Near the beginning of every episode of The WeightList Podcast, Capture Higher Ed’s podcast hosted by Drs. Thom Golden and Brad Weiner, the two data scientists each choose a number related to higher education and then discuss its significance.
During Episode 5, Thom chose the number 43, and its somewhat dire implications.
“That is the percent of colleges and universities that spend more than they can afford,” he says, referring to a 2012 study by the international business-consulting firm, Bain & Company. The report looked at the percent of an institution’s decrease in equity ratio compared to its increase in expense ratio over a five-year period.
“What’s really interesting is that when you drill down to look at elite liberal arts schools — and they identify 34 of them — almost every single one is in the danger zone, according to this analysis,” Thom says. “Eighty-one percent of elite liberal arts colleges, according to this report, are generally spending more than they can afford.
“Obviously, that’s a subjective thing, but I find this to be an interesting conversation starter, or at least an opportunity to look at exactly what we are talking about when we look at institutions that may be on paths that are taking them away from institutional health.”
The five years included in Bain’s report, 2007 to 2012, is significant, Brad points out. The report was attempting to capture the effect of the Great Recession on universities, “when stocks and assets overall went tumbling downward, including stocks and assets that were in (university) investment portfolios and endowments.
“This is particularly compelling because it helps us understand, to some degree, the fact that an enormous amount of institutional assets can lie within the stock market and within places that are extremely susceptible to market shocks.”
Listen to the rest of Thom and Brad’s informal, wide-ranging discussion here. The two go on to talk about how enrollment management, at its core, is a prediction business. They also walk through the primary ways the enrollment prediction industry has missed the mark through antiquated methodology and folk theory.
Pull up a barstool and join the conversation.
Kevin Hyde, Content Writer, Capture Higher Ed