management – Innoeduvation

Managing the Wrong Problem

Originally published June 2017

We have a revenue problem, not a cost problem.

Imagine an educational institution that finds itself running a budget deficit – projected revenues just do not balance projected costs. It’s a very familiar scene in higher education in 2017.

And so what happens? The Board of Trustees says “balance that budget!” and the Administration hears “tighten your belt!”

Cost Cutting is Easy. Revenue Growth is Hard.

Why don’t we hear “strengthen your revenues”? The answer is pretty simple: cost cutting is easier work. Cutting costs means looking inward and relying on bureaucratic authority. One can tell one’s reports to cut costs by X% and then hold them accountable for results. They in turn tell their reports to do the same and wait for results. And the work is done by poring over budget reports and having meetings with PowerPoint slides full of numbers. The work flows down the bureaucracy. Bureaucracies are more comfortable when work flows down. This process is NOT rocket science.

On the other hand, to pay attention to and do something about revenues, people have to look outward, become informed about the outside world, take in new ideas, struggle to understand opportunities and communicate them to colleagues, do the very hard work of finding out what the world wants and telling the world what you can do. This IS rocket sciencey.

What Usually Happens

By my estimation, it’s easy for a college over the course of, say, two years to deploy thousands of hours of its best people’s time and creativity talking about how to nibble away at the margins of the expense side of its budget. A 20+ person budget committee will meet several times a month, C-suite folks and their staff will meet even more often, faculty meetings, committee meetings, and all-campus meetings are devoted to the task. Consultants are hired to crunch data, in-house people crunch the data again. It’s probably not too far off the mark to imagine the institution puts more energy into this than anything else during this time.

Because.What.We.Are.Good.At

It’s not surprising, though, because most institutions have a management team that has been selected on the basis of their ability to manage the status quo, to keep things running as they are (perhaps with modest expansion and growth). The “technology” of innovation, growth, expansion, rethinking business models, being entrepreneurial, leveraging resources, finding efficiency, building strategic platforms on which new revenue streams can grow, all of these are beyond their ken. It is easy to predict that we will put all our energy into saving and so very little into earning.

And when we DO turn our attention away from cost-cutting, the furthest we usually get is to devote ourselves to RETENTION. We tell ourselves that each retained student is $15k net tuition we have next year that we might have lost. Retention attention activates our missionary zeal and provides concrete focus for building programs and hiring staff. But we are inclined to measure neither the cost effectiveness of these efforts nor their fundamental limitedness – perfect retention will only ever get you back to the already anemic enrollment you started with. And when your best people are working on this, they are not working on growth.

There is No Smaller Right-Size

This is a very big problem. When most institutional energy and brainpower is devoted to cutting costs and stemming losses, very little is leftover for actual expansion of the revenue pie. Most colleges that are struggling will not achieve anything close to a sustainable business structure via cuts and retention. They have fundamental structural deficits related to their size and there is not a smaller size that works. All of the efforts at cost management and loss prevention are efforts at managing the wrong problem.

Is it real? Can we win? Is it worth doing?

Originally posted 16 June 2017

I saw the best minds of my institution distracted by madness, meeting endlessly in vain, poring themselves over balance sheets all day looking for the do-able fix…

I’ve watched and listened for the last several years as my institution thrashed and muttered things about reinventing itself and formulating a new business model and becoming financially sustainable.

Most disturbing has been what strikes me as an almost fanatic commitment to not running the college like a business because of a fear of “running the college like a business.”

What I mean by that is that people who are rightfully concerned about those who would turn education into a financialized commodity, an institution that serves corporate overlords, and all the rest chased away ordinary business and organizational management sense driving higher education toward amateurish and disastrous practices.

I’ve spent the last few years looking for translatable lessons that might be useful for those of us who actually understand education to build our institutions into robust, successful, and sustainable enterprises so that we can hold off the small-minded interests that would be delighted to take advantage of our incompetence.

In a 2007 Harvard Business Review article George Day describes a powerful method for assessing risk and reward tradeoffs in innovation. I think Day’s ideas can be adapted to the situation of a small college like ours and I a lot of the decisions and discussions that have occurred over the last several years, and especially in the last few months, demonstrate the pathology of an organization behaving in precisely the opposite direction from these ideas.

Day is writing about how an organization should evaluate innovation opportunities. He advocates for any potential innovation to be evaluated by asking “Is it real? Can we win? Is it worth doing?”

These questions can be adapted to an evaluation of both ongoing operations, innovations, and remedial moves taken in response to emergency conditions.

Let’s start with “is it real?”

The question refers both to products and markets. In our case the two are closely related but should be assessed separately.

When we say “product” we mainly mean the programs we offer – majors, degrees, courses, credentials. When we say “market” we mean both the market of people who want to buy our product – enroll – and a post-graduation market for people with the credentials we offer.

Is the product real? In industry this means “does the technology to build this thing actually exist?” In higher education we have to ask whether there are courses, or whether courses could be designed, that would add up to some credential or program we ponder. We have to ask is this the kind of thing that one can do in four years or two years or alongside the rest of one’s education? Is it coherent? Legible?

Is the market real? Is there actually a desire/need for what we are thinking of doing? Can the student for whom it is perfect actually purchase it? Is the size of the market big enough for us to be able to get this off the ground? WILL the potential “customer” buy it (at the price at which we will need to ask)?

Can we win?

Again, the question has two sides: the “product” and the “company.”

Can the product win? Is this thing we want to offer better than the alternatives? How established are the alternatives? If the people who would want our thing are currently using something else, why would they switch? Can we survive expected responses from the competition?

Can the organization win? Do we have superior faculty and staff who can work on this? Do we have the necessary experience and skills to do this well at the necessary scale and over the necessary time frame? Are there effective internal champions to create and sustain interest and enthusiasm? Do we really understand the market and have the capacity to listen to its signals?

Is it worth doing?

Is this move likely to be profitable? “Profitable” is a simple idea – do returns exceed expenses – but we need to think carefully about what goes into this. When are we going to have to invest how much capital? What marketing expenditures are necessary to give the idea a chance? What future development and revision will starting this commit us to? What are we doing now that we will do less of as we divert personnel and resources to this new endeavor?

Does this project make strategic sense? Does this new program or change fit with our organizational growth strategy? Or is it taking us off in a direction that will distract us from what we are trying to do?

An extremely important part of thinking about whether something makes strategic sense is whether the project will generate a platform on which other things can be built. Does the initiative allow us to develop policies and practices that can be used for other things? Are we building up skills and experiences among our faculty and staff that we can use to build and enhance other programs?

The “is-it-real-can-we-win-is-it-worth-doing” filter is not a magic bullet, but it is an example of some adaptable wisdom that could make a gigantic difference in the ways faculty and administrators think about change and renewal.

Meeting as Wasted Time: Made, not Born

This has been a pet peeve of mine for a very long time. We academics completely miss the mark when we decry the number of meetings we have to attend. The problem is not the number of meetings, it’s how abysmally run they are. Both our colleagues and our administrative sisters and brothers waste scads of institutional resources (read our time) by poorly thought out, poorly prepared for, and poorly managed meetings. We tend not to help much: few of us really know how to attend a meeting and almost no one actually does any “homework” before a meeting.

One solution I have been trying to sell is the budgeting of faculty time. Anyone who calls a meeting has to “pay” for it and in any given semester there is only so many “meeting person-hours” to go around. Another is to have ongoing training in how to do meeting. It’s one area where some for profit companies have figured something out : they respect the idea that time is money and so they try to waste less of it.

Category: management