Competitive Advantage Comes From Internal Capabilities

In a nutshell, over my past 10 posts, I have advocated that most private colleges and universities should pursue a focused differentiation strategy based on a unique mission and vision that solves a significant problem for its target customers. My last few posts on this topic will address how schools determine which points of differentiation will offer them a significant competitive advantage over their competition that can be sustained over time.

Sustained competitive advantage comes from the internal resources and capabilities of the organization. And not just any resources and capabilities. They have to meet specific criteria (VRIN – sorry, another mnemonic device):

Valuable – Allows the school to solve a serious customer problem

Rare – Not widely held by the competition

Inimitable & Non-substitutable – Competitors can’t easily imitate it or substitute something else equally valuable for it

Valuable, rare, inimitable, and non-substitutable resources and capabilities are usually going to be intangible. Have an illustrious group of alumni? A campus on a plum piece of real estate? An award-winning, LEED-certified student union building? A faculty full of Fulbright scholars? Chances are that your competition does as well, or can offset that resource with something else (i.e your green building initiative = my big stadium and winning football program). These sorts of resources simply cannot lead to a sustained competitive advantage. They are widely held, and don’t solve the problems faced by today’s students. In fact, to the extent that they make tuition skyrocket, they’re making the problem worse.

If this is the case, then why do so many schools seek to enhance their reputations by going on building sprees, making huge investments in winning sports teams, luring star researchers, spending millions on ancillary student life enhancements, and the like? I contend that the answer is that these tangible things SEEM like they will make the school more attractive to students, and students may actually say they like them. However, the trick is to take these tangible, widely held resources, and find ways to use them that benefit the students and cannot easily be replicated by the competition. Some examples:

  1. Schools often brag about their large number of alumni, but do they actually know where these alums are? Are the alums actively engaged with the school? The ability to attract and engage alums in productive ways is a true distinctive capability for a school.
  2. Schools often brag about their excellent faculty and star researchers, but are these faculty accessible to the students? How often do these professors teach? Hold office hours? Creating a faculty culture of engagement with students is a critical and rare capability among all universities, particularly ones that aren’t Carnegie Research I institutions.
  3. Schools often brag about their excellent liberal arts core and highly sought after professional majors, but are these two areas integrated? Do they flow together, or are the students just offered a smorgasbord of class offering and told how many to choose from each area? Truly integrating the academic silos of the university and advising students on how to best chart their path through the curriculum is a rare and valuable capability.
  4. Schools often brag about their job placement rates and career services, but how strong are their relationships with local employers? Do they consult with the employers about what skills their new hires will need? Do they integrate those skills into the curriculum? Have they created a smooth transition from classroom to internship to employment? Integrating careers and academics into true experiential educational opportunities is another rare and valuable capability.

These are just a few examples. There are many others, and each school must look closely at their current situation and aspirations to determine what their distinctive capabilities should be. The point is that these intangible capabilities, rather than tangible resources, are more likely to lead to true competitive advantage that is sustained over time.

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Why Do Kids Go to College?

In graduate school, I had a particularly curmudgeonly professor who claimed that college was simply post-adolescent day care, and that parents paid tuition and other fees just to get their kids out of their hair for four years until they grew up and were able to support themselves. He saw the parties, sports, Greek life, and everything that went with it as a way for kids to blow off steam in a relatively safe and supervised environment. When I thought back on some of my college escapades, I saw his point.

In her MOOC about the future of higher education, Cathy Davidson suggested that modern higher education, which in the US was largely developed in the 19th century, evolved to train workers for the new industrial age. In her words, to “turn farmers into factory workers and shopkeepers into corporate workers.” She believes that the educational focus on timeliness, standardization, productivity, and segmentation of knowledge were the direct result of the shift to an industrial society. When I think back to the rigidity and rote memorization that characterized much of my education, I see her point as well.

But these are society-level views, and not much use to a college president. She needs to know what makes a given student pick a given school, preferably HER school. There are various rules of thumb for this – a kid will go where his friends go. A kid will go to the highest ranked school she gets into. A kid goes to the school that makes the best first impression when he comes for an initial visit. These things may or may not be true, but again we can clarify the discussion by adopting the view that higher education is an industry, and using the tools of strategic management.

In the view of a strategist, the student (and their parents) are consumers of a product (their education), and they choose which product to buy based on the one that solves a burning problem for them. The trick is to find out what the problem is. It is even trickier because the consumer themselves might not know that they have a problem until they are presented with a solution.

It is easy for faculty and administrators to confuse the burning problems that our students (and their parents) have with what we think students (and their parents) OUGHT to be worried about. We take it as an article of faith that students need a broad-based liberal arts education, to develop critical thinking skills, to become refined, well rounded, and civilized. We might also agree that students need job skills and career counseling to make them employable upon graduation. And who could argue with those things? That is the received wisdom we were taught growing up, and universities in the US have operated based on those assumptions since the 19th century.

The problem with these assumptions is that students face very different landscape than they did in previous generations. Think about the one of my favorite movies, Animal House. The white male students at the Delta House fraternity spent almost no time studying, as it interfered with their partying and attempts to get laid. They changed majors arbitrarily. They antagonized the dean so much that they finally got expelled from school. They reacted this news by causing a riot and committing wanton acts of destruction and any number of felonies. Yet the montage at the end of the movie showed that most of them eventually graduated and entered into successful, lucrative, and respected careers. Yes, it’s a spoof, but one of the reasons it’s so funny is that it’s a pretty accurate reflection of college students’ assumptions in the 20th century. Somewhere in the 1970’s or 1980’s, the landscape started to change. Now most students have no expectation, and little hope, of finding a respectable middle class job at graduation. 60% of adults in their 20s and early 30s receive financial support from their parents. 20% of them live at home. 45% have outstanding student loans averaging $20,000. Half of recent college graduates are either unemployed or stuck in low-wage service industry McJobs. Their lives are very different than the denizens of Delta House.

This is the elephant in the room when it comes to college decisions. It is the fundamental problem that students (and their parents) face today, and I would argue that most universities, while paying lip service to internships, career counseling, and experiential education, are not fundamentally addressing it. Most students today and in the future will not have the luxury of attending a four-year country club on their parent’s dime at $60,000/year (And rising. After a few years of slow growth, tuition is rising faster than inflation again). They are going to have to work their way through school, or delay going to school and perhaps return later to complete their degree. Schools are going to have to find a way to be both flexible and affordable. This will involve the use of (gasp) technology, not to “disrupt” higher education, but to enhance and modernize it.

The traditional liberal arts are excellent and highly useful, but are no longer sufficient to develop broadly educated students. Students need to truly understand the technologies that shape their world and how they interact with it. They are also going to have to learn to think entrepreneurially (by which I mean using creativity and innovation to solve problems) so that they can address the societal challenges that they face and have the tools to forge their own careers rather than depending on large organizations to do it for them. Schools are going to have to radically rethink their general education requirements to ensure that students are learning the fundamental things they need to thrive in the 21st century.

Students are going to need to develop real skills, as most employers no longer provide fundamental training to their new employees. They are going to need credentials and certifications that qualify them for well paying jobs. They are going to need programs that are tied to industry, so that they flow seamlessly from the classroom, to internships, and finally to employment (the way law school used to work). Schools are going to have to provide a much stronger bridge between theory and practice than they have in the past.

Once universities move past trying to solve the problems of a 19th or 20th century student, they will recognize the burning pain the young adults have right now – the fear that they are not going to be able to support themselves, live independently, and make a contribution to society. Addressing that customer problem will cause strategic universities to radically rethink what they do and how they do it.

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The Rankings Game

A few months back, I was meeting with one of our alums, and he asked me how I would categorize universities in terms of quality. I was taken by surprise, so I had to think for a minute, and then I told him that U.S. universities could be separated into three categories:

  1. Ivies, and Ivy equivalents – I won’t try and list them, but there aren’t many and you could probably name most of them off the top of your head, although people will argue around the margins. These schools are so prestigious that just going there creates enormous opportunities for students regardless of what they actually do while they are there. Their extensive wealth and ample endowments allows for an impressive array of student services, and actually makes the cost of going there lower than many other schools even if their stated tuition is high. Their loyal alumni are always available to lend a hand or open a door for fellow alums.
  2. Many for-profit institutions, and some mismanaged or unscrupulous non-profits – These schools don’t provide quality instruction, advisory, or services, and their retention and graduation rates are abysmal. Their stock in trade is accepting students who are ill prepared for college work and who also don’t fully understand the costs involved. These students then load up on cheap government loans that they use to pay their tuition. When they inevitably drop out, they are left with a lot of debt that they have no way of paying and no degree to boot.
  3. Everyone else.

That’s right, I said it – I believe that outside of the very top and bottom tier, the prestige level of every school is more or less the same, and the decision of which to attend for students should be a matter of personal fit (programs, geographic area, campus vibe, etc.) and economics rather than grasping for the “best” school. That is why I’ve also suggested that schools should focus on finding points of differentiation between themselves and their competition and trying to attract students for whom those points are meaningful.

If you don’t believe me, look around your own workplace. Do you really know where anyone went to school? Do you really care? I’m the dean of a business school with 23 full time faculty members, and I’d have to wrack my brain to come up with a list of the schools where they did their doctoral work (I could probably hit 80%, but I’d have to think for a while!). Your undergrad alma mater matters for your first job and/or graduate school application. After that, it just comes down to what football team you follow.

Yet many schools don’t believe me. The administration of these schools feel strongly that every tick up in the rankings means more and better applicants. My doctoral advisor Alan Meyer warned me against taking a faculty position at what he called a “program on the make,” and that’s what he meant – a program that is playing The Rankings Game. This classic study of how business school deans and administrators viewed rankings by Business Week and US News found that “…the rankings are widely perceived to be the single most useful gauge of a school’s ability (or inability) to compete in this marketplace” (p. 321). They also found that administrators felt that they had to play the game, even though the game is inherently unwinnable. An analysis of movement within the Business Week rankings supported that view. In a 12-year period, only 15 schools had been ranked in the top ten, and only 29 in the top 25. In fact, the rankings are remarkably stable, and the top slots are held by a small number of elite, mostly private, schools with large endowments. This finding was confirmed by a later study. This study also found that the Business Week rankings are remarkably stable over time. The original top 20 list came out in 1988. In 2004, 18 of the original 20 programs had always been ranked, and all 20 were currently ranked. In fact, the two factors that explained most of the variance in the rankings were the age of the program and its initial 1988 ranking. Since schools can’t change either of these factors, the rankings game seems doomed to failure.

Lest you think that these results only apply to B schools, a very important study was just released in Research in Higher Education (I’m linking to an article about it in Inside Higher Ed because our library doesn’t carry this journal). This study confirmed the same finding for the general US News survey of the top US universities. They found that the rankings were very stable year in and year out, and that any movement was likely just statistical noise. They also found out why. In order to make a serious move in the rankings, a school would have to simultaneously dramatically increase expenses on student services, faculty salaries, etc. (by potentially hundreds of millions of dollars), dramatically improve their entering student profile (at a time of declining enrollments and increased competition for top students), and dramatically change their reputation with other school administrators (this is worth 15% of a school’s ranking). I don’t think it’s a stretch to say that doing all of these things at once is essentially impossible.

The lesson here is that schools CAN change, sometimes dramatically, and those changes CAN result in increased enrollment and retention. However, those changes are unlikely to cause the school to make a large move in the various school rankings, so any time or money devoted to that cause is likely misspent.

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The Limitations of the “Comprehensive” University

There is a prevalent sense among academics that a university is meant to be “comprehensive” i.e. provide a full range of programs and degrees at the undergraduate and graduate level. In fact, the dictionary definition of a university is a collection of schools or colleges. However, in the U.S. the terms “college” and “university” are used in different ways. Some would say that colleges only offer undergraduate degrees, while universities also have graduate programs, but that is not always the case. Dartmouth College, for example, offers a full slate of graduate and professional programs. Community colleges traditionally offer two year degrees and vocational training, but now often offer bachelors and even masters degrees.

This terminology reflects societal confusion about the role of universities. Should they all necessarily be offering a full slate of programs? After all, Harvard famously started as a school to train young men for the ministry, leading William & Mary to claim to be the first “real” university in the U.S. However, both were centered on liberal arts education. Land grant universities, which include many of our largest and most diverse public institutions, were tasked with teaching military, agricultural, and mechanical arts. Although they were not excluded from offering other programs, they were not required or expected to.

We can resolve this terminological and philosophical confusion by adopting the position that I have taken in this series of posts – that higher education is an industry, and that institutions of higher education are in competition for a scarce number of students. There are other ways of viewing a university to be sure, and as a professor I am never comfortable with considering my students to be “customers.” Nonetheless, without restating the obvious, most universities are dependent on tuition dollars to survive, so they do need to attract students.

Viewing higher ed as an industry is liberating for schools, because they don’t have to be all things to all people, and they don’t have to offer programs that are outside of their mission, competencies, and capabilities. Recall the Porter Strategic Positioning model from the last post:

In that post, I addressed the x-axis and suggested that differentiation was usually a far more attractive path to competitive advantage than cost for most private colleges and universities. In this post, I am addressing the y-axis and suggesting that narrow market segments are far preferable than broad for most private schools, particularly smaller ones.

The standard argument against this line of reasoning is that every student is increasing marginal revenue, so schools should try to attract as many qualified ones as possible. However, this is not always the case. Maintaining entire programs for a limited number of students is very expensive, particularly if there are a group of tenured faculty teaching very small sections term after term.

Is this a coded way of saying I want to get rid of the liberal arts, and have all universities shift resources from Arts & Sciences to Business & Technology like Quinnipiac? Not at all. Many colleges and universities have created a successful niche around the liberal arts. Take Holy Cross. 3000 students. All undergraduate. No professional or pre-professional programs (OK, they have Accounting and Computer Science, but still…). No continuing ed. No online programs. Yet enrollments are good, and their financial situation seems sound. What gives? They are small and tuition dependent (apprx. 80% revenues). Like other Jesuit institutions that have been struggling, it is certainly a very selective college, but it’s not an Ivy equivalent. Prestige is only part of the picture. They know who they are and what they do well. Their mission is to be a Jesuit liberal arts college serving the Catholic community.

Compare Holy Cross to Champlain College in Burlington, Vermont. 2000 students, both undergraduate and graduate. Only professional programs. A robust set of online and continuing ed programs. It’s also doing well. So well that The Atlantic recently called it “the ideal college.” Again, I suggest that their success rests in their focus on what they are good at. In Champlain’s case, they strive to provide “radically pragmatic education.” From their mission statement: Champlain College endeavors to be a leader in educating today’s students to become skilled practitioners, effective professionals and engaged global citizens.

What unites Holy Cross with Champlain College is focus. They are not “comprehensive universities” in any sense of the term. They both have only around 30 undergraduate programs. They do not claim to be all things to all people. I can’t claim to have any in depth knowledge of either school’s operations, but it seems to me that their focus is one of their strengths. There are many large public and private universities that can succeed as broad differentiators or low-cost leaders, but focused differentiation is the right path for most small private schools.

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Why Should I Go To Your School Instead of a Cheaper One?

The first half of most Strategic Management textbooks are often filled with the various models of Michael Porter. Around Chapter 4, the Strategic Positioning model is usually introduced:

Positioning

Like many of Porter’s models, Strategic Positioning is easy to grasp, but hard to put into practice. The main point is that firm strategies are pretty generic, and can be categorized by the eponymous 2X2 matrix. The axes represent the type of strategic advantage over the competition that is sought and the relative size of the target market. In this post, I will address the type of strategic advantage sought.

I noted in the previous post that the low cost position is very difficult to achieve, and can only work if the firm has meaningfully lower costs than its competition all throughout the value chain. These lower costs will allow the firm to charge lower prices and still make money. Rule #1 of price competition is that if a firm tries to compete on price without having lower costs, it will lose money and eventually go out of business. Rule #2 of price competition is that there is always someone hungrier or more desperate than you, and they will keep attacking you from below. For every Wal-mart, there is a Dollar Store or a Costco claiming to be even cheaper.

The low cost position is very tough for private universities. Even as public support for higher ed dwindles, public universities still get significant funding from their states. What’s worse, state legislatures are loath to raise tuition for voters’ children, so in-state tuitions are often artificially low. I believe that it is possible for private universities to compete on price, but it requires a radical reframing of the traditional university experience. I will address how a private university can compete on cost in a future post.

For a private university, differentiation is a far more attractive strategic position to pursue. Differentiators charge more than the competition, but offer their customers additional value that makes them willing to pay more for the product. If you think about it, differentiation is a far more common strategy than low cost. For every Wal-mart, there is a Best Buy, a Nordstrom’s, or an Albertson’s. These stores don’t claim to be the cheapest, but they are still plenty successful.

For private schools, prestige is the most obvious and attractive point of differentiation. Prestige – generally measured by external recognition such as school ranking services – is alluring to both faculty and administration. Who wouldn’t want to work at a “top ranked” school? However, moving up in the rankings can be a difficult and counterproductive exercise that puts great pressure on administrators to fudge the numbers, and often requires the school to try to be something that it’s not. In a future post, I will take up the topic of school rankings and trying to differentiate on the basis of prestige.

Rather than prestige, most private universities can and should differentiate based on features of the school or its programs that are valuable to potential students and unique to that particular school. If a school claims to be excellent at the same things as the other schools that it competes with, they won’t differentiate it in the eyes of potential students. Points of differentiation must be unique.

So how should a university differentiate itself? I believe there are two critical determinants: the points of differentiation must be valuable and meaningful to a population of students large enough to allow the school to meet its enrollment goals, and they must be congruent with the school’s unique mission and vision. That’s why I started this thread by talking about the need for a strong, unique mission statement. Choosing to differentiate based on a particular area means that it will become a strategic priority for the institution, and that investments will be made in building and maintaining it. If senior administration is going to make such a decision, there had better be buy in from the faculty, students and other stakeholders. And the only way to get buy in and support for strategic moves is if they are consistent with a mission and vision of the institution that everyone has agreed on. If you don’t believe me, check out the situation at the University of Southern Maine. Although the recent protests at USM center on budget cuts and the elimination of faculty lines, the underlying issue is a report produced by a presidential advisory committee that proposed a review of programs based largely financial profitability and the workforce needs of the region. Compare those rationales with the actual mission of the institution:

The University of Southern Maine, northern New England’s outstanding public, regional, comprehensive university, is dedicated to providing students with a high-quality, accessible, affordable education. Through its undergraduate, graduate, and professional programs, USM faculty members educate future leaders in the liberal arts and sciences, engineering and technology, health and social services, education, business, law, and public service. Distinguished for their teaching, research, scholarly publication, and creative activity, the faculty are committed to fostering a spirit of critical inquiry and civic participation. USM embraces academic freedom for students, faculty, and staff, and advocates diversity in all aspects of its campus life and academic work. It supports sustainable development, environmental stewardship, and community involvement. As a center for discovery, scholarship, and creativity, USM provides resources for the state, the nation, and the world.

Note that the Mission does not address meeting the workforce needs of the region. Maybe it should – that’s not my point. My point is that when the President’s advisory committee suggests differentiating on the basis of workforce readiness, but the faculty thinks their mission is to provide high quality education in a broad variety of disciplines, he is asking for trouble. The report does address the idea of alignment with the school’s mission in passing. However, it is not the main thrust of the recommendations.

This is not to suggest that the financial stability of the institution is not a critical consideration. Of course it is – it just isn’t a strategic one. A strategic process would start by uncovering what makes the institution special and unique, then ensuring that its mission and vision reflects that. Once the mission and vision are in place, the school can develop a strategic plan that supports and nurtures programs and initiatives that further differentiate it from its competitors in alignment with the mission, and scales back on programs and initiatives that do not. That way, when the president is asked why he is eliminating one program and not another, he has a reasonable, logical answer.

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Can Private Universities Compete on Price?

When I began teaching Strategic Management in 2003, Southwest Airlines was just entering the Philadelphia market. This proved to be very disruptive for the dominant incumbent, US Air. Whenever Southwest enters a market, the first impact is that overall fares in that market drop dramatically. It was easy to see why in Philly. US Air responded to Southwest’s presence by launching an ad campaign saying that they would match Southwest’s fares on any route they both served. Like any good professor, I was never one to miss a teachable moment, and I would ask my classes if they thought Southwest was upset by this challenge from US Air. Invariably, most of the class didn’t think so. But when I asked why, their thinking was less clear. That is because the students often confused “cost” with “price.” They were able to identify Southwest’s low cost strategy, but they equated it with charging lower prices than other airlines.

I pointed out to them that any firm could lower their prices. In fact, US Air had announced that they would do just that. Wouldn’t that make them competitive with Southwest? Of course the answer is no, because Southwest made money at the lower fare point, whereas US Air lost money. And that is because Southwest’s costs are lower. The key to a successful low cost strategy is having meaningfully lower costs than the competition throughout the entire value chain. Lower costs means that the firm can charge lower prices and remain profitable. Knee-jerk lowering of prices to meet the competition when your costs are higher than theirs means that you start losing money. It is a panic move that is doomed to failure. Executives who console themselves that it is only temporary will be in for a rude awakening when they find that customers who are accustomed to discounted prices do not react well to sudden price hikes.

Are universities just like airlines? In this respect, yes. Private universities discount their prices so much that the stated tuition has become like the sticker price of a car – a beginning point of negotiations that no one actually pays. They do this because they don’t have an adequate response when a potential student tells them that they could get a much cheaper education at Big State U down the street.

How much do private colleges discount? A lot, it turns out. According to the National Association of College and University Officers, the average freshman got a 45% tuition discount in 2012. All students averaged a 40% discount. These discounts might have been manageable when the supply of students was increasing and enrollments were growing. However, a recent report indicates that the number of students graduating from high school peaked in 2011, and most states will see moderate to sharp declines for the next 20 years.

You don’t have to look very hard to see the negative effects of trying to lure a shrinking pool of traditional college-age students with increasingly discounted tuition. St. Joseph’s University in Philadelphia recently disclosed an $8.7 million budget shortfall. They responded in two very un-strategic ways: across the board budget cuts and a plan to increase freshman admissions to raise revenues. Across the board cuts punish all areas equally, rather than investing in promising areas and cutting less promising ones, which would be the strategic response. And, as the faculty at St. Joe’s pointed out, increasing admissions in a time of decreasing applicants will mean lowering admissions standards. The Provost is stepping down after this term.

Realizing that escalating tuition discounts is a road to ruin, a number of small colleges and universities have lowered their tuition while reducing discounting. It is an interesting experiment, but may be a tough sell now that the notion of discounting is so entrenched. It turns out that people like the idea of getting a bargain, and we expect to negotiate over big-ticket items (houses, cars, etc). College tuition is the ultimate big-ticket item for most families.

There are other tactics that universities use to reduce costs for their students such as tuition freezes and four year tuition certainty, but I believe they mostly miss the point. It is not that affordability is not an important issue in higher ed – it is. But as I noted above, the real work of competing on price is accomplished by lowering costs throughout the value chain. Universities that want to utilize a low cost strategy will have to radically reinvent themselves and their business model. Some already are. My next post will be about strategic positioning and how universities can use it to address the question of costs.

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Making Actionable Goals

One more point about actionable goals and objectives before I move on to lesson #4: There are different ways to phrase them, and the best way depends on the institution’s situation. As an example, take a look at this objective from Drexel University’s Strategic Plan:

“Direct financial investment to academic priorities, targeting academic units with the highest potential for excellence, key areas of societal concern, and emerging fields in which Drexel can build a critical mass of talent…”

The objective then goes on to name an example of such a program, and then says that a comprehensive program review will be initiated. Full disclosure – I was on the faculty of Drexel for six years, and have always thought that the institution was very well run. I also don’t think there is another U.S. university that has achieved the level of growth in enrollment, reputation, program quality, or program breadth that Drexel has experienced in the past 20 years.

What I like about this objective is that it recognizes that distribution of resources is the real strategic decision in program development, so that is the objective, to direct financial investment. Now, what are the academic priorities? They don’t know yet, so first actionable item is to initiate a comprehensive program review. If that’s where they are, fine.

But let’s go back to the example in the previous post:

“Attain and maintain accreditations and national recognition for relevant programs”

What would be a better way to phrase this as a strategic objective? Well, one would assume that the school would prioritize maintaining accreditation for accredited programs unless there was a desire to close them. I would consider funding for maintaining accreditation to be a general operating expense, not a strategic imperative.

Funds for attaining accreditation are not regular operating expenses – they are a combination of one-time expenses and an ongoing commitment to increase funding to support accreditation standards. The programs that desire accreditation should develop specific budgets that include both one-time expenses (new faculty lines, site visit costs, new clinical facilities, etc.) as well as increases in ongoing post-accreditation expenses. These requests should then be prioritized and funded accordingly by senior administration.

Let’s say for the sake of argument that the school has two accredited programs:

Business

Nursing

And three others that would like to be accredited:

Journalism

Public Administration

School Psychology

The objective could then read something like:

Our doctoral program in school psychology will achieve APA accreditation by 2015. Our MPA program will achieve NASPAA accreditation by 2016.

The Journalism faculty may be upset with this objective, and the Public Administration faculty may dislike the delay, but at least a clear strategic direction has been established, and success or failure to achieve the objective will be clear.

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Good Intentions, Bad Outcomes

There is an acronym that every undergraduate business student knows (or should know). That acronym is SMART, and it is used to determine whether a goal or objective is effective. There is some variation of wording, but the acronym stands for:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-Bound

Goals and objectives that do not meet these criteria cannot be effective because they are not actionable – either it is not clear what exactly the objective is, or there is no way to determine whether it has been achieved. Many organizations are guilty of having strategic plans with goals and objectives that are not actionable, but universities are particularly susceptible to this for two reasons. The first is that they mistake objectives for aspirations. Aspirations are great, but as noted in an earlier post, they belong in mission and vision statements. Goals and objectives are deeper into the weeds – they describe how the institution is going to achieve their mission/vision within the foreseeable future, say three to five years (anyone who says they can tell you what will be happening in higher ed in 10 years is either lying or misguided!). Second, university strategic plans have a tendency to be developed by task forces made up of various constituencies – faculty, senior administration, deans, even students and trustees get involved. As I noted in my previous post, that doesn’t mean that faculty actually get to make real strategic decisions – they just get to have input in the plan. By the time everyone has their say and all interests are placated, the resulting document is often pretty anodyne.

As an example, I will use the strategic plan of a real university. I’m not naming it not because I’m worried about offending anyone, but because it’s not relevant – this particular plan is very, very similar to many others I’ve seen.

This particular university has four goals:

  1. Enhance academic excellence
  2. Achieve student success: academic, personal, and social
  3. Enhance resources and the university’s capacity to achieve vision
  4. Strengthen university’s identity, brand, reputation, and connections with the community

These seem perfectly reasonable goals. In fact, I sincerely doubt there is any university that does not consider these four items to be critically important to its success.

The university then breaks each goal down into 2 – 4 objectives, which are similarly vague. I’ll just list the objectives for Goal 1:

  1. Objective 1: Advance faculty excellence in teaching, scholarship, and service.
  2. Objective 2: Develop and offer academic programs of the highest quality.
  3. Objective 3: Develop and implement a signature undergraduate experience that develops lifelong learners.
  4. Objective 4: Design and enact transformative graduate experiences that develop future leaders and scholars

Again, so far so good. Nothing objectionable. Nothing with which anyone could strongly disagree. But again, what will they actually DO to achieve these things? Fortunately, the plan drills down further and provides specific strategies for each objective. Surely, at this level, we will get some goals that meet the SMART criteria, right?

Not really. Here’s one of the more specific strategies:

Attain and maintain accreditations and national recognition for relevant programs

Let’s analyze it using the SMART criteria:

Specific – It is specific about what the desired result is, but who is responsible for doing it? And which programs are “relevant?” What does “national recognition” mean?

Measurable – Maintain accreditation is measurable. You either do or don’t. But what about “attain?” We don’t know what the relevant programs are, so we can’t measure if they’ve attained accreditation. And “national recognition?” I suppose my blog is national, so perhaps my recognition of this plan counts!

Achievable – Hard to say, because we don’t know how close the programs are to achieving accreditation, and we don’t know what resources the university is willing to devote toward this goal. If the answer is none, I pity the poor deans who will be asked to gain accreditation and recognition for their programs with no additional resources.

Relevant – Again questionable. This strategy falls under Objective 2: Develop and offer academic programs of the highest quality. Does a high quality program have to be accredited and nationally recognized? Like any good academic, I could argue both sides of this one!

Time-Bound – Sort of. The plan is for the time period of 2013 – 2018, so we could say “by the end of 2018,” but that’s a big chunk of time to figure out the answers to all of the above.

There are around 50 strategies listed, and I could go through a similar analysis for each of them. Again, I’m not trying to criticize the intent of this document, which is very thorough and springs from the hard work of many intelligent, well-meaning people. The main point I’m making is that we can’t expect a particular desired result to occur unless we can define it along the SMART dimensions.

I’m not quite done with goals and objectives, but I’ll save the rest for my next post. As always, I welcome your thoughts & comments.

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Where Does “Strategy” Come From?

Once an organization sets out a mission and vision, it can begin the process of creating a strategic plan that is consistent with it’s mission and moves it toward its vision of success. There are a number of ways to do this, and I believe that the right way is to find a judicious balance between centralized planning and decentralized experimentation and exploration.

This post has been difficult for me to write, as evidenced by the long gap between posts. My original intent was to discuss the two-way flow of ideas from the top down and from the bottom up. I had in mind the work of Robert Burgelman on Intel in the 1980s (Organization Science, 1991), who found that executives at successful firms both created (“induced”) strategy and developed environments where strategic decisions came from lower (“autonomous”) levels of the organization and that major shifts in strategic direction were often the result of internal experimentation and selection rather than executive fiat. I wanted to use this idea as a springboard to point out that effective corporate senior leadership teams have dismantled their centralized planning apparatus, and that universities would be wise to do so as well.

The problem that I kept running into is that almost every university will claim that they do this, and no self-respecting university president would ever admit that the faculty are not intimately involved in the strategy making process. I also suspect that the vast majority of faculty members feel that they have absolutely nothing to do with the strategic direction of their university. So where is the disconnect?

I realized after reading this excellent post from the Harvard Business Review blog that the answer lies in the difference between formal strategic plans and actual strategy making. Yes, the faculty is included in the strategic planning process. They are invited to provide feedback, serve on committees, attend round tables and open forums, etc.

However, this work will usually only result in high-level goals and objectives that everyone can agree on. Here is a good example of strategic goals from Sarah Lawrence College:

  1. Cultivate a vibrant, diverse, and engaged student body
  2. Fortify the distinctive attributes of the college
  3. Renew our leadership role
  4. Build our capacity to deliver our mission

These are admirable goals and I’m sure they have broad consensus at the school, but real strategy is a series of decisions about how to allocate resources, what specific initiatives to pursue, etc. And in universities, these decisions are largely made at the executive level without input from faculty or lower administrative levels. The faculty may complain of their lack of involvement, but often restrict their interest to their traditional domains of teaching and research, leaving critical issues such as enrollment, retention, student life, and development to administrative staff.

Both of these tendencies are unfortunate. The senior leadership team has management expertise and a holistic perspective on the direction of the university. The faculty has domain expertise, and is closer to the students. They are in a good position to understand where the market is headed. Deans and other mid-level administrators have a combination of the two perspectives. All three groups are valuable voices, and the most robust strategies will include opportunities for all of them to have a hand in real strategic decisions.

This can work is by giving operational units freedom to experiment. A company where I worked for many years, Charles Schwab, proved this with one of the biggest strategic shifts in its history – the decision in 1996 to experiment with online brokerage. This idea did not originate from the executive suite. Rather, middle level employees with direct customer contact devised the initiative with the support of senior management. As the initiative showed more promise, it was organized into a separate unit reporting directly to the CEO. In 1998, when it became apparent that online trading would be a major growth channel, the unit was merged into the general retail operation. At the time, Schwab was the #1 online retail brokerage in the world, with over 3X as many accounts as its closest competitor (an academic discussion of this subject can be found here).

Like the most innovative companies, universities would do well by offering individual academic units the freedom and resources to experiment with new ideas that fit within the general context of the school’s strategic plan. Nurturing ideas that may seem out-of-the-box at first is a great way to discover truly breakthrough programs.

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Why Universities Need Strong, Meaningful Mission Statements

In my previous post, I argued that one reason universities are running into problems is that they have failed to master basic strategic management. Chapter 2 of virtually every Strategic Management text is about Mission and Vision statements, and the reason is simple – without a strong mission and vision it is impossible to create a strategic plan.

The strategic plan involves developing objectives to meet goals, but without a real mission and vision, how can the organization determine its goals? All decisions are reduced to basic financial motivation – increase revenues, build enrollments, etc. It is fine to desire these things, but the question is how to get there. There are many ways to attract students, but to be successful, a school must know precisely what it is and what it’s trying to achieve.

I was thinking about this issue when I read a recent article in Inside Higher Ed about the enrollment and financial woes of Pennsylvania’s 14 state universities. I lived in Pennsylvania for six years, and as I read through the list of schools I realized that I recognized the names of all of them, but I didn’t know a thing about any of them. I wondered if any of them used a unique mission and vision to drive their strategic thinking, so I decided to look up the mission statement for each of the schools.

Mostly, they were pretty easy to find, which is typical. Organizations often have a mission statement, but don’t really use it because they don’t understand how it fits into the strategic planning process. A table of the universities and their mission statements follows this post. At four of the universities I was unable to find a mission. That doesn’t mean it’s not there – just that it’s not easily accessible to the casual visitor.

However, just because a school has a mission doesn’t mean it’s a good one, or one that can be used as a focus of a strategic plan. A good mission statement is clear, concise, and tells you the reason the organization exists. That reason shouldn’t be overly specific, but there must be something unique about it. Of course the schools exist to educate students, prepare them for careers, make them good global citizens, etc., but so does every other school. It’s like saying Apple exists to sell electronic devices. Wait a minute – Apple was recently criticized for a mission statement that did just that! In both cases, it may be broadly true but not very helpful.

Of the 10 mission statements I found, none appeared to be particularly useful in stating exactly why the institution exists. A few were absurdly long, and appear to have been cobbled together from statements from a variety of stakeholder groups. The others tend to be remarkably similar. The schools are devoted to high academic quality, they want to prepare students to be leaders and citizens, they are committed to diversity, etc.

If I were advising these schools, I would recommend that before they add new programs or launch new marketing campaigns to build enrollments, or cut programs and lay off faculty and staff to reduce costs, that they think long and hard about exactly who they are and what makes them unique and special. That will form the foundation of an effective strategic plan.

Bloomsburg U. Bloomsburg University of Pennsylvania is an inclusive comprehensive public university that prepares students for personal and professional success in an increasingly complex global environment.
California U. To advance its ultimate mission of building the character and careers of students, the University shall focus its efforts on three goals: student achievement and success, institutional excellence, and community service. These interrelated ends will be facilitated by the following means: high quality faculty, students, programs and facilities. These means, in turn, will be funded through an energetic program of resource acquisition and stewardship.
Cheyney U. Established in 1837, Cheyney University of Pennsylvania cherishes its legacy as America’s first institution for higher learning for African Americans. Our mission is to prepare confident, competent, reflective, visionary leaders and responsible citizens. We uphold our tradition of academic excellence as we maintain our historical commitment to opportunity and access for students of diverse backgrounds. Cheyney University provides a nurturing, intellectually challenging and socially enriching environment.
Clarion U. None found
East Stroudsburg U. East Stroudsburg University of Pennsylvania will provide:

  • Challenging and contemporary undergraduate and graduate curricula that engage and equip students to critically appraise and apply knowledge in their lives and chosen fields of study.
  • A learning community that promotes diversity and views teaching as the university’s primary focus.
  • Varied opportunities for student and faculty research, creative endeavors and involvement in public service.
  • Leadership and service in the educational, cultural and economic development of the region.
Edinboro U. Distinguished by its focus on individual attention to student success, commitment to diversity, and responsiveness to the evolving needs of the broader community, Edinboro University provides the highest quality undergraduate, graduate and co-curricular education.
Indiana U. Indiana University of Pennsylvania is a leading public, doctoral/research university, strongly committed to undergraduate and graduate instruction, scholarship, and public service. Indiana University of Pennsylvania engages students as learners and leaders in an intellectually challenging, culturally enriched, and contemporarily diverse environment. Inspired by a dedicated faculty and staff, students become productive national and world citizens who exceed expectations personally and professionally.
Kutztown U. Kutztown University’s mission is to provide a high quality education at the undergraduate and graduate levels in order to prepare students to meet lifelong intellectual, ethical, social, and career challenges.
Lock Haven U. None found
Mansfield U. Mansfield University is dedicated to a personalized education with all programs grounded in the liberal arts. As a small, comprehensive public university, we are committed to promoting leadership development through character, scholarship, cultural awareness and service to others. Through our passion for learning, we positively influence the world.
Millersville U. Millersville University recognizes excellence in teaching and learning as its reason for being and is committed to offering students a high quality, comprehensive university experience of exceptional value. Dedicated to providing nationally recognized programs that embrace the liberal arts, the University provides academic opportunities which are supported by outstanding faculty who are also accomplished scholars, artists and practitioners and are supported by a talented and dedicated professional staff.

 

The University provides an extensive range of academic and professional programs to meet the interests and needs of both undergraduate and graduate students. To better prepare students for a diverse society and workforce, the University embraces diversity of people, cultures, ideas and viewpoints. By balancing traditional and innovative learning environments both inside and outside of the classroom, this inclusive campus community enhances learning outcomes and better equips students for their chosen professions. By preparing students to become well-rounded individuals for productive roles as civic and community engaged leaders and citizens, Millersville University contributes to the public good. The University stimulates intellectual and creative energy that fosters the growth of our students, faculty and staff and contributes to the social, political and economic advancement of the Commonwealth and the wider world. The Millersville University community pledges itself to academic freedom and encourages imagination and curiosity, unfettered discourse, the exchange of divergent and controversial opinion, and multicultural awareness and understanding within an environment of civility, mutual respect and cooperation.

Shippensburg U. Shippensburg University of Pennsylvania is a regional state-supported institution. It is part of the State System of Higher Education of Pennsylvania, which is made up of 14 universities located in various geographic regions throughout the Commonwealth. Founded in 1871, Shippensburg University serves the educational, social, and cultural needs of students primarily from south central Pennsylvania. The university enrolls students from throughout the Commonwealth of Pennsylvania, the Mid-Atlantic region, the United States, and various foreign countries as well. Shippensburg is a comprehensive university offering bachelor’s and master’s degree programs in the colleges of arts and sciences, business, and education and human services. The curricula are organized to enable students both to develop their intellectual abilities and to obtain professional training in a variety of fields. The foundation of the undergraduate curriculum is a required core of courses in the arts and sciences. These courses prepare students to think logically, read critically, write clearly, and verbalize ideas in a succinct and articulate manner; they also broaden students’ knowledge of the world, past and present. The university’s primary commitment is to student learning and personal development through effective and innovative teaching and a wide variety of high-quality out-of-class experiences. The ultimate goal is to have students develop to their utmost the intellectual, personal, and social capabilities they need to perform as competent citizens prepared to embark on a career immediately upon graduation or after advanced study. The personal attention given each student at Shippensburg is reflective of the strong sense of community that exists on campus and the centrality of students within it. The university encourages and supports activities which give students many opportunities to apply the theories and methods learned in the classroom to real or practical situations, such as faculty-student research and student internships. Student life programs and activities complement the academic mission and further assist students in their personal, social, and ethical development. Committed to public service and community-centered in its relationships to the region, the university works closely and collaboratively with other organizations at institutional, programmatic and individual levels to develop common goals, share resources and invest cooperatively in the future of the region.
Slippery Rock U. None found
West Chester U. None found

 

 

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