Data-Driven Academic Portfolio: Tips for Getting Started

Treat academic programs as a portfolio to secure your institution's financial stability.

Colleges and universities are operating in a time of financial uncertainty. In the past, when faced with these challenges, higher education leaders would approach budgeting by cutting administrative costs. This is no longer a sustainable option for where the future of higher education is headed.

According to Inside Higher Ed’s 2018 “Survey of College and University Presidents,” less than half of U.S. college presidents believe their institution will remain financially viable over the next 10 years and nearly all presidents believe that additional colleges will merge or close this year. In order for institutions to remain financially stable, they must adopt new practices to face today’s challenges.

Academic offerings make up 45-55 percent of an institution’s total expenditures. Yet, many colleges and universities have little to no visibility into the profitability of these offerings. Understanding the cost of delivery across offerings is an essential part of academic planning.

Historically, liberal arts programs have financially supported other higher cost programs, but many chief academic officers (CAO) expect that to change. Inside Higher Ed's “2018 Survey of College and University Chief Academic Officers" found that more than half of CAOs anticipate declines in liberal arts education, leaving many in leadership to explore different options for growing revenue.

Financial concerns are still a main driver when considering launching new academic programs. Nearly 90 percent report that finances are at the center of conversations about evaluating academic programs. Institutions are now presented with an opportunity to think of their academic programs as a portfolio of offerings to achieve financial viability and sustainability.

Academic programs are not meant to stand alone. Universities benefit from a diversity of offerings, but they are rarely managed as a portfolio. Current approaches to managing the academic portfolio lack comprehensive, objective assessments of program viability and, according to our clients, result in skepticism and resistance from campus constituents.

The current economic climate demands that institutions develop a lean, market-responsive portfolio. Academic leaders recognize they need to maximize their resources and balance cost-intensive, mission-driven activities with activities that provide net operating revenues.

When strategically managed, the array of academic offerings can lead to a competitive advantage in the market place and long-term financial sustainability. Identifying the cost of each academic activity by using data helps institutions better address their budgetary constraints and improve resource allocations.

The first step in understanding your portfolio is to compare each program’s enrollment activity against instructional cost. Are your low-cost areas in decline, while most of your high-cost areas experiencing growth? Once you understand where your academic offerings are in terms of cost and enrollment, programs can be guided or shifted over time in alignment with strategic priorities, through investments, contractions and consolidations.

The next step in academic portfolio management is to understand component-level costs for courses instructed across academic units. The total cost of a course includes four components: course compensation, course overhead, financial aid and space. You can then find the cost per credit by dividing the total course cost by the credits.

The final step is to determine how much each major costs. Taking into account major, elective and core courses, you can evaluate whether the major exceeds net revenue per degree.

By assessing academic offerings as a portfolio, we’ve helped a wide variety of institutions overcome longstanding academic planning and financial challenges. Ultimately, a data-driven, academic portfolio model boosts financial sustainability while enriching the student experience.