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    COVID’s impact on higher education strategy

    Key considerations for the road ahead

    RFP
    Student watching videos The winds of change had already been blowing through the higher education sector at the onset of COVID-19. Leaders across the country had been contemplating significant shifts in institutional and growth strategy, how traditional brick-and-mortar delivery could continue to transition toward online or hybrid delivery models, how the student experience could be enhanced, and how costs could be managed, among other considerations.

    The arrival of the COVID-19 virus on campuses has forced institutions to fundamentally alter their operations and delivery modalities. Although the entirety of COVID-19’s impact is not yet known, it is clear that this global pandemic has served as an accelerant for change. The sector’s response to this disruption will be critical in terms of a sustainable future. There is no question that higher education, broadly speaking, will recover. However, how individual institutions fare will vary significantly. All institutions and their leaders, boards and stakeholders have options to consider for navigating the path ahead.

    Fundamental changes needed According to Inside Higher Ed’s 2020 Survey of College and University Presidents, published prior to the COVID-19 pandemic, nearly 70% of presidents felt that their institution needed to make fundamental changes to its business model, programming or other operations. The challenges presented by COVID-19 have created an environment of even greater uncertainty and gravity as institutions continue to evaluate fall 2020 reopening options and protocols. The confluence of these factors has heightened the focus on and increased urgency for transformational strategic, operational and fiscal planning.

    Each institution is in a different position when contemplating how to best navigate the near and longer-term impacts of COVID-19 in light of associated macroeconomic impacts and fiscal realities. Certain institutions were already in a tenuous financial position at the start of the 2019-2020 academic year; their circumstances have only deteriorated. Others that were more comfortably resourced are now experiencing significant pressures and economic uncertainty.



    Questions for higher ed leaders to consider, now and over the long run
  • How can our institution best allocate its limited financial resources? Which programs and offerings should be core to our future? Where should we divest or concede to others? What opportunities exist to lower our cost of delivery?
  • How has our competitive landscape shifted, and what changes can we reasonably expect in the future? Beyond fall 2020 and the 2020-2021 academic year, what will higher education “look like” 5, 10 and 15 years from now? How can our institution best position to differentiate?
  • Who is our customer of the future? How does our student population of tomorrow differ from that of the past? What kind of experience — in both academic and extracurricular dimensions — do they expect?




  • While institutions continue to solidify and disclose their plans for the fall 2020 semester, multiple strategic considerations need to be contemplated:

  • Operational contingency planning – While many institutions have already taken significant steps to adjust cost structures for the 2020-2021 academic year, additional preparation is likely required. Having contingency plans “on the shelf” that are modeled and vetted will enable institutional leaders to thoughtfully consider, prioritize and quickly deploy options in the form of a “playbook.” Maintaining a high degree of intentionality in evaluating options and tradeoffs will remain vital as institutions navigate through and emerge from a tumultuous period.
  • Long-term financial models – Forward-looking financial projections are of vital importance for colleges and universities in normal times. Challenging circumstances make these tools even more valuable in understanding the financial trajectory and position of the institution under a variety of “what-if” scenarios. Balance sheet strength, cash flow and operating performance can all be modeled and conveyed to leadership, relevant committees and boards via compelling visualizations. As some institutions consider the possibility of planned operating deficits, key questions will arise pertaining to the magnitude, duration and fiscal capacity to responsibly employ such an approach.
  • Strategy recalibration – Most higher education institutions embark on significant and comprehensive strategic planning initiatives on a periodic basis. In fact, many institutions were in the midst of such initiatives at the onset of COVID-19. An institution’s strategy and future direction are functions of its environmental factors, competitive threats, marketplace opportunities, resource availability, and priorities, among other considerations. In significantly disruptive times, even the best crafted strategies at the most resource-rich institutions need to be revisited. These strategic plans, along with any accompanying fiscal and operating plans, must be thoroughly and holistically re-evaluated in light of the momentous ground shift. Those institutions that invest the time to evaluate the windswept direction of their ship and recalibrate the rudders will be best positioned for success in the future.
  • Partnerships and consolidation – Trying times across the higher education sector will necessitate new ways of operating. Institutions should look inward to consider shared services, increased centralization and eradication of operational redundancies.

    The current circumstances also present opportunities for partnerships, alliances and mergers. Some smaller, specialized institutions simply lack the size and scale to operate in a financially viable manner on their own but would be a tremendous asset within a larger institution. Similarly, struggling midsized institutions can consider proactively joining forces toward a brighter and more sustainable future. A merger or partnership within higher education, just like other industries, need not solely be considered as a last resort option or when contemplating survival. Read “Synthetic merger: A fine elective for higher ed” for more on this topic and a framework for an implementation plan.



  • 1. Greater deviation from the traditional consumption pattern

    Greater deviation from the traditional
    COVID-19 has impacted how education is delivered and has also provided greater insight into consumption preferences (i.e., online vs. in-person). A series of lawsuits and vocal student and family sentiments regarding the diminished value of virtual, distance-learning has shed light on these preferences. An inability to satisfy them could result in students taking a gap year before enrolling, enrolled students postponing a semester or two, or abandonment of degree pursuit altogether. Further, an online education from a lower-cost institution could generate greater perceived value when compared to an online experience at a “superior” and more expensive brand.

    2. Reduced cost of delivery

    Reduced cost of delivery
    With greater optionality offered to students for delivery in fall 2020, the possibility of increasing class sizes and improving leverage of faculty offers opportunities to satisfy the consumption preferences of students while increasing productivity and reducing cost of delivery. This could help institutions balance multiple competing priorities in a manner that now has greater “proof of concept” accompanied by a compelling necessity of financial sustainability as a result of COVID-19-specific recent experiences.

    3. Development of shared services centers and increased outsourcing of administrative activities

    Development of shared services centers and increased outsourcing of administrative activities
    The transition to a remote workforce has shown organizations of all types what kinds of work and productivity are possible through virtual interactions. Although shared services centers and outsourced back-office activities have been prevalent outside of higher education for years, COVID-19 has encouraged institutions to embrace this reality and consider new options in administrative execution.



    4. Increased connectivity across stakeholders

    Increased connectivity across stakeholders
    Just as global travel “made the world smaller” in recent decades, COVID-19 has had a similar impact. Virtual collaboration is increasingly accepted and has enabled parties in disparate geographic locations to more comfortably and seamlessly interact, exchange ideas and drive progress. Plentiful opportunities will exist to access new markets, innovate programmatically, strengthen relationships with vendors and engage alumni, to name a few.


    5. Campus and facilities redesign

    Campus and facilities redesign
    Institutions have been embarking on ambitious campus master plans for decades. Looking ahead, in lieu of constructing more, higher education leaders will evaluate how their physical plant can more productively and flexibly serve the needs of their campus community and stakeholders in light of shifts in delivery modalities, consumption patterns and concerns for stakeholder well-being. Amount of space, functionality, design and versatility will deserve even greater consideration into the future.



    COVID-19’s impact on the higher education sector will go down as an incredibly disruptive one that will result in long-lasting changes. The additional decision-making and adjustments to practices that will ensue will affect the sector in profound ways. Institutions best prepared to thoughtfully and comprehensively consider options at their disposal and act with conviction will be best positioned for long-term achievement and furtherance of mission and financial objectives.

    Request the State of Higher Education in 2020 report for insights, approaches and solutions to help your institution navigate a complex landscape that depends more than ever on innovative strategies.

    Contacts:

    Joseph MulliganJoseph Mulligan
    Principal, Advisory Services, Not-for-Profit and Higher Education Practices
    T +1 732 516 5564


    Ed KleinguetlEd Kleinguetl
    Partner, Transaction Advisory Services
    T +1 832 476 3760


    Jigna ShahJigna Shah
    Senior Manager, Operations Transformation
    T +1 312 602 8898