Michael Townsley and Robert DeColfmacker
By May of 2024, twenty private colleges have closed or announced that they are
closing. If this pace continues, sixty private colleges could close by the end of 2024. Before these colleges fall into oblivion, little is heard from the boards, and it seems that the college takes action that is too little and too late. The boards of these schools don’t
seem to be governing strategically nor are they looking at operational trends but seem to be reacting to immediate crises.
Even in the best of times, you would think that some board members would have the acumen to wonder what is happening at the college. Maybe they assume that the reports that they receive tell the whole story. Nevertheless, if they are doing their duty, they
should be receiving an annual audit report by an independent auditor and meet with the auditor without the presence of the president. Receiving reports and asking trenchant questions are two different matters.
Shouldn’t boards want to know what the trend has been for key economic drivers such as enrollment, tuition discounts, tuition, and net auxiliary revenue? Moreover, wouldn’t they want to know if there are adequate cash reserves to cover annual cash flow needs?
This information is readily available from audits, basic enrollment reports, and tuition revenue, tuition discounts, and net revenue and should be provided by the president as annual reviews of college’s operations.
The issue is given the parlous state of finances at many private colleges, why are boards not more assertive in demanding information, especially trending operational data.
Here are several possible explanations from our consulting and career experience.
- Sometimes board members see their role as mainly ceremonial and are not expected to actively oversee operational and strategic performance.
- Board may be risk averse because they don’t understand the academic programs, operations, or the role of the faculty.
- Sometimes board members don’t have sufficient business or organizational experience to help gauge school performance.
- Often, board members defer to a wealthy donor and possibly to other members with a dominant personality or to those with longer board tenure.
- Trustees sometimes defer to the president to provide and explain reports and do not depend on the president to explain more nuanced and granular details
beyond the basic reports.
- Boards also assume that presidents hire chief administrative officers with the
skills to do their jobs. However, if the president is mediocre, they will surround them selves with mediocre administrators.
- Sometimes board members don’t even read the reports and reports are not received in a timely fashion.
- Most boards have an executive committee but don’t meet with the auditor
outside the presence of the President to get a more nuanced, professional and candid assessment of the college’s true financial position.
- Board members may not have adequate time or skills to read accrediting reports, other significant internal documents or understand trends in the higher education marketplace.
- Boards are not properly trained in their basic legal and fiduciary responsibilities.
- And often boards aren’t provided, nor do they seek out information on the strategic position of the college in the market.
- After a board brings in a turnaround specialist, too often the next president that they hire does not maintain the momentum of the turnaround strategy and
returns the college to the brink of failure.
This is not an exhaustive list of the reasons that boards find themselves in the difficult and troubling situation of having to vote to close an institution. There is one common
thread at colleges that at the brink of closing: these boards have not truly governed. We are in turbulent times of shrinking student markets, declining acceptance by prospective students of the need for a degree, continuing inflationary pressures on operational costs, deteriorating prestige of college brands, and diminishing skills of college graduates. If private colleges intend to survive in these uncertain times, board members need to be
more than passive seat holders.