by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
The simple answer for private colleges and universities is No! At least not for the next ten to fifteen years as the slide down the demographic cliff continues, normalcy will not be evident. Besides the impending drop over the cliff, technology will take a sizeable toll of private colleges and universities. While technology promises great cost savings and new ways to teach student, the full nature of these changes is unknown.
What could a technologically-driven educational enterprises (AI) look like in the near future.
- We are now in the stage where AI technology is providing a sophisticated editing function for administrators, faculty, and students.
- Starting the stage where AI is taking over administrative functions and teaching courses.
- Next stage, AI will replace faculty.
- Future stage, AI will become the college.
Technology could lead to these destructive outcomes for non-elite private colleges and universities:
- These colleges will struggle to compete against AI entities assuming that students remain price sensitive and AI can produce a degree faster than a college with a traditional campus.
- Will be unable to compete against massive technologically-driven educational enterprises, as a result, they will fall by the wayside.
- Will not be able to afford the technology to enter the massive technologically-driven enterprises, as a result, they will fall by the wayside
- Since they are not first entries into the technologically-driven educational market, they will be too late and will fall by the wayside.
- They will have to find unique niche academic and on-campus programs to attract students, and there may not be enough students who can afford traditional colleges offering a niche campus.
Dealing with AI as a Competitor
When AI becomes your main competitor, everything will change, and it will happen quickly and be costly to the college. First, the marketing department will need a very large budget to continuously inundate prospective students with messages, which will cost multimillions Second, the college will have to narrow its academic programs to directly fit its niches. Third, it will need to redesign services and programs to reduce costs to a minimum. Fourth, it will need to evaluate the productivity of tuition discounts. Fifth, the college’s advancement program needs to produce millions in donations and minimize endowed donations because they reduce the flexibility of the college, when it needs to quickly respond to sudden and massive changes in their competitive market.
by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
What is breathing room? It is simply the amount of cash needed to survive for one year, in particular enough cash to make it through the summer months. How does breathing room disappear here are the baker’s dozen ways:
- Borrowing to the point that all the property and buildings are 100% collateralized leaving no capacity to borrow money in an emergency.
- Waiting too later to cut expenses when expenses grossly exceed net revenue
- Raising tuition discounts (unfunded financial aid) to the point where the college receives only pennies on the dollar from tuition revenue.
- Losing the opportunity to add new revenue generating programs because there is insufficient cash to pay for the start-up.
- Delaying faculty buyouts, in particular tenured faculty, until there is not enough cash to pay for the buyouts.
- Continuing to enroll students in programs that do not produce enough revenue to cover the cost of the program or overhead.
- Postpoing negotiations with a lenders until the college has lost any leverage with lenders to either restructure debt or permit the college to delay interest payments several years.
- Over invest in private equity, which do not have an active market because they are not easily sold to generate cash. Some private equity positions, if closed early, could result in losses of more than 50% of the original cost.
- Carrying administrators who do not have the skills to do their work. This is particularly devastating when the borderline competent administrators are chief financial officers or the chief marketing officer.
- Failing to monitor average class sizes with the result that small classes do not cover the cost of the faculty.
- Deferring until too late the termination of academic programs tin which the revenue generated does not cover their direct costs or make any contribution toward administrative expenses.
- Keeping buildings open, in which they have large amounts of unused space or in the case of residence halls, they are short the number of residents needed to cover operating expenses and debt service.
- Keeping recruiters and gift officers, whose efforts fail to cover their pay.
by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
When a college is entering deep financial distress, there is one question that the president needs to answer – how many administrators and staff are needed to run the college. This administrative model has guided colleges for generations – a chief administrator is needed for every department and the department needs as many staff as the administrator claims to be needed to do the work of the department. However, in times of deep financial distress, this model is no longer workable. Here are several suggestions on downsizing an administrative structure. These suggestions will substantially increase the workload of those administrators or staff who remain, but the reductions must happen for the college to survive. There are several more points at the end about what to cut during a period of deep financial distress.
- Dismiss the position of the Chief Academic Officer. The president should be able to do the work of the Chief Academic officer.
- Dismiss the positions of assistant academic department administrators and staff. Academic department heads should be able to the work of their subordinates.
- Retain only the Development Officer, all other administrators and staff should be dismissed.
- Are all revenue centers – residence halls, dining halls, bookstore, athletics, and any other revenue center producing net positive revenue after the allocation of fixed costs? If a revenue center is not producing net positive revenue contributor, contract it out or close it.
- Retain only one administrative officer as head of all non-academic revenue services. As long as the college has a sport program, it will need to keep the athletic director. Preferably, the athletic director should coach one of the sports.
- End all free items for new and current students because these costs can result in large expenditures.
- End internal mail delivery services, the departments should pick up their own mail.
- Replace the head of building and grounds with a hands-on worker, if the current head can do the work, keep the person. Eliminate remaining maintenance staff. Keep only one member of the ground staff to handle grass cutting, trimming and snow removal. Only emergency repairs should be made.
- Revise expensive benefits by requiring larger contributions for health insurance, reduce or eliminate the contribution to retirements accounts, and reduce or eliminate any other employee benefits that require cash payments.
- Replace the Chief Financial Officer with a Chief Accountant. Eliminate all other financial and office positions except for the Bursar and Payroll.
- All expenditures no matter how trivial must be approved by the Chief Accountant. Anyone who makes a purchase that violates this directive will be responsible for the cost or will have to return the purchase.
- Can the CIO run basic operations with just one assistant? The CIO should find the least expensive phone and internet service for the colleges.
- Only offer summer courses and programs, if they generate sufficient net positive revenue to cover fixed costs.
- Cancel or postpone all construction.
- Stop all travel except that needed to save the college.
The Big Rules
Economize, Save Cash, Look for New Sources of Cash
by Michael K. Townsley | May 9, 2026 | Presidential Leadership
Over the next decade, the failure rate of private colleges will accelerate as financial reserves are depleted by these conditions: demographic cliff, rising operational costs, falling preference for degree, and tougher price completion. A recent report in The Hechinger Report[1] reports that more than a quarter of private colleges are at risk of failing in the next ten years.
A private college’s chance of surviving the next decade will depend on presidents who know how to manage power to reshape their colleges. Regrettably, most private colleges presidents come up through an academic system, which co-opts them into believing that change and presidential power is debilitating to the success of the institution. President, both aspiring and sitting chair, have learned that they are mere caretaker who are left playing the game of shuffling ideas though the faculty and hope something of the idea survives. Presidential power is further depreciated because most boards typically choose to avoid conflict and therefore thwart presidential use of power to make change.
This paper examines the presidential forfeiture of power, concept of power, and how power is constructed to effect change that serves the mission and interest of the college.
Why College Presidents Forfeit Their Power?
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- Dual governance, in which the faculty retain the right to veto academic decisions by the president;
- Presidents, who have been directed by the board to avoid conflict with the faculty;
- Presidents, who are wary of revising contracts, handbooks, board policy, and mission statements because they do not understand their prerogatives;
- Presidents, who believe that the college cannot risk bad publicity from large scale changes to policies, procedures, and programs;
- Presidents, who have not established a strong relationship with the board of trustees and have not clarified if the board will support major changes to academic or operational programs.
- Presidents, who do not understand financial reports nor the interrelationships between operation financial decisions and financial statements;
- Presidents, who do not have deep academic experience, as a result, they defer uncritically to the faculty on academic decisions;
- Presidents, who do not know how each of the offices of the chief administrators operate, as a result, they defer to the chief administrators on workloads, policies, procedures, budgets, and hiring;
- Presidents, who do not understand their discretionary authority or their control over resources that can be used to influence the support or damp the opposition of faculty or staff;
- Presidents, who do not understand how to conduct strategic planning and tend to defer planning to large groups, which diffuses responsibility for a decision and tend toward recommendations to continue the current course of action which is not working;
- Most presidents, who are risk averse, because a) they may not understand how their college operates, b) they came up through the academic ranks, which is inherently risk averse, and c) faculty tend to assume that the status quo is preferable and cannot be changed without destroying the tranquil state of the college;
- Presidents who are unskilled in basic management techniques or how to communicate decisions, delegate, authority and responsibility, efficiently manage the allocation of resources, or assess performance;
- Boards of trustees, who persist in micromanaging presidential decisions and meet with faculty and staff without inviting the president; thereby increasing a president’s risk aversion;
- Boards, who do not explicitly tell the faculty that they may only make recommendations to the board and do not make final decisions on hiring, policy, and procedures.
Why Are Presidents of Private Colleges Reluctant to Use Power?
The preceding discussion about presidential reluctance to employ power in decision making can be boiled down to the fear of the faculty. Simply put, the faculty conflict can destroy a president’s career.
Presidents often believe that faculty have greater power than they do because of board policy, contracts, governmental regulations, and accreditation standards. Even presidents, who clearly recognizes the signs of an impending financial crisis, may believe that their hands are tied because faculty power is stacked against them. Under this stress, presidents may shy away from eliminating academic programs, terminating excess faculty, reducing pay, or cutting academic budgets. It is not beyond the realm of possibilities that faculty will vehemently oppose a president attempting to reorganize to end severe financial distress. There are too many examples of faculty opposition that stymies change. In widely publicized cases, the immediate loser is usually the president because conflict and public outcry can end both a job and a career. If the college is in deep financial distress, and the faculty stops large scale changes to save the college, then they too will lose. In their case, the loss may not simply be the loss of a few colleagues, but everyone will lose their job when the college closes.
Basic Concepts of Power and Authority
Before we throw in the towel on making difficult choices and leading a major reorganization, let us first look at the concepts of power, authority, and how power can be used without destroying careers or the college.
Concept of Power
Power is the capacity of a one person to convince another person to serve the interests of both parties.
Power vs. Authority
Power is an overarching concept while authority is an element of power. The difference between the two is that power is accessible to all members of an organization, who may or may not further productivity. Power, per se is not formally assigned within an organization,
In contrast, authority is a grant of legitimacy for decisions and actions subject to corporate charters, state agencies, and state laws.[2] These grants of authority are assigned to certain positions in a bureaucratic organization. Authority establishes the right to direct others to follow orders in order to carry out the mission of the organization. A corollary is that another member of an organization cannot take on authority without the express approval of an upper-level manager/administrator and/or the sanctioning of the change by the board of trustees.
Use of Power in Decision-Making
Charles Dwyer, a noted authority on power in organizations at the Wharton School, describes power as the ability to determine and serve the needs of others to affect a decision that serves both of their interests.
According to Dwyer, members of an organization act in recognition of their self-interest that can be used to shape how we get cooperation.[3] As he sees an organization, it is a legal construct “that [is] nothing more than a [set of] means, tools, and instrumentalities in which members … can exploit for their purposes.[4] Dwyer points out that those purposes may include “power, security, respect, esteem, status, acceptance, approval, gratitude, appreciation, recognition, success, achievement, autonomy, …and transcendence.”[5] Dwyer further notes that leaders will deploy power to effect change by accessing the personal-value structure of the members of the organization
Summary
Large scale change in a private college for whatever reason is a power game that many presidents see as a losing proposition. Nevertheless, Dwyer points out that presidents can access the internal dynamics of their college to attain change. However, there are a few presidents who do take the challenge to save a college because they fear the consequences of losing the battle. Yet, there are presidents who survive a reorganization because they understand how power works and how to design change to serve the interests of the members of the institution. Of course, it is even a difficult task for these latter presidents, because they will need strong board support
Endnotes
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Marcus, John (April 13,2026); (Retrieved April 15, 2028); “More than a quarter of private colleges are at risk of closing”; The Hechinger Report; As one Vermont college finishes its last semester, a new projection shows that 442 more are at similar risk. ↑
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Gertg, H. H and C. Wright Mills, Translators and Editors (1946); From Max Weber Essays in Sociology; Oxford University Press, New York. ↑
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Dwyer, Charles (1991); The Shifting Sources of Power and Influence; American College of Physician Executives; Tampa, Florida; pages 13-14. ↑
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Ibid; p. 16. ↑
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Ibid; pp. 20-21.
by Michael K. Townsley | May 9, 2026 | Private Colleges & Universities in Crisis
Pulling a college back from the brink of financial distress requires an extraordinary effort by all segments of the college – the board, president, administration, faculty, staff, alumni, and everyone who has a stake in its survival. This blog outlines several common steps to save a college at the brink of financial distress. Let’s make it clear, the process of saving these colleges will involve a complete restructuring of the college. Before any high-level financial steps are taken, the president needs to get the backing of the board of trustees, next it needs to clean house, then the president needs to quickly find new sources of revenue, and the college will more than likely need to deal with its debt. All of these steps should be designed to give the college several years of breathing room so that it can develop programs to generate long-term positive net income. Pulling a college from the brink of financial disaster boils down to a major reorganization of the college to cut costs, raise revenue, reduce debt, and consider borrowing from the endowment.
Board of Trustees
- The president must present a coherent plan to the board describing the current and forecasted financial condition of the college. In addition, the plan should: layout the goals to end deficits by cleaning house, developing new revenue sources, dealing with debt, and borrow from the endowment.to give the college more breathing room.
- The board will need to approve a motion that clearly states: their direction to the president to reorganize the college to eliminate short and long-term deficits, their expectation that all employees to support the actions of the president, and their understanding that the reorganization will not be completed in a single year but will continue for several years.
- The chair, executive committee and the president should meet with faculty and staff to emphasize the support of the board for the changes that will be taken by the president.
House Cleaning
- Cut Expenses by:
- Closing academic programs in which enrollment does not cover the direct costs of operation. This action will involve the termination of some faculty contracts and terminating the employment of some program staff.
- Identify academic programs with an excessive number of faculty and staff given the enrollment, then eliminate staff and faculty based on the procedures established in the faculty handbook.
- Redesign non-academic staff positions with the goals to eliminate redundancy and disorganized workflows, which should lead to fewer staff employees.
- Eliminate or consolidate the number of administrative departments, which will require that administrators and staff will take on broader responsibilities and may result in fewer administrators and staff. In cases where the college is in dire straits, the president should take over a chief administrative role, for example, the president should take over the role of chief academic officer.
- Faculty and administrators will need to take over work formerly done by their former staff assistants, such as copying, mail delivery, typing, and any other work that was the responsibility of a terminated employee that must be done.
- Conduct an early retirement or incentive campaign for faculty, administrators, and staff to cut long-term costs.
- Because the college cannot survive without cash; take these steps:
- Consolidate offices and classrooms into fewer buildings; employees will have to move; there will be no choice in this step.
- Sell grounds, buildings, and equipment that are not needed.
- Arrange with students to pay their overdue bills.
Find New Sources of Revenue
- Begin a save-the -college fund raising campaign.
- Find new revenue sources that quickly generate new non-trivial amounts of money.
- The best source for new money is sports with large teams so that.
High Level Financial Action – Deal with Debt
- Start by listing all debt and covenants. Determine if the college has violated any covenants. The president will need to deal with this before meeting with lenders to negotiate a consolidation with a reduction in principle.
- Meet with lenders to negotiate the consolidation loans through a reduction of principle; the college will need help from a debt specialist during the negotiations. As you would expect, these are very difficult negotiations, but are also critical for distressed colleges carrying heavy debt loads.
- Too often financially distressed college have over-collateralization their existing loans. This reduces the capacity to borrow.
- Reappraise the physical value of the college to determine if the value of the campus exceeds the amount of collateralization, which would provide room to borrow funds to support the reorganization.
High-Level Financial Action – Borrow from the Endowment
- If the college has an endowment fund, the college should plan to take large loan to provide breathing room during the reorganization.
- Steps to taking an Endowment Loan.
- An endowment loan requires formal approval by the board and by the relevant state government office.
- Prepare a document that delineates the current and long-term financial distress of the college, the steps being taken internally to reduce the financial distress (House Cleaning and New Revenue Sources), the amount of the loan, the impact of the loan upon the endowment fund, and the expected payback period and the interest rate to be used to compute the annual payback amounts until the loan is paid-off. Provide this information to the college’s attorney and to the board.
- Contact the Attorney General (AG} for a meeting that would include the chair of the board and the college’s attorney. The purpose of the meeting is to learn about the legal procedures to borrow from the Endowment Fund and inform the AG estimated time to complete the process.
- Following the meeting the college’s attorney should prepare a motion for the board that will be part of the documentation submitted to the state requesting authority to take an endowment loan.
- After the motion is approved that was written by the college’s attorney, the college’s attorney submits the and the formal documentation to the Attorney General’s office.
- After approval maintain documents and records transaction in the records.
This list is only a partial guide; each college is unique. It will not be easy, but the survival of the college will depend on hard and painful decisions. If an obstacle arises that threatens to stop the process – PRESS ON!