{"id":527,"date":"2022-05-21T17:01:02","date_gmt":"2022-05-21T17:01:02","guid":{"rendered":"https:\/\/knowacademia.com\/?p=527"},"modified":"2022-05-22T21:08:20","modified_gmt":"2022-05-22T21:08:20","slug":"brinkmanship-planning-smoke-and-mirrors","status":"publish","type":"post","link":"https:\/\/knowacademia.com\/?p=527","title":{"rendered":"Brinkmanship, Planning, Smoke, and Mirrors"},"content":{"rendered":"\n\n

Small independent colleges may require planning of a different kind.<\/em><\/strong><\/p>\n

If you think about it, the literature of educational planning is in some ways bizarre.<\/p>\n

Much of the literature assumes that colleges and universities are rea\u00adsonably well financed, that the adminis\u00adtrators are interested in high-quality learning and better management, and that decision making is fairly rational. Planning models as\u00adsume replicable behavior and offer strategic planning processes that urge leisurely, logi\u00adcal sequences.<\/p>\n

Sometimes educational planning actually occurs as scholars suggest. But many col\u00adleges live by their wits, battling bankruptcy, improvising, and groping in the darkness. Most persons in a college are only remotely aware of their institution\u2019s true financial state and are oblivious of the financial conse\u00adquences of many of their initiatives.<\/p>\n

The behavior of college and faculty lead\u00aders is occasionally farsighted, astute, and wise. But more often it resembles the be-<\/p>\n

Michael Townsley <\/em>is vice president for finance at Delaware\u2019s Wilmington College. A graduate of Purdue University, he has served as a business manager in Indiana and holds a master\u2019s degree from the University of Delaware.<\/p>\n

havior of Tolstoy\u2019s officers in War and Peace, <\/em>grappling in the confusion and blood of battle, or the ideological, posturing behavior that Si\u00admon Schama brilliantly depicts as the reality of the French Revolution in his recent book, Citizens.<\/em><\/p>\n

These behaviors are especially true of the 500 to 600 smaller private colleges in the United States that live precariously on the brink of bankruptcy. This fact was first no\u00adticed by William Jeilema1 in 1971, and it seems just as true today. It is not sufficiently realized that approximately one-sixth of America\u2019s 3,400 institutions of higher education live in constant financial trouble. According to the U.S. Department of Education records, nearly 43 percent of all private colleges de\u00adpend on students for more than 75 percent of their revenue.2 <\/sup>For nearly all these institu\u00adtions, orderly higher education planning is a distant yearning. For them, planning, such as it is, is usually geared to short-term financial crises and enrollment shortfalls.<\/p>\n

To illustrate, here is the true story of one such college, which I will call Camus College. It is an effort to describe college management and planning as they actually take place at many institutions in the less affluent sixth of U.S. higher education.<\/p>\n

Camus College was founded in 1968. In its first fifteen years the college reported deficits in all but five years. In three of the five years in the black, emergency gifts from benefactors kept the college from closing its doors.<\/p>\n

Planning the origin of the college<\/strong><\/p>\n

Camus College began as a spark in the mind of a brash, highly ambitious, young student-affairs dean at a college in New York State. In the mid-1960s he had conceived the idea of a new college to serve late bloomers, un\u00adderachievers, and students in need of a sec\u00adond chance. The early success of Iowa\u2019s Par\u00adsons College was probably a strong influence. His keen desire to be a college president was also a driving factor. A cagey visionary, he also noticed that the Vietnam War had prompted young men to attend col\u00adlege in great numbers and that federal aid to students had begun shooting upward in<\/p>\n

1964\u201465.<\/p>\n

He looked for a campus for his college in several eastern states. Then,. near a me\u00addium-sized city, he discovered an abandoned motel, comprising a once-handsome lodge and four derelict but large, separate housing units. The motel once had a busy road run\u00adning in front, but the road was now relatively quiet because a new expressway had been constructed a few miles away. This dean of students took his savings account, borrowed<\/p>\n

Most persons are only remotely aware of their institution\u2019s true financial state.<\/em><\/strong><\/p>\n

from several relatives, and offered $10,000 for the deserted motel. The bid was ac\u00adcepted, and Camus College was born.<\/p>\n

The youthful president then recruited several hundred students from surrounding states and provided a residential, student-oriented experience, taught in the old lodge by underpaid instructors within a limited cur-<\/p>\n

riculum, which focused on the liberal arts. Since the college was without endowment, the president tried to run it as a business. Unfortunately, he never made ends meet. When enrollments declined in the mid\u00ad1970s, after the Vietnam War ended, Camus College seemed ready to close its doors, es\u00adpecially since the former motel buildings needed substantial capital repairs and reno\u00advations. The enterpreneur-president then moved to another college.<\/p>\n

Planning for survival<\/strong><\/p>\n

To keep the colleges classrooms open, the next president scrambled to find additional students\u2014fast. To do so, the college rapidly turned away from being a small, caring, resi\u00addential college for underprepared students from surrounding states to becoming a com\u00admuter college for older, employed, minority, and part-time students who lived nearby. The college also sought and obtained a U.S. Department of Defense contract to teach military personnel at a nearby military base. This \u201cstrategy,\u201d hastily devised to meet ur\u00adgent necessities, radically transformed the institution.<\/p>\n

To further boost enrollments, the col\u00adlege\u2019s leaders designed a totally different kind of college. Instead of a liberal arts cur\u00adriculum, the college mainly taught practical, career-oriented, and even a few vocational courses, concentrating on business, commu\u00adnications, and behavioral studies. Camus also arranged to teach the second two years of college at a community college in the area and aggressively sought other two-year col\u00adlege graduates.<\/p>\n

Instead of the protracted semester cal\u00adendar, Camus College switched to eight-week semesters and offered intensive one-month courses that met on four consecutive weekends. To help attract students, the col\u00adlege adopted a strategy of maintaining the lowest private college tuition in the state, advertising this advantage. And to head off financial collapse, Camus College cut its ad\u00administrative staff to the bone and moved away from mostly full-time faculty-the high\u00adest cost item at any college \u2014 to a largely<\/p>\n

part-time, adjunct faculty. The use of adjunct faculty reduced the expenses of teaching a course by 40 to 50 percent.<\/p>\n

Last, Camus College officials solicited private gifts, especially from its board of trustees. For the early 1980s, the college needed at least $250,000 a year in benefac\u00adtor gifts to balance the books.<\/p>\n

The new \u201cplan\u201d worked well, ostensibly. Head count enrollment in the early 1980s increased at an annual rate of 13 percent. Camus College enrollment shot up from a few hundred students in the mid-1970s to roughly 1,000 students in the early 1980s. Then in 1981, Camus received a $450,000 gift for a renovation. The new strategy for Camus seemed to be working.<\/p>\n

Planning for recovery<\/strong><\/p>\n

In 1981, however, Camus College ran out of money. There was a cash flow crisis. The auditors hinted that the college was broke. But how could this be? It turned out that while the college\u2019s aademic leaders were constructing their concrete new strategy, the financial structure supporting the con\u00adcrete was made of wood saplings.<\/p>\n

The crisis was the culmination of a failed effort during the previous spring to reduce the substantial deficit to a manage\u00adable size. When the audit arrived that fall, it showed a small deficit of $21,000 and emergency gifts of only $42,000. What was not readily apparent was that, to keep the deficit in control, operating expenses were being met by transferring funds from the renovation project. These transfers absorbed nearly 50 percent of the renova\u00adtion gift. However, the project still had $450,000 in bills to be paid. There were no other cash reserves in the college. Much of the balance of the gift quickly disap\u00adpeared that fall. Like the previous spring, it was used to cover payroll and other bills. Nothing was available to pay for the reno\u00advations when those bills arrived in late October.<\/p>\n

These problems were compounded by a personnel problem in the business office, typical at small, poor colleges, which often<\/p>\n

do not realize that institutions at the finan\u00adcial brink need additional expertise in the business office. At poorer institutions, fi\u00adnancial planning is at least as important as<\/p>\n

At poorer institutions, financial planning is at least as important as<\/em><\/strong><\/p>\n

educational planning.<\/em><\/strong><\/p>\n

educational planning. Instead, these colleges frequently hire bookkeepers, unsuccessful-in-business accountants, or someone who is said to be \u201cgood with money.\u201d<\/p>\n

For several years the college\u2019s auditors had urged the president to improve opera\u00adtions and personnel in the business office. She knew she should do so. Two years be-fore the 1981 cash crisis, the president had asked the business manager for a precise statement of the college\u2019s cash needs so that she could ask one benefactor for a gift large enough to put Camus on a solid financial foundation. The business manager came to the president\u2019s home with boxes of check stubs, cancelled checks, and cash records, saying he had given up trying to reconcile the checking accounts and confessing he had no way of coming up with an estimate of the cash requirements of Camus College.<\/p>\n

She decided to ask for a gift of $400,000 and received a very large contribution. But within ten months the college reported an-other deficit. Finally, she asked the business manager to leave and hired an experienced business officer, who, after several days on the job, was aghast.<\/p>\n

He had learned that the office did not post its ledgers, so there were no regular financial statements, no budget reports. Stu\u00addents were not billed for tuition and ex\u00adpenses systematically, sometimes not at all. Purchases were rarely authorized by a pur\u00adchase order. Bills were stuffed in drawers until money was available. NDSL accounts were not billed. Contracts for the adjunct faculty, which represented 80 percent of the<\/p>\n

classes offered at the college, were inaccu\u00adrate or unavailable; and the costs of paying adjunct teachers had been underestimated by one-third for several previous years.<\/p>\n

Aided by a new accountant and the au\u00additors, who were called in to set up the books, the new business officer speedily set up a new financial system. Suddenly payday arrived. The payroll was $45,000, but the college had only $15,000 in its checking accounts. Frantic, the new busi\u00adness manager called the old business man\u00adager, who advised his replacement, lust take the money from the remainder of the $450,000 gift the college received in 1981 for renovations.\u201d He said that\u2019s what he had done several times in the past.<\/p>\n

Was the short-term cash shortage in fact a long-term cash shortage? The busi\u00adness officer decided to work up a forecast. To his horror, he found that Camus College would need $600,000 within four months to keep its payables current, pay back the money taken from the renovation project, and have a two-payroll cash cushion.<\/p>\n

He took the forecast to the president, who was shocked. Screwing up her cour\u00adage, she asked the chief benefactor to do\u00adnate $600,000. He did, reluctantly, but in two payments. The second payment was conditional upon the college having in place a full financial-reporting system in six months. Through a fierce effort by the busi\u00adness staff, Camus College was soon able to provide the president, chief benefactor, and board of trustees with frequent and regular computerized reports on the financial condi\u00adtion of the college for the first time in its history. The chief benefactor was so im\u00adpressed that a year later he gave the college $3.5 million to begin an endowment fund.<\/p>\n

Planning for continued solvency<\/strong><\/p>\n

The mess in the business office allowed many in the college, especially the faculty, to think that the college\u2019s financial problems were only a matter of the disheveled busi\u00adness office. They continued to overlook the precarious financial condition of the college. Even with the business office\u2019s new-found<\/p>\n

competence, Camus continues to have seri\u00adous financial problems.<\/p>\n

The switch to a commuter college meant nearly empty residence halls and a bookstore that loses money. More than 88 percent of the latest budgets are based on student revenues, and the local market is no longer growing. Faculty continue to push for the college to replace its adjunct faculty with more full-time teachers. (The cost of hiring one full-time faculty person is almost two and one-hall times that of hiring adjunct instructors to teach the same courses.) The faculty make these demands partially because of the criticism from the regional accrediting group and from others who prefer full-time faculty.<\/p>\n

A number of the full-time faculty at Ca\u00admus sincerely believe that a return to a tra\u00additional liberal arts program would secure the school\u2019s reputation. This demand is made despite the evidence that the college does not have the resources to support a traditional program, nor does it have access to that portion of the student market.<\/p>\n

Other factors at Camus contribute to its financial condition. Every year Camus makes such a large draw from its small en\u00addowment that the fund is unable to keep pace with inflation. And until his resignation a few years ago, the college had a vice pres\u00adident for academic affairs who refused to give up his prerogative for spending funds without regard for budget limits or normal financial and accounting procedures.<\/p>\n

The college appears to have an urgent need for a new academic strategy and finan\u00adcial plan. But none is forthcoming. Camus views itself as moderately healthy. Some contend it is growing stronger because head-count enrollments since 1981 have been increasing. An unexpected gift in 1983 provided endowment income that along with large tuition increases has adequately covered the gap between revenue and ex\u00adpenses. As a result, the college has not re\u00adported a deficit in seven years. In fact, its finances are strong enough to support major renovations to a section of the old motel, while the rest of the motel has been re\u00adplaced with a new building.<\/p>\n

Living day-to-day<\/strong><\/p>\n

The college continues to practice brinkman\u00adship. Strategic planning is outside its pur\u00adview. As it has done since its inception, Ca\u00admus operates largely by the seat of its pants. The radical shift in the 1970s to serve older, nontraditional students was a desperate, for\u00adtuitous shift in the face of possible closure. To call this shift a strategy is to give it a meaning that is undeserved.<\/p>\n

Camus\u2019 real strategy is to respond to what the market gives the college. Strategy implies that forethought is given to conse\u00adquences of a decision; yet consequences at Camus are often not contemplated until after the fact. So if a new curriculum was installed,<\/p>\n

The college\u2019s real strategy is to respond to what the market gives.<\/em><\/strong><\/p>\n

it was put in place after the market de\u00admanded it. Consideration of its impact was largely ignored.<\/p>\n

If strategic planning is at the minimum a marshalling of resources to prepare an insti\u00adtution for the future, then Camus is not a stellar example. Data on its student body, its student market, or its competitors are not applied to the analysis. Planning is based solely on an intuitive sense of the forces af\u00adfecting the college. Since the college re\u00adsponds to change intuitively, it is unable to respond beforehand to the need to make a strategic change. Camus acts only when evi\u00addence indicates that there is no alternative but change. This situation is well understood by the president, who has tried to make it evident to others in the college.<\/p>\n

Camus\u2019 lack of interest in strategic plan\u00adning may be caused by its own limitations. The college has very little in the way of re\u00adsources to devote to planning. All of its ex\u00adpenses go toward its mission, providing working adults and minorities with a college education. Except for the president, the vice president for academic affairs, and the busi\u00adness manager, everyone else is a technical administrator. There is little time available for planning. One consequence is that finan\u00adcial planning is not coupled with academic planning. The likely financial consequences of innovations \u2014new academic programs, faculty promotions, or new kinds of stu\u00addents\u2014are seldom costed out in advance. And often, close tracking of the revenues and costs of novel changes is not done.<\/p>\n

Camus survives at the whim of its mar\u00adket. The college can prosper as long as the market is stable and tolerates low-cost, non\u00adtraditional higher education. However, if the market moves in a direction that forces Ca\u00admus to make a major investment in financial or human capital, then the college could be in crisis again.<\/p>\n

Nonetheless, Camus has artfully fol\u00adlowed the twists and turns of its market. The college survives because the president, in consort with the faculty, has quickly and ag\u00adgressively responded to the demands of its students. The president, in particular, is sin\u00adgularly responsible for the college\u2019s modest but growing reputation. She is indefatigable in seeking out new market niches, in con\u00advincing benefactors to support the college, and in buttressing the quality of the curriculum.<\/p>\n

Small colleges like Camus often persist because they are skilled at living on the knife edge of survival. In fact, their existence de\u00adpends on a faculty and administration that are quick to sense and respond to changes in its marketplace. Yet these colleges usually find that constantly keeping an eye on their mar\u00adket inhibits their planning for the long term.<\/p>\n

All this does not mean that Camus oper\u00adates without an implicit strategy. On the con\u00adtrary, Camus seems to operate on four stra\u00adtegic principles. Though these principles are not formally stated, they are evident in its everyday work.<\/p>\n

The main principle is that operational plans, while based on experience, are con\u00adstantly tested against reality. This leads to the next principle: that the college closely monitors its performance. It must know if students are satisfied, programs are in de\u00admand, tuition is competitive, and revenue<\/p>\n

Small, undeffinanced colleges can rarely practice textbook strategic planning.<\/em><\/strong><\/p>\n

sustains expenses. Third, the college tries to insure that its decisions and information are not independent of each other but are mutually supportive.<\/p>\n

These first three principles are essential to a college that is market driven. It must have the internal mechanisms to anticipate the twists and turns of the market. But, even a market-sensitive college may find that it is unable to predict every change in the market. For example, in 1985 Camus saw its enrollment suddenly and unexpect\u00adedly drop by 10 percent. If the college\u2019s fi\u00adnancial condition in 1985 had been as weak as it was in 1981, the loss of these students could have easily precipitated another finan\u00adcial crisis.<\/p>\n

But 1985 did not cause a crisis because the college took several steps in the inter\u00advening years to minimize financial risk. First, it reduced debt from 88 percent of its cur\u00adrent assets to zero. Secondly, cash reserves were increased from 16 percent of current assets to 65 percent. Although 1985 saw cutbacks in the staff of the college, it did not face foreclosure. A tuition-driven college<\/p>\n

that devotes a substantial portion of its in-come to debt payments places its very exis\u00adtence at risk when enrollment falls off precip\u00aditously. So, the fourth strategic principle at Camus is to limit financial risk by maintaining strong cash reserves and keeping debt to a minimum.<\/p>\n

While strategic planning for campuses like Camus is rare and difficult, a kind of collegiate planning that emphasizes market niches, rapid academic adaptation, conserva\u00adtive finances, and monitored performance can be installed. Camus practices brinkman\u00adship, but thoughtful, resourceful brinkman\u00adship.<\/p>\n

Enlightened brinkmanship requires ex\u00adceptional intuitive and market-oriented skills among the campus leaders and full-time fac\u00adulty. It also requires a well-oiled organization that tests the validity of its intuitive decisions systematically while keeping financial risk as small as possible. Small, underfinanced, tui\u00adtion driven independent colleges like Camus can rarely practice textbook strategic plan\u00adning. But neither can they survive on luck alone.<\/p>\n

ENDNOTES<\/strong><\/p>\n

1 W. <\/sup><\/strong>Jellema, \u201cThe Red and the Black,\u201d Liberal Edu. cation, 57 (May 1971), 147\u201459.<\/p>\n

2 National <\/sup>Data Service for Higher Education. Current Fund Revenues and Expenditures, All Institutions, FY 1985-86. ASCII, Disc 1\/1. John Minter & As\u00adsociates, 1989.<\/p>","protected":false},"excerpt":{"rendered":"

Small independent colleges may require planning of a different kind. If you think about it, the literature of educational planning is in some ways bizarre. Much of the literature assumes that colleges and universities are rea\u00adsonably well financed, that the adminis\u00adtrators are interested in high-quality learning and better management, and that decision making is fairly […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[18],"tags":[],"coauthors":[24],"_links":{"self":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/527"}],"collection":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=527"}],"version-history":[{"count":4,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/527\/revisions"}],"predecessor-version":[{"id":788,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/527\/revisions\/788"}],"wp:attachment":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=527"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcoauthors&post=527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}