Reimagining strategies for financial sustainability in higher education

With digitalisation becoming increasingly important for the higher education sector, universities are tasked with transforming their operations in a way that boosts efficiency and better meets student demands. However, financial issues hinder the ability of many institutions to achieve the digital transformation being asked of them.

In a webinar discussion, hosted by Times Higher Education in partnership with EY, exclusive insights from EY’s recent report, titled How are you balancing the books for a digital future?, were shared alongside opinions from experts in academia and industry. The future of institutions around the world hangs in the balance but radical ideas are a source of optimism.

“I wouldn’t have necessarily said that the higher education space was capable of being radical, but during the pandemic, this sector demonstrated its agility,” said Susan Shaffer, senior credit officer for Moody’s Higher Education and Not-for-Profit Organisations. “Government support helped, of course, but there was also a lot of rethinking around programmes, redirection of resources and finding new efficiencies. Unfortunately, then two huge issues struck. The first was the need to rehire in a challenging job market. The second concerned inflation.”

As Shaffer said, many of the challenges that threaten financial sustainability are global and entrenched. “Worldwide, the higher education sector is facing the challenge of rising participation. How can universities pay for this and compete in a global market?” asked Matt Robb, UK&I strategy leader at EY-Parthenon. “Plus, it is quite unusual to be going through both marketisation and digital transformation at the same time. Added to this, shorter-term challenges like inflation and regulatory changes also have to be met.”

“Some of the biggest risks for financial sustainability in higher education revolve around disjointed and ill-thought-out policymaking,” said Diana Beech, CEO of London Higher. “On the one hand, you have industries crying out for more skilled workers but at the moment, the UK government seems to be struggling to see things holistically.”

The Covid-19 pandemic showed that international flows were a flimsy foundation on which to base university enrolment. This may be the case, but the benefits of internationalisation and diversity should not be dismissed. However, they do need to be supported by a liberal, welcoming national migration policy.

“Here in the US, international numbers have picked up but are not back to what they were prior to the pandemic,” Shaffer said. “Because some institutions may not have a global reputation, they have to work much harder to attract international students – and often draw from very specific areas. This adds another level of fragility. If institutions are dependent on international students for financial sustainability, they must have diversity in their pipeline.”

As well as financial inflows, cost concerns abound. Universities must expand their capacity – particularly digital capacity – but need investment to move forward. “You need a high level of financial wherewithal if you are going to make the investment you need to stay current,” said Dan Greenstein, chancellor of Pennsylvania State System of Higher Education. “This is a problem exacerbated when you invest in residential education and then experience enrolment decline. I should add that the footprint of higher education is not too big – it’s just oriented towards the wrong group.”

Fortunately, there are many short and long-term actions that university leaders can take to improve financial sustainability. “In London, for instance, there are a lot of levers to pull,” Beech said. “Working in partnership with other institutions, you can have collective clout for political influence and procurement, as well as spinning out innovation and research. So don't underestimate the region you’re in.”

The question that many university leaders will be asking themselves is how radical they can – and should – be. Here, EY’s report offers some concrete ideas around strategic distinctiveness, scale, digital technologies and change capacity. “Can universities be a vehicle for change?” Robb asked. “Covid showed that they can. But the earlier they move, the better.”

Radical change must be about more than just moving courses online. “Ultimately, higher education is a people business,” Greenstein said. “You have to provide the right scaffolding around digital transformation. Yes, we can be radical, but only by empowering professional development at tremendous scale.”

“Plus, we must invest in values,” Beech agreed. “Not only the values of today but also those of the future.”

The panel:

• Diana Beech, CEO, London Higher
• John Gill, editor, Times Higher Education (chair)
• Dan Greenstein, chancellor, Pennsylvania State System of Higher Education
• Matt Robb, UK&I strategy leader, EY-Parthenon
• Susan Shaffer, senior credit officer, Moody’s Higher Education and Not-for-Profit Organisations

Watch the webinar on-demand above or on the THE Connect YouTube channel.