, to highlight what we need, let’s look objectively at what we have.

For many decades, if not from the very beginning, our higher education system has been organized around institutions and measured by time. Put another way, institutions have been the focal point of the system, and time ― defined by the credit hour—has been the lens we use to view it. By and large, this is still very much the case. While this focus served the country reasonably well for many years, the fact is that this model is simply not able to serve the dramatically larger number of Americans who need high-quality postsecondary education. Our focus needs to shift.

Now this doesn’t mean that institutions are somehow unimportant. They are critical. But the idea that decisions and funding and policies largely should respond to the needs of colleges and universities must be replaced by a focus on meeting the needs of students and, by extension, the needs of society. Just as important: the time-based method of “keeping score” in higher education must be replaced by one that measures and rewards what truly matters: student learning.

It’s hard to overstate the importance of this point when it comes to the redesigned higher-ed system we envision: Learning outcomes must be the true measure of educational quality—not time, not spending, certainly not institutional reputation, but genuine learning. In other words, the system must help many more Americans develop measurable skills and competencies. The system must be restructured so that all aspects work toward and revolve around the achievement of those learning outcomes and competencies. The ultimate goal is to build a learning-based system that offers broad, connected pathways to high-quality credentials for a vast and growing number of Americans ― from all walks of life.

Clearly, this redesign project is a major undertaking. It will require years of coordinated effort by of a variety of stakeholders. But it is an effort that must be made if we hope to create a system that can truly serve this nation in the 21st century. Pieces of the new system are already starting to take shape; in fact, you can see them coming together almost everywhere you look across the higher education landscape. The rapid rise of open, online and interactive courseware and other innovative modes of curriculum delivery … the ongoing push to control costs and increase institutional productivity … income-based loan programs and other creative methods of student aid … increased emphasis on performance-based or outcomes-based funding models in many states … a growing interest in prior learning assessment as a way of awarding credit for knowledge gained outside the classroom.

All of these trends show that higher education is moving in the right direction. But we all know there’s still a very long way to go. We’re also well aware that movement in this direction isn’t easy … because it’s a decidedly new direction. And yet, it’s clear that this is the right direction. We’ve learned from one-on-one interviews that Public Agenda recently conducted with business and financial officers at public institutions across the country—and from our own work on improving college productivity ― that there is a healthy appetite for change in higher education. More and more people are willing to question long-held assumptions, especially about how best to engage faculty and use technology.

You are natural allies in the effort to design this new student-centered, learning-oriented system. In fact no one is better positioned than you to see how important it is for us to embrace the change agenda for higher education. You see the institution in its totality, and you clearly see the bottom line … and that means you probably understand better than anyone the connections between that line and the various departments, committees, organizations and individuals that constitute your college or university.

In 2012, Bain & Co. reported more than one-third of all colleges and universities were spending beyond their means. The firm’s report declared that “if current trends continue, we will see a higher education system that will no longer be able to meet the diverse needs of the U.S. student population in 20 years. The social and economic implications of that are staggering.” Bain recommended that institutions take the obvious steps of reducing overhead and freeing up capital invested in non-core assets. It also went on to recommend that institutions focus on where they could add the most value by meeting students’ needs and strategically investing in new forms of academic delivery.

Others have weighed in as well; in 2010, for example, McKinsey & Co. recommended serving greater numbers of students by 1) creating clearer pathways to degrees that reduce “switching costs” and the costly accumulation of excess credits and 2) reducing per-student spending by redesigning academic delivery and student supports. Change is coming, ready or not. And the innovative institutions ― the ones that embrace new business models capable of supporting high-quality, lower-cost delivery—those are the ones that will come out ahead.

Of course, it’s not enough to simply convince your colleagues of the need for innovation, you also need to be driving that innovation. If you seize the opportunity to be an agent of change on your campus ― if you point out the dangers of complacency and lead the charge toward a better system—your campus colleagues will listen, and they will follow. A previous, Lumina-funded project with NACUBO paired senior higher education administrators with change agents from other fields, including health care, to glean lessons about how to manage change on campuses. Case studies from that two-year project are now helping to guide difficult conversations about the changing environments facing colleges and universities. The project showed us very clearly that you, as college and university business and finance leaders, can help redesign higher education from the inside out.

There are several practical steps you can take in this regard. If I may, I’d like to share four such steps this morning. The steps aren’t sequential, they certainly don’t constitute a comprehensive list, and I’m not sure any of them individually is more important than the others. Still, they’re worth sharing ― if only because they can get us thinking about real-world actions to take.

The first step may surprise you … because it’s really not much of a departure from what you’ve probably been doing for years on your campus: that is, thoughtful, purposeful allocation of system and institutional resources. With the budget shortfalls and financial challenges that have faced virtually every state in recent years, your skills in this area have no doubt been honed to razor sharpness. The key now is to apply these sharpened skills in a focused, targeted way … to take a real leadership role in resource allocation that truly supports increased attainment among your students.

For example, if you’re at a public institution in a state with performance- or outcomes-based funding, use Responsibility-Centered Management, (a topic that is prominently on the agenda at this conference) to align institutional budgeting incentives in ways that can help ensure more students from all backgrounds graduate on time and with meaningful degrees. More institutions also are aligning their tuition and financial aid policies to encourage students to take full, 15-hour courseloads, maintain continuous enrollment even through summer months, and graduate on time.

Today, more than ever before, institutions need to put their money where the real priority is ― that is, toward student success and graduation. As budget and financial leaders, you can drive this agenda by being a strong voice for thoughtful allocation. With each new budget request, you can ask: “How does this contribute to student learning and degree completion?” You can continue to cut costs and increase efficiency in non-academic operations through such methods as joint purchasing and back-office consolidation, and then push for those savings to be used in ways that can serve more students and serve them better. These cost-cutting moves add up, and the strategic use of the savings they generate can make a real difference in raising educational attainment rates.

And that leads me to Step 2 in driving innovation: leverage your successes. Once the resource-allocation efforts begin to bear fruit—once you can demonstrate real cost savings and point to measurable progress in student success rates ― you need to share that information with policymakers. In today’s policy environment—with employers and state officials focused ever more closely on accountability and return on investment ― institutions must demonstrate success in this area. The National Governors Association has put out a set of indicators that governors and other policymakers can use to gauge these returns. They are being advised to ask questions such as: “Are our students gaining the knowledge and skills to be successful in the workforce and life? Do our graduates get jobs that pay well enough to support families? How efficiently do we graduate students who enroll in public higher education?”

As higher education responds in ways that increase returns on public investment, stronger evidence will exist for supporting higher education as a public good … one that benefits not only individuals but also society and the broader economy.

You are well situated to carry the redesign message into the policy arena, because you have a foot in two worlds—the world of academia and the business world. Because of this, members of the policy community are more likely to see you as partners, not merely as petitioners.

This new role as a messenger or liaison ― the chief business and financial officer as a public advocate for system redesign, if you will—leads me to Step 3 for driving innovation. This third step involves the expert translation and explanation of the details upon which this new system is based. If we hope to implement and gain acceptance of this revamped, student-centered system, we must clearly understand and be able to articulate the financial underpinnings of that system. Clearly, your expertise here is absolutely critical.

As I said, this new system will require massive changes in virtually every area of postsecondary education. There will be innovative new modes for delivering course content. There will be new methods of assigning value to courses, programs and credentials ― methods based on learning outcomes, not on time. There will be new ways to facilitate transfer … new modes of assessment … new approaches to accreditation … new priorities for financial aid disbursement and allocation of government funding. In the world of competency-based education, which includes the direct assessment of learning, courses themselves have even begun to disappear. All of these changes will create new sets of goals, and new funding structures will be required to deliver on those goals.

Put another way, system redesign will raise a number of difficult questions on every campus:

  • “How do we set tuition to ensure affordability and encourage completion?”
  • “How do we prioritize spending to serve more students better?”
  • “Among students, the state and federal governments and the institution, who pays what portion of the total costs?”
  • “How do we ensure that we’re providing the services that students really need to succeed?”
  • Again, “Who pays for these services, and how much?”

These are all critical questions, of course ― and not one of them can be answered without your direct and ongoing involvement. In fact, the questions will never be fully answered because, for the system to be truly responsive to students’ needs, it will require constant recalibration.

Finally, let me point out the fourth step you can take in becoming a champion for system redesign: You can embrace the concept of collaborative leadership on your campus. The point here is that, in the student-centered, learning-focused system we hope to build, there is simply no place for the siloed, department-based approach that has traditionally defined higher education. In an age when students are so numerous and so diverse, when they face multiple and mounting challenges, when the consequences for their failure are so dire and so enduring, the only approach that makes sense is for us to take collective responsibility for increasing college attainment. The academic and business sides of the institution must work together, with a shared vision, to achieve success.

You see, student success isn’t just a product of what happens in the classroom. The number of college-educated Americans can’t increase without effort and support from every corner of your campus: from the financial aid staff to the bursar’s office to the registrar to the student support staff and beyond. Shared governance and shared responsibility are vital. As you know, that means no business office—and certainly no chief business officer ― has the luxury of focusing solely on the numbers.

Your job is about people. It’s about the students your institution serves and the future you’re helping them build. The redesigned system that I’ve tried to describe for you today is aimed at shaping that future … for each of these students, and really for all of us. That’s because the nation your students eventually build is the one we will all share, the one we will leave to our children and grandchildren.

You can help make it a bright future, and you can start today—by seizing the opportunity to be a change agent on your campus. I urge you, then, to be a “primary representative,” not just of your college or university, but of those your institution is truly meant to serve: the students.

Thank you.

Kate Snedeker

A series of reports show investing in employee tuition reimbursement yields significant financial payback.
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