While the headline for this post may be a bit overly provocative, we hope it caught your attention and you will read on. We think this is an important one and we want all hands on deck. You are an important participant in maintaining educational integrity as market forces push to streamline your institution.
The Delta project is one of our favorite data sources and this latest report did not disappoint. Their lastest Delta Project Report looks at what drives the cost of higher education.
The report identifies the main cost drivers and shows that higher ed headcount as a ratio of the number of students enrolled remained relatively flat at public institutions and increased x percent at private universities (see Chart 1 below).
From a business point of view, the challenge is productivity: institutions did not produce any growth per employee. Before you start sputtering about using this measuring stick for the academic market, bear with us for just a couple paragraphs. We can leave it to your colleagues conferring MBAs to debate why there was no growth. They can also consider how to establish benchmarks for measuring growth for education. For our purposes today, we are simply looking at this as a financial and statistical fact that other parts of the economy have shown increased productivity or more output per employee hour.
In most industries, increased scale leads to decreased costs per unit of production. Not so in education. The same or more headcount per student means that costs for education have to go up.
Universities appear to have added headcount in counseling and general support services, but have not really received credit for this improved service and/ or the improved outcomes based on those enhanced services. And clearly, when an organization improves the quality of its product, it can legitimately charge more for it.
Take a look at Chart 6 (below) from the report which highlights individual cost drivers compared to tuition increases. Historically, tuition increases ranged 3 to 5% per year from 2002 to 2010. Academic institutions, like other private sector employers, experienced cost pressures on employee benefits (pensions, healthcare).
We thought the following segment from the report summarized the findings well so we offer it verbatim:
While the source and desirability of the rise in administrative staffing remains up for debate, our research provides additional insights:
- First, these new professional workers aren’t necessarily mired in back-office, business-related jobs. Although we can’t directly map staff to spending, the wage and salary data show that colleges and universities have increased investments in student services, suggesting many of these new professional jobs were created to assist students.
- Second, expansion of professional jobs is widespread across all types of institutions, not solely related to the complex administration of grants and contracts at research institutions. However, many administrative reporting burdens are more broadly deployed (such as reporting data to the U.S. Department of Education upon which this analysis is based).
- Finally, this broad expansion at both public and private institutions suggests a systemic change across higher education, rather than an opportunistic change related to available resources.
In our work supporting international student recruitment and enrollment, we see the need for additional investment in building a global recruitment capability to generate student and parent interest and ultimately valuable tuition dollars. One reason we find this investment attractive is the opportunity this kind of initiative presents to efficiently increase the return on investment (ROI) of an institution's marketing and admissions activities.
Whether we like it or not, the term ROI will continue to be a theme in academia in the future as cost pressures continue to drive the price of higher education up. During the next decade, some institutions are simply not going to make it. And the corporate mantra of the past two decades of increasing efficiency and productivity will become increasingly important in academic planning.
We know this perspective won't go over well with many of our colleagues. Unfortunately, turning a blind eye to it is likely going to be the reason cited when we look back from 2024 and point to which institutions no longer exist.
We like to think that everyone should become part of this conversation and help guide the harsh economics of higher education. In this way we can strive to maintain educational integrity while the planning office implements "efficiency and productivity" measures.
Bottom Line: This Delta Project Report might just give you some important insights so that you can be one of the valuable voices evaluating recruitment investments and other solutions as changes are being discussed.
