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Over the past few months we have discussed the state of higher education, including the dramatic rise in college tuition, the potential financial crisis facing many institutions, the public questioning the value of a college education, and what is being done to address these issues. In a Special Report called "What every college and university board member should know about their business officers," I concluded with a message to college and university board members that they have an affirmative duty to lead their institutions to ensure that they continue to serve their missions, and that the time is now to do so.

 Around the same time, the Association of Governing Boards of Colleges and Universities issued its report of the National Commission on College and University Governance, a commission made up of 26 leaders in higher education, public policy, nonprofits, and business. Recognizing that “higher education must be reconfigured” due to its changed environment, the commission stated that “Boards must be at the forefront of those changes” and offered seven recommendations to boards “in support of the distinct role only they can play in improving institutional value through more effective governance.”

The commission's conclusion

The commission concluded that there are three areas that are problematic for most colleges and universities:

  1. Risks to sustainability;
  2. Eroding trust in institutional leadership to address quality and affordability issues; and
  3. Concern about the social and economic role of higher education.

Citing the Inside Higher Ed 2014 survey of college and university business officers discussed in the aforementioned Special Report, the negative outlook for the entire higher education sector issued by Moody’s Investor’s Service, rising costs, and deminimus increases in net tuition, the commission stated that “[v]irtually all institutions will be forced to overhaul their business models, with a new focus on value and long term sustainability rather than the traditional focus on consensus-based decision making.” The commission observed that while their governance was not the primary cause of these issues, the institutional governance structures “at most colleges and universities are ill-aligned to deal” with these problems as they are “focused excessively inward on power relationships and processes” as opposed to addressing the problems.

The commission reviewed the issues posing challenges for governing colleges and universities. Noting that change will be required to meet the challenges presented in the new economic realities of higher education, the commission recognized that this will require leadership that “is willing to take risks, build teams and create consensus needed to improve performance over many years.” Since, in the commission’s view, the single most important role is played by college presidents, the commission called for improved relationships with and mutual empowerment of presidents, and encouraged boards to work towards minimizing the high turnover among college and university presidents.

COLLEGE AND UNIVERSITY BOARD MEMBERS HAVE AN AFFIRMATIVE DUTY TO LEAD THEIR INSTITUTIONS TO ENSURE THEY CONTINUE TO SERVE THEIR MISSIONS... AND THE TIME IS NOW TO DO SO

The commission also noted that the changed business model requires boards to “pay much more attention to where the money comes from, where it goes, and what it pays for in terms of performance and quality.” This focus on finances will require that boards look to measure costs and benchmarks of performance rather than year-to-year fund balances. However, doing so will be difficult because, as was noted in the Inside Higher Ed report, a majority of business officers indicated that their institutions do not even have the data needed to make informed decisions about performance.

Finally, the commission called for revisions to the policies and processes for the shared governance model used in higher education. While shared governance has historically been perceived as a strength of higher education, it has become something to work around at many institutions because delineation of the roles of the various constituents has broken down with boards moving into academic policy and institutional management, and faculty having veto rights over financial decisions. The commission also noted that faculty input often comes only from faculty on the tenure track, which is now less than 25 percent of the faculty, and called for access to governance for academic and co-curricular support professionals.

Focus is on the college boards

After its discussion of the challenges to institutional governance, the commission then turned to the structure and performance of college boards themselves. The commission noted that frequently reported dysfunction on boards has led to an atmosphere of “incivility and mistrust” that feeds the growing public distrust of leadership in higher education and the belief that its leadership cannot address the current situation. The solution, according to the commission, is the creation of “healthier boards.”

One issue noted by the commission is confusion over the role of boards – some view the role of board members as raising funds while accepting decisions of the president and faculty, while others see board members as representatives of specific groups or as some sort of auditing committee. While the commission urged boards to be more engaged and to act as a whole board in less ad hoc and divisive manners, it cautioned boards that they should not substitute their judgments for those of the other constituents.

In short, the commission stated that

“..boards must focus on their distinct fiduciary role: to oversee the assets of the institution that the board holds in trust….[f]iduciary oversight extends far beyond a simple review of finances. It encompasses a calibration of institutional effectiveness in delivering both short-term and long-term value, which requires that boards look at the juncture of quality and fiscal sustainability and balance both short-term and long-term interests within and beyond the institution…independent of any undue influence from interested parties…” so that boards can “…focus on providing sustained value to consumers…protecting the economic and educational value of institutional assets…and seeing to it that the institution meets its obligations to society in the present and the future.”

To remedy this, boards were exhorted by the commission to do more than provide perfunctory oversight and review of routine reports with an adjusted focus on areas of strategy rather than administrative areas. The commission also urged boards to pay much greater attention to auxiliary and affiliated organizations. The commission also identified board culture itself as an asset "in need of attention," similar to buildings, endowments, and faculty, and as being vital to institutional health. As such, it advised focus on improving board relationships with the CEO, and shared awareness of the roles and scope of authority of each.

The commission's seven recommendations

Based upon this analysis, the commission issued seven recommendations for change without which the “decision making processes at most institutions will collapse under its own weight.”

  1. Boards must improve value in their institutions and lead a restoration of public trust.
  2. Boards must add value to institutional leadership by focusing on their essential role as institutional fiduciaries.
  3. Boards must act to ensure the long-term sustainability of their institutions by addressing changed finances and the imperative to deliver a high-quality education at a lower cost.
  4. Boards must improve shared governance within their institutions through attention to board-president relationships and a reinvigoration of faculty shared governance. Boards must additionally attend to leadership development in their institutions, both for presidents and faculty.
  5. Boards must improve their own capacity and functionality through increased attention to the qualification and recruitment of members, board orientation, committee composition, and removal of members for cause.
  6. Boards must focus their time on issues of greatest consequence to the institution by reducing time spent reviewing routine reports and redirecting attention to cross-cutting and strategic issues not addressed elsewhere.
  7. Boards must hold themselves accountable for their own performance by modeling the same behavior and performance they expect from others in their institutions.

While these are labeled as recommendations, the urgency felt by the commission is evident in the fact that the commission explicitly states that boards MUST do these things. Why? Because major changes have occurred in the “societal landscape that higher education inhabits and serves” and higher education governance is frankly “not up to the task.” Higher education, which is necessary for our country’s long-term success, is truly at risk. The time is now for college and university boards to get off the bench and lead their institutions.

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