What Small Colleges Need for Their Survival

News of the travails of small colleges has continued throughout the summer. Following Sweet Briar’s planned and later rescinded closure, we have watched others: Ashland’s release of tenured faculty, Bay Path University’s too-optimistic plans for online education, the failed merger of Montserrat College of Art with Salem State, and the yet-to-be consummated merger of Union Graduate College with Clarkson.

What is missing from many of the published stories of these transactions is the extent to which expert, objective, comprehensive analyses were undertaken before the announcement.  My own experience with two transactions at the Thunderbird School of Global Management has provided many lessons.

Small schools, like those mentioned, lack economies of scale, face heavy burdens of fixed, overhead costs, and are often highly dependent on annual tuition revenue. It is no surprise that they struggle. What is saddening is the potential loss of schools like Sweet Briar and Thunderbird. The very good news for Thunderbird is that it survives now as a unit within Arizona State University with the completed merger. We would have lost much if Thunderbird had closed its doors. Its historic origin from a World War II air-training base is palpable as you walk the campus grounds. Thunderbird’s specialized global education is needed now more than ever. Its students with their cognitive complexity and global outlook are terrific. Its independent-minded, globally dispersed alumni are assets to international companies, governments and NGOs around the world.

The presence of distinctive schools like Thunderbird and Sweet Briar strengthens higher education; they add diversity to students’ choices. But preserving them is complex and challenging. The challenge and complexity may not be so evident to those inside the institutions, and that is why expert help is often needed for the future of these valuable, but vulnerable institutions.

Small, vulnerable schools need an objective analysis that often comes best from the outside and those who have experienced the challenges and successes associated with improved institutional viability. Schools need an environmental analysis that offers blunt perspectives of their markets. They need an institutional analysis that reveals the trends and realistically confronts the culture, governance, and financial constraints. Schools have to take into account the complex issues of accreditation and the processes of accrediting bodies. Schools need alternatives; one size does not fit all.

For some small schools, a merger like Thunderbird’s may be the best alternative. For another, it may be new programs, including online ones. For still others, operational changes, including sophisticated CRM, may be the answer. For still others, it may be refinement of what the school stands for in its perceived brand. It may be a partnership with an outside company. And it may be a combination of all of these. But in every case, thorough, objective diagnostics with financial analyses and forecasted trends are the first steps.

I want to see schools like Thunderbird continue to work their magic and educate students. And many alumni and students may say the same for their schools. These great schools deserve an objective look at themselves and their alternatives. Experienced, external expertise is part of the answer.


The US Oil Export Ban

The U.S. Energy Information Administration (EIA) yesterday added to the pressure on the US Government to remove the ban on crude oil exports. President Obama can remove the ban with an executive order. Speaker John Boehner has stated that legislative action will be considered in the Fall. Earlier Penley on Education and Energy had urged the removal of the export ban that originated with the 1975 Arab oil embargo and ensuing gasoline shortages in this country. Part of the reasoning for this blog’s support for the ban’s removal was the added foreign policy leverage that the US gains and the positive impact of its removal on the US economy.

The varying scenarios of the EIA report add additional support for the ban’s removal. The report confirmed the limited impact of the ban’s removal on domestic gasoline prices. It would leave US gasoline prices unchanged or slightly lower. The EIA report confirmed that the ban’s removal would produce downward, but limited pressure, on the global price of crude oil. US laws now allow for unlimited exports of the products from petroleum. Domestic crude oil can only be exported with a license, as is the case for Alaska’s North Slope oil and in certain cases with crude from California.

Yesterday’s release of the report from the EIA offered relatively complex analyses of the consequences of the ban’s removal based on various scenarios of oil price and production by 2025. Those scenarios included (a) the current reference price, (b) a low oil price, (c) high crude availability, and (d) high availability but a low price. The report confirmed that, under current, reference oil prices (Brent price of $90 per barrel in 2025) and under lower oil prices, domestic production would continue along current paths. With higher production versus the reference scenario, the Brent price is held to $88 per barrel by 2025. Domestic production has been rising steadily since 2010. It has now reached more than 9 million barrels per day, which was the production level in the mid 1970s.

The removal of the export ban does have the potential to add additional pressure to produce more crude domestically. Domestic production promotes US oil independence, as Penley on Education and Energy has previously observed. For some, this pressure is viewed negatively because of the non-traditional sources of the additional production. But we remain highly energy dependent. While renewables continue to grow, and this blog has documented their growth, renewables remain a small proportion of energy production and are insufficient to meet the demand for energy. We will continue to need fossil fuels for the foreseeable future. Of course, technological changes will alter supplies and availability of both fossil fuels and renewables and their growth paths. And, additional renewables are highly desirable as a means to stem the growth in carbon with its damaging impact on climate.

As part of a mix of energy policies, including ones that support renewables, there is now even more evidence that the export ban on crude oil should be lifted. It remains this blog’s recommendation that President Obama speedily do so by executive order.

Accountability in Higher Education

The original name of this blog was Access With Success. Since its founding 5 years ago, it has drawn attention to two key education issues: access to education for all qualified students and successful outcomes from education. On July 27, US Education Secretary Arne Duncan spoke about the same two issues at the University of Maryland-Baltimore County. Mr. Duncan’s remarks identified three needed shifts in our attention to higher education: a focus on outcomes, needed innovation as well as student debt and the costs of higher education.

Too little attention has been paid to higher education’s outcomes. The issues of accountability get lost in the attention to the cost of college and the level of public debt, despite their very significance. Greater attention has to be paid to accountability. That is why I wrote, “Just graduating is not enough” in a recent blog. I wrote about the experience of our administrative team in bringing about accountability with transparent information on students’ performance at Colorado State University. Too few US colleges have adopted and maintained what we instituted there almost a decade ago.

However, there are changes that we can make in the coming reauthorization of the Higher Education Act, which was originated in 1965 and last reauthorized in 2008. Those changes can address the need for greater accountability. They include publishing data like those envisioned in the College Portrait on the Department of Education’s website. Parents and prospective students deserve information about college persistence; graduation rates; and postgraduate employment, education and career choice. This information makes good consumer sense.

The needed changes to the Higher Education Act also extend to accrediting bodies. Mr. Duncan observes in his remarks that regional accrediting bodies pay little attention to outcomes and accountability. He is mostly right. Years ago I served on a site review team of a major research university up for its periodic regional accreditation review. Another team member and I were very concerned with whether the university’s honors program was delivering a quality education. We had met the young people. They were enthusiastic about getting an education, and they appeared highly intelligent. They deserved more than what they said they were getting. Yet, the site review team’s report, led by one of the accrediting body staff, paid little attention to our concerns about outcomes. There are needed changes to higher education accreditation, including more streamlined processes, requirements for evaluation of a college’s outcomes, and encouragement for innovation in light of the financial challenges especially for small schools.

The Department of Education cannot take on the entire burden for accountability. Many don’t want it involved at all. I believe they are wrong about limiting too severely the Department’s involvement. There is a role for the US Department of Education. There is also a role for states and the institutions, themselves. States can take action now to demand outcome rather than input data from state schools. They can also take action to make that information publicly available in accessible websites. Private and proprietary institutions can do the same.

Mr. Duncan’s remarks address all of higher education, not just for-profit education. We have needed this widespread focus on all of higher education. I applaud what he has done. I hope his remarks receive widespread attention and debate.

What Happens if a State Raises Education Spending?

For many years, we have questioned whether increased expenditures on schools mattered. Money does matter. New research confirms it. This new research comes as states like Michigan pass legislation to increase funding to schools, and Arizona considers Governor Ducey’s proposal to use proceeds from the State Land Trust to increase funding of Arizona’s schools.

It is reasonable that there have been doubts about the impact of money on education quality. Resources can be spent on infrastructure, administration, and other non-instructional expenses. Many doubt that these non-instructional expenditures improve learning outcomes and the quality of education. New research addresses those doubts and makes the case for the impact of money on a state’s educational quality and state GDP. The research comes from the National Bureau of Economic Research (NBER). It includes two recent studies, Human Capital Quality and Aggregate Income Differences (Human Capital), released this week and The Effects of School Spending on Educational and Economic Outcomes (Spending and Outcomes), released a few months ago.

The most recent study on Human Capital attributes up to one-third of variation in state GDP to the quality of a state’s human capital. It demonstrates this result over a four-decade period. The study makes the case for state investment in attracting a highly skilled workforce and growing that workforce with investments in the quality of the state’s educational system. The authors conclude, “The importance of human capital, and particularly cognitive skills, provides support for policies of various states that are aimed at improving the quality of schools.” The research supports the recent actions of Michigan and the plans of Arizona.

The Spending and Outcomes study from NBER links increased funding of education to important, desirable outcomes, including higher graduation rates, lower subsequent adulthood poverty and increased wages. It shows the greatest effect of a state’s investment for low-income children who are often educated in the poorest of a state’s school districts. The study examined how a district spends additional resources. School districts could spend more on support services, physical capital, and instruction. In considering instruction, the study looked at student-to-teacher ratios, student-to-guidance counselor ratios, teacher salaries and length of the school year.

The study found that about 80% of the marginal increase in funding was spent on instruction with more of the increased funding going to instruction than any other area of the budget. It concluded that the positive results for a state’s increased spending are primarily driven by reductions in class size, increases in instructional time (e.g., longer year or elimination of 4-day school weeks), and increases in teacher salaries that result in attracting and retaining more highly qualified teachers.

For states that raise funding of schools, then, there are very positive outcomes. In addition to the demonstrated impacts on high school graduation rate and increased state GDP, there are other benefits that can be derived from the outcomes. Companies depend upon the quality of the human capital in the labor force, and a better-educated citizenry raises the state’s economic development potential. With lower poverty, there is likely to be depressed demand on services like Medicaid for the poor. Prison populations may well drop, thereby decreasing the need for more funding. With higher wages of citizens and higher state GDP, there is likely to be more tax revenue without pressure to raise tax rates or search for new forms of taxation.

These two studies from NBER make the case for increased state expenditures on education.   The research demonstrates that the expenditure on education is an investment with substantial positive outcomes. That is what happens when a state raises funding for its educational system.

June 15 International Energy Agency Report

Today, the International Energy Agency released its energy outlook. Here are the highlights.

  • Growth in lower carbon energy sources, including renewables and natural gas, may be having a real impact on carbon dioxide (CO2) in the environment. In 2014, to the surprise of most people, CO2 remained flat despite global economic growth of 3%.
  • Nearly half of all new power generation came from renewables. The conversion rate of power generation from coal to natural gas continued to rise, but coal continued to be a major source of global power generation. Energy efficiency measures were implemented widely.
  • Energy efficiency contributed substantially to the flat growth rates in CO2. The US announced new standards for energy efficiency in a variety of manufactured products, including electric motors and walk-in coolers and freezers. China, India, Mexico and other countries announced new minimum energy performance standards.
  • In 2013 renewable power generation rose by 128 gigawatts. More than one third of that gain came from wind power, and about a third came from solar power.
  • Power generation from natural gas increased by 9%. Prices for natural gas continued to decline due primarily to the increased availability that has come from new technology, particularly hydraulic fracturing. Natural gas, as previously noted in this blog, produces substantially lower carbon emissions.

The energy sector is undergoing substantial change; yet we will remain dependent on fossil fuels for many more years. Technology is likely to continue to improve CO2 emissions, especially in developed countries. But developing countries, especially the poorer ones, will continue to be dependent on cheaper fossil fuels like coal.

Progress in reductions in CO2 emissions are heavily dependent on market forces, including lower prices and new technologies that come from research. That research has been responsible for new methods like hydraulic fracturing increased efficiency in photovoltaic cells and greater efficiency in battery storage.June

How University Leadership Matters

There is something to an educational leader with a vision for the institution along with engaged faculty, staff and students. Penley on Education and Energy made the case that Leadership Matters in K-12 education in an earlier blog. It matters as well in higher education where I have spent most of my career.

Diana Natalicio has transformed higher education in El Paso, Texas. Ms. Natalicio became president of the University of Texas at El Paso not quite 30 years ago. UTEP is a better place today as a result of her leadership. She has sought increased research support, based on UTEP’s historic science and engineering role; UTEP began as the School of Mining and Metallurgy. She has raised UTEP’s enrollment of Hispanics; it is more representative of the El Paso community now. She has increased graduation rates, including those of Hispanic students, in technical fields like healthcare, engineering and mathematics. UTEP has received national recognition as a Hispanic-serving institution.

Building hope, engendered by vision, is what Ms. Natalicio has done as UTEP’s leader. In 2013, the New York Times quoted her about what had transpired over the years of her presidency. “I think the biggest difference between then and now is our self-confidence as an institution.” Building hope began early in her tenure, she says in a video welcoming students on the UTEP website. “We saw liabilities where there were real assets. What I understood was that these were all opportunities just waiting to be capitalized on.”

Leadership matters, of course, in every organization.  One day in Denver an airline CEO and I awaited a panel discussion. We talked about what we really did – he as CEO of an airline and I as president of Colorado State University. It quickly became evident that the leader of an airline and the leader of a university had much in common. Both of us saw our prime responsibility as building hope through vision.

That combination of vision and hope builds employee engagement. Earlier in my career, a colleague and I developed a measure of employee engagement that was published in the Journal of Organizational Behavior. In that article, we labeled one type of engagement, moral commitment, a kind of engagement that mattered most for employees’ performance. Those individuals with moral commitment see their future aligned with that of the organization.  With personal hopes’ being achieved via the organization’s success, performance rises.

A good leader encourages engagement. That is exactly what Ms. Natalicio has done at UTEP as its leader. Upon becoming president, she saw what some considered the isolated, border location of UTEP as an opportunity. She viewed the often less-well-prepared, first generation college students as hard working with great potential. She took the substantially Hispanic community of El Paso as a bridge to more Hispanic graduates. She built hope from what many perceived as challenge. She did so by offering a glimpse of the possible in her vision that leapt beyond felt inferiority to hope and engagement.  Leadership matters, and Ms. Natalicio demonstrates it.

Leadership Matters

Years ago, the Brookings Institution published a report on what mattered for the success of students and learning outcomes in high school. After many years, I still recall that one of the two significant variables was leadership of the school principal. Perhaps that research was no surprise; leadership matters.

Those of us close to education know how critical good leadership really is to K-12 and higher education.   If we are to improve education, one of the most obvious, but occasionally overlooked, areas to do so is to appoint good leaders and give them the authority and responsibility to lead their schools. While this inherently means less operational interference from the district, board, and others, the benefits of good leadership mean a great deal.

We need leaders who are committed to making a real difference in their schools. We need transformative educational leaders. If the primary focus of a school’s leader is on self-advancement or self-protection it is tough to be a transformative leader. Self-protection is very easy to understand. Leaders are always in vulnerable positions. We admire those who do succeed. That is why we look back to people like Franklin Roosevelt and Ronald Reagan. They faced challenges, took risks, and the world – and this country – are different and better because of their leadership.

That is why I admire Tim Ham, the retired Superintendent of Madison School District in Arizona. A 2013 study of superintendents by the Brookings Institution concluded that it is quite rare for a superintendent to make a difference in student achievement. In 2012 in Penley on Education and Energy, I had written about how Mr. Ham made a difference. He led with a strategic choice – commitment to a school’s cultural changes in the face new digital learning tools. Mr. Ham took risks; he made strategic choices. He led. His schools were better for it.

We too often see the alternative – a school or college leader whose interest is in the next career step, a more prestigious school to head, or a higher salary. Such individuals may achieve what they want for themselves, but they are not good leaders. The school or college they leave behind is little changed by their time as its leader. Few strategic choices were pursued that would have made a real difference in the school. The superficial was their modus operandi; publicity and self-promotion were their rewards. That is not good leadership.

Good leaders, the kind who are recognized by the Rodel Foundation and make a difference in a school, face many barriers. External constraints inhibit changes and learning innovations. Long-time stability in the education industry presents a leader with a culture of steadiness rather than innovation. School leaders’ own career goals make risk-taking on behalf of the school questionable for them. Tenure, unions and the absence of valid, effective internal performance evaluation of teachers or professors limit them. It is much easier to be an administrator or a cheerleader than it is to be a good leader.

Good leaders make strategic choices that transform their schools. But strategic choices bring risk. We understand that from business. What we need to see are changes that result in the selection and encouragement of more good leaders of schools. This means changes to the selection process of school leaders. It means limits to the external constraints that we place on schools, especially K-12 but also the legislative constraints on public colleges and universities. It means changes to the boards with a focus on governance rather than operational management.

Realizing the goal of school and college improvement is not entirely a matter of good leadership, but that long-remembered Brookings study made it clear. Leadership does matter.

America’s Future Labor Force as a Majority-Minority Nation

America’s economic prosperity is at stake. For those of us committed to economic development, this is serious. Our future is in jeopardy. We have it within our power, however, to mitigate the risk. Between 2040 and 2060 projections from the US Census Bureau data are that the US becomes a majority-minority country. The state of Arizona does so by 2025; California, New Mexico and Texas are already majority-minority. It is now clearer than ever that our future prosperity will depend upon the minority population’s preparation for the workforce. This more diverse workforce is the future of American business labor.

The issue of workforce preparation and education was thoroughly addressed a few years ago by a Commission appointed by then Secretary of Education, Margaret Spellings. In meeting her with other university presidents, I was impressed with her understanding of the linkages among higher education, K-12 and America’s labor force. The Commission’s final report found that

America’s national capacity for excellence, innovation and leadership in higher education will be central to our ability to sustain economic growth and social cohesiveness. Our colleges and universities will be a key source of the human and intellectual capital needed to increase workforce productivity and growth.

In that report and in previous, preliminary draft reports, the Commission linked our future economic prosperity to the capacity of K-12 education to prepare students who were ready for college at graduation. Readiness for college in math, language and science is essentially the same for readiness for work. A major effort to raise high school standards ensued with the focus on college and work readiness.

As we approach a majority-minority US population by mid-century, the failure of our educational system becomes ever more alarming. A college education is increasingly essential for job preparation, and completion of high school is a prerequisite. Yet, too many minority students in our K-12 schools are still not succeeding. Across the US only 58% of Hispanics and 57% of Blacks graduated from high school while 85% of whites graduated on time in 2013. An alarmingly low number of Native Americans – only 49% – graduated on time.

There are policy initiatives that we can adopt in order to change the dismal future that appears to lie ahead. I will mention only a few:

  • Adoption of higher state and local standards that are linked directly to college and work readiness. The Common Core, despite the controversy, is focused on raising standards and increasing college and work readiness;
  • Access to private and charter schools for minority and low-income students. States like Arizona have led the way with charter schools and the introduction of rigorous reauthorization processes by the Arizona State Board for Charter Schools;
  • Higher teacher pay for schools that are remote and rural, e.g., schools on Indian reservations and low performing schools in city centers; and
  • Adoption of Move on When Ready, a program that the Center for the Future of Arizona has embraced from the National Center for Education and the Economy.

Educational policy choices are tough to implement. There is good reason. We experienced K-12 education, and we have strong feelings about it. But a failure to adopt innovations, a failure to introduce policy changes, and a failure to invest public money in selective policy changes is a mistake. We need to alter what appears to be a future of limited economic prosperity. It will become too late by mid-century. We still have a chance.

Tesla’s Home Storage System – Disruptive for Utilities

The real impact of the recently announced Tesla battery home storage system will be to utilities. And this will be a disruptive impact. The Tesla battery, along with a sophisticated power management system, has the potential to substantially decrease the demand of a home solar system on power from the grid and on the grid, itself.

Several utilities, including those in Wisconsin, New Mexico and Arizona have introduced fees that raise the costs for a solar homeowner’s use of the grid. The argument from utilities is that solar homeowners place demands on the grid without paying for the full expenses of the utility for grid maintenance.

Most home solar systems do not isolate the home from the grid. During peak power times and in early evenings, solar homeowners purchase power from the grid. During sunny, non-peak hours, they sell excess generated power to the grid through net metering agreements. Net metering, which is policy in most US states, allows a solar homeowner to provide home-generated power to the grid during sunny, low peak power periods. The solar homeowner then uses power from the grid during more expensive high peak power periods such as hot sunny afternoons or early evening. But they offset the homeowner’s cost of the more expensive peak power during a billing cycle with their own power, which was sold to the grid during the non-peak period of the day.

Newly imposed fees by some utilities such as Arizona’s Salt River Project (SRP) are designed to share more fairly the utilities’ expense for the grid and its maintenance among those with and without home solar systems. For example, SRP has recently introduced a grid fairness fee that is based on a solar homeowner’s use of peak demand power. With the Tesla battery or an alternative, along with a sophisticated power management system, the SRP customer with home solar can substantially reduce its demand for peak power by depending upon stored power from earlier in the day. This will further reduce the solar homeowner’s dependence on the grid. And it will leave more of the expense for the grid to the utility and to customers without solar power.

Tesla’s new home battery, among others such as some recent ones from Germany, will be disruptive. Depending upon a homeowner’s demands for power, it can isolate a home from the grid or nearly isolate it, especially with likely improvements to the battery and related technology. It can certainly substantially reduce the solar homeowner’s dependence on the grid. In places like Arizona, where some solar suppliers have discontinued installation of home solar to SRP customers, the Tesla battery and its competitors will reopen those markets to home solar systems.

We are seeing substantial improvements to the efficiency of photovoltaics, lithium ion batteries and battery power management systems. Those improvements have the potential to alter how we generate power, who owns power generation systems, and how we maintain a power grid that we will continue to need.

What Happens After College Matters

What happens after college matters – to graduates and their families. As a result of a college education, graduates should be prepared to begin their careers or enter more advanced education for specialized fields. Some companies are providing just what graduates need in order to find employment, and one of those is AfterCollege, a San Francisco-based company, started by a Stanford graduate, Roberto Angulo. I am honored to serve as an advisor to the company.

AfterCollege is committed to matching graduates and interns to potential employment opportunities and meeting companies’ needs to find knowledgeable and skilled employees for their job openings. Because AfterCollege is committed to matching the right graduate to the right job, it is very focused on the analytics associated with matching student to job opportunities. That means that AfterCollege addresses one of the critical outcomes of an undergraduate education – the right employment opportunity.

Besides its increasingly sophisticated analytics, AfterCollege works closely with a student’s faculty member. We know from students’ self-reports that a faculty member is the second most influential person in their career-related decisions, after their parents, of course. What may surprise many is that the same self-reported data place the university’s career center much lower in its relative influence on them. It is the self-report data that have confirmed AfterCollege’s commitment to work closely with faculty members. Metrics collected by AfterCollege show that faculty members read its emailed messages about jobs. That makes these influential people even more effective in supporting a student’s career decision-making.

AfterCollege is working hard to target jobs that it sends to a student who signed up for that service, and comments from users indicate that AfterCollege’s service is being well-received by those students. The company has made a practice of improving its analytics such that the right job is targeted to the right student. And the analytics confirm the successful targeting of jobs to students with students’ own positive responses. One student recently said, “I like the analytic-driven approach that AfterCollege seems to use.” Another user of AfterCollege pointed to its access to employment opportunities by saying, “So far, this is the site that allows me to apply to jobs I haven’t found at all on other sites.”

We depend heavily on colleges to provide the learning experience that prepares students for career success. Thankfully, there are companies like AfterCollege that have made a point of understanding how students make career decisions and what employers need from students. Luckily AfterCollege’s analytics and its faculty-driven focus are making it easier on both.