The current environment we are all living in is scary on many fronts. First and foremost is the health of our family, friends, neighbors and co-workers. Second, many of us worry about the security of our jobs as the virus causes epic problems with the economy. With everyone staying at home, much economic activity has come to a standstill. In our particular industry, this means products not being made, installations not happening and worries about how much will be able to resume once this crisis has passed.
In higher education, in particular, this has generated a lot of discussion. A year or so ago, I wrote a blog post about the future of higher education. At that time, many schools were in financial trouble and at risk of closing. In fact, just over a month ago, a study was published, “The College Stress Test,” which indicated that 10% of colleges were at risk of closing. Events over the past six weeks have introduced even more uncertainty into these futures. Largely, every college in the country sent students home and sent most employees home too. Many schools have also decided to refund the remainder of room and board that students never used. Depending on the size of a school, these expenses could range in hundreds of thousands to millions of dollars.
Now is the time when integrators, designers and installers wonder how many of their education clients come back after this. How many clients simply close? How many have money to spend? I thought this would be an excellent time to help these firms think through how this works with colleges and universities.
The biggest differentiator in finances between colleges is whether one is private or public. Most public colleges were never on the brink of closing. They had a varying but relatively stable revenue stream coming from their states. It is fair to think that this is going to change after this virus has run its course. States are going to have difficult choices to make on budgets, as they can not run a deficit. Tax income (of every sort) is going to be drastically lower than the predictions made in December and January as budgets were being developed. The flagship schools will continue to operate, and states are likely to think about focusing their money on those schools. I would expect that many of these schools will also look more deeply at online and blended learning. Those who will be most affected are the smaller, satellite public schools. Certainly, discretionary spending will be severely limited.
If your customers are private institutions, then the worry is not from falling tax revenue, but there are still worries. Here are some things to consider as you think about how best to support these customers. The first factor to consider is whether a school is mainly tuition-driven or can draw a large part of its operating budget from its endowment. Both face risks but different types of risks. Schools with substantial endowments (say over 500 million) typically draw a more significant percentage every year from their endowment to supplement the budget. Considering the hits that endowments have taken from the stock market, these schools may be less willing to take a lot of money out. Additionally, most private donors are going to be giving less in the short term, as they have also experienced significant capital losses. In past recessions, these institutions would turn to layoffs rather than significantly reducing the endowment.
Schools that are tuition-driven face less of a threat from the endowment, because they only take a small amount (if any) to run the operating budget. However, being tuition-driven is a considerable risk right now. Schools are unsure of how admissions funnels will operate over the next few weeks. Will students and families want to stay closer to their homes, and therefore change decisions on which school they will attend? Will international students be willing (or able) to return to the United States after the summer? Even if the virus has run its course by then, and many of the stay-in-place orders are lifted, these schools may be wary of spending money by summer. They need to be prepared if classes resume, and an astonishing number of students don’t return. In these cases, projects that are not already well underway may be put on hold to ensure there is a contingency. Schools may look to their endowments as a rainy day fund, but those funds would be used to keep the school operational, not to start new projects.
If either of these types of schools have contracts with integrators that they can keep, perhaps now is a time that they can get ahead of the game. Classrooms and entire buildings are empty. Is this a good time to get in and remove old equipment and pull new wires? Most of this work could be done by one or two people while maintaining a safe distance from each other. This will set you up for more free time over the summer, and keep your staff working. Some pose the idea that all schools will decide that online learning is the way to go, and immediately begin a transition to having some portion of their programs online. They argue that this will be the force that changes higher education to virtual for good.
I, for one, do not agree with this. Many schools base their value proposition on the on-campus experience. This includes close personal relationships with faculty and staff, along with interpersonal relationships and experiences that can not be duplicated online. So, don’t expect that every school will suddenly need to change every classroom to support this. It is likely that many schools will be thinking about being better prepared for future disruptions, hopefully not as severe as what we are currently experiencing. So, I believe that building classrooms, of all sizes, that allow for people to join remotely will be a standard. That means cameras, mics and recording devices in all classrooms. This way, during any other health emergencies, those who are most at-risk, or sick, can stay out of the classroom and still continue their education.