Trusteeship - March/April 2021 - 60

A QUESTION FOR PAUL N. FRIGA, PhD

How much has COVID-19
cost higher education?
Paul N. Friga is a clinical associate professor of strategy at
the Kenan-Flagler Business School at the University of North
Carolina at Chapel Hill. He also cofounded ABC Insights,
a consortium of universities working to become more
efficient and effective, which was acquired by HelioCampus
this year. Friga will be leading the new practice area of AGB,
the strategic transformation of public higher education.

How much has COVID-19 cost U.S.
higher education institutions?

Can you explain your research
methodology?

The financial impact of COVID-19 on
U.S. higher education has been devastating.
In a recently completed research study, I
estimated the potential damage to be $183
billion over fiscal years, academic fiscal
years, 2020 and 2021. Due to decreased revenue of 14 percent on average per university
(lower enrollments, lower tuitions, increased
discounting, lower auxiliary revenues on
campus, lower room and board, lower athletics, lower state and local funding, etc.)
and increased expenses due to safety protocols of just over 25 percent of lost revenues,
such as testing, increased technologies, and
operational adjustments on campus.

Our research approach sought to go
beyond surveys; we conducted an extensive review of publicly announced budget
deficits and hits to revenue on a university-by-university basis. We focused on
the top 400 U.S. News and World Report's
universities and the top 100 liberal arts
colleges and found data for 107 of those
institutions and analyzed and found averages and multiplied them times the macro
spending in U.S. higher ed.

ASK THE EXPERT

The Urgency of Public
Higher Education
Transformation
MARCH 23, 2021
Join Paul Friga, an expert in higher education strategy and the leader of AGB
Consulting's practice area: Strategic
Transformation of Public Higher Education, for this interactive discussion and
dialogue about how much the higher
education sector has lost due to COVID,
what institutions are doing to deal with
budget deficits, and how to position
themselves for long-term success. See
www.agb.org/asktheexpert.

60 TRUSTEESHIP MAR. APR. 2021

What strategies can colleges and
universities take to mitigate costs
or plan for the future in this difficult
environment?
Not doing anything and hoping that
this will blow over is the biggest mistake a
university could make. The vast majority
of institutions have made significant shortterm changes that may have been unheard
of in years past. Those changes include
hiring freezes across the board, leadership
pay cuts (especially leadership), furloughs,
layoffs, frozen capital projects, and extreme
control involving cost containment. That
has helped mitigate the short-term resource
losses, but it can put a university at risk
without strategic reinvestment at the same
time. The analogy is this: we've had trees
that have gone overgrown with branches.
So, the key is to avoid across-the-board cuts
and strategically cut the right branches and
simultaneously add more fertilizer and water

and nutrients for the tree to grow healthier.
So, the more difficult changes that some
institutions are making that more need to be
addressing include streamlining administrative services to avoid redundancies in units
within a campus and campuses within a system-particularly in areas such as IT, HR,
and finance. Another critical area to investigate for systematic long-term change would
be academic spend, both rightsizing faculty
to match current levels of enrollment as well
as examining faculty productivity for topics
such as research output, teaching loads, and
release time. The last piece to strategically
handle COVID-19 but position your university for the long-term, is to invest in areas
of growth, such as new research areas that
are in high demand, new programs that are
more attractive to students and employers,
more online educational offerings in select
areas, and highly productive faculty who can
help universities deliver on their mission.

How can boards help navigate
decisions regarding costs and their
institutions' financial model to
ensure they remain financially viable
and thrive in the future?
Boards are the most critical stakeholder
group in the transformation of higher education. This is a time for leadership that is often
inherent in the collective experiences of
board members, but must be applied to help
universities navigate uncharted territory. For
example, new priorities have surfaced that
are typically uncomfortable and difficult for
some presidents and cabinets to address. In
particular, boards should shift their priorities
to strategic resource allocations that include
significant cuts in unproductive areas and
reinvestment in new areas and in highly
productive people. Number two is they
should consider major new initiatives such
as mergers, affiliations, and even closures.
Third, they should increase demands for
accountability and assist the cabinet in setting strategic and financial dashboards with
tangible goals for transformation.
-Elena Loveland

PHOTO COURTESY PAUL N. FRIGA

http://www.agb.org/asktheexpert

Trusteeship - March/April 2021

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