Sometimes, large lessons can be learned from the travails of small institutions. The near-demise of Sweet Briar College in Virginia (now attempting to renew itself, but with uncertain prospects) and the struggles of Cooper Union in New York (with issues of policy and governance) have much to teach us about the challenges facing both many small colleges and some larger institutions.
The proposed closing of Sweet Briar College illustrates not just the problems that confront small liberal-arts colleges seeking to survive in an increasingly competitive and often unfavorable environment but also the political challenges involved in achieving “death with dignity” when a venerable institution may no longer have a viable place in the highly competitive market for students. The high-decibel debate over free tuition at Cooper Union in New York City, which is far from over, raises equally profound questions about the most effective way of serving lower-income students. (Is “tuition free” the right mantra? We think not, its obvious populist appeal notwithstanding.) Proper governance at the board level — and the risks of governmental interference — are other topics informed greatly by the Cooper Union saga. So, there is much to learn from these two stories.
The announcement in March by the Sweet Briar Board of Directors that the college was to be closed at the end of the 2014-15 academic year sent shock waves through much of the liberal-arts college community. The reasons given by the president and the board included a low and declining enrollment, with only about 500 students in residence in the fall of 2014 — despite vigorous recruitment efforts and a discount rate for incoming students of 62 percent. (The discount rate is the share of gross tuition revenue given back to students and their families to encourage them to enroll.) Although these efforts increased the number of applicants, they did not even maintain enrollment and, of course, hurt net tuition revenue. The lack of success in attracting a critical mass of students has been attributed in large part to the fact that Sweet Briar is a small, single-sex, liberal-arts college in a remote location that no longer appeals strongly to daughters of affluent families.
Nor is the unrestricted endowment at Sweet Briar nearly robust enough to buffer the effects of declining net tuition revenue. The unrestricted endowment of roughly $16 million is less than the college’s debt of about $25 million, and there is, in addition, substantial deferred maintenance. Vigorous efforts notwithstanding, the board was unable to identify any viable options that would justify efforts to stay open (coeducation, mergers, new marketing approaches, program changes, land sales, etc.).
Finally, in the course of exploring options of all kinds, the board commissioned a study of fund-raising possibilities by knowledgeable professionals, which concluded that donors could not be expected to come close to meeting the college’s needs for operating income and a much larger unrestricted endowment. A report by Moody’s Investors Services comparing Sweet Briar’s enrollment and key financial metrics with those of all Moody-rated women’s colleges produced comparisons that are devastating.
The sum total of this evidence left the Sweet Briar board with no choice but to accept the inevitable. But, not surprisingly, the decision to cease operation and close the college was deeply disappointing to current students, staff, and alumnae. A “Saving Sweet Briar” group was formed, and in June a settlement, brokered by the state attorney general, was reached. It provides that the college will stay open at least through this academic year (and probably longer), that the Saving Sweet Briar group must contribute $12 million by specified times to keep the college open, and that the president and a majority of the board will resign, to be replaced by nominees of the Saving Sweet Briar group (in fact, the entire board resigned). The settlement was approved by the circuit court judge.
We suspect, along with others, that the determined effort by the attorney general to reach this settlement was fueled in no small part by political considerations and his reluctance to be seen as failing to support a venerable women’s college with many influential graduates. The circuit judge had also made clear his desire to keep the college open. Faced with the strong views of these political heavy hitters, it is not hard to understand why the then-president and board agreed to the settlement.
In any case, about 40 first-year students were expected to matriculate this fall; there are 241 enrolled students on campus and 79 in study-abroad programs. The question now is whether the new president and board can, in the long run, produce a sustainable educational-financial plan, which must involve enrolling many more students than in recent years and raising the sizable amounts of money that surely will be needed. There are numerous examples of successful efforts by colleges to keep going, or to restart themselves, sometimes by changing directions and sometimes by merging.
An impressive case is Trinity Washington University, which changed from a women’s college serving a relatively privileged student body to a multifaceted urban institution with (among other things) a weekend program for working students. But it is hardly irrelevant that Trinity is located in Washington, D.C., rather than in a sparsely populated part of Virginia. It is important to recognize that just as what worked for Trinity would not work for Sweet Briar, so the Sweet Briar case is not a glimpse into the future of all liberal-arts colleges or of women’s colleges in general. Each case has to be evaluated on its own terms.
Still, there are a number of important lessons for any college from the Sweet Briar saga. One is that markets really matter — and they can change profoundly in a relatively short time. Adverse trends can be so pronounced and other options so limited that the needs of higher education, writ large, are not served by “saving” (even temporarily) every institution in trouble. There are situations in which an institution needs to celebrate its past achievements and avoid the prospect of a lingering decline that is likely to dissipate resources that could have been used more wisely. An important, if obvious, lesson is that macro needs at the national level — such as the need to increase the overall number of students with degrees — cannot be translated mechanically into micro decisions concerning the future of particular institutions.
And it is by no means only small liberal-arts colleges in remote locations that face painful decisions. Cooper Union for the Advancement of Science and Art, in New York City, long known for its no-tuition policy, continues to face challenges to its financial viability as well as vexing governance issues.
With zero tuition revenue, Cooper Union has been hard pressed for decades to make ends meet — for years the college closed annual operating deficits with money from its unrestricted endowment. It also borrowed heavily. When President Jamshed Bharucha (with whom one of us — Lawrence Bacow — worked at Tufts University) arrived in 2011, he quickly concluded that the situation was unsustainable: The annual operating budget had a deficit of more than $20 million, and unrestricted assets were being drawn down at an alarming rate to cover shortfalls. Substantial alterations in the business model seemed essential.
One obvious change, albeit painful to the many believers in the idea that higher education should be free, was to begin to charge modest tuition — and to decide as well to: (a) rebate half of the tuition charge to all students and (b) adopt an aggressive need-based financial-aid program that would cover not only the rest of the tuition but living costs for students with the least resources of their own. It seemed (and seems) perfectly reasonable to expect students who can afford to do so to contribute something to the institutional costs of their own education, recognizing that attending college confers private as well as public benefits. What’s more, this combination of policies actually increased, rather than reduced, the socioeconomic diversity of the college. In addition to budget cuts, some new graduate programs were introduced with attendant tuition, all in a determined effort to keep Cooper Union viable — an effort that seemed to be succeeding.
Not surprisingly, the board’s decision to charge tuition was greeted with outrage from some students, alumni, and faculty who believed it represented an abandonment of Cooper Union’s most fundamental values. Any progress toward creating a sustainable business model has been threatened by extreme intra-board conflicts, pending litigation, an intervention by the state attorney general, and the decision of the board to refuse to renew the contract of the president (who left in June).
The personal nature of some of the intra-board debates is extremely troubling, as are allegations of political deals and conflicts of interest. Leading an institution such as Cooper Union is difficult under any circumstances, but internecine warfare is an added burden — perhaps an insurmountable one. It is unclear, to say the least, how the institution will be able to attract competent leaders, given the current board/political situation.
Different though they may be, the issues faced by Sweet Briar and Cooper Union represent a fair sampling of the challenges of running a private college in today’s difficult economic environment. Business models that made sense in years past may no longer be viable. Most small colleges face escalating operating costs and downward pressure on virtually all their revenue sources. Colleges like Sweet Briar find themselves no longer able to routinely increase tuition, or if they do, they face the need to discount it substantially to maintain enrollment.
Following the recession of 2008, most institutions scaled back their assumptions about investment returns, and, indeed, endowments no longer produced the revenue necessary to sustain the enterprise — this was Cooper Union’s problem. And while it is nice to hope to make up gaps in operating income through increased philanthropy, rare is the institution that can do so on demand, especially when facing widely publicized financial problems.
These tough times call for hard choices, and boards need to act before they face existential threats. Unfortunately, those choices often require institutions to depart, sometimes radically, from treasured traditions that lie at the core of institutional identity. When tradition meets unsustainability, tradition must yield, but it rarely does without a fight.
Both the colleges’ boards were accused by multiple constituencies of not acting transparently; however, it is very difficult to be open and transparent about really hard choices without alienating key constituencies. A college that finds itself on an unsustainable path and tries to communicate openly about unpopular choices risks a run on the bank. Most donors are unlikely to contribute to what they perceive to be a sinking ship. (It will be interesting to see if the Saving Sweet Briar group succeeds in raising significant amounts of money on a continuing basis, especially if the future of the college continues to look problematic.)
Also, prospective students may be scared off by honest communication from an institution that without fundamental change its days may be numbered. College represents the largest investment many families will ever make after housing; who wants to invest in a degree from an institution that may not exist beyond the next few years? Finally, at least some faculty and staff who have options may exercise them if they believe that future employment at their college is uncertain. Thus, truly honest and open communication about financial exigency may put a fragile institution into a death spiral.
Social media and modern communications also amplify campus disputes into national stories. In years past, a debate on a small rural Virginia campus would have been confined to the campus, its most ardent alumnae, and the local media. But modern communication lowers the cost of organizing alumni and others who may be geographically distributed all over the world. And the web makes local stories instantaneously national ones, further fanning the flames of protest and making it harder for governing boards to ignore the noise and do what is right for the institution long term.
At a time when more institutions are likely to face these problems, we fear that the risk of controversy, coupled with substantial second guessing, may cause governing boards to shrink from their fiduciary responsibilities. At both Sweet Briar and Cooper Union, litigation threatened to displace governance as a means of addressing the future of each institution. To be sure, there should be mechanisms for evaluating decisions of boards, but reasonable standards should be applied, and expeditious ways need to be identified to address the societal need for checks and balances. Donors’ wishes should certainly be treated with respect — but no donor should be able to mandate eternal life, or a particular way of operating, for institutions that face changing conditions.
Boards themselves can be an important source of problems. The Cooper Union board was deeply divided and certainly did not cover itself with glory in yielding to outside pressure to dismiss its president. But when boards do behave well, as we think the board of Sweet Briar did, board members should be supported and not pilloried. One conclusion to be drawn from this two-institution comparison is that having a dedicated and supportive board may be necessary for presidential and institutional success, but it is hardly sufficient.
And, as we have written before, we were struck by the outsized role played by the attorney general in each case. Two private institutions were driven hard to make (accept?) decisions regarding aspects of their future by two politically chosen and politically motivated officials. State governments surely have a role in overseeing the functioning of private institutions in their domain, but it is fair to ask how directive (and how heavy-handed) such a role should be.
There is, we regret to say, yet another takeaway: The manifold pressures that produced a last-minute deal that will keep Sweet Briar open for at least one more year (and maybe more) are ominous. In today’s world, with politicians intervening, county judges feeling political heat, and irate alumni using social media and public-relations machinery to generate strong opposition to any potential closing, colleges may find prolonged death agonies — or prolonged battles for survival — inevitable.
How many able, courageous people will be willing to serve on the boards of troubled colleges? Intemperate debates — in the press and in the courts — over what should happen when an institution is struggling help explain why capable people may be reluctant to step up to leadership roles in potentially divisive and stressful situations. Institutions cannot thrive without some stability in board membership.
It is significant that the entire board at Sweet Briar felt compelled to resign (some were required to do so under the terms of the agreement) in response to a mandated “changing of the guard” — it is, in any case, certainly easy to understand their feelings and their reluctance to go along with what they had concluded was a doomed course of action. At Cooper Union, five experienced and dedicated trustees resigned. It would hardly be surprising if able academic leaders chose to decline the presidency of an institution if their reward for thoughtful and decisive leadership in the face of great challenge would be dismissal or even humiliation.
In the future, rather than confront truly difficult decisions and risk personal insult and damage, it may often seem easier for presidents and trustees just to hope that the sun will shine tomorrow, whatever the official weather forecast — and to assume that if it rains eventually, as it almost surely will, it will rain on someone else’s parade.
