Friday, September 10, 2010

Higher Ed in a World of Declining Demand

Demand for higher ed is actually not declining, at least overall. In fact, most headlines would indicate the exact opposite: higher ed is booming.  But if you look at growth rates in enrollments, you'll note that it is high at top tier traditional institutions and very high at for-profit institutions. Enrollment is often stagnant or dropping at traditional lower tier universities.

Lower tier universities account for over 98% of the institutions in the traditional sector.

Under the current conditions, lower tier traditional universities are doomed:

  • They have the bureaucratic inefficiency of higher tier institutions without the resources to compensate.
  • They adhere to performance metrics related to academic excellence which are not directly tied to their revenue drivers.
  • The only institutions that really figure in the public discourse are the top tier ones.

As it turns out, their most direct competitors, for-profit universities turn these attributes on their head:

  • They have dramatically reduced administrative overhead and extremely lean cost structures.
  • Their performance metrics are tied to revenue drivers, namely enrollments.
  • They figure prominently in the public discourse but often very negatively. The main knock is that these institutions focus overly on obtaining up front payment for their services without delivering results such as improved job prospects.

In light of these data, the only real hope for lower tier universities is to compete on demonstrated student outcomes by adapting their programs to current market conditions. But they often can't or don't due to bureaucratic inefficiency and the fact that they do not adhere to performance metrics that drive revenue.