Revenue Generation Strategies: Leveraging Higher Education Resources for Increased Income : AEHE Volume 41, Number 1 [1 ed.] 9781119049159, 9781119049067

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VOLUME 41 NUMBER

1

Revenue Generation Strategies: Leveraging Higher Education Resources for Increased Income JEFFREY W. ALSTETE

ASHE Higher Education Report A v a i l a b l e o n l i n e a t w i l e y o n l i n e l i b r a r y. c o m

ASHE Higher Education Report: Volume 41, Number 1 Kelly Ward, Lisa E. Wolf-Wendel, Series Editors

Revenue Generation Strategies: Leveraging Higher Education Resources for Increased Income Jeffrey W. Alstete

Revenue Generation Strategies: Leveraging Higher Education Resources for Increased Income Jeffrey W. Alstete ASHE Higher Education Report: Volume 41, Number 1 Kelly Ward, Lisa E. Wolf-Wendel, Series Editors Copyright C⃝ 2014 Wiley Periodicals, Inc., A Wiley Company. All rights reserved. Reproduction or translation of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. Requests for permission or further information should be addressed to the Permissions Department, c/o John Wiley & Sons, Inc., 111 River St., Hoboken, NJ 07030; (201) 748-8789, fax (201) 748-6326, www.wiley.com/go/permissions. Cover image by

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ISSN 1551-6970

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ISBN 978-1-119-04906-7

The ASHE Higher Education Report is part of the Jossey-Bass Higher and Adult Education Series and is published six times a year by Wiley Subscription Services, Inc., A Wiley Company, at Jossey-Bass, One Montgomery Street, Suite 1200, San Francisco, California 94104-4594. Individual subscription rate (in USD): $174 per year US/Can/Mex, $210 rest of world; institutional subscription rate: $352 US, $412 Can/Mex, $463 rest of world. Single copy rate: $29. Electronic only–all regions: $174 individual, $352 institutional; Print & Electronic–US: $192 individual, $423 institutional; Print & Electronic–Canada/Mexico: $192 individual, $483 institutional; Print & Electronic–Rest of World: $228 individual, $534 institutional. CALL FOR PROPOSALS: Prospective authors are strongly encouraged to contact Kelly Ward ([email protected]) or Lisa E. Wolf-Wendel ([email protected]). Visit the Jossey-Bass Web site at www.josseybass.com. Printed in the United States of America on acid-free recycled paper. The ASHE Higher Education Report is indexed in CIJE: Current Index to Journals in Education (ERIC), Education Index/Abstracts (H.W. Wilson), ERIC Database (Education Resources Information Center), Higher Education Abstracts (Claremont Graduate University), IBR & IBZ: International Bibliographies of Periodical Literature (K.G. Saur), and Resources in Education (ERIC).

Advisory Board The ASHE Higher Education Report Series is sponsored by the Association for the Study of Higher Education (ASHE), which provides an editorial advisory board of ASHE members. Ben Baez Florida International University Amy Bergerson University of Utah Edna Chun University of North Carolina Greensboro Susan K. Gardner University of Maine MaryBeth Gasman University of Pennsylvania Karri Holley University of Alabama Adrianna Kezar University of Southern California

Revenue Generation Strategies

Kevin Kinser SUNY – Albany Dina Maramba Binghamton University Robert Palmer Binghamton University Barbara Tobolowsky University of Texas at Arlington Susan Twombly University of Kansas Marybeth Walpole Rowan University Rachelle Winkle-Wagner University of Nebraska – Lincoln

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Contents Executive Summary

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Foreword

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An Introduction to Revenue Origins and Changes Need for Revenue Established Income Sources Recent Disruptions and Opportunities

1 8 15 23

Academic Programs for Generating Additional Income Noncredit Academic Programs Credentialing and Certificates Programs Degree Completion and Upgrade Programs Partnerships, Alliances, and Joint Ventures Study Abroad Programs Branch Campuses Online Distance Education

28 38 43 48 54 62 66 69

Nonacademic and Auxiliary Opportunities Maximizing Facilities Utilization Other Alternative Revenue Sources, Grants, and Outsourcing Technology Transfer

77 80 86 92

Strategic Considerations for New Income Budget Planning Options Contemporary and Developing Approaches

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97 99 104

Conclusion

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References

114

Name Index

129

Subject Index

134

About the Author

138

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Executive Summary New opportunities and increasing challenges have created a need for a thorough review of existing and innovative practices for financial revenue in higher education. Supplemental revenue streams that earn additional income for colleges and universities include continuing education, credit and noncredit certificates, degree completion and upgrade programs, study abroad, branch campuses, distance education, auxiliary services, technology transfer, and partnerships or alliances with other organizations. These endeavors were previously regarded as sideline ventures, but are becoming recognized as strongly needed revenues that supplement traditional tuition income. Graduate schools and schools of continuing and professional studies are offering more postbaccalaureate certificates and credentialing programs that reflect new demands in the modern workplace and global markets. Certificate programs may be the largest area of academic revenue growth for higher education over the next decade, and institutions must plan to leverage their assets with both academic and nonacademic activities. This monograph seeks to examine several important questions in continuing higher education, supplemental programs, and auxiliary services today. Specifically, why is there a need for more revenue? What are the options and prospects for colleges and universities to increase income from these and other nontraditional sources? What challenges do different higher education institution types face in enhancing their existing revenue streams? How can colleges and universities strategically plan to leverage their resources to fulfill their current mission and expand revenue streams effectively?

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Higher education has gained the perception by some people and groups as overpriced, ineffective, outdated, and not producing a sufficient return on investment. The reasons stated often include the easy access to nearly unlimited funds from student loans, supposedly overpaid and underworked faculty, overstaffed bureaucracies, a lack of accountability, and a general disconnection from the needs of society. In addition, there have been widely publicized problems with many for-profit institutions that have resulted in legislative scrutiny and accreditation intervention. To compound the financial problems and public image, macroenvironmental issues such as the slow growing economy, volatile financial markets, rapidly changing demographics, and other societal changes are creating challenging dilemmas to maintain operational viability. Therefore, supplemental revenue generation can broaden the support base and help mitigate some of the criticism facing traditional collegiate institutions. Moreover, there is a view by some observers and organizations that there is a societal devaluation of college degrees that is causing a wider recognition of new types of credentialing that is different from programs that were previously offered (DiSalvio, 2013). However, established colleges and universities have already been offering various types of certificate programs and online delivery systems for many years. Supplemental revenue is being achieved at institutions using on-campus, off-site, and online distance education courses in fields such as business, information technology, and healthcare (Cottrell et al., 2012; Pritchett, White, & Skinner, 2006). Internal and external stakeholders should be informed that certificates, credential programs, and traditional higher education degrees are not mutually exclusive. One of the main premises that this monograph proposes is that there can be a beneficial synergy in creating a mixture of educational offerings that serve multiple constituencies and purposes. While some higher education scholars and leaders have voiced concerns about the current and pending financial problems, along with external doomsayers, there are also critics of believers in a “higher education bubble” (Reynolds, 2012) and state that the worries about financial demise are exaggerated. Times of distress such as this can actually allow and encourage colleges to try new ideas in program creation, implement organizational improvements, and arrange supplemental revenue sources. There are many colleges Revenue Generation Strategies

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and universities today that meet their budget goals regularly and are properly planning for different contingencies in financial performance each year. Often, three possible outcomes are annually planned for, such as not meeting budget expectations, achieving, or exceeding the revenue goals. Opportunities have developed with noncredit programs and courses becoming common and often a requirement in many professions. More adults are pursuing additional credentials, and generally seeking additional higher learning. Some traditionalists within academe lament the supposed decline of more traditional higher learning as professional training and practical vocational-type courses are increasingly being offered at many types of institutions (Aronowitz, 2001). Yet, it can also be seen that many noncredit programs offer highly educated faculty members with expertise in specific areas an intellectually stimulating opportunity to teach sophisticated topics such as art, music, theatre, writing, history, current affairs, and other subjects to mature leaners. Examples can be found in schools and departments of continuing education at many types of public and private institutions. Noncredit programs can support the concept that not all students should enroll in traditional academic degree programs (Rosenbaum, 2004), and that in offering quality education for people who need career training or self-development, established colleges and universities can be the best provider as shown in many successful examples. In addition, there are alliances, joint ventures, and partnerships with other higher education institutions and private corporations that have become increasingly common methods of academic program expansion. These endeavors enable institutions to achieve new revenue rapidly, lower internal program development costs, save time on institutional approval for some organizations, and most importantly qualify for authorization by state agencies and federally recognized accrediting bodies. Certain observers of the recent trends in higher education state that one of the primary reasons for the increase in online distance education programs offered is the relatively higher cost of traditional on-campus collegiate learning (W. G. Bowen, 2013; Kamenetz, 2010). Bowen discusses the linkage between the rising tuition rates (or as he calls it, a cost disease) and the expansion of online learning and overall institution information technology costs. He warns that there are hidden costs for building and maintaining the technology viii

infrastructure and compliance issues that may not necessarily increase efficiency or uphold the broad goals of a true higher education experience. Other writers such as Kamenentz (2010) forecast that people will increasingly use distance education and other online-learning platforms in a more do-it-yourself fashion to achieve their personal learning goals. Kamenentz sees several underlying fundamental trends guiding the recent transformation that affects what he sees as a coming transformation in higher education. This includes the prediction that most of the increase in higher education enrollment will come from non-traditional institutions and that students will primarily attend lower cost or less selective institutions such as community colleges and for-profit colleges. This estimate may have lost some validity in light of the recent declines in for-profit enrollments and increasing scrutiny by government agencies. Nevertheless, alternative nonacademic revenue sources can be created and delivered by many types of institutions as described in the methods and examples identified. For a long time, other organizations such as companies, hospitals, and secondary schools have contracted with colleges and universities to educate their employees rather than attempt it internally. Therefore it can be viewed that academe has been a subcontractor of education services to some extent. So, it should not be surprising nor overlooked that outsourcing of revenue ventures in higher education is also an accepted practice. Outsourcing can be conducted by signing agreements with private off-campus companies to offer and operate services which may have historically been administered by the institution (D. Thompson & Morgovsky, 1996). In addition, since part of the mission of many higher education institutions is the creation and dissemination of knowledge, financial benefits from these activities may be a rational goal. Colleges and universities receive revenue royalties from patented discoveries, and the trend in licensing and patenting the inventions created by faculty members has increased partly due to technology transfer programs (Grassmuck, 1991). As institutions have learned to benefit from these activities, there is increasing financial support for faculty research, start-ups, and inventions (Di Meglio, 2008). These revenue streams can help colleges and research universities in particular remain true to their mission yet yield

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significant revenue that supplements tuition income, along with other revenue from hospitals, student housing, endowments, and additional sources. Modern college and university strategic planning activities now include specific financial revenue objectives and use effective budgeting models. Responsibility center management (RCM) is an approach that reinforces the attainment of academic priorities while delegating operational authority and accountability to unit-level departments (Hensley, Bava, & Brennan, 2001; Kosten, 2009; Mayer, 2011; Neal, 1995; Strauss & Curry, 2002; Whalen, 1991). Performance-based budgeting (Dougherty & Reddy, 2013) and performance funding (Burnett, 2012; Layzell, 1998; Liu, 2011) are other approaches that can be used to encourage revenue-generating activities by awarding financial resources based on the achievement of specified results (Dougherty & Reddy, 2013). Plans such as this can include intentions to: ∙ award financial resources based on performance determined by results achieved, ∙ identify and implement new revenue sources, ∙ use committees and individuals from all levels of the institution to determine what is institutionally viable and mission-centered, and ∙ integrate academic planning and budgeting more effectively. Successfully sustaining financially viable operations depends on effective budget implementation with consideration for institutional values in operational planning and resource allocation (McClenney & Chaffee, 1985). The importance of successful delivery of the strategic goals and plans has been identified as the cornerstone of any income generation activity in higher education (Warner & Leonard, 1992). In recent years, colleges and universities have learned to recover from challenging financial circumstances by looking for best practices at other institutions that can be adapted. These modern administrative techniques are combined with creating new programs or customized initiatives to help institutions survive in a competitive higher education marketplace that requires adept leadership and prudent financial management. Mactaggart (2007) recognizes how revenue can rescue institutions

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from dire financial circumstances by achieving a balanced budget with actions such as making the campus more attractive, adding graduate programs specializing in the latest topics, reducing costs but not necessarily personnel, and strategically improving the institution’s public reputation. Additional revenue generation activities can support the fundamental purpose of higher learning and sustain organizational viability, not dilute or diminish it. Each institution’s distinctive competencies and capabilities should be identified and built upon in an effective strategic planning process to compete in today’s challenging environment. Colleges and universities have many opportunities to address both local community needs and the demand for greater global awareness in education. Chief academic leaders and budget planning officers should work together to create a broad differentiation strategy for the organization by developing a successful vision, specify financial objectives that rely less on traditional tuition revenue, determine a plan with specific amounts of alternative revenue that are realistic, implement the plan while being mindful of higher education’s organizational nuances, and continually evaluate the results to make adjustments as needed. Faculty and administrators should work together to arrange effective, distinctive, sustainable holistic systems of income generation that ensure students can receive a sound education while supporting the traditions and important institutional missions.

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Foreword As public support for higher education has declined, tuition has hit the margins, and endowments have lacked performance, colleges and universities have had to engage in a wide array of activities to supplement budgets and generate revenue. Once relegated to the domain of for-profit entities, revenue generation has become a necessity for colleges and universities looking to balance budgets and grow into the future. In spite of the demand to be entrepreneurial and open minded about different approaches to budget diversification, how and where to seek additional revenue is not always easy to find in a competitive fiscal climate where multiple organizations are looking for broadened opportunities for income to meet organizational demands. In this monograph, Revenue Generation Strategies: Leveraging Higher Education Resources for Increased Income, Jeffrey W. Alstete provides an overview and analysis of the need for additional revenue in addition to the various ways that higher education organizations can diversify financially and broaden their sources of revenue. The monograph includes an overview of the different types of revenue generation strategies including academic programs, nonacademic and auxiliary opportunities, and planning for new income strategies. Each chapter provides a thorough review of the different types of review streams and ideas to develop the streams. The topics included in the monograph are thorough and broad-based. Alstete is careful in his consideration of factors like institutional type and public/private backgrounds in addition to how these factors shape revenue generation. Revenue generation is highly context and situation dependent, and the author is careful to consider how different settings, institutions, and leaders can broaden revenue. xii

The monograph is sure to be of interest to administrators working to broaden revenue opportunities at their institutions. Throughout the book readers will find practical and useful examples that outline how different types of revenue can be used and in what types of settings. Researchers interested in finance, leadership, entrepreneurialism, and other topics related to revenue generation are also sure to find the monograph useful and informative. The author provides a very thorough and analytical review of the literature. The monograph is well-researched and informed and provides a base of understanding and information for people interested in research in the area of revenue and the types of programs that can diversify additional revenue opportunities. The book is also sure to be helpful and informative to those interested in strategic planning, from either an administrative or a research perspective. Revenue generation is an important component of the planning process, and as administrators consider growth in the future, the monograph can serve as a tool to help guide a comprehensive planning process. The financial landscape of virtually all higher education institutions have changed in recent years. Campuses across the country rely on a broad array of revenue streams in order to stay vital and support organizational goals. The Revenue Generation Strategies monograph provides a wide compendium of information to guide administrative decision making related to financial diversification and is a welcome resource to add information and understanding related to budgeting, finance, leadership, planning, and other contemporary issues related to revenue. Kelly Ward Lisa E. Wolf-Wendel Series Editors

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Published online in Wiley Online Library (wileyonlinelibrary.com) ∙ DOI: 10.1002/aehe.20019

An Introduction to Revenue Origins and Changes

F

INANCIAL SUPPORT HAS BEEN a challenging issue in higher education for centuries. Funding has often been a note of discord for intellectually oriented people from ancient times when students paid tablet writers or tutors directly for instruction, to the University of Bologna in the Middle Ages, to early American colleges in the 18th century (Lucas, 2006; Rudolph, 1990; Thelin, 2004; Veysey, 1965). Monetary sources ebbed and flowed somewhat erratically from tuition, philanthropy, and government entities. Early American colleges encountered periodic problems by relying on financial support from state governments, while a concurrent increase in the number of denominational colleges during that period caused institutional missions and support systems to vary further. There were colleges that had ambitions of national stature but were hampered by poor strategic and financial management. During one period there was even a reckless attempt at funding with a concoction called a perpetual scholarship. This policy entitled the owner to provide free tuition for one person in perpetuity based on a one-time payment (Rudolph, 1990). However, this scheme was often a last resort for sectarian institutions seeking a quick fix for financial troubles, and helped lead to unintended consequences such as colleges that were eventually entirely enrolled with students not paying any tuition. Unstable financial management continued for many years with colleges often closing due to their dependence on tuition and little steady support from state and federal governments. It should be noted that nonprofit institutions did receive an important Revenue Generation Strategies

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form of indirect government support in the form of tax exemptions from local and federal governments that continues today. Veysey (1965) recognizes a long history of problems with tuition dependence in practical financial matters and the fundamental concepts. Higher education in early America was generally not associated with utilitarian goals, aside from colleges that educated clergy. There was a negative perception of institutions that depend on student tuition, in a consumerist fashion, because it presumed that it would naturally lead to lower quality students. Therefore, there are long-standing reasons for institutions to look for alternative sources of revenue. Rudolph (1977) states that by the mid-19th century the classic curriculum was being modernized at least in part due to monetary concerns. An example of the changes during this period occurred at Brown University where the president found an advocate for the rising middle class and encouraged curriculum flexibility in exchange for a “ . . . proposed offering [of] a course of study for which students would be willing to pay” (p. 110). Although these reforms were not initially successful at many institutions, curricula evolution was not permanently set back. Societal changes and student demands continued, thus affecting the financial revenue operations of colleges. Moreover, academic traditions of shared governance involving deliberate but often slow consensus building is a different way of thinking compared to the business-oriented risk taking and rapid decisions to be used to address rapidly changing market conditions (Stripling, 2014). In addition, there were and still are many critics of the supposed pedestrian needs concerning revenue in academe as well as a general disdain for commercialization (Bok, 2003; Tuchman, 2011; Washburn, 2006). John Dewey deplored what he called “the atmosphere of money-getting and money-spending” that was increasingly common in higher education, which “hides from view the interests for the sake of which alone has a place” (Dewey, 1902, p. 11). Business-related practices in general were seen by some people as a corrupting influence on the pure intentions of preserving, pursuing, and teaching knowledge. However, the business practices, the growth of administration, and dependence on revenue for instruction and nonacademic activities had penetrated academic life deeply by this time (Hofstadter & Smith, 1961; Lucas, 2006). 2

In the early 20th century, many universities continued to be short of money even as higher education began to educate more than only elite members of society. Thelin (2004) identifies a typical example in the case of Williams College in Massachusetts. It was a liberal arts college with an enrollment that grew very large after World War II and like many other colleges the United States was faced with inadequate state funding. The unwillingness to raise tuition rates forced many institutions such as this to solicit donations or to close. Then an unexpected and significant change in funding appeared in higher education revenue with the enactment of the G.I. Bill. This directly and indirectly backed more utilitarianism in academe, greater accommodation, and wider access as the system moved from elite to mass and universal postsecondary education. It should be noted that the G.I. Bill of 1944 and the Veteran’s Adjustment Act of 1952 for Korean War veterans also funded vocational noncollege career occupational training programs not just traditional higher education. Thelin adds that the research revenue sources for universities were subsequently influenced during the beginning of the Cold War by increased federal funding and the appearance of the “Federal Grant University” (Thelin, 2004, p. 277) as well as increased philanthropy and other external funding. Later in the 20th century, rapidly rising tuition and increasing student debt became widespread. This helped fund tremendous institutional growth and larger facilities, along with increasing public criticism. In addition, the rising higher education enrollment in other countries and changing methods of financial support created significant challenges for many institutions to survive. By the 1970s, colleges and universities of all types were experiencing difficulties in annual operating budgets and stable support from their long-term financial endowments. Higher education institutions were not effectively structured and administered to control or mitigate frequent decreases in revenue (Thelin, 2004). Although total enrollment growth continued in the 1980s and 1990s, changes in college and university operations were greatly challenged to meet the expenses due to greater expectations and to have sufficient revenue sources. The primary elements of higher education budgets were not dissimilar from other organizations with revenues and expenses varying by the institution type and markets served. Specifically, the revenue sources Revenue Generation Strategies

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differ depending on whether institutions are publicly supported, private nonprofit, size (community colleges or large state universities), and mission (such as liberal arts or research institutions). There are books on the basic elements of college and university budgets that identify common sources of revenue such as: ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙

state funds, tuition, mandatory student fees, endowments, special student fees, gifts/grants/contracts, auxiliary services, special programs, contracted institutional services, hospitals, licensing/patents/royalties, church support, and miscellaneous income (Barr & McClellan, 2011; Meisinger & Dubeck, 1984).

These long-established sources of revenue and new ideas for revenue generation will be explored, examined, and presented in consideration of the institutional type, mission, and geographic location. It is more important than ever that college and university leaders realize that they are responsible for more than just achieving annual tuition and fundraising goals. Modern leaders must think beyond traditional income sources and improve institutional effectiveness while being mindful of the value of faculty and the collegial culture. In addition, higher education scholars seem to have a consensus that colleges have underestimated the significant financial challenges that institutions face. This may be partly due to the nature of the academic culture and the scholarly focus on intellectual endeavors that often garner greater internal attention. Nevertheless, it has been recognized that there has been a growth in the number and size of institutions over the centuries as institutions have 4

developed from educating only elite individuals, to mass groups, to universal populations (Trow, 1973). Yet this growth has not diminished the strains on financial resources as one might expect in a rapidly expanding market with an increasing number of paying participants. In fact, the pressures have become even greater. More students have enrolled with greater needs and expectations of more services, while the sources of net revenue did not experience a similar growth in many institutions. In a recent analysis of the observations of college leaders who have experience in leading institutions with serious financial problems, Brown (2012) found that both faculty and institutional staff/administrators must be keen to facilitate changes that can enable the college to continue functioning. In addition, Brown adds that “ . . . they have to do so with the enthusiasm and commitment that can make the changes successful. And finding adequate funding to support new and sustain existing initiatives is critical” (p. 15). Therefore, college trustees, governing boards, and faculty and staff must be well informed and motivated to continue striving for institutional financial viability. These community stakeholders must keep in mind that the important missions of colleges and universities cannot be done without adequate revenue, sound financial management, and prudent administrative decision making. Although some higher education scholars and leaders have voiced concerns about the current and pending financial problems, along with many external public pessimists, there are also critics of this thinking who say that the worries about a “higher education bubble” (Reynolds, 2012) or financial demise are overstated. There are many colleges and universities that meet their budget goals and are properly planning for different contingencies in financial results each year, such as not meeting budget expectations, achieving, or exceeding the planned revenues. At a recent higher education conference organized by admissions and marketing consultants, a Moody’s analyst stated that forecasts about college closings and the supposed bubble are exaggerated (Troop, 2013). It was specified there and elsewhere that higher education in the United States has survived previous ominous challenges, such as the “baby bust” approximately 20 years ago when there were predictions that many institutions would be shut down. In the end, merely one half of a percent did not make it, and other sectors of higher education actually rebounded strongly. Revenue Generation Strategies

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Conversely, there are those who believe there is a bubble “denial” in that some higher education leaders are not properly addressing concerns expressed by federal officials, the public, and the media (Mrig, 2013). In this view, there is a perception that colleges and universities continue to administer in ways that were successful in the past but are ignoring critical warning signals today. These signs include rising expenses, sluggish or declining family income, changing student and societal expectations, new technology, and an overall decrease in public trust of postsecondary education. In established strategic management planning, this type of communication calls for an updated and broad differentiation approach for organizations. Various types of colleges such as nonselective private liberal arts and more rural colleges that are primarily tuition dependent will probably fare poorly compared to elite or larger and more financially sound institutions. It is likely that the results will eventually be somewhere between a complete collapse and continuity as the system is currently structured. So it is not surprising that recent higher education strategic planning concepts have frequently proposed that colleges and universities need to either greatly increase in size and/or become more distinctive in their campus and programs in order to thrive in the coming years. Some readers of this monograph series may be concerned with the seemingly pedestrian humdrum or business-like focus on the topic of revenue generation. However, while colleges and universities do indeed have higher goals such as creating social and economic impact, intellectual inquiry, and educating students to become enlightened members of society, those loftier goals require financial sustainability. The following identification, analyses, and synthesis of issues are organized into chapters that first explore academic programs for generating additional revenue, including continuing education, noncredit courses and programs, degree completion and upgrades, branch campuses, distance education, off-campus activities, alliances and joint ventures, and study abroad. Following these academic endeavors, opportunities are examined for producing revenue from nonacademic activities such as facilities and space rental policies, vendors/consignment enterprises, grants, outsourcing, and technology transfer programs. Throughout the following report, ideas and examples will be considered and discussed in regard to their institutional type (such as private- or public-supported institutions), as well 6

as geographic location because various revenue efforts may be more appropriate for some institutions than they are for others. After the academic and nonacademic sources of new revenue are explored, the strategic and operational budget planning approaches to administer in the different institutional types will be considered. Colleges and universities today are faced with the choice of cutting programs, services, and other expenditures, increasing revenues, or a mixed approach. There are many classic decision-making models that normally direct organizations to first analyze the problem, consider alternative solutions, test ideas, and verify and implement decisions to solve an administrative problem such as this (Harrison, 1999). Other decision system variations such as WRAP—which involves modifying the decision-making process by Widening the search for options, Reality testing assumptions, Attaining distance before deciding, and Preparing to be wrong—are designed to help leaders and administrators think outside traditional parameters (Heath & Heath, 2013). The main premise of this monograph could probably be placed in the latter decision-making scheme because it seeks to broaden the revenue base with new and expanded existing income streams. However, readers could simply consider the ideas presented here within their established decision-making frameworks that seek additional revenue in lieu of only reducing costs because organizational expenditures rarely decrease significantly in many budgeting systems. This is not to say that cost increases should not be examined, and there are many works published on the need for cost cutting (both in regard to tuition and internal budgetary expenses) in higher education. Particularly, the growth in administration positions compared to faculty has been identified (Belkin, 2014; Burgan, 2009; Ginsberg, 2011) and should be examined for improving net revenue. Efforts such as this can show that both costs and revenue are being considered. This is important because academia must convince internal institution members and external stakeholders such as governing boards, accrediting agencies, alumni, potential students/parents, and others as to why colleges and universities should pursue additional revenue activities when there is a perception that so much money is already being received in income. This should be explained with sound reasoning and clearly articulated statements Revenue Generation Strategies

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supporting the types of programs, services, and activities shown in later chapters that can have dual purposes. One is to generate new revenue, but the other is to show society that higher education has evolved to offer important and needed services. It is mainly to motivate the existing members of college communities who may be somewhat discouraged by the increasingly widespread criticism of our work regarding the supposedly unjustifiable rising costs. Making revenue a priority can be the key to both unlock greater performance from existing resources and leverage the tremendous assets and knowledge of the people in higher education. Academic communities have the capability to demonstrate the true value of intellectual inquiry, academic research, and inquisitive thinking that can offer benefits to a rapidly changing, increasingly technological, and highly global socioeconomic system. But first the reasons for more revenue must be analyzed and examined further. The intention of this monograph is to explore recent trends and best practices in revenue generation at all of the generally recognized institutional types including, but not limited to, community colleges, liberal arts colleges, private comprehensive institutions, private- and state-supported public research universities, and specialized colleges. Readers who could find this information helpful include senior college leaders such as presidents, vice presidents, chief budget officers, deans, as well as institution-wide budget committee members, trustees, faculty department heads, and external agencies that want to understand the nature of revenue sources in higher education and opportunities for improvement.

Need for Revenue It is valuable to understand that the situation today is not just that more revenue is needed for colleges and universities to pay for increased costs. The established sources of revenue have been diminishing for which replacement in the institutional budget is needed as well. This is important because these two problems (the need for new revenue and replacement income) have been conflated in some news articles, research studies, media reports, books, and common public perceptions that colleges are on an unsustainable path in 8

their current revenue and expense model (Blumenstyk, 2012a, 2013a; Brown, 2012; Brown & Ballard, 2011; Fain, 2010; Harden, 2013). A survey in 2011 by Moody’s Investor Service found that although net tuition revenue rose in the previous year, the projections for the future are negative (Fain, 2010). This is particularly challenging for taxpayer-supported state institutions where recent events have compelled more reliance on tuition to cover operating budgets as state funding diminishes along with a tapering of private giving and endowment revenue. Subsequently, more recent reports by Moody’s assigned negative outlooks to all American universities citing the increasing financial pressures on all key revenue sources (Briody, 2013). In addition, while the enrollment trend has continued to increase at traditional public and private nonprofit institutions, many for-profit private colleges have experienced steep enrollment decreases in recent years despite implementation of enrollment management strategies that award substantial tuition discounts. The decreases in sources of traditional tuition revenue and operating cost increases have left colleges and universities of all types financially challenged. An analysis in 2012 by the private-equity firm Bain and Sterling Partners of approximately 1,700 private and public nonprofit colleges revealed that one third have been on unmaintainable financial routes in recent years and that another 28% are falling into similar conditions (Blumenstyk, 2012a). This is troubling to everyone involved in higher education because many people, students as well as faculty and staff, are concerned about their future and opportunities for their children. The report identified colleges in regard to expense and equity ratios, although some figures may be skewed in regard to wealthier institutions where endowments suffered large losses in recent years. Nevertheless, long-term debt has increased tremendously, as well as interest payments, property, physical plant, and equipment expenses. Colleges and universities are making operational decisions to defer maintenance in an attempt to reduce costs, while other overhead costs have also been increasing. These increasing expenditures, combined with decreased government funding, and increased student loans have led to widespread concerns about the way colleges are run and question their value to students and society. Pessimists have even predicted that many colleges will go bankrupt or close (Briody, 2013; Brown & Ballard, 2011). A recent study by an editor of New Directions for Higher Revenue Generation Strategies

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Education (Brown & Ballard, 2011) predicts that many colleges will be closing due to revenue shortfalls and financial problems that often cause accreditation renewal to be denied. The summary of that study examines a variety of institutions and forecasts that more than half of all existing private colleges in the United States will close or merge by 2025. Because colleges and universities in the United States need accreditation by a federally recognized agency to award student loans in addition to attracting students and helping to maintain quality education programs (Alstete, 2004), the prediction seems possible and is echoed by other writers examining higher education who also cite issues such as financial problems, new technological developments, and changes in educational expectations (Briody, 2013; Brown, 2012; Harden, 2013). The internal and external challenges are intriguingly described in Cautionary Tales: Strategy Lessons From Struggling Colleges (Brown, 2012), which with case research determines that colleges generally do not decide to close on their own. Instead the decision is normally forced upon the institutions by external assessments from other organizations such as the founding church or regional accrediting agency. A very informative research study of college and university business officers was conducted in 2012 by Insider Higher Ed that captures important assessments of financial issues and perceptions of institutional budget officers (Green, Jaschik, & Lederman, 2012). This was the second year in a report series that examines important challenges facing different types of institutions from the perspective of higher education financial officials. Questions were asked regarding: ∙ ∙ ∙ ∙ ∙

the current financial well-being of colleges and universities, recent changes, expectations for the near future, important issues to be addressed, and other critical financial concerns.

In this annual survey and the previous year’s study, the financial officers were optimistic about the financial health of their organizations (see Figure 1)

10

FIGURE 1 Rating the Financial Health of Our Institutions

Note: Percentage report “good” or “excellent.” Source: Green et al. (2012, p. 8); used with permission.

unlike many external critics. Officials at public institutions provided slightly higher ratings than their counterparts at private colleges and universities. However, there are some noticeable declines when considering certain institutional types. For example, there were decreases in good and excellent ratings in public and private universities, public baccalaureate colleges, and community colleges. Interestingly, the results found that there were increases in the reported financial health at public master’s institutions, private master’s institutions, and private baccalaureate institutions. If this study is viewed as one report among many with different forecasts about the financial status and prospects, the actual need for revenue improvements probably differs on the basis of institutional type and the information source. The survey also revealed a difference between internal institutional senior campus officials, such as budget officers, and academic program leaders. The

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business officers seem to believe that academic leaders often cannot or will not become involved in important discussions about the sustainability of the methods that earn revenue. However, the survey is inherently one-sided due to the population questioned, and some readers of higher education literature would undoubtedly view the problems differently. For many years, academic traditionalists have stated that the problems and the disappointing results currently experienced are due largely to the way that colleges and universities have strayed from their origins and their proper role in society. This could be due to the nature of the ongoing debate of vocational versus scholarly academic purposes of the institutions as well as changing student/parental/societal expectations. To further complicate matters, there has been a growing acknowledgement of the importance of managing organizational knowledge in organizations in the past 20 years. Writers such as Metcalfe (2006) have acknowledged the importance of managing knowledge in an era of “Academic Capitalism” for operating with market-like behaviors. She adds that “the production of human capital is one of the more important functions of higher education in modern society” (Metcalfe, 2006, p. 5). This can be a useful concept to inform internal and external higher education stakeholders because it can help remind people that the traditional concepts of maintaining human knowledge, discovering new knowledge, and encouraging intellectual inquiry are as important as ever, aside from financial and institutional mission challenges. Colleges and universities continue to have the ability to perform many critically vital functions in society that are increasingly needed. However, higher education needs to periodically remind society about these purposes. In regard to private colleges and universities, a research study was conducted to determine if tuition discounting (which is often scholarships based on financial need or academic merit), endowment, and prestige affect enrollment yield (Meadows, 2009). The results of this doctoral dissertation found that the yield from raising tuition prices at private colleges is demonstrably weak. The researcher applied previous scholarly concepts (Breneman, 2001; Breneman, Doti, & Lapovski, 2001; Zemsky, Wegner, & Massy, 2005) in the analysis and concludes that institutions frequently seek to raise as much money as they can and are generally unwilling and/or unable to control costs.

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Effective leadership of revenue generation efforts and proper implementation of administration polices to increase income are recommended as the best way to improve financial performance. This type of research and its findings are echoed in the popular press today, yet could be disputed as a simplistic view of the complicated higher education system that serves multiple purposes in society. Nevertheless, the slowing of revenue growth is a long-term problem with current data from institutions to verify this disappointing fact. Mrig (2013) cites Moody’s 2013 Higher Education Outlook that 35% of private institutions and 29% of public universities in the United States failed to achieve a 2% revenue growth in 2011 and have significantly increased their long-term debt. The question is raised about where the “new and sustainable revenue streams will come from, and what steps must be taken today to ensure these opportunities aren’t overlooked?” (p. 15). The proposed answers to these questions are shown in examples from institutions achieving new sustainable revenue streams as well as potential new ideas that are yet to be widely implemented. New revenue-generating policies and programs often start small, and then develop to become established and more widely used. The new and replacement mechanisms may vary by institutional type, as readers of this monograph will see. However, the overall goal of sustaining organization viability and long-term financial success is a common goal. Some critics of the incomegenerating activities include college and university leaders who view this as an inappropriate academic “commodification” in the modern era, particularly the “seeming loss of collegiate community, growing curricular incoherence, the virtual eclipse of the liberal arts, an alleged neglect of undergraduate education generally, and unchecked careerism among a new generation of nontraditional collegians” (Lucas, 2006, p. 317). Whether learning is currently being or has already been turned into a commodity has not eased the financial strains or reduced the number of internal and external faultfinders of higher education fiscal policies. A goal of this monograph is to explore various revenue options, and not repeat what has been said in previous books and articles regarding the dire straits of colleges and universities or the supposed breakthroughs in innovative programs or operational practices. The objective is to

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thoroughly analyze options for institutions of all types to learn what can be done to reinforce their missions with supplemental revenue that is not mutually exclusive of their organizational intent, activities, and development. This discussion of the unenthusiastic opinion about monetary issues in higher education does not seem to have greatly impacted institutional leadership practices. Some scholars of higher education have sought to understand the new schema in light of ongoing societal and postsecondary changes. Slaughter and Rhoades (2004) state in Academic Capitalism and the New Economy that there is a strong competitive environment in the knowledge-based economy by higher education institutions (both private and public) to create, promote, and deliver many types of research results, educational programs, and consumer services today. It is pointed out that “in many cases, academic capitalism is not very successful in generating net revenues [for higher education institutions], and it leads to undesirable outcomes . . . they reduce their distinctive involvement in local communities” (p. 329). However, the authors also point out that the “educational mission of higher education could be reinvested in by judicious use of the proceeds from intellectual property . . . [and] a share of revenues generated by intellectual property could be placed in a public trust that could have as its purpose directly aiding students and communities in a variety of ways, whether through scholarships, research internships, or direct grants toward community development” (p. 337). Other scholars and university leaders including Derek Bok (2003) state that higher education institutions may be jeopardizing their true mission in the pursuit of money, and there are risks in increased secrecy of corporate-funded research, venture capital, and industry-subsidized programs that can cause ethical conflicts. Bok adds that entrepreneurial endeavors may have some short-term financial success, but can cause institutions to lose public trust and the respect of faculty if colleges and universities do not vigorously uphold academic standards (Bok, 2003). In recent years, many institutions have adapted to these challenges and integrated what businesses now call “corporate social responsibility” in college and university missions related to social justice and public service activities. Overall, higher education institutions have adapted successfully to various calls for action in recent years, and this latest call for more revenue is also being answered. Colleges and universities have created and implemented 14

successful revenue activities that will be identified in the next chapter. Depending on the reader’s type of institution, some ideas may be more suitable than others.

Established Income Sources When beginning the examination of an important subject, it can be informative to start with a description of the topic so that the meaning is understood. The Merriam-Webster Dictionary defines revenue as “the total income produced by a given source” (“Revenue,” 2013). There are multiple sources of revenue in higher education institutions, and they vary in percentages depending on the type of institution. For many years there has been an abundance of perceptions about the true sources of monetary income of colleges and universities. Views differ not only in regard to the type of college, but also the role of the individual considering the question (Patton, 1981). Students are likely to believe that their tuition payments are the primary source of money for running their institution, whereas faculty members in smaller colleges believed, although this may have changed in recent decades at private colleges, that federal grants provide the bulk of revenue. Interestingly, faculty at public institutions frequently perceived that private institutions are funded chiefly by gifts and endowments. Note that these perceptions were collected over 30 years ago when the analysis was conducted. Nevertheless, there are still widespread misconceptions about the sources of income for the different types of institutions. The reality is that although tuition and student fees are indeed part of the operating revenue, they actually comprise a relatively small amount of the income that public colleges and universities receive. According to the U.S. Department of Education’s National Center for Education Statistics (nces.ed.gov) and as reported in the Almanac of Higher Education 2013 for the fiscal year 2011, public four-year institutions obtain 19.6% (nearly one fifth) of their revenue from tuition and fees, and nearly another fifth from state appropriations (19.3%), with small amounts from state and local grants (Chronicle of Higher Education, 2013). As readers familiar with higher education institutional types might expect, public two-year Revenue Generation Strategies

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institutions receive slightly less (16.2%) of their operating revenue from tuition and fees, and a larger percentage (nearly one fourth, 24%) from state appropriations. The two-year public institutions also receive relatively large amounts from local appropriations (16%) and federal grants (22.2%). Both four-year and two-year public institutions receive much less of their total operating revenue from tuition and fees than private four-year and two-year institutions. Therefore, although normally classified as “public or state institutions,” these two-year and four-year colleges and universities are sometimes called “state supported or publicly supported” by higher education writers who are familiar with the true nature of funding sources. Aside from the federal, state, and local funds, these public (supported) two-year and four-year institutions currently earn other revenue from other nonoperating income such as: ∙ ∙ ∙ ∙ ∙

auxiliary enterprises (8.1% and 3.8%), independent operations (5.6% and 1.7%), gifts (2.3% and 0.4%), investment income (3.9% and 0.7%), and other income (1.9% and 1.1%).

Thus, there are opportunities for these colleges and universities to increase their revenue streams in several of the existing areas, as well as new activities that will be examined later. The operating and nonoperating revenue allocations are illustrated in Figures 2–4 for the three largest institution types, with categories adapted and consolidated from the National Center for Education Statistics as reported in the Chronicle of Higher Education (2012). In regard to private institutions, recent tabulations of revenue reveal that tuition and fees account for nearly one third (29%) of revenue at private nonprofit four-year institutions and well over one half (69.8%) at private nonprofit two-year colleges (which declined from the previous year). It is not surprising that the share of net total tuition is much higher than that at public institutions. However, four-year and two-year private institutions also receive a notable amount of federal appropriations, grants, and contracts, 8.8% and 9.9%, respectively, a decline from the previous year, as well as small amounts 16

FIGURE 2 Condensed Revenue Illustration for Public Four-Year Institutions

coming from state and local appropriations, grants, and contracts. Four-year private institutions receive less than 10% of their operating revenue from private gifts, grants and contracts, and investment returns, and two-year private colleges receive even less. Other revenue sources, such as investment returns (which accounted for 25.8% in 2011) and educational activities (7.1% and FIGURE 3 Condensed Revenue Illustration for Public Two-Year Institutions

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FIGURE 4 Condensed Revenue Illustration for Private Four-Year Institutions

5.2%), increased from the previous year. The four-year institutions’ hospitals produce (on average) 8.4% for those private universities with medical programs. Interestingly, and relevant to ideas being examined, “auxiliary enterprises” currently account for 7.1% and 5.2% for four-year and two-year private institutions. This is notable because these percentages decreased slightly from the previous year, yet have a potential to become larger sources of additional revenue for institutions as discussed. It should be noted that federal, local, and state government policies have provided and continue to provide significant indirect financial support granted for tax-exempt status to private nonprofit and public institutions, but not to for-profit postsecondary institutions. This third type of institution does not have tax-exempt status and is normally established as a business corporation. These colleges and universities are even more dependent on tuition and fees (net allowances), and are identified in a separate section of the National Center for Education Statistics Report and the Chronicle of Higher Education’s Almanac following public and private nonprofit colleges and universities. They receive notably high revenue percentages of 89.7% and 85.3% from tuition and fees, which is a slight decrease from the 2011 report (Chronicle of Higher

18

Education, 2012). It is well known that these types of institutions are different from traditional public and private colleges and universities in many ways such as student recruitment practices, admission standards, campus facilities, dependence on students to obtain loans, and accreditation matters. This has garnered criticism from legislators and others regarding student loan default rates, graduation rates, and other issues. Nevertheless, these institutions do receive some federal appropriations, grants, and contracts that account for 5.3% and 8.8% of their revenue, which also decreased from the previous year (Chronicle of Higher Education, 2013). In total, the revenue percentages reportedly received from state and local appropriations, grants, and contracts, as well as private gifts, grants, and contracts, are extremely small. It may be surprising to some readers that private for-profit colleges and universities do not receive more than 2% from supplemental educational activities and auxiliary enterprises. However, due to the general lack of traditional campus physical facilities, sports activities, and other reasons, it is understandable that these institutions focus primarily on their main revenue source: tuition and fees from students that are largely supplied by government loans. Recently, for-profit colleges have experienced significant declines in revenue (Pope, 2012), been criticized for their high student loan default rate, and faced increased scrutiny by accreditation agencies and legislators (Blumenstyk, 2014). The established sources of income stated so far are supported by other reports including one in a series of briefs developed by the Delta Cost Project at the American Institutes for Research (AIR) using data from the Integrated Postsecondary Education Data System (IPEDS; Kirshstein & Hurlbut, 2012). The IPEDS Analytics: Delta Cost Project Database 1987–2010 was released in 2012 by the U.S. Department of Education with the intention of updating key tables and figures. The report titled Revenues: Where Does the Money Come From? answers the title question by listing net tuition, state and local appropriations, gifts, grants, federal government aid, and auxiliary enterprises as reported in the aforementioned Almanac of 2013–14. However, the Delta Cost Project report also examines changes in recent years and reveals informative findings on revenues from 2000 to 2010. For example, the

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report states that “community colleges continue to suffer revenue declines in 2010, as revenues per student declined by 7 percent or approximately $1,000 per FTE (full-time equivalent) student from 2009 to 2010. Community colleges are also the only public institutions where total operating revenues were lower than they were a decade earlier” (Kirshstein & Hurlbut, 2012, p. 1). It is important to note that an increase in enrollment at these institutions occurred without an overall growth in revenues, and the report details some of the reasons for decreases in revenues for each student. Therefore, despite the well-known surge in community college enrollment, these institutions also have a current need to consider expanding and/or adding revenue sources. In addition, the primary findings on revenue changes reveal that operating revenues increased by 8% at public research institutions, while only 1% at public master’s institutions, and were unchanged at baccalaureate colleges and universities. On a positive note, investment returns for nonprofit private institutions rebounded in 2010 due to a recovery in the financial markets (though this may still be considered a volatile and unpredictable revenue source), and a particularly significant gain in private gifts, investments, and endowments during the recent period of 2009–2010. Private research universities received large increases in this area as well, and public research universities were the only institution type to experience an increase in endowment income. As with most statistics, financial or otherwise, the change in percentages should be looked at with a critical eye in regard to the time period selected, the starting point, and normal variation when looking at what is reported. It is clear that revenue changes also vary among institutional types; therefore, the options and opportunities for the different institution types will be examined further in examples and concepts. Revenue per FTE is a somewhat useful indicator for comparative performance, but other useful data are also available online using the nationwide IPEDS Data Center Reports by the National Center for Education Statistics, Institute for Education Sciences (nces.ed.gov/ipeds/datacenter). Although the revenue tabulations are explained on the website, readers should be aware that certain institutional characteristics may inflate some measures such as revenue per FTE due to specialized programs that generate large annual revenue,

20

including medical, biological, and agricultural research. This online system allows users to: ∙ ∙ ∙ ∙ ∙ ∙

examine individual institutions, compare different institutions, sort on variables, view trends, create group statistics, and generate various reports from the data that American institutions are required to report each year.

When colleges and universities are looking for best practices to adapt, it is important to consider institutional type, such as public or private, four-year or two-year, and nonprofit or for-profit status. The concept of adapting best practices from peer and aspirant institutions is widespread (Alstete, 1995) and many college leaders continually measure key performance indicators (KPIs) or key success factors (KSFs) using different improvement methods including benchmarking. However, it is important to understand that merely collecting measurement “benchmarks” is not as effective as true benchmarking where best practices are uncovered from within or outside an industry and then adapted for ongoing continuous improvement at an organization (Alstete, 2008). This means that different institution types can learn best practices and discover revenue-generating strategies from outside their category type (public, private, or for-profit) and even outside the higher education system. In the book titled Privatization and Public Universities (Priest & St. John, 2006), a writer for InsideHigherEd.com, Scott Jaschik, states that private sector methods are being adapted by public institutions as a way to facilitate revenue generation and financial management with a desire to maintain or improve their academic reputation. Jaschik notes that the shift in funding sources from public taxes to student tuition revenue has been a trend in public higher education since the early 1980s and is an indicator of the transition to the private college model in the financial operations of public universities (Jaschik, 2006).

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The chapters in the Priest and St. John book also examine various aspects of the change in funding, including tuition, student aid, increased private capital by forming private corporations and patents, new e-learning systems as money-making endeavors, further commercialization of research and contracting services, and a fundamental modification of financial operations with marketing efforts as a result of increased student tuition (Priest & St. John, 2006). Therefore, changes in revenue are occurring from both the external sources and internal developments. The strategy of tuition discounting for revenue management has been extensively examined in higher education and public institutions, and it has been found that student aid can be leveraged for revenue generation (Hillman, 2012). However, as stated earlier, it has also been observed that this approach for additional income is only beneficial to a certain level. A research study of 174 institutions from 2002 to 2008 found that “when unfunded tuition discount rates exceed approximately 13%, institutions may experience diminishing revenue returns to this financial aid investment” (Hillman, 2012, p. 263) as scholarships or tuition discounts are somewhat euphemistically identified. Therefore, institution leaders, trustees, and admission and financial aid administrators should be cautious in excessively lowering tuition to implement policies that seek to increase net tuition revenue (Carlson, 2014). However, tuition discounting should also not be neglected in the strategies to boost revenue and maximize student access, as well as maintaining reasonable tuition increases to preserve affordability. Sources of revenue vary from more tuition dependence to less (especially in regard to private for-profit, private nonprofit, and public institutions), and the proper management of financial aid leveraging should not be considered inconsequential. College and university strategic planners seek to balance tuition scholarship and student aid, using sophisticated models that account for their student demographics, institution type, geographic location, competitors, stated goals, and other factors. However, these endeavors have limits, and many people both within academe and outside believe that higher education may be reaching, or has already reached, a “tipping point” in affordability (Archibald & Feldman, 2010; W. J. Bennett & Wilezol, 2013; Ehrenberg, 2002; Rey, 2012). Institutions have responded to the recent financial pressures in a variety of ways to seek revenue 22

and in their budget planning. Therefore, it is timely to focus this monograph on the supplemental revenue-generating aspects of budgeting that many academic administrators and faculty leaders can consider, not only chief budget officers.

Recent Disruptions and Opportunities A report on Trends in College Pricing by the College Board supports the concerns about rising tuition prices but notes that in the 2012–2013 academic year the increases have been somewhat smaller and were actually below the average rise in the past decade (Baum & Ma, 2012). However, the findings of this study also found concerns in what students actually pay in regard to the average net price at public four-year colleges, public two-year colleges, and private four-year colleges after previous declines. Most relevant to this examination of institutional finances is the conclusion that “State appropriations per full-time equivalent (FTE) student declined by 10% in 2011–12, leaving this source of funding 25% below its level five years earlier, after adjusting for inflation” (p. 4). Previously, during this period there were unusually large Pell Grants, veteran’s tax credits, and financial aid, yet the average net price paid by full-time students increased for the second consecutive year in 2012–2013. This is a troubling concern for colleges and universities that depend on state appropriations, because this trend affects planning in enrollment patterns, college affordability, and public opinion. Institutional leaders are aware of this, and although the decreases in tuition may leave many colleges financially strained, a new survey of almost 300 colleges and universities by Moody’s Investor Service reveals that approximately one third forecast that their net tuition revenue will either decline outright this year or increase at a rate that does not keep pace with inflation, and is the signal of the sustained financial pressure they have confronted (Blumenstyk, 2013a). While institutions have attempted to control the tuition discount, which is the revenue diverted to student aid, discounting has continued to increase in recent years to attract more students and assist needy families. Part of the result is that more institutions (18% of private and 15% of public Revenue Generation Strategies

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supported) project an outright decline in their net revenue, due at least in part to this discounting. This is especially true for the smaller, more demographically and location-focused, less selective colleges, while the market-leading and broadly differentiated institutions with higher credit ratings have coped better and maintained student enrollments. This is not to say that these institutions have not been affected, but they have more flexibility in addressing changing financial circumstances. Many institutions are more limited in their ability to adjust revenues and expenses. There are possibilities for additional revenue sources and expanding existing revenues for all institution types that will be considered. It is imperative that these alternatives are understood because the recent concerns and trends in net tuition price affect not only how much students pay, but also the budgeting of expenditures at colleges and universities that are not likely to decrease in coming years (Carey, 2012). While public institutions have experienced reduced funding from federal and state programs, as well as increased regulations, states are increasing fees for students who take more credit hours than necessary to graduate in four years (Rey, 2012). In addition, more revenue needs can be seen in forecasts from the National Institutes of Health because financial changes will reduce some alternative funding sources on which institutions depend and therefore compel universities to find replacement income. These volatile financial trends are complicated further by federal budget issues that have made it more difficult and costly for students. News reports have also diminished hopes that by completing college and graduate school, students will have more employment prospects. Increases in interest rates on federally subsidized student loans are threatening to rise, and this will not only add additional costs to students but may also negatively affect college enrollment. Therefore, it is understandable that many people perceive the overall environment of higher education as quite unsettled at this time, partially due to the unpredictable economy and the latest trends in higher education funding strategies. In particular, the increasing privatization combined with the multiple involvements of private industry and capital markets that have now been accepted not only as a valid and appropriate source of income for colleges and universities, but also as a social responsibility of private industry (Geiger & Heller, 2011).

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Furthermore, a report on the financial trends in higher education in the United States by researchers at the Center for the Study of Higher Education at the Pennsylvania State University states that the increase in the spirit of privatization in both public and private tuition sourcing, along with commercial research funding activities, “has meant increased exposure to market forces . . . [and] the mushrooming of financial aid in all its forms” (Geiger & Heller, 2011, p. 1). The privatization has enabled a growth in real tuition prices, and increased expenses and expenditures that have greatly affected all types of institutions. The report adds that the trend would not have been possible if not for the large growth of financial aid from the federal student loan system. This has affected private and public aspects of the system as institutions compete for these public funds in a market-driven competitive environment. Generally, the trend in recent decades has been: ∙ ∙ ∙ ∙ ∙

more funding, more spending, higher tuition, more competition, and more research.

Other endeavors that are notable include a wide-scale desire and respect for learning and intellectual advancement for nobler reasons. Many colleges and universities have reemphasized or added critical thinking to their missions, often with the intent to display higher value to students and funding sources. From an economics or business perspective, it is interesting to see how there has been a lack of demand elasticity as prices increased with an abundance of colleges and universities in the United States and internationally for students to choose from. Normally a large number of competing organizations result in a lowering of costs, an encouragement of innovation, and increased differentiation of products or services. Yet this is not widely perceived as occurring in the United States with over 4,500 higher education institutions (Selingo, 2012) and an increasing number of institutions globally. In a recent book chapter by the late J. Douglas Toma, the recent trends Revenue Generation Strategies

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have not indicated that institutions are becoming more distinctive, and are primarily focused on moving to the next level in prestige rankings such as those constructed by news magazines (Toma, 2012). This is unfortunate because more innovation is needed (Christensen & Horn, 2013; Kelly & Carey, 2013) and less unrelenting pursuit of the generic typologies that are common in magazine rankings. Institutional governing boards and administrative leaders seem easily convinced that a higher ranking will lead to increased revenue. Whereas, for many institutions, a more distinctive institutional mission as mentioned earlier would not only facilitate a sound educational model, but will also lead to more revenue by having a special appeal. Fortunately, many of the regional and specialized accreditation agency standards have begun to recognize this, and are now requiring higher education programs and institutions to become distinctive, not just larger and higher in supposed prestige. Toma states that colleges and universities seek prestige in the way that traditional corporations seek monetary profits. However, these efforts for prestige, influence, and excellence are largely not counteracted by incentives leading to parsimony and efficiency, thereby driving up costs that can lead to institutional failure (H. R. Bowen, 1980; Province, 2009). Recent revenue trends and variations have also been analyzed at specific institution types, such as research extensive universities from 1984 to 2008 (Leslie, Slaughter, Taylor, & Zhang, 2012). The results of this study of 96 such institutions found that a large amount of tuition revenues at public research universities are likely to be expended on instruction whereas private research universities typically spend revenues on merit aid and research. The study concludes that private institutions “strategically deploy revenues from a wide variety of sources to secure particular students and to conduct research activities” (p. 633). This slightly different pattern of revenue generation and expenditure among the various types of research institutions is not surprising, and university leaders should consider the mission and goals of their particular organization in regard to balancing the objectives of teaching, research, and service to society. In addition, the multiple sources of revenues have varied in recent years among institution types in both the United States and other countries. For example, an analysis of changes in higher education around the world recently found certain international trends in the public and 26

private financing systems (Sanyal & Johnstone, 2011). Governments in many countries are showing an inability to support the entire increase of expenditures and there is a marked movement toward self-financing (which is already common in the United States) that has been observed in both nonprofit and for-profit postsecondary segments. The costs of enrollment increases are significant in many countries, and the researchers recommend that institutions continue to lobby for public support, make improvements in efficiency, and seek to increase private revenues. The United States still has a relatively large percentage of the population pursuing postsecondary education, and other countries are also now increasing enrollments which strongly affect revenue as well as expenses and the need to explore additional funding sources. Aside from the sourcing of private and public funds in higher education, another noted area recently publicized as a trend of disruption (or at least the potential for it) in the industry is the creation of large open enrollment distance education courses. These new endeavors, titled Massive Open Online Courses (MOOCs), have become part of a new higher education strategy and delivery because this could offer new financial revenue streams to capture (Dua, 2013). The revenue potential of these courses and programs is being hypothesized internally by traditional institutions and externally from companies that facilitate their creation and administration. The most important challenge for colleges and universities confronting an uncertain disruptive future is to create an organizational ethos that is encouraging and supports advancements to develop at all levels of the institution in this new era of digital competition (Hanna, 2000). Whether these new offerings will be a sustainable long-term trend is yet to be seen; however, several prominent institutions are now offering these courses, and MOOCs will be briefly examined in a forthcoming section. This chapter reviewed the history of revenue in higher education, established sources (such as tuition, local, state, and federal appropriations, gifts, grants, auxiliary enterprises, and online offerings), and recent trends. Next, there will be an examination of examples of academic and noncredit programs, distance education, degree completion, branch campuses, and auxiliary enterprises for generating additional revenue as well as organization strategies to inspire these efforts. .

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Academic Programs for Generating Additional Income

I

T IS GENERALLY UNDERSTOOD that academic programs are the core offerings of colleges and universities. If this activity were compared to a traditional manufacturing or service-based company, academic affairs would be the main production area where the product or service is created. This organizational silo is the most widely recognized revenue-producing area in higher education institutions. Normally, a vice president for academic affairs or provost oversees various school deans, department heads, academic divisions, libraries, and often the admissions/student recruitment departments. These responsibilities include essential degree and certificate programs authorized by state and federal agencies including credit and noncredit offerings. The other commonly structured organizational divisions are nonacademic departments, such as student financial services, information technology, alumni affairs, physical plant, and other areas, which are primarily charged with supporting the revenue generation activities of academic programs that are central to the institutional mission. This is not to say that the nonacademic areas cannot generate revenue. They can, and examples will be examined in the next chapter. However, for most institutions the primary mission and a large percentage of institutional revenue are from degree and certificate programs. Therefore, the academic arena that generates tuition will be the first institutional area examined in this monograph. Existing tuition revenue streams from the academic degrees, and programs are commonly expanded and new offerings are frequently added to increase revenue. It is important for

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leaders who often began their higher education careers on the basis of their intellectual and scholarly achievements to broaden their organizational awareness and be mindful that administrative complacency of existing traditional programs can be harmful. Achieving and maintaining financial success is a serious matter that requires simultaneous preservation of academic integrity while also seeking to expand revenue income for the reasons previously stated. Successful leaders of academic divisions and departments should: ∙ stimulate new endeavors, ∙ encourage academic departments and faculty members to plan new offerings, ∙ set up effective reward systems, ∙ organize meetings to encourage new ideas, ∙ control costs, ∙ supervise academic integrity to ensure quality, ∙ align programs with the institutional mission, ∙ ensure sufficient resource allocation, and ∙ provide direct assurance of learning outcome assessment procedures for compliance with regional and specialized accreditation standards for ongoing improvement. It is important to appoint appropriately educated and experienced individuals to key positions in the academic areas, who can effectively work simultaneously on maintaining academic traditions of institutions and pursue new revenue endeavors. Colleges and universities are comprised of very different constituent groups, with many highly educated and accomplished individuals who are experts in specific fields that often need to have intellectual and professional respect for those asking that more revenue be generated. Therefore, leaders of academic programs have a special challenge to elicit the creation, development, and implementation of important programmatic offers from scholars who also have demanding multiple roles in the institution. Nonacademic administrators and staff may already understand and be motivated for additional revenue due to the nature of their position descriptions, and recent reports have indicated this. For example, a survey of college and university Revenue Generation Strategies

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business officers in 2012 found that chief financial officers believe that the most important strategies in the next few years are to increase revenue, obtain more corporate support, and grow the size of the endowments that generate revenue for the institution (see Table 1). Since the top two strategies recommended are academic responsibilities (increasing net tuition and developing/expanding online programs), it is appropriate to examine these endeavors first. The Green et al. (2012) report states that tuition revenue can be increased in two ways: 1. recruit a larger proportion of students who can or are willing to pay a greater portion of the tuition, either with personal or family funds or with the “hard cash” provided by government or other external grants, scholarships, and loans; or 2. reduce the tuition discounts (institutional aid or tuition waivers) that bridge some (or all) of the gap between family resources, external grants, scholarships and loans, and actual tuition, or that are used as non-need merit scholarships to encourage groups of students to matriculate. (p. 15) These are functional and frequently used methods by many colleges and universities today. Though perhaps more so in the recruitment of students rather than reducing tuition discount rates that are often more of a mediumto long-term goal than a feasible reality in the short term. In addition, tuition discounting has increasingly become widely known to have benefits that are appealing to use now but are unsustainable because of negative institutional consequences in the long run (Carlson, 2014). However, as stated previously, these recommendations regarding academic strategies for increasing tuition are from a report by nonacademic officers, specifically the chief financial officers. The recommendations may be somewhat limited within the construct of existing academic endeavors and financial aid packaging, and do not necessarily expand the offerings or create new academic programs. This is where the difference between academic leaders who have experience in actually creating and delivering academic services, and those who are directly responsible lies: for example, education initiatives that add revenue compared to the support-area leaders. Expanded or new 30

TABLE 1 Strategies Important to Institutional Efforts to Increasing Revenue Over the Next Two–Three Years

Increasing net tuition revenue Developing/expanding online programs Securing more corporate support (grants, gifts, contracts, etc.) Significantly increasing the size of the endowment Recruiting more out-of-state students (U.S. residents) Investing more in fundraising activities Using campus facilities and other resources on a year-round basis Recruiting more international students Reducing the discount rate

All Institutions

Public Doctorate

Public Master’s

Public Bacc.

Public Assoc.

Private Doctorate

Private Master’s

Private Bacc.

70.6 52.8

62.8 60.4

75.0 70.0

60.0 40.0

58.9 53.4

45.5 4.6

85.1 56.0

81.5 50.0

52.3

58.5

63.3

42.3

49.2

40.9

54.7

54.4

51.1

48.1

60.4

33.3

32.7

50.0

68.9

57.7

48.0

73.6

60.0

30.8

31.2

25.0

55.1

50.4

46.9

54.7

57.1

46.2

34.5

59.1

54.7

45.6

38.2

50.0

42.0

33.3

26.4

14.3

42.7

43.2

37.8

67.9

48.0

19.2

24.5

5.6

45.9

35.6

37.2

26.7

34.2

11.8

33.3

18.2

54.1

47.3

Note: Percentage rating the issue as 6 or 7; scale 1 = not important, 7 = very important. Source: Green et al. (2012, p. 16); used with permission.

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academic revenue can include new undergraduate majors, new graduate degree programs, certificates in specialty areas that enable students to earn an additional credential aside from their primary degree major, and post-master’s certificate programs that offer lifelong learning to current, previous, and new students of the institution. Two private nonprofit institutions in a large metropolitan area in the United States have generated significant new revenue with these kinds of academic programs. One is a large comprehensive Catholic university with over 10,000 students in several schools, including arts and science, education, law, health and medical sciences, diplomacy, and theology. The university was founded in the mid-19th century and has a long history of growth through internal expansion. In the 1990s, the academic programs were continuing to grow, and the deans of academic schools were encouraged by the senior administrative leaders to create new programs to generate additional revenue. A mid-level administrator in one of the professional schools looked at the existing offerings within the institution and examined academic programs offered at other colleges and universities for ideas. One noticeable difference was that the university did not offer post-master’s certificate programs as other institutions (even smaller colleges) had been providing for many years. Therefore a proposal was created by the dean’s office and sent to the appropriate faculty committees for consideration, first within the school, then to the institution-wide governance body for approval and finally to the state higher education agency. It is important to obtain faculty and administrator support at all levels to ensure support for quality programs that are created and delivered. Once approvals were obtained to offer several 15-credit (consisting of five three-credit courses) post-master’s certificate programs, the university added the certificates to the relevant brochures and promotional materials. In addition, since these certificates were designed for holders of master’s degrees, a direct-mail campaign was conducted using a mailing list obtained from the university alumni office. The new revenue generated came from previous students, current students who continued immediately when current degrees were completed, and new students who earned master’s degrees from other universities but were interested in an additional certificate from this reputable institution. 32

Another example of new academic program development that was specifically done for new revenue generation occurred at a mid-size private comprehensive college, also in a large metropolitan area. This happened to be the institution that served as an example of best practices for the previous large private university in regard to post-master’s certificate programs. This college offers a variety of traditional liberal arts programs along with many professional programs in education, business, mass communications, and criminal justice. Like many institutions of this type, the college recently crafted a five-year strategic plan that includes specific academic revenue generation goals. This plan begins with a market analysis, and then seeks to make improvements in academic program approval processes, grow existing graduate programs, and improve graduate admissions administration and graduate program retention ratios. As mentioned, distinctiveness is a key concept in many institutions today as they seek to strategically position academic degree programs from competing (often called peer) institutions to maximize revenue generation. This particular mid-size private institution has begun to examine its special capabilities and resources. The decision was made to increase the number of joint bachelor’s/master’s (three years plus two years) programs, examine the possibility of certain 3 plus 1 programs, and increase the number of interdisciplinary majors and minors (such as combining traditional liberal arts with professional career subjects). Directives from the senior academic leadership team, combined with effective annual budget planning, have been successful in implementing these plans and creating new programs. Revenue increases at this institution have already been achieved as shown in reports that the college is regularly exceeding forecasted credit hours and student enrollments, thereby producing budget surpluses. These types of programs are the heart and soul of higher education. Academic leaders today are becoming increasingly aware of their multiple responsibilities to not only support the traditional scholarly activities as leaders of the faculty, but also lead efforts to sustain the institutional viability with new revenue generation. It can be professionally rewarding to administration leaders and faculty members when they leverage their intellectual capabilities related to studious activities by creating new academic programs that appeal to students and produce important results for the institution. Critics of higher Revenue Generation Strategies

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education have stated, or implied, that academe is generally seen as stagnant, stodgy, and not producing services worthy of the money received from taxpayers and private tuition. Therefore, new academic programs and revitalization of existing programs can also help to mitigate concerns by these external constituencies and remind those within the academy that they can continue to provide value to society. Contentment often leads to individual and institutional inertia. This can be overcome by reviving a spirit of worthiness that is frequently forgotten by individuals who devote most of their daily lives to scholarly intellectual activities. Reconnection with the institutional academic mission needs to be initiated by the academic leaders, along with colleagues on the front end of academic program delivery. Faculty may not be opposed to improvements and changes if proposed developments are respectfully handled in a collegial and convincing way. In addition to medium- and large-sized private institutions, reducing organizational inertia by moving from planning to action in academic areas is an important and viable strategy for publicly supported institutions. An example can be seen at Indiana University-Purdue University Indianapolis (IUPUI), a large system of 15 Indiana University Schools and 2 Purdue University locations in Indianapolis. This institution has effectively leveraged its resources with an academic plan involving 11 strategic initiatives for research, teaching, and service that have “generated several substantial new revenue streams” (Sukhatme, 2012, p. 19). It has been reported that the additional revenue generated has helped stem financial problems from the economic slump and aided the construction of a healthy organizational culture by encouraging research in various disciplines and enhancing student retention. In addition, this large public institution system has improved the learning experience for students with the creation of updated degree programs and an enterprise titled Research, International, Service and Experiential (RISE). Overall, this is an example of effective strategic planning at a large urban public university with a multifaceted approach to producing new revenue that includes adding new programs to directly support its institutional mission. Strategic planning advice will be examined in a later chapter, but in this chapter on academic programs it is useful to understand how the front-end delivery of courses, programs, and research is influenced by the institutional 34

system and organizational ethos in which they are grown and sustained. Program expansion can be part of an adaptive strategy that is used by some colleges and universities (public and private), including specialized institutions (Rozhon, 2008). An investigation was conducted of specialized institutions seeking to expand their curricular offerings and the case study examined two higher education organizations that pursued different approaches aside from internal development. “Alliant International University expanded programs through an acquisition. The Pacific Graduate School of Psychology expanded programs through partnerships” (p. iv). Strategic alliance, partnerships, mergers, and acquisitions are a common practice in business management (A. A. Thompson, Peteraf, Gamble, & Strickland, 2014), and have been adapted in higher education along with outsourcing of certain operations and vertical integration in regard to precollegiate programs and alumni campaigns. In the case of the Pacific Graduate School of Psychology, academic programs were expanded with the establishment of partnership agreements with other institutions such as Golden Gate University, DeAnza Community College, the University of San Francisco, and Stanford University. This partnership results in serving new student bodies and geographic locations, and the institution was subsequently reincorporated in 2009 as Palo Alto University. This private nonprofit institution now has undergraduate and graduate programs that are offered in collaboration with the aforementioned institutions in California and is fully accredited. Partnerships are a practical method of academic program expansion because they can reduce the time and expense compared to internal program development that often requires not only internal institutional approval, but also authorization by state agencies and federally recognized accrediting bodies. Aside from mergers, another method for rapid expansion that was examined in the study involves acquisitions, which have similar benefits but involve an outright purchase that can result in a new name, location, and institutional classification such as special focus on a doctoral/research institution (Rozhon, 2008). Alliant International University is an example of an acquisition strategy that was used for academic program expansion by a nonprofit private higher education institution also located in California. This acquisition is similar to a merger in that the resulting institution is the product of combining two Revenue Generation Strategies

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previously established institutions (the California School of Professional Psychology and the United States University). The academic programs at Alliant International University enroll about 4,000 students who are largely in professional graduate programs in business, psychology, and education. While this university is featured as a military-friendly institution due to its location and program offerings, the concept of institutional mergers and acquisitions for academic program expansion can be an important option for other institutions to consider. In highly competitive environments, the option to offer specialized areas of instruction may encourage a strategic decision to acquire another institution or merge. In some cases, one institution’s name will be used for the new organization or an entirely new name will be created. Strategies and goals may differ, but the sustainability of institutional revenue and achievement of mission-oriented objectives should be of primary importance to academic leaders and institutional policy makers. Chief financial officers have also stated that extraordinary planning efforts are important for higher education institutions today because additional revenue is needed due to the impact of the economic downturn, and therefore there is a need to examine previously undiscovered institutional strategies to increase revenue (Green et al., 2012; Inside Higher Ed, 2013b). High demand graduate courses have been a common and frequently used academic program method for supplementing tuition income. “Many schools are developing graduate program[s]—in areas such as management, healthcare, and education—because they are in demand and can be profitable” (Di Meglio, 2008, p. 3). Examples can be found at institutions such as New England College in New Hampshire where graduate degree programs in healthcare and fine arts were created with a hybrid structure of online and oncampus coursework to help shorten student degree completion time. The institution is admittedly tuition dependent and developed these programs specifically to generate additional revenue. The new programs leverage the existing strengths of the institution’s faculty and resources in an effective way that maintains academic integrity and enables faculty members to leverage their intellectual assets. Shorter courses have been a long-standing approach to generate additional revenue, and are described in the Income Generation

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Handbook: A Practical Guide for Educational Institutions (Warner & Leonard, 1992). This pioneering and informative book was published over 20 years ago by the Society for Research into Higher Education and describes many examples of income generation projects, and strategies for development. The handbook was primarily aimed at audiences in the United Kingdom, but is informative reading for educators in other countries as well. The work recommends that institutions:

∙ develop a strategy to utilize their strengths for potential markets, ∙ encourage an enterprise culture, ∙ facilitate financial procedures for distributing appropriate monetary incentives, and ∙ generally conduct good practices.

In many countries, courses and degrees offered on site at companies, healthcare organizations, and nonprofit organizations can generate significant financial revenue whether they are delivered by a single institution or cooperatively with other educational institutions. These recommendations are related to many of the principles and examples identified in this monograph. For example, an increase in semester credit hours and headcount enrollment was achieved at a large private university in New Jersey through improved marketing, recruitment, and admissions procedures, as well as a new off-campus master’s degree in taxation program at a national telephone company. This specialized professional graduate program started in the mid-1990s and ran for several years until all of the students graduated. In addition, more students were enrolled in this particular on-site program by delivering the courses using video-teleconference to company sites in Ohio and California. This institution did not have a continuing education program director, and the additional revenue streams from these programs were initiated, developed, and delivered by an academic administrator in one of the established schools in the university.

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Noncredit Academic Programs Another area of revenue generation in the academic area of responsibility involves noncredit programs. These offerings have been defined as having no credit applicable to undergraduate or graduate degrees, are not part of an academic curriculum, are often offered by schools or departments of continuing education, are not normally supported by state funds, do not appear on student degree transcripts, and are frequently created in contracts for business and industry (Milam, 2005). Noncredit programs can provide strongly needed sources of supplemental revenue for specific or general operating income needs of an academic institution and allow rapid response to the needs of organizations in the communities served by colleges and universities. Noncredit programs and courses are becoming, and have already become, an expected and often required part of life in society for many people who are seeking credentials for new employment opportunities or for selfdevelopment. Yet, many noncredit programs can offer highly educated faculty members with expertise in specific areas an intellectually stimulating opportunity to teach quite sophisticated topics such as art, music, theatre, writing, history, current affairs, and other topics. Examples can be found in schools and departments of continuing education at many types of public and private higher education institutions. These noncredit programs could also support the notion that not all students should enroll in traditional academic degree programs (Rosenbaum, 2004). By offering high-quality education for people who need career training or self-development, established colleges and universities can and should be the best provider as shown in many successful examples. One of the oldest, largest, and well-known institutions offering noncredit courses and programs is the School of Continuing and Professional Studies (SCPS) at New York University (NYU SCPS, 2013; Zwerling & Vajda, 1986). The SCPS has been providing education experiences for over 80 years, and currently has 2,300 courses on campus and online, along with certificates as well as for-credit graduate degrees in a wide variety of rapidly growing areas. This type of institution is a good example of world-class best practices for other colleges and universities to examine closely for programs and courses that could

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be adapted back to the home institution as part of an initial development and/or ongoing process for increasing revenue generation. Noncredit offerings involve highly specialized training that not only provide a certificate from the SCPS, but also provide the opportunity for professional certification in career-oriented areas. Some of the curriculum topics include computer technology, business, publishing, finance, law health sciences, hospitality, tourism, and sports management. These subjects are in addition to other highly intellectual and culturally sophisticated courses that adults often participate in for self-improvement and lifelong learning. Topics in these areas include languages, applied politics, global affairs, humanities, arts, and writing. This is a world-class example of a broad differentiation strategy that enables revenue generation activities to be both practical and scholarly. The offerings comprise traditional higher learning topics that are intellectually advanced for highly accomplished faculty and students. Anecdotal comments by faculty members in adult continuing education courses have reported that teaching these courses can be as challenging as, or more challenging than, regular full-time undergraduate day courses due to the nature of the students in these courses and the sophisticated level of classroom discussions. It has been stated that the United States has become “A Nation of Students” since 40% of adults participate (or have participated) in education programs that are attended for work-related training, self-development, or annual continuing education requirements (Speer, 1996). However, the ratio may have changed in recent years due to the declining percentage of citizens employed and overall national demographics. While large enrollments do not ensure success for all institutions, noncredit courses, certificates, and programs offer individuals an opportunity for ongoing lifelong education from young adulthood to the lengthening retirement years. Noncredit programs are offered at large and small institutions, private and public, urban and rural, to a variety of student populations. These endeavors not only leverage existing resources such as faculty expertise and facilities to generate new revenue, but can also help make the public aware of the traditional degree and certificate programs offered at the institutions, for both the noncredit attendees or family and friends they might recommend. There is limited research available on this additional benefit of noncredit programming, but it has been observed that Revenue Generation Strategies

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adults enrolled in noncredit personal development and practical vocational courses often commented that they were pleased with the educational experience at the institution and were likely to recommend the college to friends and family for undergraduate or graduate degree offerings. In addition, as previously mentioned, collaborative arrangements with other institutions can be an effective means to develop and implement off-campus corporate on-site noncredit training programs for generating additional revenue. For example, in the 1990s several directors of continuing education at institutions in the New York metropolitan area formed a local industry-training consortium that worked together to solicit companies and medical centers for on-site noncredit course offerings. In addition to private institutions, there are many noncredit programs offered at community colleges that evolved to meet the need for credentialing and certification in specialized areas (Flynn, 2002). Two councils that are affiliated with the American Association of Community Colleges have been very active in supporting these endeavors by engaging in communication with businesses, education, governmental, and regulatory agencies to determine how community colleges can provide needed programs. Community college leaders are advised to leverage their core competencies, particularly in technology and other areas related to industries located in their community. Also, institutions should conduct environmental scanning as part of their regular institutional research practices to assist strategic planning with the goal of developing noncredit, contract training, and community service programs in their offerings. More than a decade ago it was stated that “[Community] College faculty, administration and staff are working within an infrastructure not easily suited to rapid realignment and redeployment of resources to address new opportunities” (Flynn, 2002, p. 21). Certification programs are a large need that is now being filled by these institutions to generate revenue, reassure the public that higher education systems are worthy of public support, and enrich communities with both practical and high-quality programs that prepare students to be successful. In regard to demographics of retirees and learning options for older populations, many colleges and universities have tapped into this growing demographic group with appealing noncredit programs that often examine 40

intellectually rich areas of scholarship and culture. Courses of this type can be created and offered individually by institutions, or in partnership with an outside organization. One of the leading providers is Road Scholar, which is the current name of noncredit programs offered by the well-known nonprofit organization Elderhostel Incorporated. The organization was formed by two educators in the mid-1970s and initially offered courses at five colleges and universities in New Hampshire (Elderhostel, 2013). Elderhostel offerings can be a self-formed group of senior adult students based at institutions, guided by faculty to provide on-campus courses for area residents and visitors. The Road Scholar courses are also an excellent opportunity for faculty members to create and teach a variety of intellectually stimulating high-quality learning experiences in a variety of areas for travelers to the institution’s location or at international locations. These programs require careful administration, properly trained and experienced directors to oversee them, and support from the college or university’s senior administration to be successful. While the revenue surplus per course may be relatively modest, significant additional gross income can be achieved by offering a large number of offerings on campus during summer sessions when facilities are often available. Off-site locations near the campus can be used during the academic year. Faculty members who teach these noncredit programs have commented that they are as academically challenging as graduate-level courses. As a result, for college and university faculty members who are interested in traveling or have specialized expertise that may not fit in a traditional credit-bearing course, the Road Scholar or Elderhostel courses can be a rewarding opportunity to share their knowledge and generate revenue. The current aging “baby-boomer” population will have a large amount of interest in travel and disposable income to spend on learning activities such as this (Shapiro, 2005). Private and public institutions in many geographic locations sponsor local on-campus or near-campus Elderhostel programs and travel destination Road Scholar programs. In addition to using the intellectual assets of faculty members who are willing to teach these courses, the physical facilities of higher education institutions are also put to fuller use for revenue generation. “Some of our college- and university-based programs utilize pleasant on-campus housing, such as graduate student or faculty apartments Revenue Generation Strategies

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or suites, and a very few use dormitories (those that do utilize modern facilities)” (Elderhostel, 2013, para. 10). Elderhostel attendees have understandably higher expectations for housing quality today while on Road Scholar trips compared to when the programs were started over 30 years ago, when there was an element of the thrifty youth hostel tour origins still present. Therefore, colleges and universities that have made significant capital investments in new or upgraded student housing, athletic facilities, and other campus structures may be wise to consider ways to maximize their revenue potential. Noncredit programs such as this that are administered and offered by academic leaders can be part of an overall strategy for supplemental revenue. Along with the expansion of academic credit programs, student services, externally funded research institutes, and auxiliary services, the “wave of continuing and executive education activities for which there was a burgeoning external market that universities and their professional schools were eager to tap” is continuing to offer higher education institutions significant opportunities (Zemsky et al., 2005, p. 24). Effective administrative management of noncredit programs is also important for successful revenue generation, such as proper planning, organizing, controlling, budgeting, and reporting. A benchmarking research project was conducted in the mid-1990s and funded by a grant from the Association for Continuing Higher Education (ACHE) that measured administrative processes and financial ratios of noncredit programs (Alstete, 1996). The results found that programs with strong financial surpluses were achievable with careful attention to publicity efforts, registration procedures, the number of new courses offered, viable class sizes, appropriate tuition prices, and instructor costs. A part of the reason for the synergistic effect of noncredit course offerings on institutional effectiveness is that many “nontraditional-age students are likely to perceive higher barriers to access—and postsecondary success— than traditional age students” (Kortesoja, 2009, p. 60). A research article that examines choices for nontraditional-age students regarding noncredit courses and credentialing programs examined the hypothesis that credentials are valued more strongly than noncredit courses by working adults who are seeking job skills. Thus, colleges and universities should establish and provide a wide range of opportunities for different types of students. Institutions can achieve 42

this through decentralized administration of courses and programs by various academic departments, or through a division, school, or college of continuing and extended education. Hanna (2000) found that “ . . . continuing education programs and divisions operating in an entrepreneurial mode have achieved some success over the past decade in service to the adult market” (p. 112). Examples that can serve as models include private institutions of various sizes such as urban populations, including St. Louis University, Loyola of New Orleans, the University of San Francisco, and others, that established colleges of professional studies or lifelong learning to provide programs deliberately separated from the core university teaching and research purposes. The advantage of having a separate school or college of continuing education is that there is inherently more accountability of achieving additional revenue from noncredit academic programs that can be provided. However, there are also advantages to a more decentralized approach that may encourage faculty and administrators for all academic departments in a college or university with rewards or incentives (as well as budget disincentives) for increasing revenueproducing activities that complement existing offerings, leverage faculty and facilities, and promote the organizational abilities to additional and/or wider populations of people.

Credentialing and Certificates Programs It has been stated, although disputed as well, that due to the supposed erosion of the value of the college degree in modern times, new forms of credentialing will bring different expectations from students in higher education than previous generations (DiSalvio, 2013). It is not surprising that learning experiences with the sole purpose of earning a credential or certificate are forecast to become an increasingly popular alternative or supplement to traditional degree programs. Webster’s Dictionary defines a credential as “something that gives a title to credit or confidence” (Reese, 2011, p. 21), and there are a number of ways that this can be delivered. Recently it has been determined that certificates are the most rapidly increasing type of higher education credential in the United States, exceeding two-year associate’s and postgraduate Revenue Generation Strategies

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master’s degree programs as the second most widely earned credential after baccalaureate degrees (Carnevale, Rose, & Hanson, 2012; Gonzalez, 2012). The attractiveness is their relatively low cost to students, shorter completion time, and potentially higher earnings when measured against associate’s degrees and some bachelor’s degrees. According to a report by Georgetown University’s Public Policy Institute Center on Education and the Workforce, a remarkable 22% of all the postsecondary credentials awarded in 2010 were certificates. This is an increase from only 6% in 1990, and the number earned annually by students has grown from 100,000 to one million. According to the report, the areas of study offered are often occupational such as business and office services, transportation, healthcare, and manufacturing trade skills. Interestingly, and in support of what was stated in the previous section on noncredit programs, the report notes that earning a certificate can be a motivation toward earning a college degree after completing a certificate. In addition, it was found that one third of certificate students have already earned a previous associate’s, bachelor’s, or master’s degree before starting a certificate program, although a majority earned a certificate first. There can be a very effective organizational collaboration created when institutions offer noncredit, credit certificates, and other education-related services that encourage students to see the value of an institution’s offerings, faculty, facilities, and services. In recent decades, the rapid expansion of information technology in all sectors of society has created a need for individuals with abilities to not only effectively use the new systems, but also create, repair, upgrade, and maintain them. Continuing education schools and colleges such as the programs at New York University described earlier, as well as many community colleges, have sought to meet increasing requests for specialized education and technology training throughout the world (Flynn, 2002). Industry-needed credentials provide company employers an assurance that the learner has achieved a specific skill or knowledge and is appealing to student employees because it is often portable (for students) to other employers within an industry (Reese, 2011). Community and technical colleges are undergoing a large increase in enrollment due to the value of these certificates and credentials. Examples are seen at institutions such as Bishop Sate Community College in Mobile, 44

Alabama, where the institution offers programs in the college’s Division of Commercial and Industrial Technology. The vocational areas of study include: ∙ ∙ ∙ ∙ ∙ ∙ ∙

automotive technology, barbering/hair styling, commercial food service, masonry, plumbing, tailoring/alterations, and welding.

Other certificate and credentialing examples can be seen at community colleges with many degree and certificate programs in applied business, captioning and court reporting, and allied health areas. The students enrolled range in age from teenagers to senior citizens, and fast-track career certificate programs are particularly appealing. Community and technical colleges often partner with private companies, such as Valley Technical College in Wisconsin that collaborates with the Cisco Networking Academy to train students in preparation for professional certification. More examples and concepts about higher education partnerships will be examined in an upcoming section. Despite the reports that there is strong evidence in the value of a college degree in regard to total lifetime earning potential, and that each additional level of higher education achieved produces more financial benefits (Zaback, Carlson, & Crellin, 2012), there are still critics of the system in society and by some of the graduates (W. J. Bennett & Wilezol, 2013; Deresiewicz, 2014). As stated earlier, additional revenue generation strategies in higher education, including and particularly credentials and certificates, may stem some of this criticism of the traditional college degree and institutions. As stated, there is a view by some people and organizations that there is a coming devaluation of the customary college degree programs and a rise in new types of credentialing that is different than previously offered (DiSalvio, 2013). However, established colleges and universities have been offering certificate programs and new online delivery systems for many years. Supplemental revenue has been achieved using on-campus, off-site, and online distance education courses in Revenue Generation Strategies

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a variety of fields such as business, information technology, and healthcare (Cottrell et al., 2012; Pritchett et al., 2006). Certificates, credential programs, and traditional higher education degrees are not necessarily mutually exclusive. This is another reason that there can be a revitalized institutional strength that results when a variety of educational offerings are created that serve multiple constituencies and purposes. For example, professional credentialing in healthcare education in the United States has undergone increased scrutiny in recent years (Cottrell et al., 2012). “Health education professionals can pursue individual-level credentialing through state agencies that license or certify teachers to teach health in schools or the National Commission for Health Education Credentialing (NCHEC), which administers the Certified Health Education Specialist (CHES) and Master Certified Health Education Specialist (MCHES) Credentials” (pp. 681–682). Colleges and universities can and should be part of the converging demands of the healthcare industry, private independent health education, and state officials. This can help ensure quality ongoing learning is provided to healthcare professionals that higher education institutions have significant experience delivering. The side benefits of additional revenue and making attendees aware of additional education credentials, certificates, and degree programs that are also offered are not inconsequential. Nursing, radiology, and many other healthcare fields are only some examples of offerings where colleges and universities can leverage their intellectual strength, reputation, and educational industry experience to codevelop new programs that serve ongoing needs of this important and quite large industry. In the area of business education, a topic that has recently become increasingly important is business continuity and risk management. A medium-sized private college in the New York metropolitan area is now offering graduate degree specializations, as well as certificates that can be completed concurrently with a master’s degree, and post-master’s certificates (for credit). These programs serve the needs of professional managers, organizations, and government agencies that are concerned about the possible consequences of neglecting planned responses to natural and man-made disasters. These particular certificates consist of five three-credit graduate courses (15 credits), which can be completed concurrently within the master of business administration 46

program (as a second specialization) or subsequently for returning alumni and new students who hold graduate business degrees from other institutions. Credentialing and certificate programs, either online, on campus, or at an international location, are another way to provide offerings to a global population. Adapting credentialing instruction and examinations can involve translating tests for use in multiple languages, and specific methods for evaluating test and item function across groups (Sireci, Fitzgerald, & Xing, 1998). For example, Microsoft certification examinations are an example where a large private company offers international credentials. However, colleges and universities can partner with private companies or professional organizations as many schools of continuing education are currently doing including the prominent one at the SCPS of New York University. The programs in a variety of technical, business, and academic areas can be offered in several delivery formats for domestic and international student populations. The revenue increases may be small on an individual course basis, but as with Elderhostel programs, the gross annual revenue can be significant when there are a large number of courses and programs offered in total. In addition to internally developed programs and courses, partnerships, and joint ventures, colleges and universities can use licensing as an expansion strategy for increasing revenue. Licensing is often less risky and has lower start-up costs than in-house development for organizations (Bozhinova, 2012; Corney, 2009). An example was identified in 2006 at Boston University where the institution has been successfully licensing its continuing education programs to an independently developed 18-member affiliate network made up of academic institutions, consulting organizations, and computer information technology training companies in the United States and abroad (University Business Staff, 2006). The affiliates purchase the university’s programs for an annual fee, the equivalent of $40 to $100 per student per day, depending on the program. The licensed programs are marketed as offered by Boston University, which generates about $1.2 million a year from this licensing. In addition, institutions can expand their “brand” with licensing agreements. The University of California (UC) Irvine Extension, which is for continuing education, collaborated with the nonprofit Getulio Vargas Foundation, a Brazilian school and the country’s largest provider of online education. The Revenue Generation Strategies

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resulting new program will allow UC Irvine to teach project management online in another country. This deal follows similar arrangements, such as the contract with Laureate International Universities (LIU), a for-profit enterprise. Through this contract, international students enrolled in various LIU programs can spend summers at UC Irvine, while UC Irvine Extension students have access to LIU programs in other countries (University Business Staff, 2006). From the examples shown in this chapter, it is clear that colleges and universities are using a variety of academic expansion strategies including partnerships, joint ventures, licensing, alliances, as well as traditional internally developed academic programs. Higher education leaders should understand that there are many options and opportunities for programmatic creation, implementation, and development.

Degree Completion and Upgrade Programs Colleges and universities in the United States and elsewhere have also been successfully generating additional revenue by offering programs designed for individuals who stopped out of college and then seek to complete their bachelor’s degree. According to the U.S. Department of Education, National Center for Education Statistics, only about 58% of traditional first-time students who enrolled full-time at a four-year higher education institution in the fall of 2004 completed a bachelor’s degree at that institution within six years (National Center for Education Statistics [NCES], 2012). Furthermore, the improvement from 55% in 1996 has not been substantial indicating an opportunity still exists for additional revenue by providing programs for completion. It is informative to note that private nonprofit institutions have the highest four-year graduation rate, followed by public institutions and private forprofit institutions (which have a notably dismal rate of only 28%). In recent decades, the response by various types of institutions, and perhaps the reason for the small increase, has been to offer programs specifically designed for the “adult learner” that are aimed at students who are often working full-time jobs and need courses scheduled accordingly. These degree completion programs are commonly offered through departments and schools of continuing 48

education, or through traditional academic schools and departments. The focus is often on professional fields of study such as mass communications, education, business, computer science, health sciences, and similar topics suitable for career advancement. It has been declared that degree completion should be a national priority to reverse the trends in the higher education student completion rate and to assist in the economic improvement of society (Ebersole, 2010). Agencies and organizations such as the Commission on the Future of Higher Education, the National Center for Higher Education Measurement Systems (NCHEMS), and the National Center for Public Policy in Higher Education have researched this matter and state that degree completion is essential for economic advancement and to show society that colleges and universities are not preoccupied with prestige rankings instead of important publicly relevant missions. Interestingly, one of the first external degree programs in the United States is located in the State of New York and was “inspired by the British Open University (OU) in the 1960s, [where] the Regents of the State of New York created their own ‘open’ institution in 1971” (p. 24). Just as in the United Kingdom, the Regents institution was created to serve adult, nontraditional-age college students with an open-enrollment policy that simply requires a high school diploma or General Equivalency Diploma (GED) for admission. For many years, adults were awarded degrees that required prior coursework after an assessment of their prior learning. This institution later changed its name to Excelsior College and added online distance education in addition to independent-study format courses. Excelsior has a very large enrollment of degree-completing students who earn degrees using: ∙ transfer credits, ∙ credits for training, and ∙ college credits by examination, assessment, and instruction. Traditional private and public higher education institutions should be aware that institutions such as Excelsior accept transfer credits, and actually encourage students to attend multiple institutions, thereby changing the nature of postsecondary education further toward a purpose of a degree attainment. Capable colleges and universities should offer more than just Revenue Generation Strategies

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degree completion and degree upgrade programs for people who are looking for broad intellectual development and a quality higher education experience. According to an article in the Journal of Continuing Higher Education, a “systematic approach to designing and evaluating effective adult degree completion programs” (Murry & Hall, 1998) was recommended and is now being offered at many, but perhaps not enough, colleges and universities through schools of continuing education. This research study of chief academic officers in the late 1990s found that 49% of the institutions had adult degree programs, 87% granted credit for prior learning, and 85% permitted part-time degree completion. These numbers may have changed in recent years due to continuing increased demand for degree completion and the growth of online distance education courses. Nevertheless, programs for degree completion options should not be neglected despite the increased competition, changing technology, rising tuition costs, and other issues. As previously stated, these programs help postsecondary institutions in meeting the needs of society today. Degree completion can also encourage students to see the value of intellectual inquiry and lifelong learning. Establishing and delivering adult-centered degree completion programs at traditional colleges and universities can complement existing on-campus programs and/or programs offered off site at satellite campuses (Parkinson Norton & Pickus, 2011). An example can be seen at Wichita State University where satellite campuses concentrate on adult-learner degree programs and are specifically promoted as complementary offerings in regard to the traditional urban-service research institutions. This private institution was founded in 1886, enrolls more than 14,000 students, and the satellite campuses have generated surplus income from the time the campuses first opened. Revenue was an additional benefit to the original intention of the satellite campuses to serve adults with higher education programs whose lives had interrupted their degree completion. This multifaceted academic program strategy is not uncommon, and the federally recognized regional accrediting agency (the North Central Association Commission on Higher Learning [NCA]) offers specific guidance to institutions on “Principles of Good Practice in Adult Degree Completion Programs” that identifies the mission, resources, education programs, planning, and other elements of successful program establishment 50

and administration (NCA, 2013). Another example of degree completion program implementation that has been analyzed occurred in the 1990s at a small four-year private liberal arts institution in Florida, Warner Southern College (Satterlee, 1995). It was shown that financial planning tools such as a break-even analysis could be used to make effective decisions on program development, continuation, or termination, by scrutinizing the costs and revenue achieved by degree completion programs. While degree completion can serve several purposes, the institutional viability and desire to earn additional revenue should be carefully balanced in planning and delivery. On the basis of an examination of published research on adult degree completion programs, Murry and Hall (1998) identified eight items and related principles for institutions and individuals who want to create and implement an organized approach to program strategy and assessment that are still relevant today: ∙ Institutional mission and program objectives should be established and periodically reviewed; ∙ The program should include definitions and periodic needs assessment; ∙ The program should have established assessment criteria and methods of acquiring credit for prior learning; ∙ Program degree requirements should incorporate and encourage learning acquired through adulthood; ∙ Program curricula should identify and incorporate adult learner needs; ∙ Programs should provide courses and instruction at times and places that are compatible with adult learner lifestyles; ∙ Programs should provide academic performance assistance for adult learners; ∙ Financial aid and financial planning should be provided for adult learners. (Murry & Hall, 1998, pp. 22–23) For implementation, the study found that 38% of programs had designated specific funds for adult learners, and 60% received state and federal money for these students. It is important to note that only 25% of the adult degree programs at the time of the study offered financial support that was Revenue Generation Strategies

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sufficient to cover all of the educational expenses incurred by degree completers. However, this may have changed in recent years due to modern enrollment strategies, improved technology, and new professional program development. In addition, many colleges and universities today also offer tuition insurance (that guarantees payments) to undergraduate students that may be of particular assistance to degree-completing students who often have adult life emergencies that can frequently and unexpectedly interrupt a semester of study. Therefore, tuition insurance should be emphasized to these students early in their inquiry and application process for reassurance that their life situation will not adversely affect their financial liabilities if an emergency arises. More confident applicants and accepted students can then lead to more registered students, continuing students, and graduates. The changing and volatile nature of the economy and society today has helped to create an environment where students repeatedly start at one institution, complete a few courses, stop out for a while, and enroll in courses elsewhere. It is not uncommon for students to have transcripts from several higher education institutions and coursework completed in several disciplines as their individual pursuits and circumstances change. This affects institutional degree completion rates, thereby influencing external evaluation factors and rankings that colleges and universities are often concerned with. However, there are methods and strategies that can not only help address the degree completion issue, but also provide additional revenue. Articulation agreements (specific academic course transfer policies) among institutions enable and simplify the transfer of college credits for students to complete degree programs (Tenbergen, 2010). These agreements are especially beneficial to students from two-year community colleges who desire to complete a bachelor’s degree by reducing barriers, confusion, and easing the transition process. From a strategic revenue generation perspective, articulation agreements can benefit both the two-year and four-year institutions, because these agreements encourage more students to initiate and pursue two degrees and ideally have a more efficient educational experience instead of completing unnecessary extra courses that might produce a negative experience or perception about higher education in general.

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However, other research has shown that community colleges may not be the most successful choice for students who are seeking to complete a baccalaureate degree (Long & Kurlandaender, 2009; Sandy, Gonzalez, & Hilmer, 2006). After adjusting for student selection, results indicate that although straightforward estimates are considerably biased, community college students are 14.5% less likely to finish a four-year degree within nine years. Optimization technology has been suggested as a tool to assist timely degree completion by helping students make effective decisions and guide their planning in education programming (Dechter, 2009). To maximize revenue, higher education institutions need to address underlying problems such as the effects of part-time enrollment, deficiencies in academic readiness, and improper course planning. Other factors such as emotional intelligence, learner autonomy, and retention in accelerated undergraduate degree programs have also been examined as important issues for adult education leaders to carefully manage nontraditional students in degree completion efforts (Buvoltz, Powell, Solan, & Longbotham, 2008). Many colleges have offered evening programs for decades that are designed for adults pursuing a bachelor’s degree, including Aquinas College in Grand Rapids, Michigan (R. J. Bennett, 1971). This institution began to offer a program titled “Career Action” in 1969 designed specifically to enable students who are working full-time to complete their bachelor’s degree. Interestingly, it was noted that many established evening postbaccalaureate graduate school programs in business and law were already established at that time. But very few were designed specifically for undergraduate degree completion. This was largely due to the way that many students received reimbursement from company employers, or were funded by the Veteran’s Administration and various foundations. Innovative features such as scheduling courses on 12-week trimesters, quadmesters, convenient registration procedures, continuous personal counseling, awarding life-experience credit, and appealing course offerings help institutions such as this establish and sustain viable revenue generation streams that provide valuable education experiences. These programs can enable colleges and universities to carry out their mission to broader segments of society.

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Degree upgrade programs are slightly different from degree completion in that these programs seek to offer students opportunities to update their knowledge, continue their education, modify their career path, and/or educate students who are not necessarily seeking advanced degrees. Adler (1999) describes these programs in an article titled “Degree Upgrades: A New Service, a New Market, and a New Strategy for Higher Education.” Degree upgrades are proposed as a “set of three of four courses whose distinguishing characteristic is their relationship to change in a discipline or in society” (p. 15). Students may be individuals who have completed postsecondary degrees ranging from two-year associate to doctoral programs. These degree upgrades appear on official college transcripts, have a prescribed sequence of courses, and suggest necessity for students seeking to update certain topics of their knowledge. Other institutions are also offering degree upgrade programs, such as Delaware State University, the University of Kansas, as well as Queen’s University and Nipissing in Canada. In addition, examples that are similar and quite common in the United States are accelerated programs such as one-year (or slightly longer) accelerated Bachelor of Science in Nursing and/or Master of Science in Teaching degrees that are designed for students with bachelor’s degree in unrelated areas, yet enable completion of a degree that prepares them for professional certification and licensure for employment. These programs can generate revenue as well as applying the faculty and institutional resources in appropriate ways that increase public awareness, solidify the value of the college or university, and create connections with other organizations such as hospitals and elementary/secondary school systems.

Partnerships, Alliances, and Joint Ventures Organizations have many options and methods to earn additional revenue, increase their services, and strengthen their activities. As private companies and nonprofit organizations often do, colleges and universities can collaborate with other institutions. A recent monograph in the ASHE Higher Education Report series titled Partnerships and Collaborations in Higher Education (Eddy, 2010) examines the concepts, methods, and keys to success in 54

creating and sustaining collaborative efforts. The crucial element stated in the report for successful achievement in partnerships and alliances is the building of relationships first between individuals, who then shift the relationship to the respective institutions involved. These relationships must be continually nourished and maintained, or else they can fall into nonfunctioning arrangements that are not productive. Therefore, higher education faculty and administrators must be properly motivated, encouraged, and rewarded directly and indirectly with recognition from their institutions. It is crucial to have a supportive organizational culture where they work to initiate and sustain partnerships, alliances, and joint ventures. While many faculty members and administrators meet people from other higher education institutions as well as private companies or government agencies through their professional activities, efforts must be made to establish external communication and resist the temptation to become solitary scholars or internally focused only on their institutional activities. The well-known report by the Commission on the Future of Higher Education in 2005, also known as the Spellings Commission, conducted an analysis of the higher education system and made recommendations for improvement (George-Jackson, 2008). Among the recommendations that the U.S. Higher Education system should apply, a borderless education perspective, as other reformists have proposed, adopts a more global orientation by advocating for and entering into global partnerships and alliances “so that many beneficiaries of higher education can bring optimal contribution to the development of the sector at this time of global change” (Eggins, 2003, in GeorgeJackson, 2008, p. 97). Many colleges and universities in the United States have already been offering degree programs in foreign countries by partnering with local higher education institutions, offering study abroad courses and semesters with various types of alliances, and individual faculty members who conduct research activities with foreign colleagues through joint institutional programs and for government support. Business corporations have been partnering with higher education for many years, providing direct institutional aid, custom education programs, and research grants, as well as individual faculty and student financial support. Higher-education–business relationships started well over 100 years ago Revenue Generation Strategies

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when institutions such as Johns Hopkins and Cornell partnered with business leaders for creating new goals, topics, and approaches in higher education thereby strongly connecting the two realms (Gold, 1981; Veblen, 1953). While observers such as Veblen and others view this as part of an unstoppable effect of changing many of higher education’s priorities from classical studies toward useful research, there were and are counterrevolutionaries in higher education who support the more traditional goals of colleges and universities (Harris, 1970). This perception persisted and grew despite benefits provided to higher education such as the establishment of the retirement funding system for faculty members in the United States that started in the early 20th century with business support. Furthermore, a wide array of monetary backing not only provided valuable support to higher education for society but also indirectly supported the traditional liberal arts. This is through the enrollment of an overall number of new students who are required to complete liberal arts courses as part of college core curricula, and in professional undergraduate degree programs such as business. Collaboration between business and higher education has resulted in important benefits to both members of the alliances and does not necessarily reduce the demand or value of traditional learning because business leaders and important specialized accrediting agency policies clearly state so in their accreditation requirements (Association to Advance Collegiate Schools of Business [AACSB], 2013). This idea regarding the value of broad education responsibilities by businesses is not new, and high-ranking nationally known figures such as the chairman of the Ford Motor Company have stated this belief (Caldwell, 1980). In addition, the president of the International Ladies Garment Workers Union stated over 30 years ago that higher education has a duty to educate students about not only basic economic and practical business matters, but also topics such as science, literature, and history, else the value of partnership outcomes will be diminished. It was recommended that the creation of a permanent organization consisting of academics and business labor leaders be created to research issues of mutual concern. However, other concrete individual higher education partnerships and alliances in North America became more common (de la Garza, Landrum, & Samuels, 1997). Examples of the different types of partnerships in the United States have been identified, and although these 56

may be a bit dated at this point they still provide an informative typology to consider: ∙ A single company partners with a single institution of higher education. For example, a partnership between Westell Technologies, Inc. and Northern Illinois University for just-intime training of employees has enabled the company to grow by 30% in just three years. ∙ An entire industry cooperates with an institution of higher education. General Motors, Ford, Chrysler, all automobile manufacturers, have partnerships with Glendale Community College of Maricopa Community College District. The community college prepares automotive maintenance technicians; in return, the corporations and local dealerships sponsor students in the training programs, provide cooperative education placements, supply tools for the students, and keep the programs equipped with the latest technology. The Glendale program offers dedicated laboratory classrooms, full-time faculty assignments, program oversight, and student recruitment services. In addition, under contract with General Motors, GCC operates a GM Training Center that provides new product training for technicians employed by GM dealerships. ∙ Multi-tiered partnerships of companies in an industry cluster including major companies and suppliers, a group of educational institutions, and several government organizations. The Semiconductor Industry/Education Partnership involves six major wafer fabrication manufacturers, a handful of suppliers to the industry, six community colleges, three K–12 school districts, and two economic development organizations. The objective is to develop a pipeline of students into advanced technical programs at the colleges that would provide the 7,000 technicians needed by the industry over the next five years. (de la Garza et al., 1997, pp. 14–15) Revenue Generation Strategies

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Characteristics of innovative, successful, and smart alliances/partnerships include personal trust between those in the university and those in cooperating companies, a series of mutual interactions such as visits to each other’s location, and a shared understanding of how beneficial the relationship is for company employee development or technological improvement. In addition, de la Garza et al. (1997) identify other examples of partnerships in Mexico and Canada. Many college–business alliances have been initiated and arranged by individuals. The success is often based on individual experience in setting up these types of relationships, and successful personal outreach to individuals is the first step. Subsequent frequent communication, meetings, lunches, and a mutually respectful professional rapport between the individuals involved is a fundamental basis for the initiation and ongoing work. An assistant dean for graduate programs in the business school at a large private comprehensive university in New Jersey in the early 1990s initiated first contact with a large electric and gas utility company to directly fund graduate research assistantships for several students each year. The program provided students with full tuition and a monetary stipend to work with faculty members during their time in the graduate business program. Like many alliances and partnerships, the program grew from a relationship that was established with individual human resource employee benefit managers who administered policies that provided employees with graduate tuition remission for full-time employees. Another type of company–university alliance was formed at the same university with a nearby telecommunications company headquarters and other companies, who were offered a tuition adjustment (or discount) for agreeing to send a certain minimum number of students to the university each semester. These are examples of mutually beneficial alliances that allow the companies and their employees to save money on tuition expenses, while the university can be assured to earn a specified revenue stream for a certain number of years. This assists in academic course planning, budget forecasting, admission processing, and faculty development by enabling professors to teach courses for groups of highly engaged company employees enrolled in programs at an active private or public organization workplace. Faculty members can truly benefit from this direct interaction with companies, healthcare institutions, and government agencies. These partnerships can also encourage 58

faculty intellectual contributions by increased engagement and maintenance of professional qualifications. This is important in business, professional, and technical fields because teaching courses for on-site cohort groups of students on campus or using online distance education systems can have these additional faculty benefits of providing interaction with current practitioners in the field. In fact, it is a requirement of some specialized higher education accreditation associations that faculty members maintain academic as well as professional qualification currency in order to teach graduate courses (AACSB, 2013; Alstete, 2004). Other examples of alliances and partnerships established by an academic administrator occurred at different sized private higher education institutions and several types of companies in various industries. These included agreements with private companies and healthcare organizations to offer on-site degree programs, collaborating with other colleges and universities to form a consortium to solicit and provide noncredit courses on-site at organizations, negotiating with secondary schools to offer college course credits for advanced courses, and signing agreements with outside agencies to offer new programs that generate additional revenue. Many private nonprofit and for-profit private education companies have a selection of established programs and courses available that can be arranged for fast delivery by traditional higher education institutions. These programs can be examined to determine if they fit the mission and strategic plans of the college or university. Then suitable proposals can be requested, scrutinized, negotiated, and set up for instruction at the institution or licensing the institution’s name and support. Partnerships, alliances, and joint venture operations should be considered an important strategic academic opportunity because there are significant benefits and in addition new revenue can be achieved. Among these new gains are: ∙ additional publicity for existing programs and facilities, ∙ fuller utilization of campus resources, ∙ more opportunities for faculty to use their expertise and experience additional professional outlets for their intellectual activities, and ∙ an increased synergy with communities and organizations that higher education institutions become involved with. Revenue Generation Strategies

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In regard to multiple higher education institution consortia, an informative special issue volume of New Directions for Higher Education was published in 2002 titled Leveraging Resources Through Partnerships (Dotolo & Noftsinger, 2002). Many of the chapters examine collaborative consortium arrangements involving more than one institution. There are examples in various academic departments, institution types, and program offerings. The Virginia Tidewater Consortium for Higher Education consists of 15 institutions situated in a metropolitan area of Southeastern Virginia (Dotolo, 2002). This cooperative project began in the late 1970s and early 1980s when the colleges and universities involved decided that a joint effort was needed because of the large expenses in offering courses on television or “telecourses” that were new at the time. It is important to note that this consortium was not just among higher education institutions. The consortium formed a partnership with the local Public Broadcasting Station and the local cable television provider that offered to assist with the costs in order to aid their public image and conduct what now might be termed corporate social responsibility. The Virginia Tidewater Consortium is an excellent example of how internal and external alliances can be established to benefit all the participants. Some of the reported lessons learned regarding forming institutional relationships are that cooperation should be mutually beneficial, even casual relationships between the organizations are important, and open-ended relationships with no termination plans should be avoided because circumstances change. International collaboration is another method that colleges use to generate revenue by offering courses and programs at locations around the world, and by bringing international students to their home location. Faculty members or administrators who often meet potential international partners at scholarly conferences or through academic research activities may initiate this type of institutional relationship. For example, an associate dean for the business school at a large private metropolitan-area university attended an international specialized accreditation association meeting where he met the dean of an accredited business school in South America. He initiated personal contact, directed a bilingual staff member to travel to the other institution, and arranged a formally signed articulation agreement with the large private

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university in another country that enables international students to attend graduate school at the American institution. Other examples include collaborative arrangements for degree completion, or partnerships in jointly offering new programs by two institutions. This can also help the content of curriculum by addressing the need for global perspectives, increasing the appeal to prospective students, and generally improving the quality of the programs by adding international features that can improve the reputation, rankings, and scope of offerings. It is widely believed that “Globalization is arguably the central societal, cultural, political and economic phenomenon of our time” (Godbey & Turlington, 2002, p. 89). Higher education can benefit tremendously because international programs can create sustainable and cost-effective experiences for students that set an example of intercultural cooperation for people, organizations, and countries. Aside from demonstrating the importance of learning in an increasingly complex global society, colleges and universities can also benefit from additional revenue and use this as another example of the value that higher education institutions provide. Godbey and Turlington (2002) note that international academic consortia have been in existence for decades in a variety of capacities, some short term and some long term. As stated, international partnerships often start with certain individuals who make first contact. For example, “faculty members at Denison College and Kenyon College in Ohio have developed a collaborative program in Middle Eastern, South Asian, and international studies, and distance courses have been developed in introductory Japanese and advanced Chinese” (p. 94). International partnerships can start small, from one or two institutions, or begin with a consortium endeavor such as one in the Birmingham area. In this case, a collection of five private and public higher education institutions created an English Language and Cultural Institute to provide education to international students and researchers at the five colleges and universities involved. Sources of supplementary revenue can vary, and this consortium received a $20,000 grant from the Community Foundation of Greater Birmingham to aid in this project (Godbey & Turlington, 2002). Collaborative ventures can obtain funding from local agencies, as well as state and federal governments or international organizations. The international programs that have been developed can provide Revenue Generation Strategies

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practical and meaningful benefits if they are properly planned, maintained with mutual respect, updated periodically, and have realistic expectations by all institutions involved.

Study Abroad Programs In addition to partnerships and collaborations in higher education, another recent issue of this ASHE monograph series also examined commonly offered ventures that have revenue generation potential. In Study Abroad in a New Global Century: Renewing the Promise, Refining the Purpose (Twombly, Salisbury, Tumanut, & Klute, 2012), it is stated that over 90% of institutions offer some type of study abroad activity. This report provides a thorough examination of the history, current practices, and educational concerns of the colleges and students who choose to study abroad for a course or semester. A notable finding is that even though many institutions offer these programs, only a relatively small number of American students choose to study abroad during their college years. Therefore this could be seen as an opportunity for additional revenue since programs and institutional support systems are already in place, yet are not fully utilized. Twombly and coauthors state that there is room for improvement in program offerings concerning the educational outcomes, an integration of the programs within the overall higher education experience for students, and a reexamination of how colleges and universities assess the effects of study abroad participation. While these academic matters are certainly a primary issue, there are also financial issues and opportunities to examine for increasing study abroad revenue generation that can be examined further. Widespread perceptions about revenue aspects are represented in a recent article titled “The Opportunity Cost of Study Abroad Programs: An Economics-Based Analysis,” which specifically examines the financial costs of offering and publicizing these programs, and their impact on institutional budgets, and offers ideas to address program issues that often arise (Heitmann, 2008). There are a large variety of study abroad procedures, as well as institutional and financial arrangements provided by different colleges and 62

universities but not administered by the home institution. This article largely examines examples of outgoing study abroad students and does not consider the other home country students who may enroll in a study abroad program at another domestic institution or the incoming foreign students from program agreements with foreign colleges and universities. These are important revenue generation aspects to plan when institutions are considering study abroad programs as part of an overall academic menu of offerings that generate revenue and educate students in an increasingly global society. Nevertheless, there are important issues raised, such as how most colleges that offer these programs are nonprofit and frequently find that student tuition does not cover the total expenditures of study abroad activities. Heitmann (2008) believes that the direct costs are justified because of the potential lost opportunities for student learning, educating for a global economy, and that institutions may lose students for a semester to other institutions who offer study abroad. An excellent example can be seen at Muhlenberg College in Pennsylvania, which is a small residential institution with approximately 2,100 students. It is notable that in one academic year, nearly 200 (almost 10%) students were scheduled to participate in semester-long programs, and after accounting for costs of running the program including additional faculty, the institutional cost savings total is $560,000. This is reasoned as the value of enabling 200 students to engage in a study abroad experience. While opportunity cost is indeed an important economic reason to offer study abroad and some readers may agree that charging only regular tuition is therefore justified, these programs can also generate revenue if they are properly implemented. Additional income can be obtained from: ∙ charging students additional fees, ∙ publicizing unique study abroad programs to visiting students from other colleges and universities that may not be offering programs, ∙ encouraging more internally developed study abroad activities instead of outsourcing to third parties or having the programs run entirely by foreign universities for expediency, and ∙ freeing on-campus space for more students to pay for housing. Revenue Generation Strategies

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Aside from increased revenue, internally developed and administered study abroad programs can encourage faculty engagement, help promote distinctiveness of both the program and other overall institutional offerings, and make the programs appealing to students who may be more willing to enroll in a program that is taught and led by members of the college community. To help college leaders plan and implement study abroad programs, there are informative books that examine these programs in depth. For example, The Handbook of Practice and Research in Study Abroad: Higher Education and the Quest for Global Citizenship (Lewin, 2009) is a comprehensive survey of various institutions’ practices. The handbook also includes recent research, concepts, and best practices as stated by academic leaders of study abroad from the United States, Canada, and other countries. In addition to examining the importance of global citizenship and the role of the academy in encouraging students to become more internationally oriented, the practical institutional challenges of infrastructure, finances, accessibility, and quality control are also studied. Best practices are similarly scrutinized carefully in Educating Global Citizens in Colleges and Universities: Challenges and Opportunities (Stearns, 2008). This book is meant to be a guide for the important aspects of global education such as study abroad, international student enrollment, and alliances to set up branch campuses overseas. While these books are useful for learning about the general importance of study abroad programs and international partnerships, as well as understanding how specific examples are arranged and administered, financial revenue issues are more specifically addressed in broader institutional schema elsewhere. For example, an article titled “Study Abroad Perspectives on Institutional Operations” (Boronico & Boronico, 2010) examines the impact of study abroad related to revenue generation, cash flow, capacity planning, and related issues at the University of New Haven. This private institution integrated study abroad programs as an important part of its strategic plan to strengthen experiential education, increase retention, and improve enrollments by raising the early decision rates of incoming students. The study abroad program enables additional revenue in this indirect manner because a feasibility study found that 58% of the incoming freshman class stated that their intention to study abroad was a significant reason that made their selected university 64

more attractive. International program tracks were added in various fields of study (majors) for students to choose. In addition, the institution planned to expand options for three-year degree programs and offer study abroad during summer sessions. It is important to synthesize the important benefits and costs, by understanding that these endeavors are examples of how institutions can increase their distinctiveness, increase revenue by direct student enrollment in the study abroad programs, and indirectly produce income by making them more appealing to prospective students who may have chosen to attend elsewhere if the programs were not promoted in their first year. Distinctive competencies and capabilities can and should be deliberately emphasized in effective strategic planning processes to compete effectively in a challenging environment, address the need for global awareness in education, and help ensure institutional survival by offering a broad differentiation of programmatic offerings that generate revenue. Institutional planners should also be aware that study abroad programs have risks, as do partnerships/alliances, joint ventures, noncredit programs, and most supplemental revenue-generating activities. Therefore, thorough ongoing oversight and environmental scanning is needed to ensure continuity and minimize risk. Recently it has been stated that directors of study abroad in Europe have been informed that their programs may now be less meaningful than student trips to China and Africa. While many American students will certainly still travel to Europe, strategic partners in other parts of the world are being widely sought for research, student exchanges, and study abroad more frequently (McMurtie, 2013). From a strategic planning perspective, it can be seen as a prudent decision to not rely on one supplemental income stream in regard to study abroad from a single location. In addition, there are also risks of fluctuating exchange rates that study abroad directors have experienced that can cause negative financial pressure, force cost cutting, and increase charges to students (Fischer, 2007). Moreover, considering these global issues, academic as well as financial, the modern university can be considered as a type of multinational corporation in planning and strategic actions taken (Ahmed & Rao, 2011). American institutions are expanding abroad seeking new revenues, particularly the U.S. institutions that are increasingly offering business programs in Asian countries. The strategies employed to obtain new Revenue Generation Strategies

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revenue sources are not unlike conventional international business expansion strategies. The strategies employed can be basic international, multidomestic, and transnational strategies where the offerings are moderately tailored to the needs of the specific country in which the programs are offered, or true global approaches where the institution does not modify the educational offerings for the host country. There are strengths and weaknesses of the different study abroad approaches, and higher education institutional planners and study abroad directors should carefully consider their institutional resources, strategic plans, market opportunities, and potential host country regulations when planning to seek additional revenue from study abroad programs, international branch campuses, joint research projects, and other international ventures.

Branch Campuses A related strategy that overlaps with study abroad is the practice of establishing branch campuses domestically or internationally. Branch and regional campuses have been a part of the higher education system for many years in private and public institutions (Bird, 2014). Campuses are often created with the intent of generating additional revenue as their primary goal, and locations are chosen on the basis of where the student populations are situated (Pratt, 2014). For example, Northeastern University chose to put its branch campus in Charlotte, North Carolina, in an office building located in the busy uptown district that has been identified as one of the nation’s fastest growing cities. Rather than recruiting students to attend their main campuses, colleges and universities frequently pursue revenue by launching these moneymaking satellite facilities in locations near and far. Boston-based Northeastern University chose North Carolina; Emerson College in Boston chose Hollywood, California; and Bentley College of Waltham, Massachusetts, selected San Francisco for their branch campus. Branch campus locations should be carefully chosen, be effectively supported by the main campus, and maintain awareness of external changes in the branch environment. For example, a private medium-sized comprehensive college whose home campus is in 66

Westchester, New York, identified an opportunity for new revenue in the late 1970s by locating a branch campus in a neighboring county where students were available and where there was minimal competition. Other nearby colleges eventually began offering similar graduate programs, and by the 1990s the number of students enrolled decreased. Selecting locations, deciding which programs to offer, providing proper institutional support, and conducting effective strategic planning are important for success. It is also important to know that there can be life cycles in enrollment success that should be carefully monitored as branch campuses grow from start-up to maturity. Some branches may wither and die, while others may grow from prot´eg´e to peer. Overall, the number of college and university international branch campuses has increased over the past two decades to more than 200 campuses in 65 countries around the world (Kratochvil & Karram, 2014). Campuses may be set up domestically and internationally as part of a larger strategic plan in institutional development. As an example for comparison, private businesses make carefully crafted strategic plans for expansion as domestic-only, multi-international (with a few foreign locations), or to be a true global leader with operations in a large number of countries (A. A. Thompson et al., 2014). Normally, organizations generate most of their revenue in their home country (which could be considered the main campus in a university system) and then seek opportunities in other countries to generate additional revenue. Some of the overseas locations are considered “profit sanctuaries” and others are established with the goal of eventually generating surplus revenue. Therefore, colleges and universities should strategically decide if they desire to be a large multicampus global university or a more modest higher education institution with one or several branches domestically and internationally. Net revenue, financial aid implications, and curricula experiences for students are a confluence of factors to consider when planning branch campuses (Altbach, 2011; Kurz, 2011; Wilkins & Huisman, 2012). Colleges and universities have learned that international experiences are important today for educating students, and that setting up satellite campuses can help accomplish this while also generating supplemental revenue. Interestingly, this is done in several ways. Financial aid policies can be established that allow Revenue Generation Strategies

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students to pay for their tuition, free up on-campus residential space for other students, and facilitate an important learning experience for a semester or two in other countries. For example, Marist College in New York has set up a satellite branch campus in Florence, Italy. This location offers bachelor’s and master’s degree programs in several disciplines, as well as traditional study abroad, and an innovative full-year Freshman Florence Experience (Kurz, 2011). This is an effective method to encourage study abroad at the branch in Italy and retain more net tuition revenue because the institutional financial aid and federal/state aid is fully applied. Other examples include New York University’s Shanghai location, Texas A&M’s planned campus in Israel in 2015, and George Mason University’s new campus in South Korea (Marklein, 2013). Overall, higher education institutions can use branch campuses as they seek to expand their global image, elevate their ability to compete for new domestic and foreign students, and improve their international curricula offerings for students and faculty members. Administering a branch campus is often complicated by institutional practices that block opportunities for growth due to misunderstanding revenue sharing policies and the opportunity costs of new program development (Bird, 2010, 2014). These issues can be overcome if leaders create a reasonable overhead charge in their budget plans, develop an effective revenue sharing model between the main and branch campuses, and are cautious of main campus greed in viewing the branches merely as cash cows. It can be a challenging yet rewarding leadership activity to conceive and select new branch campus locations, design new programs, gain institutional support, and see the seeds that have been planted grow into fully functioning operations that serve several important needs while earning important additional revenue. However, as mentioned earlier, branches sometimes need “pruning” despite the widespread growth in recent years, and leaders of both branches and main campuses should understand that external environmental forces can affect program success. Recently, this has been identified as being partly due to increased accountability of branch campus academic program quality by accrediting agencies as well as the greater convenience of online distance education for many students over traditional in-person courses (Kiley, 2012). Online distance education programs are also having an increasing impact on 68

international learning due to convenient access, lower costs, and the variety of offerings from well-respected institutions.

Online Distance Education The rapidly growing area of online distance education in higher education has been examined in many books, journals, articles, and reports in recent years, including a previous issue of the ASHE monograph series, Quality in Distance Education: Focus on On-Line Learning (Meyer, 2002). This report from over 12 years ago studied important fundamental characteristics of web-based learning for fully online (no on-campus attendance) learning and using technology to enhance traditional courses. Meyer wrote on the basis of her professional experience as a director of distance learning and technology at the University and Community College system of Nevada. She offered an informative perspective during a time when web-based learning was in a relatively early to moderately widespread implementation stage in higher education. Subsequent books and journal articles examine the latest methods in course design, multimedia learning technology, and strategies for optimizing student performance. A large majority of institutions now offer online learning in several formats from fully online, to hybrid (partially online and on-campus), to web enhancement of traditional on-campus courses (Alstete, 2007b; Alstete & Beutell, 2004; Baron & Crooks, 2005; W. G. Bowen, 2013; Bower & Hardy, 2005; Fung, 2004; M. G. Moore, 2012; Watts, 2003; Wei, Chen, & Kinshuk, 2012). Most of the literature examines specific instructional techniques, best practices for engaging students in online learning, as well as some of the administrative policies that can help ensure delivery of quality courses and programs. For example, the Handbook of Distance Education (M. G. Moore, 2012) is the third edition of an award-winning book that provides a thorough compilation of empirical scholarly research on all facets of distance education over the past 30 years. This contains planning, instruction, administration, policies, as well as a review of the established pedagogical theories and globalization of distance education today. There are important practical guidelines in the Moore handbook, including advice related to revenues and costs. Revenue Generation Strategies

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For instance, guideline number 6 states “Many institutional issues [about distance education] concern resource availability or conflicts over priorities (e.g., staffing, facilities, marketing efforts). The best solution to avoiding such issues is to have as much budget autonomy as possible. Programs that have direct control of their revenue and expenses can make decisions that benefit the program without requiring approval from the rest of the institution” (p. 434). This recommendation regarding decentralization has been a frequently mentioned topic in higher education administration aside from distance education (such as graduate programs, continuing education, and others). While many scholars and administration practitioners recommend centralization of program administration as being a more effective operational strategy, others who have administration experience and who have conducted empirical research advise more decentralization for greater effectiveness (Alstete, 1997; Hensley et al., 2001; Strauss & Curry, 2002; Whalen, 1991). For online distance education, some colleges and universities have a centralized department or dean who oversees these activities, whereas other institutions allow, enable, and/or support individual faculty members and academic departments to create and deliver online courses and programs. The Moore handbook states that costs of distance education should be properly analyzed prior to and during implementation. A cost–consequences analysis is a tool suggested as one method of evaluating “the cost-efficiency, cost-effectiveness, and cost-benefit analysis” (p. 459). Net revenues can be affected by the costs and technology fees charged to students and are often used as a way to alleviate negative impacts on revenue generation. However, costs to students such as tuition, housing, fees, and books have come under increasing scrutiny in recent years and are now the subject to internal and external strategies to become more cost-effective. Most of the discussion today about this timely topic examines recent trends and new techniques, and forecasts the future of its effect on colleges, universities, and society (Bates & Sangra, 2011; W. G. Bowen, 2013; Clark & Meyer, 2011). Some institutions are entirely virtual in that all their courses and programs are offered online distance education (Carnoy, Rabling, Castano-Munoz, Montoliu, & Sancho-Vinuesa, 2012; Gros, Garcia, & Escofet, 2012; Meyer, 2009; Razavi, Strommen-Bakhtiar, & Krause, 2011). 70

Since these fully online institutions obviously rely exclusively on distance education revenue, these organizations are not the central focus of this chapter. The purpose here is to explore supplemental revenue generation ideas for traditional colleges and universities. Nevertheless, there are lessons that can be learned from the fully online-learning providers such as: ∙ their course delivery methods, ∙ their methods for international student engagement, ∙ what types of new programs are developing (competitor environmental scanning), and ∙ what strategies traditional higher education can use to maintain currency and sustain viability in an increasingly global online virtual educational and economic environment. Interestingly, there is relatively little scholarly research available on the revenue generation aspects of distance education for the established higher education providers to guide them in effective financial management. However, distance education is currently generating revenue for colleges and universities. There is an annual report, The Survey of Distance Learning Programs in Higher Education (“Monthly Metric,” 2012), that shows the revenues earned by institutions in the United States and other countries. The findings are illustrated in Table 2, and show that the average (mean) annual revenue for all institutions is quite substantial, over 3.7 million U.S. dollars. Institutions located in the United States average a bit more at just over four million dollars, and somewhat less in other countries, $2.1 million. When categorized by institutional type, it is informative to see that there is significantly more revenue generated annually at four-year-granting colleges (over $10 million), compared to junior/community colleges, master’s/PhD-granting institutions, and research universities that average just over one million dollars per year. This indicates a potential opportunity for those institution types to consider expanding their online distance education programs, and for four-year institutions to reinforce their successful strategies to help ensure that their competitive advantage is sustained. Revenue Generation Strategies

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TABLE 2 What are the Current and Approximate Total Annual Revenues From Your Distance-Learning Program? Mean $3,715,325.00

Median $405,000.00

Minimum $6,375.00

Maximum $51,000,000.00

Mean $4,098,300.00 $2,183,425.00

Median $605,000.00 $360,850.00

Minimum $6,375.00 $112,000.00

Maximum $51,000,000.00 $7,900,000.00

Mean $1,309,606.25 $10,432,600.00 $1,625,375.00 $1,160,850.00

Median $1,419,712.50 $250,000.00 $400,000.00 $1,160,850.00

Minimum $399,000.00 $18,000.00 $6,375.00 $321,700.00

Maximum $2,000,000.00 $51,000,000.00 $800,000.00 $2,000,000.00

Broken out by total FTE student enrollment Number of Students Enrolled Mean Less than 2,000 $259,486.11 2,000–5,000 $903,333.33 5,000–10,000 $2,400,000.00 More than 10,000 $12,412,225.00

Median $250,000.00 $410,000.00 $2,000,000.00 $2,000,000.00

Minimum $6,375.00 $300,000.00 $1,500,000.00 $321,700.00

Maximum $800,000.00 $2,000,000.00 $3,700,000.00 $51,000,000.00

Broken out by type of distance-learning program Availability Mean Open to all students $3,908,236.84 Focused on off-campus students $50,000.00

Median $410,000.00 $50,000.00

Minimum $6375.00 $50,000.00

Maximum $51,000,000.00 $50,000.00

Entire sample Broken out by country Country United States Other Broken out by type of institution Institution Junior or community college Four-year degree-granting college Master’s/PhD-granting Research university

Source: Used with permission by the Primary Research Group, www.primaryresearchgroup.com

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Overall, millions of dollars in total annual revenue are received each year from many domestic and foreign students who enroll in online distance education courses and programs from around the world. Administration leaders, faculty members, consultants, and institutional boards need to carefully consider the future direction that their particular college or university should take in regard to maximizing revenue from distance education, leveraging their institutional strengths and capabilities, and competing successfully against other established higher education providers and fully online postsecondary institutions. Aside from the increasing use of electronic communication and globalization, some observers of the recent trends state that one of the primary reasons for the increase in online distance education is the cost of traditional oncampus collegiate learning (W. G. Bowen, 2013; Kamenetz, 2010). Bowen discusses the linkage between the rising tuition rates (or as he calls it, a cost disease) and the expansion of online learning, as well as the costs of institution information technology systems and support. He warns institutions that these are hidden costs for building and maintaining the technology infrastructure and compliance issues that may not necessarily increase efficiency or uphold the broad goals of a true higher education experience. Other writers such as Kamenetz (2010) predict that people will increasingly use distance education and other online-learning platforms in a more do-it-yourself fashion to achieve personal learning goals. Kamenetz sees several underlying fundamental trends guiding the recent transformation that affects what he sees as a coming change in higher education. This includes the notion of the “80/20 Rule” that most of the “growth in higher education over the next century will come from the 85 percent of students who are ‘non-traditional’ in some way—older, working adults, or ethnic minorities” (p. xi). These students will primarily attend the 80% of colleges and universities that are less selective such as community colleges and for-profit institutions. This estimate may have lost some validity in light of the recent declines in for-profit enrollments and increasing scrutiny by government agencies. Another prediction related to the technology transformation is what Kamenetz calls the “Great Unbundling.” This debundling of the learning activities from traditional campus offerings such as collegiate social experiences, sport activities, and other features may be Revenue Generation Strategies

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suitable for some learners, but is not appropriate or even desired by all potential and current students. Many students truly want the experience, resources, and background of established higher education institutions and highly qualified faculty members who have experience teaching on-campus courses to effectively facilitate online distance education. Traditional higher education providers not only have respected reputations to uphold, but they also have the ability to use their experience to generate additional revenue by providing online courses to supplement existing collegiate course schedules as well as fully online programs that are taught and administered by institutions that can deliver worthwhile education that is properly planned, implemented, and assessed. While various authors and higher education leaders, such as those mentioned previously, believe that increasing college costs to students, slow economic growth in recent years, and the increasing use of technology in society have led to increased enrollment in distance education, the cost of distance education to colleges is a concern and there are additional perceptions that economic difficulties may not make it easy to generate supplemental net revenue. For example, Konetes states that “Higher education, due to the allencompassing nature of distance education initiatives, is required to invest large amounts of resources in order to create and uphold programs with which to generate income” (Konetes, 2011, p. 7). This additional investment is seen as a potentially limiting factor on the net revenue due to higher fixed costs such as personnel, technology, and ongoing system upkeep. In addition, it has been stated that the amount of additional revenue produced by distance education is lower than estimated and more complicated due to the competing forces of supply and demand on colleges and universities (Carr, 2001). These perceptions have probably been disproven to an extent in some ways, but supported by various less successful online endeavors. Higher education has certainly proceeded rapidly in the past decade by offering more courses and programs online at traditional institutions and new fully online virtual universities. Other very recent ventures include partnerships with private companies to offer large online distance education courses, which have produced mixed results (Kolowich, 2013a, 2013b; Shirky, 2013). But for many institutions and perhaps most, distance education is being used to satisfy a growing 74

expectation from students and to interest some individual faculty members to teach online, and is being increasingly integrated into college and university strategic plans for long-term growth. Recently, the aforementioned partnerships of higher education institutions and new online education companies have created a highly publicized distance education method called massive open online courses, or MOOCs (Clara & Barbera, 2013; Dennis, 2012; Green, 2013). At the time of this writing, there has been discussion about the potential of these free or lowcost courses that offer education from elite institutions to large masses of people, which could change long-standing higher education fundamentals and present a threat to quality and reputation. Although these programs are probably still in an early growth stage, it has been stated that MOOCs have the possibility to become a strong competitor to traditional higher education (Dennis, 2012), especially if employers and members of society come to believe that a certificate completed online from a world-renowned institution is a superior measure of skills or knowledge than a regular degree from lower tier, though fully recognized, traditionally structured colleges or universities. Distance education has evolved over the past century in delivery methods first using mail, radio, television, and email, and today online using the Internet. As students and organizations continue to use information technology in their daily lives and workplaces, it is likely that expectations and acceptance of these programs will continue to evolve into more sophisticated distance education systems. Additional net revenue is indeed generated for many institutions from online distance education courses programs directly by adding credit hours that students enroll in aside from their on-campus courses, visiting students from other institutions domestically and internationally, and from the reduced costs of classroom facilities usage. This chapter identified a variety of academic programs and initiatives that are available for different types of higher education institutions using academic programs to supplement traditional revenue sources. However, it is important to conclude the chapter with a limitation. A recent research report found that new academic program creation does not necessarily increase revenue (Carlson, 2013). It is understandable that many colleges and universities immediately seek to create Revenue Generation Strategies

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new academic programs and cut costs to fix budget shortfalls. Therefore, the report concludes that just cutting costs and adding programs are only part of the answer to address financial problems. Fundamentals of the teaching, learning outcomes, increasing institutional collaboration regionally or through the Internet, as well as nonacademic auxiliary services should and must be considered as part of a multifaceted supplemental revenue strategy for long-term financial sustainability.

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Nonacademic and Auxiliary Opportunities

A

UXILIARY AND SERVICE ENTERPRISES have been producing supplemental revenue at colleges and universities for many years in a variety of formats and activities. These activities can be directly managed by a higher education institution, by a separate entity formed by the college or university, or by a formal agreement with a lease operator (Stumph, 1985). It is not surprising that the National Association of College and University Business Officers (NACUBO) views these services from a clearly financial perspective and states that “An auxiliary enterprise furnishes a service directly or indirectly to students, faculty, or staff, and charges a fee related to, but necessarily equal to, the cost of services” (Weizenbach, 1982, p. 197, as cited in Stumph, 1985, p. 65). Although these auxiliary enterprises are described as satellite business operations that are administered by and for the college community, and indirectly or directly serve to benefit core academic endeavors with important services and supplemental revenue generation, there are also opportunities to bring in more revenue by serving outside constituencies aside from traditional academic stakeholders. This is especially important for institutions to consider today as tuition and costs rise. The addition of new sources of nonacademic revenue can be beneficial to long-term sustainability, as well as providing important innovations in campus utilization, technology advancement, and other services to society (Villano, 2006). The National Association of College Auxiliary Services (NACAS) was founded in 1969 and includes a somewhat broader definition of ancillary activities as “Non-Academic

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TABLE 3 College Auxiliary Services (NACAS, 2013) Bookstores Card systems Childcare Communications Concessions Conferences e-Commerce Facilities

Food services Housing Laundry Mail services Parking Physical plant Print/copy/mail Purchasing

Retail stores Recreation Security Student union Technology Transportation Vending

Source: Used with permission of the National Association of College Auxiliary Services.

Campus Support Services” (NACAS, 2013). Examples of these services are listed in Table 3. The services identified are an excellent starting point for examining nonacademic and auxiliary revenue-generating activities, and additional externally sourced funding opportunities that will be considered in this chapter. The services initially listed are already in place at many institutions. These are important to nurture and develop because they help sustain a vibrant learning community and fulfill important student needs. In addition, prospective and current students today increasingly expect high-quality auxiliary services such as these to enhance their collegiate campus experience. In recent decades the number of services has expanded, and nonacademic auxiliary activities have been integrated into overall institutional strategic planning and operational practices at most colleges and universities (Milshtein, 2002; Pittman, 2012). Over 20 years ago, the prescient aforementioned Income Generation Handbook: A Practical Guide for Educational Institutions (Warner & Leonard, 1992) clearly positioned the stimulation of new activities for income generation through nonacademic and auxiliary operations as a core tenet of the work. Examples described in the handbook include: ∙ ∙ ∙ ∙

the sale of services such as full-cost short courses, consultancies, professional services, testing products,

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∙ ∙ ∙ ∙

market research, photocopy and office services (albeit somewhat dated at this time), audiovisual (now called multimedia technology support), and other related services that leverage the people and infrastructure of colleges and universities.

In addition, Warner and Leonard propose the exploitation and direct sale of products, use of facilities, residences, catering, conferences, inward advertising within the institution, brokering faculty expertise, distance education, and effective investment of institutional money to generate additional income. The chapter that explains these supplemental activities was appropriate for the time when it was written both in content and in regard to the changing nature of higher education funding in the United Kingdom in the late 20th century. The authors wisely concluded their list with advice to readers that every idea for income generation is worthy of consideration because of the challenges being faced, and that synergies for income generation can benefit other activities and goals of the institution. In addition, it has been stated that there is a different perspective among public and private institutions on “where to draw the bottom line . . . when it comes to auxiliary services” (Milshtein, 2002, p. 60). The executive director of the Cal Poly Foundation in California states that public institutions financially depend on auxiliary services such as the bookstores, cafeterias, franchise restaurants, conference centers, and adult student housing. Some private institutions have neglected to supplement their overall revenue effectively with income from other sources, and were forced to merge or close, although this is not the case in all private institutions, and additional revenue can be successfully achieved as seen in other examples in this chapter. These services are often minimized or abandoned for not being viewed as an important part of the primary institutional pursuits, but recently the auxiliary activities are achieving more recognition as a needed source of funding. Robert Hassmiller, the former leader of NACAS, recently stated that “Their revenue can range from seven to 10 percent of a campus budget, and in total dollars is on the increase” (T. Robinson, 2011, p. 1). Also, the NACAS tabulated the auxiliary revenue in 2005 and reported that $40 billion was delivered Revenue Generation Strategies

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to institutions in the United States as a result of these auxiliary services. This amounted to approximately 8% of total revenue; however, it is likely that this amount has increased since then. Auxiliary services mentioned so far can be potent revenue generators for institutions, and there are more current sources that identify similar lists of nontuition examples (T. Robinson, 2011). Warner and Leonard (1992) conclude that revenue generation ideas should be considered with an understanding of the criteria for transferability to the home institution. This is dependent on a number of factors such as the range, level, and type of regular programs offered, the skill of the faculty, the physical facilities available, the extent to which there is space capacity of physical and human resources, size and geographic location of the institution, and the ingenuity of the staff in identifying relevant ideas and their willingness to risk applying them.

Maximizing Facilities Utilization Generating revenue from college facilities has been an auxiliary operational strategy for many years as a way to develop productive uses of underused educational assets (Educational Facilities Labs, 1974). Articles, books, conference papers, institutional strategic plans, and private company reports contain numerous examples of ideas for producing additional revenue from this resource. These include, but are not limited to, renting of classrooms, auditoria, theaters, student housing, and student unions. Many institutions have full-time mid-level or executive administrators in charge of maximizing campus space utilization and generating revenue from the physical plant. There are often programs directed at specific constituencies such as summer camp programs for high school students, professional conferences, vacation or leisure learning programs such as the Elderhostel programs mentioned earlier, as well as refurbishing or refinancing real estate property for generating surplus revenue and redeveloping existing institutional property to produce additional income. Books such as Budgets and Financial Management in Higher Education (Barr & McClellan, 2011) recommend that effective space and physical plant utilization be part of a combination of factors that can lead to increased 80

revenue. For example, the book describes a mid-sized public institution that achieved an increase of $10 million in one fiscal year from a combination of new charges for the rental of facilities to outside groups, modest enrollment growth at the undergraduate level, new endowed faculty positions, and an increase in student fees and research grants. It is frequently revealed, as stated earlier, that a certain synergy of positive revenue effects can be achieved when campus vibrancy is enhanced by an overall increased level of activity, higher performance expectations of individuals and departments, and external publicity that results when new people visit a college or university campus. All institution types, public and private, large and small, urban and rural, can leverage their campus space for financial gain. Rhode Island’s Bryant College promotes its campus accommodations to outside groups, and rental revenue reportedly accounted for approximately 5% of the total college annual budget at the time of the report (Earls, 1996). This private institution was founded in 1863, has physical facilities conveniently arranged in a central compound, and regularly markets its programs and quality along with space rental to enhance institutional revenue. In the 1990s, Johns Hopkins University administrators “turned four deteriorating historic townhouses into a financially successful inn. The Peabody Inn . . . . [to] yield a nearly $125,000 financial reserve for the Peabody Institute, the university’s music school” (Bridges & Brant, 1994, p. 40). While the initial primary revenue source was from Elderhostel program participants, this type of entrepreneurial initiative for maximizing utilization of existing physical space to generate revenue is only one illustration of successful strategic planning of auxiliary services that maximizes facilities usage. There are examples elsewhere in higher education where rental income from real estate holdings can generate significant income. An example is seen at Cooper Union in New York that has several investments including the Chrysler Building that produces $7 million in rent annually (Couch, 2013). American industrialist Peter Cooper founded the institution to offer a free education for students, supported by a significant endowment including substantial real estate holdings. Other examples of effectively leveraged real estate have been set up at various types of institutions. Emmanuel College, which is a private Catholic liberal arts institution in Boston, rents property to Merck pharmaceutical company and generates $50 million in Revenue Generation Strategies

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revenue from a longer term lease agreement (Di Meglio, 2008). Lasell College in Newton, Massachusetts, has taken the revenue generation from real estate to another level by becoming a builder and owner of 188 apartments and 16 buildings. Likewise, large public institutions can also pursue these alternate revenue streams as shown by the California State University system that was reportedly seeking real estate partnerships with professional sports teams. College athletics has been criticized as corrupting the academy and being in need of reform (Nixon, 2014), yet there are opportunities for revenue that institutions can use to justify their continued cocurricular activities and value. For example, some of the larger universities have the opportunity to consider installing luxury stadium boxes. This may be most effective at institutions with powerhouse sports programs, such as the University of Michigan. They are planning to add 83 luxury suites to their historic Michigan Stadium, which first opened in Ann Arbor in 1927. While some fans and members of the university’s Board of Regents have opposed the luxury boxes, stating that the bowl stadium should maintain its regular seating only, others note that the boxes will create prime revenue opportunities. Revenue from the luxury boxes is expected to help pay for the overall costs of the stadium’s $226 million renovation and was scheduled for completion by August 2010 (University Business Staff, 2006). Colleges and universities serve multiple purposes, and sports facilities can be an ideal venue. New structures, such as those in place at California State University, Dominguez Hills; Nova Southeastern University, Florida; and other campuses, incorporate football fields, baseball diamonds, and track and field areas, as well as offer space for trade shows and parking. The new facilities also create strong links to the community and can generate profits. Cal State’s 125-acre multiuse facility provides about $200,000 in annual revenue from sports events’ ticket revenue and parking fees. In addition, the Smart Revenue Generators list identified other examples such as physical upgrades, retrofits, and partnerships. Efforts at the University of British Columbia led to $3 million in annual savings. The institution realized an additional $11.3 million in savings from cutting paper usage by 58 million sheets and energy usage by 76.3 million kilowatt hours. In regard to auxiliary program partnerships, colleges and minor league baseball teams are increasingly opening stadiums together to save money and provide a better 82

facility for both parties. One such ballpark is Fitton Field in Worchester, Massachusetts, a 3,300-seat facility renovated by College of the Holy Cross and the Worcester Tornadoes that was designed by Geller Sport. Because college and professional baseball team schedules do not typically overlap for entire seasons, scheduling conflicts are less common than one might think (University Business Staff, 2006). Maximizing facilities effectively can go beyond housing, office space rentals, facilities upgrades, and sports teams. The leadership team at Purchase College, State University of New York (SUNY), turned their parking lot into a revenue-producing venture with an agreement to allow passengers at a nearby airport to park vehicles for $10 per day. The revenue stream has been successful and produced nearly $1 million for scholarships, college improvements, and maintenance (Mills, 2012). There are other ways that colleges and universities are creating wholly new revenue streams from facilities utilization that leverage the physical plant for other ventures that extend beyond traditional academic education. While public institutions face decreasing state funding and other revenue challenges, tuition-dependent private institutions are especially vulnerable in today’s environment and have become particularly creative in seeking new nonacademic revenue sources using their current assets. To expand services for different age groups and reduce dependence on traditional tuition, campuses are offering day care and childcare programs and provide senior housing for alternative revenue. For example, Fisher College is highly tuition dependent and officials have stated that the institution is strategically planning to reduce the dependence from 91% to 85% (over $1 million) through nontraditional sources (M. Moore, 2010). This private institution along with Babson College and Emmanuel College are leveraging their locations near the appealing downtown Boston location by renovating physical plant space that can be used for multiple purposes to add revenue. Nonacademic nontraditional programs that involve usage of physical plant space at these institutions include summer programs for high school students, childcare, senior care, market research focus groups for private companies, and allied health programs. Colleges and universities have been increasingly integrating facilities utilization in their strategic planning efforts with specific monetary objectives in annual budgets and with the creation of Revenue Generation Strategies

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new administration positions to be responsible for these efforts. For example, Clarkson University recently announced the creation of a new cabinet level position with the title Senior Director of Conferences & Event Services (Kulper, 2013). This high-level administrator will be expected to increase and advance the university’s established conference and event programming activities, as well as produce added revenue for the institution. This type of position and support staff will not only be self-sustaining financially within the overall university budget, but will bring in supplementary revenue as well. St. John’s University in New York has an Office of Conference Services that serves to offer rental space for conferences, seminars, or social events, including overnight accommodations in student residence halls on all four of their campuses during the summer. Other quite aggressive business-minded utilization facilities have been found at: ∙ The University of Texas at Austin (UT), which has partnered with Host Communications to post content on its interactive TexasSports.TV (linked through the athletic department’s website, www.TexasSports.com). Annual subscribers pay $79.97 to access live or replayed games and matches, press conferences, and a highlights show, among other features. UT has also partnered with Time Warner Cable to launch a Video On Demand channel specifically for UT athletics. Viewers pay $3.95 a month for the digital channel, currently available in Austin, Waco, San Antonio, and Dallas, which boosts exposure. The university earns a portion of the revenue. ∙ University of Akron’s (Ohio) supplemental revenue plan includes drilling natural gas wells around campus and selling the gas to local energy companies. The school predicts that the gas wells will become a steady revenue source in a few years. Each well costs about $325,000 to drill, but an annual profit of $60,000 to $120,000 is expected after three to six years. ∙ Oregon State, Penn State, Michigan State, and Washington State are selling items online. Penn has sold everything from pianos to doughnut machines. The University of Wisconsin opted to not use eBay by creating an online auction site that brought in $280,000 during its first year. ∙ The University of Maryland’s Samuel Riggs IV Alumni Center rents out alumni center space, which opened next to the football stadium, and 84

∙

∙

∙

∙

became a popular venue for alumni wedding receptions, birthday parties, bar mitzvahs, and professional events. North Dakota State University also rents its alumni center for everything from small business meetings ($10 to $40 an hour for a conference room) to weddings ($500 for a four-hour event or $1,100 for an all-day reception). Saint Michael’s College in Vermont is using its residence halls, classrooms, dining hall, and gym to generate additional revenue in off-season summer months. In one summer conference season several years ago, over 2,000 conferees stayed in excellent accommodations, including air-conditioned suite-style housing, linens, shampoo, soap, Internet hookup, WiFi, a pool, workout rooms, and a summer theater. The college also earned about $250,000 from gatherings of quilt makers, motorcycle riders, legislative staffers, and others. Maryville University in St. Louis takes advantage of evening and weekend downtime, when students are not on campus, to rent out campus facilities such as computer labs to outside companies. This makes efficient use of the space while earning money for the university. Mount St. Mary’s College (California) rents two of its locations, one set in the hills overlooking the ocean and the other in a historic downtown district, to film crews. The college hired an agency to book campus facilities for television shows and movies. Projects are considered on an individual basis for content, as well as the impact on students, classes, and parking, before approval is given. Virginia Commonwealth University; the University of California, Davis; the University of Colorado at Boulder; Duke University, North Carolina; and the University of Pittsburgh are just a few institutions leasing roof space for cellular tower antennas to generate additional revenue of $2,000 to $3,000 a month. However, it should be noted that contract amounts are highly dependent on the size of the area served and how much cell volume the antenna will produce. Also, institutions should use caution because cell towers may be considered a specialty lease compared to basic office and retail leases and the site acquisition people are seeking the best deal for their companies (University Business Staff, 2006).

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The examples described here are informative cases of collaborations, partnerships, joint-ventures, and various revenue generation ventures that enable higher education institutions to broaden their revenue streams. The University of Delaware (UD) partnered with a Pennsylvania business group to fund a new campus hotel to complement the university’s conference center. UD agreed to put up 75% of the funding, or $9 million, to build the hotel, and earns 75% of the proceeds. Further, it draws travelers to the campus who otherwise would have to stay at another hotel two miles off campus. Many colleges and universities, private and public, from small to large in size, and in different locations have learned that the physical plant has the ability to generate income for the institution if individuals are placed in responsible positions, held accountable for results, and given proper support and recognition within the administration system.

Other Alternative Revenue Sources, Grants, and Outsourcing A recent edition of the series New Directions for Higher Education examines several ways that colleges can improve their strategic direction to avoid closure from internal and external threats (Brown & Ballard, 2011), and the primary conclusion is that most institutions were forced to close by outside agencies on the basis of financial issues. This may not be surprising to readers, and the book provides informative examples of how colleges and universities that avoided closure used alternative revenue sources. One example is Wilson College, which successfully revitalized itself by expanding their market base, revising their curriculum, utilizing their campus more effectively, and creating new alternative sources of revenue generation such as a day care center (Armacost, 2011). As mentioned, day care centers have been active enterprises at various institutions for many years as an additional revenue source that serves the public and is a convenience for employees. However, this program at Wilson College was particularly successful with high-quality services which then led to the development of other new programs such as conferences, workshops, meetings, retreats, and wedding events. Revenue generated from the 86

initiatives increased continuously and the use of facilities grew 20-fold in a nine-year period. Being that the college has a relatively small residential population, it was reported that the traditional-aged students occasionally felt a bit inundated by these extra activities and questioned if the campus is truly there to serve them. Leaders of institutional efforts to increase external revenue should seek to mitigate these concerns by students and staff by carefully selecting appropriate programs, strategically planning them so as not to interfere with regular college campus operations, and informing the college community that these types of additional services and programs are needed for institutional financial sustainability. Yet not all of the alternative additional nonacademic revenue sources conflict with higher education institutional cultures. Some of the services can enhance and support the established collegiate experience sought by students. For example, selling items such as soft drinks and the related marketing efforts on a campus may not appear out of place to students in today’s consumer-based economy. For many years, companies such as Coca-Cola and Pepsi have been competing to sign agreements that can be very lucrative for colleges (Van Der Werf, 1999). Originally, large institutions such as Pennsylvania State University signed agreements such as a $14 million contract for 12 years to make Pepsi Cola the exclusive soft drink sold on their campus. Soft drink companies have since moved their competition to mid-sized universities and community colleges. The plentiful cash enticements and large commissions have enabled higher education institutions to earn significant additional revenue. At one time it was estimated that Coke and Pepsi alone spent $2 billion over a three-year period at colleges and universities before the remaining two thirds to four fifths of U.S. colleges and universities had signed agreements. This type of popular product that is marketed to the general public, and college student populations in particular, is only one example of the kind of revenue-generating activity that higher education institutions can do by leveraging their population demographic of current students, their campus facilities, and their established connections with internal and external constituencies. Another example that could be considered a similar type of consumer product or service offered on campus is the collaboration with financial service institutions that offer credit cards to students and a supposed Revenue Generation Strategies

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opportunity to learn about personal financial responsibility as well as providing the institution with additional revenue (Cahill, 2007). However, there has been increasing criticism of these business relationships for not truly being in the best interests of students (Barron & Staten, 2004; Staten & Barron, 2005). Higher education leaders, student advocates, and educational business officers need to make prudent and thoughtful decisions about what types of additional revenue sources are appropriate for their institution’s mission, value, and organizational culture. Some additional revenue ventures may be more benign and less controversial in the academic arena. Since part of the mission of most higher education institutions is the creation and dissemination of knowledge, financial benefits from these activities may be a more amenable choice for some organizational cultures. For many years colleges and universities have received revenue royalties from patented discoveries, and the trend in licensing and patenting of inventions created by faculty members has increased due to technology transfer programs (Grassmuck, 1991). As institutions have learned to benefit from these activities, many are offering financial support for faculty research, start-ups, and inventions (Di Meglio, 2008). These revenue streams can help colleges and research universities in particular remain true to their mission yet yield significant revenue that supplements tuition income, along with other revenue from hospitals, student housing, endowments, and other sources. An annual survey in the late 1990s found that 132 research universities in the United States earned over $446 million in royalties in one fiscal year and were awarded 2,239 patents (Basinger, 1999). This trend was found to be increasing in another survey two years later by the Association of University Technology Managers (AUTM) which revealed that U.S. universities collected more than $641 million dollars from inventions, patents, licensing revenue, and technology developments (Blumenstyk, 2000). As mentioned earlier, there may be some administrative advantage to decentralizing new revenue generation activities through comprehensive strategic planning goals that specifically encourage academic as well as nonacademic departments to seek new revenue streams for alternative sources. For example, libraries at the University of Arizona have sought to increase revenue from other sources such

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as cafes, for-credit courses, grants, and partnerships with athletic departments to offset funding shortages (Cuiller & Stoffle, 2012). Externally funded grants are not just sought after by libraries, since they are often an intellectually based activity for creating and expanding knowledge that is naturally in the domain of higher education faculty. Although many types of grants could include academic elements, they are examined in this chapter because grants can vary greatly by type and are not necessarily connected to academic degrees, certificates, or monetary revenue from educating students. According to the U.S. Department of Education, National Center for Education Statistics, Delta Cost Project Database for 1987–2010, the average annual revenue per full-time equivalent (FTE) student for “Federal appropriations and federal, state, and local grants and contracts increased from $5,248 to $8,389 at public research institutions” (Kirshstein & Hurlbut, 2012, p. 7). The amount is just slightly lower at public master’s institutions, but quite lower (nearly one half ) at public bachelor’s institutions, and much lower (one quarter or less) at public community colleges, and private bachelor’s and master’s colleges and universities. However, private research institutions received more, $11,691 per FTE in 2010. Therefore, it is not surprising that other institution types, such as private baccalaureate and comprehensive master’s institutions, are increasing internal planning efforts to encourage faculty to apply for more grants. Advice has been written, administrators have been hired, and faculty incentive programs are being implemented at many institutions to solicit as much government and private grant funding as possible (Ferreira, 2011; Licklider, 2012; Sundberg, 1994; Vest, 2007). Obtaining grant revenue is also common at institutions in many other countries. For example, universities in Australia have reportedly become highly engaged in maximizing external research funding for their university (Goldworthy, 2008). A large number of faculty members, academic departments, and scholars apply for research grant funding annually, and comparative employee performance achievement in obtaining the funding is allocated in what some critics believe is disproportionately weighted toward evaluating research performance activities. This is because some academic disciplines require larger amounts of funding than others, and therefore the weighting

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schemes are perceived as an inaccurate measure if monetary grant amounts are the only factor used in determining success. Higher education institutions should carefully plan grant reward strategies so as not to disincentivize faculty and intellectual efforts on grant writing activity that might have been better spent producing scholarly journal articles or books that do not require funding and not divert funding from worthy individuals or departments that have less need for grant money yet serve an important part of fulfilling the institutional mission. In fact, a recent research study in the United States analyzed the effects of scholarly output and institutional types on the dispersal of federal research grant money (Ali, Bhattacharyya, & Olejniczak, 2010). The study found that while faculty members with a larger number of academic publications and citations do have a stronger chance of obtaining competitive research grants, the benefits taper as the number of academic papers published increases. It was found that the institutional characteristics in regard to private versus public and overall research emphasis of the university have a higher level of influence in determining the total amount of grant money earned than the number of grants. In addition, the role of the grants officers in higher education institutions is important because they have been identified as a key proponent in obtaining additional revenue since they specialize in understanding where and how to secure the external funding that is essential in accomplishing strategic initiatives in this area (Willard, 2002). Alternative nonacademic revenue sources can be created and delivered by colleges and universities as described in methods and examples examined in this chapter, and there are other options as well. Due to budget cutbacks, declining resources, and the many internal and external forces influencing higher education in recent years, institutions have increasingly implemented outsourcing for services and activities that are not part of their core mission. When first considering this approach, it may seem that the goal is cost cutting, but actually net revenue can be increased through increased efficiencies by contracting with companies that are experienced and successful in areas such as information technology (IT), campus bookstores, dining services facilities operations, security, childcare services, and even remedial noncollegiallevel education programs (Wood, 2000). Advocates of outsourcing believe

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that there is higher level of productivity and lower costs, but critics are not pleased with the consequences on human resources, dilution of loyalty to the academic institutions, and the start-up costs that are frequently incurred. Nevertheless, outsourcing is widely used at higher education institutions and reports have found that only a small percentage produce all services inhouse (Adams, Guarino, Robichaux, & Edwards, 2004; Bartem & Manning, 2001; Kaganoff, 1998; Kelderman, 2013a; Wood, 2000). Many institutions have found improved satisfaction of students using the outsourced services, lower costs, and increased revenue that may be worth some potential negative perceptions. Outsourcing has moved beyond dining services and campus bookstores, and resulted in significant revenue advantages. For example, Ohio State University signed an agreement in 2012 to lease their parking facilities to an Australian company for 50 years in a deal worth $483 million. This produced a 20% increase in the value of the university’s endowment and allowed the institution to set aside more than $150 million for environmental sustainability and $83 million for student scholarships (Kelderman, 2013a). There are examples of other colleges that arranged for additional revenue sources using similar strategies, such as the University of South Florida’s $100 million agreement with a company to manage its sports arenas and North Carolina’s outsourcing of the management of its endowment fund to a nonprofit company. These outsourcing strategies are not new in higher education (R. J. Robinson, 1991), and various articles and reports have indicated that they have increased in recent years. College and university business officers have been known to encourage this approach, with the perspective that if someone else can perform a service more efficiently, then it should be done if it does not compromise core academic values (Bartem & Manning, 2001). Therefore, it is not surprising that this retention of traditional academic authority, and employment policies in general, may be reflected to some extent in studies that reveal that private institutions have outsourced activities such as ground maintenance and custodial services to a much greater extent than public institutions do (Adams et al., 2004). In addition, other institutional characteristics may be related to the amount of outsourcing conducted, such as master’s institutions having more bookstore outsourcing than private institutions, or

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community colleges outsourcing more financing, construction, and management of student housing projects (Bekurs, 2007). Although these studies largely examined institutions in the United States, outsourcing will likely continue to increase globally as higher education is becoming increasingly international in competition for resources and students since market entry and travel barriers are lowering. The result is a forecast that there will be more outsourcing, twinning, and franchising in higher education (Armstrong, 2007).

Technology Transfer As mentioned, many colleges and universities can earn substantial revenue from technology transfer. In the United States, the federal government is a major source of research revenue, spending approximately $40 billion per year and enabling licensing revenue up to $3.4 billion in 2008 (Economist, 2005; Loise & Stevens, 2011). Government policies were not supportive prior to 1980 because money supplied by federal authorities was confiscated from the servicer or grantee by the funding agency, therefore not effectively motivating research activities. After the passage of the Bayh–Dole Act in 1980, higher education institutions and small companies were allowed to own their inventions that were created with federal support. Colleges and universities were then incentivized to license inventions for commercial growth and reward inventors with significant revenue, provide support for additional research, and counterbalance the expenses of technology transfer processes. Aside from the financial assistance to institutions and revenue generated, the Bayh–Dole Act has helped society at large by producing 153 new drugs and vaccines (Chatterjee & Rohrbaugh, 2014). In addition, university patenting licensing has a large impact on the U.S. economy by contributing up to $836 billion to the gross domestic output and three million jobs between 1996 and 2010 (Pressman, Roessner, Bond, Okubo, & Planning, 2012). These are significant contributions to the general social order and support many fundamental self-declared missions of colleges and universities today. Nevertheless, revenue generation is still a primary reason that institutions initially seek to engage in technology transfer endeavors. 92

An excellent example of a well-planned technology transfer process is illustrated in the Technology Development Office at Boston University (BU). Their stated mission is to “help each inventor realize the full commercial potential of their ideas. We accomplish this by working with each inventor to develop and implement a commercialization strategy/plan that best fits with their specific goals and circumstance” (BU, 2014, p. 1). Their website is especially informative and practical for university personnel, with clear information about the grants and patent process, disclosure, evaluation, patent formulation, and related matters. The web page has sections on: ∙ ∙ ∙ ∙ ∙

submitting a new idea, developing a strategy, implementing a strategy, formal agreements, and agreement maintenance.

This example at Boston University is very encouraging and collegial for faculty members, and could serve as a sample of best practice for other institutions. Other successful programs identified examples at the Massachusetts Institute of Technology (MIT), Auburn University, the University of Colorado (Swamidass, 2013), as well as websites at the University of Pennsylvania, the University of British Columbia, and other institutions. In addition, there is an Association of University Technology Managers that assists universities, hospitals, and research centers in managing “the transfer of discoveries resulting from academic research to companies that transform these intricate technologies into viable products for the world” (AUTM, 2014a, para. 2). This organization defines technology transfer as the “process of transferring scientific findings from one organization to another for the purpose of further development and commercialization” (AUTM, 2014b, para. 3). Researchers on this issue propose various complementary roles for universities in the advancement of academic entrepreneurship (Wright, 2014). These models include supporting innovative world-class research to gain long-term competitive advantage for the institutions, typically including the creation of spin-offs involving academic scientists or indirect support of corporate spin-offs and start-ups by Revenue Generation Strategies

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students and alumni. These ideas support the argument for a meaningful settlement of the seemingly utilitarian activities and the loftier higher education goals to create and spread knowledge. It is important to know that some universities are more successful than others at generating spin-off companies, commercializing inventions, and generating revenues. Organizational research on this important issue attributes success of outcomes to institutional resources, capabilities, financial capital, and employee assets (O’Shea, Allen, Chevalier, & Roche, 2005). Econometric estimates that analyzed panel data from 1980 to 2001 confirmed that the success of technology transfer, entrepreneurial orientation, and spinoff performance is dependent upon four things: 1. The past success and history of each university in using the research stocks available, and effectively leveraging their technologies, products, and operations; 2. The quality and presence of high-performing faculty in certain research areas; 3. The size and nature of the financial resources budgeted to universities for research affect academic entrepreneurship; and 4. The scale of resources devoted in technology transfer office (TTO) personnel increases spin-off activity (O’Shea et al., 2005). These findings are informative since they clearly corroborate the appropriate role of concrete and intangible resources in accounting for entrepreneurial behavior for spin-off activity. In addition, these findings and general higher education organizational concepts argue for the need to establish a supportive culture for endeavors such as this, actively partner with outside organizations, recruit and retain superior talent, and create a proper infrastructure to back revenue-generating academic research. University to industry technology transfer is also a vital source of revenue for institutions outside of the United States. In Europe, there was a commission in Lisbon that developed a strategy in 2000 to emphasize the importance of creating and dispersing academic knowledge to promote regional economic development (Schoen, van Pottelsberghe de la Potterie, & Henkel, 94

2014). Policies to support the creation of university TTOs are backed by many national and regional governments, and four models have been identified in Europe: 1. Classical TTO, which solely serves one higher education institution and is combined within the administration system; 2. Autonomous TTO, which is comparable but has considerably more independence from the university’s governance; 3. Discipline-integrated technology transfer alliance (TTA), which serves several universities and is conducted apart from higher education institutions; and 4. Discipline-specialized TTA, which concentrates on one academic discipline and also serves several universities (Schoen et al., 2014). The classification and qualitative study of these different arrangements found that it can be deceptive to compare universities with different goals and administrative structures. Some programs were developed and implemented in a particular system for good reasons and comparing only the type of TTO without considering the institutional background is not informative based only on quantitative measures. Styles and outputs vary, and form should follow function. In addition, European commercialization of academic research is also characterized as being affected by the quality of faculty patenting (Czarnitzki, Hussinger, & Schneider, 2011). Faculty and the knowledge produced by scientists have been clearly recognized as a key factor that affects technological progress and related funding benefits. The aforementioned expenses of technology transfer process operations are imperative for universities to examine when considering these ventures. While dissemination of taxpayer-funded research findings and benefits to society are important, university leaders “view revenue as the most important of the measurements” (Tyler, 2013, p. 917). In actuality, large net revenueproducing deals are quite infrequent and even the total amount of income produced from all operations is normally not meaningful in relation to overall university budget and the expense involved in setting up a TTO. There are exceptions to this in regard to some cases of very financially successful efforts. However, the usual return on investment compared to the money spent and Revenue Generation Strategies

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costs of technology transfer does not yet normally provide revenue surpluses for a worthwhile model at most institutions (Bok, 2004; Clements, 2009; Tyler, 2009). Colleges and universities may believe that they have opportunities to hit a “home run” with their faculty expertise in certain specialized areas, but TTOs should be planned with the understanding that they may only break even financially or increase costs. However, benefits to society and fulfillment of institutional missions can be valid reasons to support technology transfer, with surplus revenue generation being a possible extra reward for success.

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HOUGH READERS MAY NOW BE intrigued by the options and opportunities examined, questions remain in regard to which approaches are appropriate. How can an effective plan be created and what revenue generators are best for different kinds of colleges or universities? Institutional leaders and external critics often become overly concerned with the reasons for the high tuition costs of postsecondary education because it has been widely publicized. While costs are indeed important to understand, it has been determined by some experts that they are rational and legitimately aligned with similar rising costs in other fields and are therefore justified (Archibald & Feldman, 2010). These include, but are not limited to, the explanations stated earlier such as the highly educated labor involved, new technology, economic conditions, the complexity of the financial aid policies, and increased demand for student services, among other reasons. The construction of an institutional financial revenue generation strategy should begin with an understanding that cost increases are likely to continue. While tuition increases may be leveled to some extent, the reasonable solution to maintain and cultivate institutional survival and student affordability is to set up additional revenue streams. Strategies must be selected and implemented that are suitable for specific institutions and appropriate for higher education in general. Alfred (2005) defines strategy in higher education as “a systematic way of positioning an institution with stakeholders in its environment to create value that differentiates it from competitors and leads to sustainable advantage” (Alfred,

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2005, p. xiv). This strategy differentiation, as identified in this monograph, can be broad or narrow. Crafting it can be viewed as more of an art form than a science, and asks intelligent questions to contemplate about important issues in an imaginative manner. Established strategic management policies state that this organizational tool is a carefully planned process with defined steps such as developing a vision, setting financial objectives, determining a plan, implementing the plan, and evaluating the performance to make changes (A. A. Thompson et al., 2014). Yet strategic planning in higher education may not be this simple and directly comparable to other types of organizations, especially in regard to generating new revenue. The comprehensive two-volume work Understanding College and University Organization: Theories for Effective Policy and Practice (Bess & Dee, 2010) offers a practical way to apply established organization theories to college and university institutional problems. In fact, this remarkably thorough work contains specific recommendations of how to relate theories to problems and explains how different strategic management models can be used to address complex difficulties. When looking at the organizational-environment conditions and various conceptual strategy models, such as linear, adaptive, emergent, and symbolic, all of these approaches have some characteristics that can be helpful to higher education. However, one that stands out is the symbolic model because it is “based on a social contract, instead of an organismic or biological view of the organization” (Bess & Dee, 2010, p. 733, as cited from p. 93 of Chaffee, 1985b). Colleges and universities should seek to not merely engage in continual adjustments to the external environment (as it is normally done in other strategy models), but instead construct a shared commitment in the form of social contracts that affect how institutional leaders view their organization and the environment (Chaffee, 1984, 1985a, 1985b). In this way, the strategic endeavors such as new financial revenue activities can be more consistent with the culture of particular institutions and therefore be more likely to succeed. To some extent, Chaffee describes strategy as a forward-moving activity based on action and aimed at previously contemplated variations of future scenarios (Bastedo, 2012; Neumann, 2012) with an appreciation of human beings in the organization who truly want to have real meaning in their 98

work. More and more colleges and universities are conducting strategic planning activities with specific financial revenue objectives, including objectives to identify and implement new revenue sources, using committees and individuals from all levels of the institution to determine what is institutionally viable and mission-centered. Integrating academic planning and budgeting effectively is crucial for success, and it has been known for many years that successfully running colleges and universities depends on budget implementation that includes consideration of the values of the institution in using operational planning and resource allocation (McClenney & Chaffee, 1985). This importance of successful delivery of the strategic goals and plans has been identified as the cornerstone of any income generation activity in educational institutions (Warner & Leonard, 1992). Without setting up effective implementation plans, the organization’s output will be in disarray. Putting quality first, careful monitoring by organizational leaders, understanding the key roles of the faculty and administrators, caring for the end user, and supporting the educational entrepreneurs in colleges and universities are extremely important for effectively leveraging institutional resources for financial strategy improvement.

Budget Planning Options While chief financial officers, vice presidents, deans, and department chairs are often the members of academic communities who are most familiar with budgeting, it is important for everyone including faculty, staff, midlevel administrators, and anyone appointed to responsible positions to be aware of how their institution operates in regard to financial matters. Six commonly used budget models in colleges and universities have been identified: incremental budgeting, zero-based budgeting, activity-based budgeting, responsibility center management (RCM), centralized budgeting, and performance-based budgeting (Hanover Research, 2012). Incremental budgeting is a commonly used traditional approach where budget models are based upon amounts allocated in the previous budget year. Only new revenue expectations are assigned while decreases are frequently enacted as a Revenue Generation Strategies

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percentage of the college or university’s prior budget in a broad manner. Although this type of system is appealing because it is easy to operate, it is not helpful to identify how costs occur or contribute to revenue creation. In zerobased budgeting the prior year’s budget is cleared and all departments must request funding with reasons stated to justify their request. This can be an effective method to control unnecessary costs and reduces the “entitlement mentality” in regard to cost increases according to the Mackinac Center for Public Policy (LaFaive, 2003). A more revenue-based system is activity-based budgeting that assigns financial resources to institutional activities that obtain the highest return in the form of increased revenues. This system allows colleges and universities to link the revenue generated to broader strategic initiatives. However, to implement it properly requires a large amount of time and resources. An intriguing budget model that has garnered attention in higher education is RCM (Hensley et al., 2001; Kosten, 2009; Mayer, 2011; Neal, 1995; Strauss & Curry, 2002; Whalen, 1991). The RCM is an approach to budgeting that reinforces the attainment of academic priorities in institutions and delegates operational authority in a decentralized manner to unit-level departments, schools, and divisions. In this system, departments are allowed to determine their own priorities and earn their revenues and tuition from student income along with the associated expenses incurred. This approach supports previously mentioned research that decentralized administrative decision making can be more effective (Hensley et al., 2001; Kosten, 2009; Strauss & Curry, 2002; Whalen, 1991). However, this does not mean there are no potential negative consequences because RCM has the potential to cause internal conflict among individual departments in their struggle for financial survival to obtain needed resources. Boston University President Robert A. Brown “claims that the competition for students promoted by RCM could cause deans to resort to inefficient measures to prevent students from enrolling in other colleges” (Hanover Research, 2012, section 5). In addition, Brown states that inappropriate incentives can encourage engineering schools to teach English. Other examples also might occur without appropriate oversight of decentralized revenue pursuits such as when schools or departments in the arts and sciences offer professional programs in business fields, which could 100

endanger initial or reaffirmation of specialized accreditation, as well as undermining successful programs instead of growing overall institutional revenue. Therefore, RCM and decentralization of administrative authority should only be implemented if they are well planned and the institutional policies and organizational culture are suitable. In examining the different budget planning approaches so far, one might believe that a moderately centralized budgeting approach is needed because it could combine proper oversight authority with some decentralization encouraged in budget planning decisions. Centralized budgeting can be a prudent way to steer institutions during challenging financial conditions by allowing experienced high-level administrators to make important decisions, yet there is a drawback in that departments may then be less encouraged to generate revenue. A sixth budgeting approach to consider in seeking revenue-generating activities is performance-based budgeting (Burnett, 2012; Layzell, 1998; Liu, 2011) or performance funding (Dougherty & Reddy, 2013; Dougherty et al., 2014). In the way that activitybased budget rewards money founded on the sum of revenue-generating actions that departments carry out, these processes award financial resources on the basis of performance determined by specified results achieved. To administer these budget strategies effectively, the funds that are expended should be explicitly linked to the generation of specific outputs that translate into results. Public colleges and university systems often implement these systems as a consequence of the recent and ever-increasing demands for accountability and transparency. In examining these six alternative budget models, RCM and performance funding are especially promising for increasing revenue in colleges and universities. A central principle of this monograph supports the concept that new higher education revenue sources can be expanded using the methods described in previous chapters for increasing the overall sources of income for all divisions and organizations. The activities identified do not simply take revenue sources from other intrainstitutional departments, or competing colleges and universities, as it might commonly be perceived. This can be particularly appealing to academic leaders who work in collegial environments that encourage collaboration with other departments and institutions. Appropriate financial growth strategies encourage all departments and academic units Revenue Generation Strategies

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to succeed by generating additional revenue from many income streams to support a wide variety of programs and departments that are part of an institution’s mission and offer long-term financial stability for academic leaders, faculty, and support personnel. Potential revenue changes can occur with careful attention to supplementing existing revenue and adding new income systems in the institution types examined. Carefully planned reduction in reliance on traditional tuition and greater expectations from supplementary sources are reasonable and responsible. An example would be a college or university that currently depends on 90% or more of their annual revenue from tuition and then strategically plans reductions of several percentage points per year in a typical five-year plan. The goal at the end of the time period could then be 80%, with further reductions designed in the next five-year plan. These proposed changes also reflect the aforementioned continuing declines in federal, state, and local grants and contracts, as well as decreasing revenue from student tuition and fees. The goal of increased revenue is shown by the slightly higher percentages expected and needed from auxiliary enterprises and other revenue sources. These proposed adjustments are not radical and are achievable with prudent care in choosing which revenue streams need improvement to replace declines in various areas. In addition, the supplemental revenue generated will be strongly influenced by the choice and implementation of an appropriate strategy such as Chaffee’s symbolic approach, which includes an understanding and appreciation of the people at the institution who are responsible. It is individuals, often but not always working teams, who should be guided, encouraged, and supported to craft new methods for increasing existing revenue streams or at least mitigate losses if there are unstoppable declines to develop new or enhance existing supplemental revenue generation methods. An example can be seen at Wilson College, which faced serious strategic and operational financial challenges that tempted the trustees to close the institution (Armacost, 2011). This private liberal arts institution was able to make transformational changes to turn the college into a financially stable institution. Success was helped in part by receiving a $344,000 grant from the federal government program Strengthening Development Institutions, “a portion of which was to support program development for the Division of 102

Continuing Studies. The second [critical incident] was a vote of the faculty and the board to establish the Division of Continuing Studies” (Armacost, 2011, p. 35). In this way, the institution is maximizing the possibilities of strategic financial endeavors using Chaffee’s symbolic approach by creating a social and practical contract with the people who are involved. Recently, Chaffee wrote more about how important it is to support these types of initiatives by “aligning financial decisions regarding revenues, creating and maintaining institutional assets, and using those assets—with the institution’s mission and strategic plan” (Chaffee, 2010, abst.). This idea of strategic finance is gradually becoming more widely recognized as a useful concept for assisting college and university boards of trustees, as well as presidents, to create long-term sustainability that effectively aligns an institution’s revenues and expenditures. In the case of Wilson College, the specific key strategic initiatives undertaken are included: ∙ expanding the market base by improving the student quality and number of new first-year students; ∙ revising the curriculum such as reducing the number of courses, decreasing the number of majors, and a restructuring of academic departments; ∙ creating firm connections with the local community and surrounding region by encouraging faculty engagement in community events and welcoming local residents on campus for various new continuing education courses; ∙ utilizing the physical plant more fully, such as leasing of land and selling four buildings for development as a retirement community, and other efforts to maximize endeavors of underused physical plant space; ∙ establishing new sources of revenue generation, including programs mentioned in previous chapters such as a day care center, rental of space for conferences, workshops, meetings, and retreats; ∙ two capital campaigns and an annual fund supported by alumni; and ∙ overall improvement of institutional financial management (Armacost, 2011). These types of practical financial strategic initiatives more effectively leverage the assets and abilities of higher education institutions, improve the Revenue Generation Strategies

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employee and organizational culture, and support traditional college or university endeavors for what is already being done well, as well as expanding revenue sources into related activities that do not diminish their fundamental purpose. When financial crises become pronounced and need immediate attention, this is often a difficulty that did not need to occur if proactive financial strategic planning and action had been conducted. Understandably, it can be a challenging administrative task to balance the needs of the internal higher education constituencies, prospective students, external review agencies, governmental legislators, institution ranking systems, and other stresses that are increasingly requiring additional attention by administrators and faculty leaders. However, careful review and proper implementation of proven strategic financial management, and general organizational strategic management planning activities are crucial for colleges and universities in maintaining viability in today’s challenging environment. Complacency, focusing too much on daily internal or external crises, and not following through in fully engaging the valuable personnel who are already employed by institutions can have tremendous opportunity costs or missed revenue increases in higher education.

Contemporary and Developing Approaches While many higher education leaders, administrators, and consultants concentrate their strategies on reducing costs, external critics continue to disparage the prized features of higher education such as faculty tenure, research activities, class size, and other factors (Mrig, 2013). There are new adaptive models for revenue generation that maintain traditional activities, reinvigorate institutional vitality, and produce additional income. Approaches of modern highly productive and financially successful colleges include systematically enabling students to complete degrees, reducing nonproductive or duplicative programs, redesigning the instructional delivery, improving core support services, and optimizing many noncore services and other operations that contribute to institutional effectiveness (Auguste, Cota, Jayaram, & Laboissiere, 2010). These approaches can include the previously mentioned RCM models 104

that provide incentives to generate additional revenue (Porter, 2013), as well as computerized tactical decision-making support systems (Harmon, 1986), scenarios, and simulations (McIntyrn, 2004), and new organizational structures at the institution to maximize revenue (Hutt, Bray, Jones, Leach, & Ward, 2010). These developments have become more common at colleges and universities today as part of, or perhaps the beginning of, the ability to truly maximize the power of institutional assets for long-term financial sustainability and growth. Due to the very challenging and volatile modern-day higher education marketplace, colleges and universities have been forced to learn to recover from distressed financial circumstances by looking for best practices at other institutions that can be adapted, using modern administrative techniques, and creating programs or customized initiatives that are appropriate. Mactaggart (2007) identifies how revenue can rescue institutions from dire financial circumstances by achieving a balanced budget with actions such as making the campus more attractive, adding graduate programs specializing on the latest topics, reducing costs but not personnel, and strategically improving the institution’s public reputation (Mactaggart, 2007). The avoidance of financial difficulties due to “disruptive innovation” of new entrants in higher education by becoming more competitive, or by traditional institutions adapting disruptive approaches, has also been recognized. For example, the University of North Texas is seeking to increase overall institutional revenue with a multifaceted approach including: ∙ ∙ ∙ ∙ ∙ ∙ ∙

de-emphasizing research, locating a campus closer to an economically disadvantaged area, creating more career-focused majors in narrow areas, concentrating attention on both traditional and older students, paying students for advisement and administrative tasks, lowering tuition costs, and other somewhat far-reaching methods.

Some of these strategies could be considered as being concerned with efficiency and thereby diminishing academic quality and traditional higher Revenue Generation Strategies

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education values. This does not need to occur to increase revenue. Examples of new revenue generation techniques have been shown that can supplement tuition income such as the many concepts listed in the previous sections of this monograph. In addition, some contemporary administrative techniques were developed many years ago, but have only been recently adapted or classified as a distinctively different decision strategy worthy of consideration. One example is called “joint big decision committees” (JBDCs) and it can be a viable mechanism for important organizational culture transformations (Corak, 1991). There are several approaches that can be considered for this idea on the basis of various organizational theory concepts such as bureaucratic, rational choice, decision process, collegial, political, and cultural. Corak (1991) conducted a study of the JBDC process on four higher education campuses: the University of Montana, Missoula; Georgia Southern College, Statesboro; Shippensburg University, Pennsylvania; and West Virginia University. It was determined that the JBDC approach can act as a change agent and help colleges and universities to institutionalize strategic planning into goal-setting and decisionmaking activities. Other techniques that were recommended years ago but are only recently becoming more recognized include separately identifying financial project arrangements in activities and using costing sheets suggested by Warner and Leonard (1992). Their Income Generation Handbook states that systems such as these “should be able to identify income and expenditures under each project heading, give a clear indication as to whether the project is in the black or red, and give an accumulated overview of all commercial activity across a department, division, or faculty [school]” (p. 36). This is recommended by performing activities such as an income generation audit (to determine where the money is currently coming from), market research (to identify distinctiveness), institutional strategy development and creating an enterprise culture, improving the institutional profile, facilitating financial procedures and practices, committing to new endeavors, improving delivery methods, and using effective tactics to reduce expenditures where it can be done appropriately. Methodical and systematic approaches such as this are used quite frequently today by different types of colleges and universities in their strategic 106

planning implementation efforts. For example, a medium-sized private comprehensive college in a large U.S. metropolitan area recently developed a fiveyear strategic plan that established more than 25 project teams, with faculty and administrator team leaders, who are responsible for specific goals and action steps. Some of the explicit objectives include fully identifying, reviewing, and revising the institution’s distinctiveness, academic program quality, and student successes; new entrepreneurial activities to generate additional revenue; and strengthening physical and human resources to meet increased residential demand and optimize the use of campus facilities. The adaption of these business-like approaches to the academic environment should involve a more holistic and humanistic approach than is normally done in private companies. The Chaffee-like symbolic method of including garnering social contracts with institutional stakeholders is achieved in this type of planning endeavor using master planning consultants to meet personally with various constituency groups during multiple visits to the campus and closely related community groups, along with many intrainstitutional town-hall meetings, and various electronic and personal outreach efforts for people who are directly involved with the core functions of the higher education activities. Overall, higher education institutions today are becoming more MarketSmart and Mission-Centered (Zemsky et al., 2005). The end result of adapting elements of strategic management principles is that college and university leaders have appropriately tailored the concepts so that responding to changing market conditions has enabled and even stimulated higher education institutions to better fulfill their missions. A recent article describes how disruptive innovations such as online learning can help colleges to thrive (Christensen & Horn, 2013). Rapid changes such as this have revolutionized other industries by adding more affordability, convenience, and simplicity. Examples such as Franklin W. Olin College of Engineering and Babson College in entrepreneurship illustrate how new competency-based institutions have motivated traditional colleges to improve. Often, higher education institutions today are creating autonomous (decentralized) departments to concentrate on these new endeavors, as well as to properly integrate entrepreneurial activities throughout the college or university system. Several experts on the higher education academic workplace recently have identified the barriers to Revenue Generation Strategies

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innovation and astutely point out that faculty and administrators are adapting effectively. History has shown that good colleges have continuously changed, albeit somewhat slower than other organizations, during the course of time (Boyer, 2013; Deresiewicz, 2013; Herbst, 2013). In addition, effective strategic planning is not a new concept in higher education and the origins of establishing institutional missions, analyzing data and the environment, choosing strategies, and using tools such as probability–differentiation matrix or force field analysis were identified more than 30 years ago in an edition of New Directions for Institutional Research (Cope, 1981). Colleges and universities are sometimes perceived as reacting slower to changing environments than they actually are, both within the United States and in international arenas. Moreover, there has been significant criticism recently of governmental and private organization’s efforts to gauge the financial health of colleges and universities (Blumenstyk, 2012b, 2013b, 2013c). The National Association of Independent Colleges and Universities has continued its denunciation of the U.S. Department of Education’s annual “financial responsibility scores” because of the incorrect labeling of institutional reputation on the basis of the outdated accounting principles and misrepresented financial ratios. The many examples identified in this monograph and the overall relatively low rate of closure due to financial problems show that external rankings published in magazines or listed in government reports do not accurately reflect the true financial status of institutions or their ability to improve. While there have been a number of private for-profit institutions that were closed due to performance and financial issues, and many public colleges are increasingly being pressed for new revenue by needy students combined with reduced public funding (Kelderman, 2013b; Wang, 2013), there are many examples of successful financial revenue generation strategies and options for implementing new ideas. In addition, there are predictions of additional innovative changes in higher education that will have positive effects on financial performance and academic learning in the near future. These forecasts include increasing use of e-advising, evidence-based pedagogy, optimized class time, easier educational transitions, fewer large lecture classes, additional developments in distance education, aggressive pursuit of new revenue, more public– private partnerships, and other strategies (Mintz, 2013). Therefore, although 108

there have been, and still are, a large number of accurate and arguably inaccurate forecasts about the demise of traditional higher education structures, new strategies and methods that are already being employed show that institutions can successfully adapt to challenging macroenvironmental issues with effective strategic financial planning, implementation, and pursuit of new methods to earn income.

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Conclusion

A

FTER CONSIDERING THE ORIGINS of revenue in higher education, current practices, recent trends, and identifying imaginative activities being conducted, it is clear that colleges and universities have many possibilities to diversify their income sources. In an ideal world it might be better if members of higher education communities did not need to be concerned with revenue and business matters for supporting scholarly intellectual activities. Since at least the start of the last century, institution leaders, writers, and commentators have lamented the influence of external businesses and internal bureaucratic practices for corrupting the true purpose of American university operations to produce useful graduates (Veblen, 1918; Veysey, 1965). Nevertheless, while students are indeed not products as in manufacturing industries, and the honorable purposes of intellectual inquiry and public service should not be tarnished, there are important lessons that can be learned from the business world that can be appropriately used in academe. If not, the higher education institution system may not be sustainable and society will be diminished. The strategic planning approaches examined in this monograph along with academic and nonacademic/auxiliary activities identified can do more than add needed revenue. These activities can create a more vibrant college and university community that raises awareness of the institution’s capabilities, makes fuller use of physical and intellectual capital, and truly supports the core mission. Therefore, it is important to inform internal and external constituencies because outspoken critics may perceive an

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overemphasis on revenue generation and view this as a symptom of the overall decline on the original academic mission and purpose of higher education. It is argued that there is too much of a curricula focus on vocational education instead of proper education based on the broad-based liberal arts curriculum (Ginsberg, 2011; Inside Higher Ed, 2013a). Fundamentalists in academe often view any importance placed on learning outside of the traditional classroom subjects, instead of fundamental academic disciplines, as an unwarranted institutional change. They view scholarly pursuits and providing education as having an inherent conflict with mere organizational monetary income endeavors that reduces the long-standing honorable spirit of tenure and academic freedom that has endured for many years. While Ginsberg and others conclude their diagnosis of falling faculty influence with recommendations for intrainstitutional reversals of administrative growth, it is proposed in this monograph that costs should be reduced and the equally important goal is to further supplement already broadening revenue streams that do not diminish scholarly academic endeavors. Moreover, additional revenue can enhance the institutional infrastructure in ways that support the many principled academic activities conducted at different institutional types from community colleges, to private liberal arts colleges, to major research institutions. Like other skeptics, author Nathan Harden recently predicted that half of all the approximately 4,500 postsecondary institutions in the United States will disappear in the next 50 years due to technological and societal changes, and larger universities with big budgets are especially vulnerable. Many readers and scholars might be in agreement with this highly negative forecast, but Harden also points out that smaller and more responsive institutions with effective leadership will likely perform best and continue to operate (Briody, 2013; Harden, 2013). In addition, institutions with large student enrollments and operating budgets are often offered excuses by observers and practitioners for ineffective administrative and leadership practices. Large institutions can also be responsive to changing societal and higher education demands if the institutional leadership is selected properly and held accountable for effective strategic decision-making outcomes. A synthesis of the ideas presented in the previous chapters leads to the conclusion that the key to successful supplemental revenue generation is to appoint Revenue Generation Strategies

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institutional leaders who have initiative for broad revenue streams and qualifications to: ∙ seek new endeavors, ∙ communicate with a wide variety of potential new partners for collaboration, and ∙ find professional satisfaction in the creation, development, and oversight of new program development. While the ideas of this type may seem to be at odds with academe’s tradition of shared governance and deliberative consensus building, there also needs to be support for some decisiveness and risk-taking (Stripling, 2014). Efforts by faculty leaders and administrators can be collegial and produce new revenue. Academic communities should not be complacent and should be encouraged with incentives and appropriate rewards that are integrated in institutional organizational cultures and written strategic plans. This monograph examined how additional revenue generation activities, whether they are for academic credit, noncredit, partnerships, joint ventures, branch campuses, auxiliary enterprises, and other endeavors, can support the fundamental purposes and true higher learning, not dilute or diminish it. Derek Bok recently stated that although money is a somewhat perplexing function in higher education, it is clearly indispensable for colleges to endure and advance (Bok, 2013). However, Bok also concurs with the fundamental concept stated throughout this monograph that institutions should critically review current policies that seek to remove practices merely for short-term financial improvement at the expense of compromising important academic values. Higher education is a complex system. Between the macroenvironmental forces, internal administrative improvements available, and the need to look at other institutions to adapt ideas for revenue improvement, it is clear that the broader issue of business complexity is being confronted. The complexity approach to managing is one of fostering, of creating enabling conditions, and of recognizing that excessive control and intervention can be counterproductive (Gharajedaghi, 2006; McElroy, 2003; Mitleton-Kelly, 2003). When enabling conditions permit an organization to explore its space of possibilities, 112

the organization can take risks and try new ideas. Aside from programmatic development and cost-saving approaches to increase net revenue, many of the colleges and universities identified in this monograph are now using modern strategic planning methods such as choosing a differentiation approach to compete successfully. In addition, the analysis and synthesis of effective administration concepts and practices support administrative decentralization. While centralization of some activities is certainly needed for efficiency and proper control, the largely entrepreneurial endeavors examined in this compendium show that the freedom to explore new areas for revenue growth is facilitated better with less micromanagement of highly capable members of higher education communities. Whereas the practical ideas examined here are primarily centered on revenue generation, there is also a broader agenda proposed to reinforce public and private support. Colleges and universities should use every opportunity available to demonstrate the value of supporting organizational strategies and operations with dedicated intellectual inquiry. People who devote their lives and careers to research, teaching, and service, and are passionate about their work can help individuals improve their lives and society at large. A likely benefit will be that the financial challenges can be abated if the ivory tower shows its worth with effective planning and delivery of services. There are many choices to make and constructive opportunities available that can be examples for new revenue generation ideas. Trustees, presidents, administrators, and faculty members should work together to plan effective, distinctive, sustainable holistic systems of income generation that ensure students can receive a sound education, so that higher education institutions can continue to be repositories and creators of new knowledge that are important to the evolution of humanity’s ongoing quest for enlightenment.

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Name Index A Adams, O., 91 Adler, K., 54 Ahmed, A. A., 65 Alfred, R. L., 97, 98 Ali, M. M., 90 Allegrante, J. P., 46 Allen, T. J., 94 Alstete, J. W., 10, 21, 42, 59, 69, 70 Altbach, P. G., 67 Archibald, R. B., 22, 97 Armacost, M.-L. M., 86, 102, 103 Armstrong, L., 92 Auguste, B. G., 104 Auld, M. E., 46

B Ballard, S. L., 9, 10, 86 Barbera, E., 75 Baron, J., 69 Barr, M. J., 4, 80 Barron, J. M., 88 Bartem, R., 91 Basinger, J., 88 Bastedo, M. N., 98 Bates, A. W. T., 70 Baum, S., 23 Bava, D. J., 70, 100 Bekurs, G., 92 Bennett, R. J., 53 Bennett, W. J., 22, 45

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Bess, J. L., 98 Beutell, N., 69 Bhattacharyya, P., 90 Birch, D. A., 46 Bird, C., 66, 68 Blumenstyk, G., 9, 19, 23, 88, 108 Bok, D., 2, 14, 96, 112 Bond, J., 92 Boronico, C., 64 Boronico, J., 64 Bowen, H. R., 26 Bowen, W. G., 69, 70, 73 Bower, B. L., 69 Boyer, R. K., 108 Bozhinova, M., 47 Brant, J. F., 81 Bray, N. J., 105 Breneman, D. W., 12 Brennan, D. C., 70, 100 Bridges, J. G., 81 Briody, B., 9, 10, 111 Brown, A. W., 5, 9, 10, 86 Burnett, J., 101 Buvoltz, K. A., 53

C Cahill, T. P., 88 Caldwell, P., 56 Carey, K., 24, 26 Carlson, A., 45 Carlson, S., 22, 30, 75

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Carnevale, A. P., 44 Carnoy, M., 70 Carr, S., 74 Castano-Munoz, J., 70 Chaffee, E. E., 98, 99, 102, 103 Chatterjee, S. K., 92 Chen, N.-S., 69 Chevalier, A., 94 Christensen, C. M., 26, 107 Clara, M., 75 Clark, R. C., 70 Clements, J. D., 96 Cooper, P., 81 Cope, R. G., 108 Corak, K., 106 Corney, R., 47 Cota, A., 104 Cottrell, R. R., 46 Crellin, M., 45 Crooks, S. M., 69 Cuiller, C., 89 Curry, J. R., 70, 100 Czarnitzki, D., 95

D Dechter, A., 53 Dee, J. R., 98 de la Garza, G. F., 56, 57, 58 Dennis, M., 75 Deresiewicz, W., 45, 108 Di Meglio, F., 36, 82, 88 DiSalvio, P., 43, 45 Doti, J. L., 12 Dotolo, L. G., 60 Dougherty, K. J., 101 Dua, A., 27 Dubeck, L. W., 4

E Earls, A. R., 81 Ebersole, J., 49 Eddy, P. L., 54 Edwards, T. L., 91 Eggins, H., 55 Ehrenberg, R. G., 22 Escofet, A., 70

130

F Fain, P., 9 Feldman, D. H., 22, 97 Ferreira, W. F., 89 Fischer, K., 65 Fitzgerald, C., 47 Flynn, W. J., 40, 44 Fung, Y., 69

G Gamble, J. E., 35, 67, 98 Garcia, I., 70 Geiger, R. L., 24, 25 George-Jackson, C. E., 55 Gharajedaghi, J., 112 Ginsberg, B., 111 Godbey, G. C., 61 Gold, G. G., 56 Goldworthy, J., 89 Gonzalez, A., 53 Gonzalez, J., 44 Grassmuck, K., 88 Green, K. C., 10, 11, 30, 31, 36, 75 Gros, B., 70 Guarino, A. J., 91

H Hall, B. L., 50, 51 Hanna, D. E., 27, 43 Hanson, A. R., 44 Harden, N., 9, 10, 111 Hardy, K. P., 69 Harmon, J. I., 105 Harris, M. R., 56 Harrison, E. F., 7 Heath, C., 7 Heath, D., 7 Heitmann, G., 62, 63 Heller, D. E., 24, 25 Henkel, J., 94, 95 Hensley, P. A., 70, 100 Herbst, S., 108 Hillman, N. W., 22 Hilmer, M. J. J., 53 Hofstadter, R., 2 Horn, M. B., 26, 107

Huisman, J., 67 Hurlbut, S., 19, 20, 89 Hussinger, K., 95 Hutt, C. D., 105

J Jaschik, S., 10, 11, 21, 30, 31, 36 Jayaram, K., 104 Johnstone, D. B., 27 Jones, J. L., 105 Jones, S. M., 101

K Kaganoff, T., 91 Kamenetz, A., 73 Karram, G., 67 Kelderman, E., 91, 108 Kelly, A. P., 26 Kiley, K., 68 King, L. R., 46 Kinshuk, 69 Kirshstein, R. J., 19, 20, 89 Klute, P., 62 Kolowich, S., 74 Konetes, G. D., 74 Kortesoja, S. L., 42 Kosten, L., 100 Kratochvil, D., 67 Krause, P., 70 Kulper, K., 84 Kurlandaender, M., 53 Kurz, K., 67, 68

L Laboissiere, M. C. A., 104 LaFaive, M. D., 100 Lahr, H., 101 Landrum, B. A., 56, 57, 58 Lapovski, L., 12 Layzell, D. T., 101 Leach, K., 105 Lederman, D., 10, 11, 30, 31, 36 Leonard, C., 37, 78, 79, 80, 99, 106 Leslie, L. L., 26 Lewin, R., 64

Revenue Generation Strategies

Licklider, M. M., 89 Liu, Y., 101 Loise, V., 92 Long, B. T., 53 Longbotham, G. J., 53 Lucas, C. J., 1, 2, 13

M Ma, J., 23 Mactaggart, T., 105 Manning, S., 91 Marklein, M. B., 68 Massy, W. F., 12, 42, 107 Mayer, L. J., 100 McClellan, G. S., 4, 80 McClenney, B. N., 99 McElroy, M. W., 112 McIntyrn, C., 105 McMurtie, B., 65 Meadows, J. L., 12 Meisinger, R. J., Jr., 4 Metcalfe, A. S., 12 Meyer, K. A., 69, 70 Meyer, R. E., 70 Milam, J., 38 Mills, J., 83 Milshtein, A., 78, 79 Mintz, S., 108 Mitleton-Kelly, E., 112 Montoliu, J. M. D., 70 Moore, M. G., 69, 89 Mrig, A., 6, 13, 104 Murry, J. W., Jr., 50, 51

N Natow, R. S., 101 Neal, J. G., 100 Neumann, A., 98 Nixon, H. L., 82 Noftsinger, J. B., Jr., 60

O Okubo, S., 92 Olejniczak, A. J., 90 O’Shea, R. P., 94

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P Parkinson Norton, S., 50 Patton, C. V., 15 Peteraf, M. A., 35, 67, 98 Pheatt, L., 101 Pickus, K., 50 Pittman, J. S., 78 Planning, M., 92 Pope, J., 19 Porter, M. V., 105 Powell, F. J., 53 Pratt, T., 66 Pressman, L., 92 Priest, D., 21, 22 Pritchett, C. C., 46 Province, T. P., 26

R Rabling, B. J., 70 Rao, C. P., 65 Razavi, A. R., 70 Reddy, V., 101 Reese, S., 43, 44 Rey, J., 22, 24 Reynolds, G. H., 5 Rhoades, G., 14 Robichaux, R. R., 91 Robinson, R. J., 91 Robinson, T., 79 Roche, F., 94 Roessner, D., 92 Rohrbaugh, M. L., 92 Rose, S. J., 44 Rosenbaum, J. E., 38 Rozhon, T. A., 35 Rudolph, F., 1, 2

S Salisbury, M. H., 62 Samuels, B., 56, 58 Sancho-Vinuesa, T., 70 Sandy, J., 53 Sangra, A., 70 Sanyal, B. C., 27 Satterlee, B., 51 Schneider, C., 95

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Schoen, A., 94, 95 Selingo, J., 25 Shapiro, H., 41 Shirky, C., 74 Sireci, S. G., 47 Skinner, L. B., 46 Slaughter, S., 14, 26 Smith, W., 2 Solan, A. M., 53 Speer, T. L., 39 St. John, E., 21, 22 Staten, M. E., 88 Stearns, P. N., 64 Stevens, A. J., 92 Stoffle, C. J., 89 Strauss, J. C., 70, 100 Strickland, A. J., III, 35, 67, 98 Stripling, J., 2, 112 Strommen-Bakhtiar, A., 70 Stumph, W. J., 77 Sukhatme, U., 34 Sundberg, J. O., 89 Swamidass, P. M., 93

T Taub, A., 46 Taylor, B. J., 26 Tenbergen, K.-G., 52 Thelin, J. R., 1, 3 Thompson, A. A., 35, 67, 98 Toma, J. D., 25, 26 Troop, D., 5 Trow, M., 5 Tuchman, G., 2 Tumanut, S. D., 62 Turlington, B., 61 Twombly, S. B., 62 Tyler, J. E., III, 95, 96

V Vajda, P., 38 Van Der Werf, M., 87 van Pottelsberghe de la Potterie, B., 94, 95 Veblen, T., 56, 110 Vest, C. M., 89

Veysey, L. R., 1, 2, 110 Villano, M., 77

W Wang, M., 108 Ward, J., 105 Warner, D., 37, 78, 79, 80, 99, 106 Washburn, J., 2 Watts, M. M., 69 Wegner, G. R., 12, 42, 107 Wei, C.-W., 69 Weizenbach, L. F., 77 Whalen, E. L., 70, 100 White, B. J., 46

Revenue Generation Strategies

Wilezol, D., 22, 45 Wilkins, S., 67 Willard, L. W., 90 Wood, P. A., 90, 91 Wright, M., 93

X Xing, D., 47

Z Zaback, K., 45 Zemsky, R., 12, 42, 107 Zhang, L., 26 Zwerling, L. S., 38

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Subject Index A AACSB. See Advance Collegiate Schools of Business (AACSB) “Academic Capitalism,” 12 Academic Capitalism and the New Economy, 14 Academic programs, for additional income, 28–76; branch campuses, 66–69; credentialing and certificates programs, 43–48; degree completion programs, 48–53; degree upgrade programs, 54; noncredit academic programs, 38–43; online distance education, 69–76; overiew, 28–37; partnerships, alliances, and joint ventures, 54–62; requirements for, 29; study abroad programs, 62–66; tuition revenue, strategies for, 30 Advance Collegiate Schools of Business (AACSB), 56, 59 AIR. See American Institutes for Research (AIR) Almanac of Higher Education, 15 American Institutes for Research (AIR), 19 Association of University Technology Managers (AUTM), 88, 93 AUTM. See Association of University Technology Managers (AUTM)

B “Baby bust,” 5 Bain and Sterling Partners, 9

134

Bayh–Dole Act, 92 Branch campuses, for additional income, 66–69; administration of, 68–69; location selection, 67 British Open University (OU), 49 Budgets and Financial Management in Higher Education, 80 Business-related practices, 2

C Cal Poly Foundation, 79 Cautionary Tales Strategy Lessons From Struggling Colleges, 10 Certified Health Education Specialist (CHES), 46 CHES. See Certified Health Education Specialist (CHES) Chronicle of Higher Education, 16 Chronicle of Higher Education’s Almanac, 18 Cisco Networking Academy, 45 Credential: definition of, 43 Credentialing and certificates programs, 43–48; in healthcare education, 46–47; licensing of, 47–48; vocational areas of study, 45

D Degree completion programs, for additional income, 48–53; assessment of, 51; at Excelsior College, 49–50; implementation of, 51–52; strategy for, 51

Degree upgrade programs, for additional income, 54 Delta Cost Project, 19

E Educating Global Citizens in Colleges and Universities: Challenges and Opportunities, 64 Elderhostel programs, 41–42, 47, 80, 81 Established income sources, 15–23; nonoperating income, 16; revenue per FTE, 20–21; tuition discounting, 22–23 Excelsior College, 49

F Financial health, of institutions, 11 Ford Motor Company, 56

G Geller Sport, 83 General Equivalency Diploma (GED), 49 Getulio Vargas Foundation, 47 G.I. Bill, 3

H Handbook of Distance Education, 69 Handbook of Practice and Research in Study Abroad: Higher Education and the Quest for Global Citizenship, The, 64 “Higher education bubble,” 5 Higher Education Outlook, 13

I Income Generation Handbook: A Practical Guide for Educational Institutions, 36–37, 78, 106 Income sources. See Revenue sources Indiana University-Purdue University Indianapolis (IUPUI), 34 Insider Higher Ed, 10 Institutional budget officers, 10–11 Integrated Postsecondary Education Data System (IPEDS), 19 International Ladies Garment Workers Union, 56

Revenue Generation Strategies

IPEDS. See Integrated Postsecondary Education Data System (IPEDS) IPEDS Analytics: Delta Cost Project Database, The, 19 IUPUI. See Indiana University-Purdue University Indianapolis (IUPUI)

J JBDCs. See Joint big decision committees (JBDCs) Joint big decision committees (JBDCs), 106 Journal of Continuing Higher Education, 50

K Key performance indicators (KPIs), 21 Key success factors (KSFs), 21

L Laureate International Universities (LIU), 48 Leveraging Resources Through Partnerships, 60

M Market-Smart and Mission-Centered, 107 Massive Open Online Courses (MOOCs), 27, 75 Master Certified Health Education Specialist (MCHES), 46 MCHES. See Master Certified Health Education Specialist (MCHES) MOOCs. See Massive Open Online Courses (MOOCs)

N NACAS. See National Association of College Auxiliary Services (NACAS) NACUBO. See National Association of College and University Business Officers (NACUBO) National Association of College and University Business Officers (NACUBO), 77 National Association of College Auxiliary Services (NACAS), 77–79

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National Center for Education Statistics (NCES), 48 National Center for Education Statistics Report, 18 National Center for Higher Education Measurement Systems (NCHEMS), 49 National Commission for Health Education Credentialing (NCHEC), 46 NCES. See National Center for Education Statistics (NCES) NCHEC. See National Commission for Health Education Credentialing (NCHEC) NCHEMS. See National Center for Higher Education Measurement Systems (NCHEMS) New Directions for Higher Education, 9–10, 60, 86 New Directions for Institutional Research, 108 Nonacademic and auxiliary opportunities, for additional income, 77–96; from consumer products, 87–88; facilities, use of, 80–86; from grants, 89–90; outsourcing, 90–92; overview, 77–80; from patents, 88; technology transfer and, 92–96 Noncredit academic programs, 38–43; Elderhostel programs, 41–42; Road Scholar programs, 41–42 North Central Association Commission on Higher Learning (NCA), 50–51

O Online distance education, for additional income, 69–76; delivery methods, 75–76; lessons from, 71; massive open online courses, 75; revenue generation, 71–72

P Pacific Graduate School of Psychology, 35 Partnerships/alliances/joint ventures, for additional income, 54–62; with business corporations, 55–59; consortia and, 60; international collaboration, 60–62

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Partnerships and Collaborations in Higher Education, 54 Privatization and Public Universities, 21

Q Quality in Distance Education: Focus on On-Line Learning, 69

R Research, International, Service and Experiential (RISE), 34 Responsibility center management (RCM), 99–101 Revenue: cost cutting for, 7–8; academic programs for, 28–76; disruptions in, 23–27; institutional efforts for, 31; need for, 8–15; nonacademic opportunities for, 77–96; nonoperating income, 16; operating cost and, 9; opportunities for, 23–27; per FTE, 20–21; for private four-year institutions, 18; for public four-year institutions, 17; for public two-year institutions, 17; sources of, 4–5; strategic considerations for, 97–109 Revenue sources, 4–5; established, 15–23; financial challenges and, 4–8; overview, 1–8; traditional tuition, 9 Revenues: Where Does the Money Come From?, 19 RISE. See Research, International, Service and Experiential (RISE) Road Scholar programs, 41–42

S School of Continuing and Professional Studies (SCPS), 38–39, 47 SCPS. See School of Continuing and Professional Studies (SCPS) Smart Revenue Generators, 82 Spellings Commission, 55 Strategic planning, 97–109; approaches to, 104–109; budget planning options, 99–104; overview, 97–99 Strengthening Development Institutions, 102

Study Abroad in a New Global Century: Renewing the Promise, Refining the Purpose, 62 Study abroad programs, for additional income, 62–66; impact of, 64–65; revenue sources in, 63; risks of, 65–66 Survey of Distance Learning Programs in Higher Education, The, 71

TTO. See Technology transfer office (TTO)

U Understanding College and University Organization: Theories for Effective Policy and Practice, 98

T

V

Technology transfer office (TTO), 94–96 Trends in College Pricing, 23

Veteran’s Adjustment Act, 3 Virginia Tidewater Consortium, 60

Revenue Generation Strategies

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About the Author Jeffrey W. Alstete is an associate professor of management and business administration in the Hagan School of Business at Iona College, New York, where he teaches on-campus and online distance education courses on business policy and strategy, entrepreneurship, international management, managerial decision making, competitive intelligence, knowledge management, global benchmarking, and other advanced graduate courses. Positions he previously held include associate dean in the Hagan School of Business at Iona College, director of Continuing Education at St. Thomas Aquinas, and assistant dean for graduate programs in the W. Paul Stillman School of Business at Seton Hall University. He established many on-site programs at companies and healthcare centers, set up the first video and online distance education courses at three institutions, and developed new study abroad courses, partnerships with foreign universities, as well as new on-campus noncredit and credit programs to generate additional revenue. Dr. Alstete wrote three previous ASHE Higher Education Reports: Benchmarking in Higher Education: Adapting Best Practices to Improve Quality (Alstete, 1995), Post-Tenure Faculty Development: Building a System of Improvement and Appreciate (Alstete, 2000), and Accreditation Matters: Achieving Academic Recognition and Renewal (Alstete, 2004), as well as College Accreditation: Managing Internal Revitalization and Public Respect (Alstete, 2007a), published by Palgrave Macmillan. In addition, he is an author and a reviewer of journal articles, book reviews, and conference presentations that examine higher education and business issues. He earned his doctorate in higher education administration from Seton Hall University, an MBA and an MS from Iona College, and a BS from St. Thomas Aquinas College. 138

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