SEVIS With A Smile? Or ‘A Delusion, A Mockery And A Snare’?

Data-driven predictions of future international student enrollments can be very useful for international recruiters, university budgeting and potential investors in higher education.  Recent commentary using Student and Exchange Visitor Information System (SEVIS) data shows how visa data can be characterized in a way that suggests the challenges faced by US higher education are overstated.  But clarity around what this data source includes and where it might exaggerate or diminish trends is vital to avoid misdirection and poor decision making.     

The increasingly user-friendly ‘SEVIS By the Numbers’ web-site provides good access to visa data complete with interactive maps and is a popular source.  It claims it ‘illustrates trends and information on international students studying in the United States’ but it does not disaggregate between those enrolled at universities and those on student visas taking the Optional Practical Training (OPT) extension which allows for post-study work.  Confusing or conflating the two is unhelpful in understanding the implications for the state of US higher education.  

Executive action in 2016 increased the maximum length of employment under OPT for foreign students with STEM degrees to 36 months, which, along with a booming US economy, resulted in a material increase in the number of STEM graduates staying on to work in the US.  While these students hold F-1 visas (and are reported in the SEVIS numbers), they are not tuition-paying students enrolled in a US university.    

To give a sense of materiality of the OPT numbers, the Institute of International Education (IIE) Open Doors Report reports shows that the proportion of OPT students rose to 18.6% of ‘total international students’ in 2017/18 from 12.4% in 2014/15.  When the IIE announced that the ‘number of international students’ increased to reach a new high of 1,094,000 in 2017/18, the growth in OPT numbers masked the reality that students enrolled in full-time study in US universities actually declined year-on-year and were lower than 2015/16.

Source: Institute of International Education, 2018, https://www.iie.org/opendoors

A better guide to the health and future of international student recruitment may be provided by IIE’s data which shows that both undergraduate and postgraduate new enrollments have fallen for two years in a row, and non-degree enrollments for three.  Critically, between 2015/16 and 2017/18 the number of undergraduates and graduates enrolled fell by over 17,000 while the number of non-degree students fell by less than 5,000.  While percentage falls in non-degree students can look high, the number of students is relatively low compared to the main body of academic students.        

Master’s Level Enrollments and Students From India

Thinking of SEVIS data as a proxy for enrollments is particularly distorting at Master’s level and for understanding trends for students from India.  SEVIS suggests that the number of Master’s ‘students’ grew by 27.7% between 2014 and 2017 while IIE data indicates that numbers actually enrolled in universities grew by only 8.4%.  The difference is driven by the 69.1% increase in OPT numbers (83,175) shown in IIE data over the four years.    

Source:
Institute of International Education, 2018, https://www.iie.org/opendoors and SEVIS data from INTO Corporate Blog

Note: The SEVIS data and the IIE Enrollment data is not synchronous.

The Pew Research Centre has reported that students from India are significantly more likely to utilise the OPT opportunity than other international students.  IIE’s breakdown indicates that between 2016/17 and 2017/18 the number of students from India enrolled on Graduate programmes declined by nearly 10,000 while the numbers doing OPT increased by over 18,000.  The increase in numbers doing OPT appears to be slowing which is likely to reflect emerging options around the world and the declining competitiveness of the US in retaining international talent. 

At undergraduate level, which is unaffected by OPT,  IIE and SEVIS both show a small growth in students from India year-on-year to 2017/18 but this should be seen in the context of growth in Canada which had 123,000 students from India in 2017 – 63% more than the year before.  This was largely driven by an increase of 67% (86,900) going into colleges, presumably as a result of the opportunities for progression to university, work and citizenship.  It will be interesting to see how far growth in Indian undergraduates in the US goes when these routes seem more straightforward and available in Canada.

Source:
Institute of International Education, 2018, https://www.iie.org/opendoors

The 1st Baron Denman coined the phrase ‘a delusion, a mockery and a snare’ in a legal context in the 1840s, and imprecise use or understanding of data has a similar potential to lure, deceive and trap the unwary.  No source of information is without flaws and weaknesses but it is also foolhardy to take one source, view or instance as giving definitive guidance. In that respect there is plenty of evidence that competitors are challenging the US, that global student mobility is changing, that demographics are shifting and that technology is disrupting the established order.

Image by Gerd Altmann from Pixabay

BIG QUESTIONS FOR PRIVATE PROVIDERS

The past few months have seen Ardian purchase Study Group, Navitas on course to be taken private and, most recently, news of EC’s North American Higher Education division moving to Study Group.  Between 2010 and 2014 the pathway market was characterized by over a billion dollars of private investment and a dash for growth in university partnerships.  But as global competition, technological disruption and changing demographics bite there are closures, sales and realignment.

As the market becomes more challenging investors have some strategic decisions to make. Recent developments and news coverage gives some grounds for speculation on what that might mean.

Cambridge Education Group/Bridgepoint Capital

In 2013 Bridgepoint Capital paid ‘an enterprise value of UK £185m’ (around $241m) for CEG.  One commentator suggested, “The pathways sector has delivered remarkable growth and profitability over recent years. Strategically the space is exciting..”.  It seems possible that the future will be about excitement in other parts of the portfolio. 

CEG recently confirmed the closure of its ONCampus individual pathway centers at Rochester, Rhode Island, CSU Monterey Bay and the University of North Texas.  The relaunch of ONCampus Boston in fall 2019 and direct recruitment at Illinois Institute of Technology keeps a toehold in US HE.  But with no further ONCampus developments in the UK since 2016 it looks like it has called time on pathways linked to individual universities.    

But the Group has other options and is investing in the CATS College brand (colleges for 14-18 year olds) with the first China centers opening in March 2019.  The two centers are in Shanghai and will provide a path for students to join CATS UK Colleges and other CEG options in the UK.  In the UK the company’s digital delivery arm has also been growing and added Cass Business School and the University of Hull as partners in 2018. 

It seems plausible that CEG is focusing on driving the CATS business and building a growth story around digital while putting pathways into a holding pattern.  

INTO University Partnerships/Leeds Equity Partners

In 2013 Leeds Equity £66m purchase of a 25% stake in INTO valued the business at around £266m.  Six years later the Sunday Times has ‘cautiously, put a £170m price on the operation’ (entry 876, Sunday Times Rich List 2019. Public filings show that in 2018/19 a preference dividend of £15m was paid for the first time, presumably to Leeds. 

INTO added the medium sized, public, Illinois State University and smaller, private institution, Hofstra to its US portfolio in 2018.  But data from Oregon State and Colorado State reflects the tightening of the US market and the possibility that new partnerships may erode the enrollments of existing partners.  INTO hasn’t opened a new UK partner since 2016 and average enrollments at mature partnerships (five years or more) and wholly owned centers shows that overall recruitment in the UK is no greater than 2014/15 levels.      

The company’s joint-venture model was a key differentiators in the early days but has been substantially replicated by a US competitor.  INTO is focused on pathways but has the potential to build business as a recruiter of non-pathway international students for existing or new partners.  If Leeds Equity are looking to move on this could be the moment where the business recapitalizes to buy out their 25% share and perhaps get some headroom to invest in new business opportunities.

Shorelight

Shorelight was six years old in January 2019 and is the only major pathway provider with no interests outside the US.  The portfolio grew in the last twelve months with the additions of  Cleveland State University (March 2019) and Mercer University (October 2018).  Eighteen university partners mean that there are a lot of seats to fill at a tough time for the US market.  

With the squeeze on international enrollment growth in the US, Shorelight probably needs to dominate pathway recruitment to deliver the results expected by partners.  The growth in pathway options and degrees delivered in English around the world has made it a buyers’ market for students and recruitment agents. Any outperformance in recruitment is likely to come at a price and provoke a competitive response. 

Declining markets, increasing costs and over-supply are not easy problems to solve and it may be time to look for new options to spread costs and risks.  Given Shorelight’s recruitment infrastructure and evidence of success with some good universities in the US it could be productive to pitch for a high-quality university in the UK, Europe or Australia.  A big name that doesn’t want to be part of the Kaplan, Study Group, Navitas or INTO portfolio might find a dedicated partner worth a conversation.         

Study Group/Ardian

The purchase of Study Group by Ardian positioned the investor with the ambition to make ‘strategic acquisitions’, and a belief that pathway growth would continue to be ‘double digit’.  It is difficult to see that organic growth in the US will be the main driver of the latter prediction.  But taking on EC’s operations in the US appears to signal an intention to continue to build market share. 

Other recent Study Group signings have been with sub-degree colleges in Canada providing a route to degree level study, post-study work and possibly citizenship.  It may be a smart way of infiltrating a market where universities have seemed relatively resistant to the lure of pathways. In 2017, 41% of international students at post-secondary level, including a 67% increase in those from India, studied in colleges.

Study Group’s business is diversified geographically and has high-school/college options as well as pathways.  The UK/Europe pathway business looks stable and recently announced a new partner in Aberdeen.  In the US the Managing Director has just left and it may be a good moment for strategic review in the context of market conditions. 

Image by Anemone123 from Pixabay

More Pathway Recruitment Indicators

Detailed, consistent and up to date insights into pathway recruitment performance are often difficult to find.  Some US universities give good data at a granular level and I reported on some of these in a recent blog.  The completion of the reporting cycle for INTO’s Joint Ventures and wholly owned centres in the UK gives a comprehensive picture of their enrolments in the 2017/18 financial year.

For the ten entities – eight joint ventures and two wholly owned centres – that have been trading five years, total enrollments bounced back from the low point in 2016/17 but remain short of 2013/14 levels.  This suggests that it’s probably still pretty tough going for the UK pathway market.

Table 1 – Average Enrolments for INTO Centres 2013/14 to 2017/18

Source: Annual Reports

At a detailed level the drivers of growth were Newcastle and City which bounced back after several years of decline and Queen’s.  Long-term partners East Anglia seem to have bottomed out after three years of decline.  Neither Stirling or Gloucestershire, the most recent partners in this group, have got over the 200 student mark after five years.

Table 2 – INTO UK Centres Average Enrolments 2013/14 to 2017/18

Source: LLP Annual Reports

INTO centres split educational oversight between ISI and the Quality Assurance Agency with the former giving specific details on numbers enrolled and the latter being less prescriptive.  While the annual reports noted above are averages across the financial year (August to July) in question, the ISI education oversight into three centres gives deeper insight into the most recent autumn intakes.

The distinction between EFL and FE used in the ISI reports broadly distinguishes between students on English Language only or Academic courses.  Newcastle appears to have a significant number doing both. 

Table 3 – Student Population of three INTO centres – November 2018

Source: ISI Educational Oversight Reports

The other INTO Joint Venture is Newcastle University London which had an inaugural intake in 2015 and offers both pathway and degree courses.  At the time of launch the university indicated that ‘…..in collaboration with INTO, our London campus is expected to grow to 1,200 students’.  Three years in the average numbers for 2017/18 were 381.

Recent UK pathway activity from established providers has largely centred on adding well ranked partners with Study Group, Navitas and Kaplan gaining Aberdeen, Leicester and Essex respectively.  Newer players have generally picked up less well-known names with Oxford International adding Greenwich and QA HE with Southampton Solent.  With the UK Government launching its new strategy for international student recruitment it remains to be seen if the cake will grow for everyone or if the strong will dominate.

NOTE: Table 2 updated 16 June 2019 to include INTO Glasgow Caledonian University 2017/18 enrolment   

US INTERNATIONAL STUDENT ENROLLMENTS – PEER TO PEER AND PATHWAYS

Making sense of trends in US international enrollments presents real challenges due to the diversity among ~4,000 institutions.  Looking at Oregon State University’s self-identified peer group of four other public universities is an opportunity to get under the surface.  It also provides insights as to how private providers offering pathways and direct recruitment support to universities, are contributing to overall numbers and adjusting their programs in an increasingly crowded market.

It’s a small sample over a limited time but it may offer some pointers for universities considering how best to meet their recruitment needs*.  Over a four-year period to fall 2018, one of the two public universities without private provider support was competitive in terms of overall international student enrollment. Where a new peer institution was added to the provider’s portfolio during the period it did better than longer-term partners.   

Some universities have benefited significantly from partnering with a private provider to bring global recruitment expertise to both pathway and direct enrollment.  But some have been less successful and new dynamics are emerging as the sector matures, competition increases and student numbers fall.  Where a private provider services several universities with similar academic and ranking characteristics the potential for internal competition for students is likely to increase. 

For the university this makes the task of selecting a provider more complex and the consideration of tighter commercial terms on target numbers and non-competing partnerships worth close attention.  The lure of having a partner who offers to take all the up-front costs while returning more international students than the university currently has will always be attractive.  But the prospect of signing a long-term contract to become a commodity product in an undifferentiated portfolio is less so.

A MIXED PICTURE IN TOTAL INTERNATINAL ENROLLMENTS AMONGST THE ‘ORANGE PEERS’

Oregon State University (Oregon State) defined four institutions as “Orange Peers” for the purposes of its Strategic Plan . Two, Colorado State University (Colorado State) and Washington State University (Washington State) are, like Oregon State, partnered with INTO University Partnerships.  The others, University of Nebraska (Nebraska) and Oklahoma State University (Oklahoma State) do not have any private-provider pathway relationship.

A working assumptions of most private pathway provider relationships is that the university will benefit from students progressing from the pathway as well as direct applications as the institutions international profile is raised. Providers have also increasingly focused on recruiting students directly to the university i.e. not just through a pathway, with remuneration often coming as a percentage of tuition fees paid by the student. Looking at an institution’s total international enrollments is one way of considering how the partnership is delivering.

The four-year picture in Table 1 broadly reflects the overall slowing in the US since 2015.  However, Washington State had year-over-year growth of 66 students and 46 in 2017 and 2018 respectively, which may reflect the early growth stage of the partnership with INTO which commenced in 2017.  Both Oregon State and Colorado State, long term INTO partners from 2009 and 2012, respectively, saw overall enrollments decline in 2018. 

Nebraska, which has no private-provider support had the strongest growth over the four years, increasing by 283 students or 11.2%, despite a dip between 2017 and 2018. Oklahoma State fared significantly worst with a fall of 236 students. 

The IIE Open Doors report shows that between 2015 and 2017 (the latest comprehensive reporting available) US total international enrollments fell by 0.56%.  All of the ‘Orange Peers’, except Oklahoma State, out-performed on that timescale. It will be interesting to see how 2017 to 2018 enrollments compare against the national trend.

TABLE 1 – ‘Orange Peers’ – Total International Enrollments Fall 2015 to Fall 2018

Source: Institutional Reporting

PATHWAY PROGRAMS REFLECT CHANGING CIRCUMSTANCES

Pathway enrollments help underpin direct recruitment to university programs. As global markets change in terms of major sending countries and the demands of students they need to operate flexibly to maintain relevance. As the number of pathways in the US has grown competition for students has intensified.

In June 2018 Inside Higher Education’s Elizabeth Redden took a deep dive into pathway performance as US international enrollments came under pressure.  She noted, in particular, a steep decline in pathway numbers at Oregon State driven largely by falling numbers of Academic English students.  Fall 2018 data shows that this has continued along with a decline in both Graduate and Undergraduate pathway numbers.

TABLE 2 – INTO Oregon State University Enrollments – Fall 2015 to Fall 2018

Source: Oregon State University Institutional Research

At Colorado State one response to the changing market conditions has been a notable increase in the number of pathway courses and the range of academic disciplines covered.  In fall 2015 six pathway programs secured 152 students, an increase to 14 programs in 2017 drove a short-term increase to 163 enrollments, with numbers falling back to 142 in 2018 despite a further program being added.

Enrollments on the business pathway program have fallen sharply over the period with engineering enrollments also declining in 2018.  New programs in computer information systems, computer science and finance have ameliorated the overall decline.  These shifts demonstrate that traditional recruiting patterns are under considerable pressure and raises some questions over whether emerging courses will reach the same volume of enrollments.     

Table 3 – INTO Colorado State University Enrollments – Fall 2015 to Fall 2018

Source: Institutional Research, Planning and Effectiveness Reporting

At the time of writing it was not possible to find any specific detail about enrollments in the Washington State pathway programmes.

FUTURE DIRECTIONS

US pathway growth continued after new international student enrollment growth peaked in 2016, with around 20 further partnerships by 2019.  The ubiquity of pathways has seen an increasing duplication of academic offering and ranking status within each provider’s network. The recent closure of three of CEG’s pathways operations in the US suggests that some partnerships may begin to look sub-optimal over time and that restructuring is likely to happen in the future. 

In this new world, well-placed universities looking for partnerships hold a great deal of power to dictate commercial terms or to choose to invest in alternative recruitment options.  Locking out competitor institutions, contractually-binding performance criteria and understanding how to exit a failing partnership without penalty should all be considered as part of the commercial terms.  There are still many opportunities for the smartest and most creative to do well.         

*Data provided by universities is seldom wholly consistent and some provide greater granularity than others. Every effort has been made to make fair and consistent comparisons but any authoritative corrections or comments are welcome.

International Education Strategy – Less Haste, Less Speed

The UK Government’s recently launched ‘International Education Strategy: global potential, global growth‘ has received many plaudits.  But those who believe the floodgates will be opened, with growth similar to recent years in Australia and Canada, should consider the compound annual growth rate implied.  Getting from the 460,000 international students enrolled in 2017 to the 600,000 targeted for 2030 only requires a growth of just over 2% each year.  A bit better than the 1.23% compound growth in enrolments from 2014 to 2017 but it’s hardly tearing up any trees.

A joined-up, Government backed strategy is not in itself a bad idea but this one raises lot of questions and is light on answers in key areas.  The 460,000 number used is the aggregate of international fee-paying students (320,000) and current EU-fee paying students (140,000).  It’s not entirely clear if the plan, and its £35bn target in education exports, includes EU students paying full international fees, staying with UK fees or replacing them with others from round the world.

Staying on the financial side, it was only in June 2015 that Jo Johnson, Minister of State for Universities and Science, said, ‘We are committed to increasing education exports from £18 billion in 2012 to £30 billion by 2020.’  One presumes that the 2020 target will be missed if the plan is really only to add a further £5bn by 2030. These things are easy to say and people lose track of the performance as easily as they lose track of the politicians who made them. 

To add to the potential for confusion, the new Strategy lumps in trans-national education and includes ‘…education providers setting up sites overseas, and education technology solutions being sold worldwide.’  Given global demographics, the rise of English-language degree provision in emerging countries and the spread of technology, it will be interesting to see how effort is coordinated between the paths to revenue.     

When people start talking about long-term growth and big numbers I am reminded of the song, ‘The Impossible Dream’ from Man of La Mancha.  Visions of tilting at windmills, living with ‘unbearable sorrow’ and the inevitability of the Spanish Inquisition come to mind.  It is likely to be tough to sustain international student growth over a decade or more and it seems to me that the real need is for more urgent action and targets.     

It’s not as if we haven’t been here before and history does not offer good omens.  In 2013 the Government published a strategy – International education strategy: global growth and prosperity – where the stated ambition to help the sector secure 3.7% enrolment growth from 2011 to 2020.  On that reckoning the graph shown below suggests international student enrolment in 2017 should already be around 550,000 by now rather than 460,000.

Source:
International education strategy: global growth and prosperity 2013 (p.41)

This reflects another problem with long-term strategies.  Those responsible for blowing the trumpets when they are launched are seldom around to answer for the failures or receive the plaudits.  David Willetts MP (now Baron Willetts) was the Minister for Universities and Science launching the 2013 Strategy, but left the Government by 2014. It is difficult to see The Rt Hon Damian Hinds or Dr Liam Fox being around in 2030.

It is also not entirely heartening to see Action 1 of the strategy being the appoint of an International Education Champion.  Perhaps this newly appointed Degree Czar will be able to develop and implement joined up policy which would be a good thing.  But the 2013 Strategy document was also strong on the need for coordination that never quite happened as the Treasury called for growth and the Home Office battened down the hatches on visas.

It might have been better to see the long-term vision broken down into short-term targets. 5.46% growth per year in international enrolments for the first five years seems a good idea.  It will not surprise the observant and mathematically minded readers that this would take the UK to 600,000 enrolments by 2022.

After that a different set of issues would begin to emerge as the global picture and the UK’s own demographics begin to change.  By 2025, according to the ONS, the number of 18-20 years olds in the UK is likely to be back to 2014 levels and will continue to grow rapidly to 2030 which might bring very different pressures on the sector.

The tension between long and short term is very real and I am reminded that John Maynard Keynes said, ‘The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.’  Education is a long-term business but the needs of the sector are both urgent and important.  It would be good to see the Government responses couched in equally urgent terms.

Brexit – University Challenge But Pathway Provider Opportunity?

Last Friday saw a pretty eye-catching announcement by the University of Surrey whose problems appear to demand radical cost-cutting action including offering all staff voluntary redundancy. One highlight was Vice-Chancellor Max Lu’s comment that ‘Some of the main financial challenges include reduced income due to Brexit….’.  If that’s right a number of universities might be even more troubled. 

In 2017/18 the average percentage of EU students (defined as EU domiciled but non-UK) in all degree awarding institutions listed by HESA was 5.94%.  With an EU population of 9.9% Surrey was considerably above the norm but far from alone with Lancaster University and City University at 10.1% and 10.5% respectively. This might go some way to explaining Lancaster’s desire to set up a remote campus in Germany.

Leaving aside relatively narrow, specialist degree awarding institutions, Cranfield with 21.2% EU and University Colleges Birmingham with 20.6%, look to have a lot at stake.  The broadly-based university with greatest exposure seems to be Aberdeen where 19.9% are EU.  If the big brands and specialists are able to overcome any Brexit jitters the next most vulnerable English university looks to be Essex with 12.8% EU.

Table 1: Top 20 Universities for EU Students As A Percentage Of Total Enrollments (excluding  specialist institutions) 2017-18

Of course, the spectre of Brexit may just be the University of Surrey’s way of getting impetus for restructuring.  To be absolutely fair Lu’s comments continue, “… and an ever more competitive student recruitment environment, significantly increasing pension costs and a national review of tuition fee levels.”. That would be true for every university so it is interesting that he adds, “Our university also faces the not inconsiderable impact of a fall in our national league table positions.”

The potential for league tables to create such havoc with a University’s finances is troubling and needs consideration at another time. But the potential for a sharp fall in European Union recruits is certain to be a concern for those institutions with heavy representation and it would bring even sharper competition to the battle for UK and full-fee paying international students.  In that respect the bigger brands have an inbuilt advantage and will be looking to take an even bigger share of the market.

As Brexit plays out it will also be interesting to see if more pathway operators are able to convert university nervousness about recruitment into opportunities for partnership. Navitas seem to have a head start in operating overseas campuses for partners, but QA Higher Education operates UK campuses with full-degree courses for several of its partners, and INTO have been doing the same for Newcastle University in London. It’s an interesting development area for pathway operators attempting to diversify and deepen their services.

SHOPPING FOR IDEAS: HIGH STREET TO HIGHER EDUCATION

Higher education should look to the disruption in retailing and other sectors to develop a roadmap to the future.  While no two sectors are the same, the notion that novel and implementable ideas can come from other alternative disciplines has a good history1.  The parallels between retailing and higher education offer particularly fertile territory for consideration. 

There are, arguably, particular similarities between department stores and universities.  Both offer wide ranges of largely similar products and make claims about their quality, customer experience and real estate to justify premium prices.  Moreover, in recent years both have been driven to special offers, discounting and increased marketing costs in an attempt to secure the volume of customers they need to survive.

Breaking Bad As Demographics, Technology and Globalisation Bite

The heyday of high street and the shopping mall, from the mid to late 20th century, coincided with the ‘massification’ of higher education2.  The demands of the baby boomer generation coupled with consistent c5% annual real GDP growth in developed market economies from 1950 to the early 1970s3 underpinned both.  Changing demographics and the relative decline in government investment has made higher education as vulnerable as retailing to changing market forces.   

In that context, headlines reported a record number of over 7,000 store closures in 20174. While doomsday predictions that “50% of the 4,000 colleges and universities in the U.S. will be bankrupt in 10 to 15 years”5 may be wide of the mark, closures are accelerating.  For universities it may be ominous that the major losers in retailing were department stores which “have been suffering a death by a thousand cuts for years due to poor merchandising and outdated business models”.6

Further broad comparisons between the sectors can be drawn.  Technology is often cited as a key factor in the disruption of retail and higher education, and education is rapidly moving to a point where attendance at a bricks and mortar institution is optional.  But even if technology had not created generations of digital natives who learn in new ways it has placed the power of search and comparison is in their hands. 

Globalisation has also had a marked and growing impact in both sectors with a shift in favour of Asia Pacific over the past ten years7.  China’s improving performance in global university rankings and its plans to be the dominant global centre for international students by 20498 suggest the direction of travel. The traditional distribution of international students from east to west appears to be shifting rapidly and institutions need to develop effective responses.

Finding The Path From Apocalypse To Renaissance

Against these headwinds there are a small number of universities in the world who may have the financial and brand strength to resist these global tides.  Short of a catastrophic scandal, financial mismanagement or a government bent on vandalising its international credibility it is probably safe to assume that the likes of Harvard, Cambridge, and other national or private treasures are secure. 

For the rest there is an urgent need to refine, realign and reinforce what they offer to students.  A germane lesson for them from retailing is that, despite the headlines, overall in 2017 more stores opened than closed and retail sales grew by 4.5% (over $232bn)9.  While the media were coining the phrase ‘retail apocalypse’, smart investors and business operators were moulding their offer to meet the needs of a changing world. 

Retailers have invested significant brain power and cash in trying to find a way through the storm.  Their focus on their value proposition – how they solve customers’ problems at the right price – is a useful tool for focusing on what is important.  And there are a number of themes which universities might consider.

1.            Provide unique and compelling products and experiences

Dreary, derivative and duplicated product lines are not enough in an era where a world of choice is accessible at the touch of a button.  Universities must examine their own “product lines” (degrees and other courses) and determine how much they can be streamlined into areas that are both market sensitive and differentiable from the competition.  While the campus experience is not dead it cannot be taken for granted, and the marketing lessons of experience-driven destinations such as national parks and vacation resorts might provide inspiration.

2.            Online delivery must be world-class

Costco, Walmart, Nordstrom and others have invested heavily in ensuring that their online involvement is well resourced and competitive with the best that Amazon can offer (their success is one reason that Amazon has begun advertising itself in traditional media10).  For most universities the reach and scalability of online is attractive but they will be competing against the rest of the world.  Only the very best quality delivery of market relevant courses with full academic commitment and outstanding user experiences will stand the test of time.

3.            Pace, performance and personalisation  

Retailers have optimized supply chains and utilized technology to ensure that product is always available, personalisation is possible, delivery never disappoints, and repeat business is maximised.  For universities excellence must extend from the first point of contact to the building of alumni networks and lifelong learning.  If a programme of study or administrative process is not competitive, a disciplined university will recognise the problem quickly and adjust it or eliminate it.

4.            One size does not fit all  

Sears declined from being the largest retailer in the US in 1989 to near bankruptcy in 2018, but Dollar General, 7-11, Aldi and O’Reilly Auto are among those opening stores.  Value, convenience and specialisation have given them growth opportunities in the market.  It’s a reasonable reminder that there are millions of students around the world with differing needs and resources.  Universities should actively focus on understanding the market, seek differentiation and develop their niche.

Perhaps the best rallying call from retailing is what Deloitte has termed ‘the great retail bifurcation’11 with growth for ‘price’ and ‘premium’ performers contrasting with ‘balanced’ retailers, who have broadly similar offerings, lagging behind; they suggest that the moment is ripe for a modern renaissance which uproots traditions, institutions and thoughts.  More starkly they comment on the need for ‘new and unique capabilities’ and reflect the degree to which the ‘new requirements differ from the old operating model’.

All told, however, the most significant and radical change needed may be an unravelling of the emotional commitment to delivery and outcomes which remain organised around a model first established in the 11th century.  The large fixed-cost base of buildings and grounds have also come to be seen as more central to the identity of most universities than meeting the needs of their students.  There is a pressing need to focus hard on the needs and expectations of the customer and consider new models and concepts.  Looking outside the sector for inspiration may help.

References

  1. Sometimes the Best Ideas Come from Outside Your Industry, Poetz, Franke and Schreier, Harvard Business Review, November 21, 2014
  2. ‘The United States Country Report: Trends in Higher Education from Massification to Post- Massification’, Gompert, Iannozzi, Shaman and Zemsky, National Center for Postsecondary   Improvement, Stanford, 1997)              
  3. Multinationals and Global Capitalism: From the Nineteenth to the Twenty-first Century, Geoffrey G. Jones, Oxford University Press, 2005).
  4. 2017 just set the all-time record for store closings, CNN Business, October 25, 2017
  5. Quote by Clayton Christensen, from Inside Higher Education, November 21, 2017
  6. Debunking the Retail Apocalypse, Holman and Buzek,  IHL Group, August, 2017
  7. Global Powers of Retailing 2015 Embracing Innovation, Deloitte Touche Tohmatsu Limited, 2015
  8. Carma Elliot OBE, Director China British Council, quoted in The Pie, December 19, 2018
  9. Retail’s Radical Transformation/Real Opportunities Beyond the “Retail Apocalypse” to a Bright Future, Holman and Buzek,  IHL Group, August, 2018
  10. Jeff Bezos used to hate spending money on ads, Eugene Kim, CNBC, February 1, 2019
  11. The Great Retail Bifurcation, Why the retail ‘apocalypse’ is really a renaissance, Deloitte Insights, Deloitte Development LLC, 2018

GOOD NEWS – FOR SOME – IN UK INTERNATIONAL ENROLMENT 2017/18

The latest HESA release showing enrolments in UK institutions for 2017/18 show a welcome increase in international enrolments.  Digging under the surface suggests that the trends of the past five years are getting reinforced.  The big brands are doing well and there are a couple of well organised outliers.

Table 6 of the HESA data allows us to look at total enrolments by individual institution which gives a good sense of who is able to replace students leaving the university with new enrolments as competition increases.  Looking at the total enrolments also gives a better sense of what might be happening to tuition revenue.  The table shows that total international enrolments have gone up by 3.8% from 307,540 to 319,340 – that’s 11,800 students.

Ten institutions absorbed 7,320 additional students with the Russell Group universities taking eight of the ten places. In terms of ‘branding’ the 24 Russell Group universities added 10,230 students overall.  De Montfort continues its remarkable performance in international recruitment and that’s great credit to the focus and discipline of the management team. 

The performance of the University of the Arts is also very strong.  Looking at the Annual Report the university is showing a 19.8% increase in international fee income for the year in question – from £86m to £103m.  It’s a strong and differentiated higher education brand in one of the world’s most culturally vibrant cities and looks to be leveraging those benefits

Table 1 – Top Ten Universities for Increases In Total International Enrolments (Non-EU) 2017/18

This lop-sided distribution of growth inevitably means that some universities did less well.  Those showing the largest losses may all have strategic reasons for reducing international numbers but that seems the least likely explanation.  The universities Sheffield Hallam, Hull, Sunderland and Greenwich were all identified as being in long-term decline in international enrolments in my blog Winning And Losing In Global Recruitment back in April 2018.

Table 2 – Top Ten Universities for Decreases In Total International Enrolments (Non-EU) 2017/18

While international enrolments reflect global competitiveness they should be seen in the context of wider recruitment issues in the sector.  Lower ranked universities are already being squeezed by the bigger and better placed universities when it comes to recruiting home-students.  It’s a painful double-whammy for some institutions as they face into the Augar Review and the Government’s thinking on post-school education.

Universities: ‘A Common Treasury’ For The Knowledge Economy

For several decades UK higher education has been a battleground for short-term thinking, abdication of responsibility and political point scoring.  But Phil Baty of the THE recently that the UK HE sector has been the subject of an unusually intense barrage of bad headlines.  This is often part of the softening up process before a government intervenes with its latest ideologically driven initiatives.

The ‘independent’ trigger may be the Augar Review which is part of the government’s current review of post-18 education.  The Review themes of choice, value for money, access and skills provision offer cover for significant intervention in the sector.  There are many areas where universities do each of these things well but the very notion of autonomous, self-governing institution does not give it an easy time in assembling a coherent, sector-wide response.

More worryingly, the review’s focus on ‘wage returns’ picks a battleground where universities have probably relied too long on distorted ‘average earnings of graduates’ to defend themselves.  Alongside attacks on pay levels of Vice-Chancellors, unconditional admissions and grade inflation, the sector is painted as being self-serving, complacent and out of touch with its student customers or employers’ needs.  It is painful to watch at a moment when the UK needs to defend its reputation for quality higher education against global competition rather than have a firing squad in an inward-facing circle.

In thinking about the future of the sector I was reminded of the ideas of Gerrard Winstanley, the ideological driver of the True Levellers (commonly known as the Diggers) in the late 1640s who saw the land as a ‘common treasury for all’.  Their attempt to implement his ideas of a Utopian society based on common ownership of the land and shared purpose in meeting the needs of all was suppressed by the government of the day.  But in a global knowledge economy it seems to me that universities have a strong claim to be today’s ‘common treasury for all’.

Taking this as my starting point I offer my own version of steps that might help build a better integrated and more stable higher education sector:

1.           An Independent ‘Bank Of Education’ To Oversee Quality, Relevance and Cost

Independent central banks emerged in many developed countries because the economy is too important to place all the levers in the hands of transient governments.  The same is true of education but the sector is also too important to have the rights and needs of students as the only consideration.  The Bank of England’s mission is ‘Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability’ and that is the breadth required by a ‘bank of education’ freed from political interference.            

2.           If One Pays Then Everyone Should Pay

I have always believed that education is a common good and should be free.  If that cannot be the case then it seems illogical to have arbitrary cut off points to begin repaying student loans.  Every graduate should begin, on a sliding scale, to repay their student loan from the moment they begin earning a salary.  It would mean every graduate can say they are giving back – even if it is only pennies – in line with the benefit they receive.  Every graduate gets treated the same with a straight deduction from earned income without external contributions or the ability to pay the debt early. 

3.           The Beneficiaries Of An Educated Workforce Should Pay More And Get Involved

The data on pay suggests that graduates do not always get premium ‘wage returns’ but in principle employers should always benefit from a better educated workforce and the burden of funding should reflect that.  Several writers have noted that the model provided by the Apprenticeship Levy has potential for higher education and the notion of hypothecated funding seems attractive.  But a slogan from the 1700s, no taxation without representation, is a good reminder that employers should also have a right, indeed should be obliged, to support and guide university activities.

4.           A Strategy For UK Education As A Major Economic Asset

Governments around the world, particularly in recent years China, Canada and Australia, have demonstrated that a joined-up approach to higher education can be of significant economic benefit.  Even without UK government help, well-ranked institutions have shown that at both an international and country level that they can monopolise declining or static pools of potential students.  Whether the future is in building global super-brands or allowing weak players to fail a coherent, data-led and output driven, game plan for UK higher education, is important.

5.           Consider Undergraduate Study As A First Job

Young people have lots of reasons for going to university straight from school but it is difficult to understand why their experience should be seen as so removed from those who go straight to employment.  Both have to be disciplined, have to learn, want to enjoy their experience and are looking for a grounding that will allow them to progress.  As traditional undergraduate teaching is altered by blended learning, bite-sized credentials, online delivery, compressed time periods and 24/7 availability there is a moment to see work and study as part of a continuum.  I heard recently that learning ‘is a seventy year job’ – it’s a good way to think about education.     

 6.          Stress Tests and Plans For University Closures

There has been a lot of posturing around the potential for universities to fail but precious little sign that anybody has a plan for the eventuality or a way of understanding the risk level.  There should be absolute clarity around the responsibilities for understanding the potential for failure, managing/reviving a declining university and the way in which its closure or repurposing might be led.  In terms of the ‘common treasury’ there is an associated need to consider the broader interests of the sector and national/local economy by managing unfettered growth from universities unfairly advantaged by brand and financial muscle.

From Deal to Delivery With Pathways

After the champagne has been drunk and lawyers have left the building the respective teams of the pathway provider and the university face ‘operationalising’ the arrangement.  57% of College and University Admissions Directors believe ‘pathways programs will become more important to US higher education in the current environment’ (IHE/Gallup Survey, 2018) so it’s a good moment to consider how that can work.  Here are a few thoughts and things to consider based on experience from both sides of the fence.   

Most deals are driven by senior management who want to meet strategic needs including more students, revenue and diversity.  Work groups, steering boards and workshop sessions are often held in the context of political will from the top down to get a deal done.  But once they believe the international recruitment issue is resolved the top team moves on to other priorities.

The failure of many pathways to deliver the expected results can be traced back to this moment because there is no perfect preparation for the day to day engagement between two culturally different organisations.  Caution, disorientation and lack of empathy quickly become frustration, blame and mistrust.  As Mike Tyson memorably put it, “Everyone has a plan until they get punched in the mouth”.

Personal relationships between key decisionmakers can help and one example will serve. One pathway provider wanted to take over all communication with agents, a plan that was being resisted wholeheartedly within the university.  It became a symbol of resistance in the international office but a sign of naivety and bloody mindedness by the provider. 

Over a couple of Long Island Iced Teas in a Malaysian bar the universities head of international recruitment explained the insecurities, egos and justifications to the provider’s Global Sales Director.  After a pause he simply said, “OK.  You carry on communicating directly.  As long as you promise that we can review in six months and if it isn’t working we try my way.”

It allowed the head of international a ‘victory’ but also the chance to give a clear warning to the internal team that they had to deliver.  Having conceded without rancour the provider was able to leverage goodwill on other issues. A year or so later both the main protagonists agreed that it was never that important an issue in the first place.

But personal relationships are the result of hard work, respect, regular engagement and transparency.  There will always be decisions to make, changes to consider and strong views to manage. Below are a few things that will almost certainly come up in the first year or so and some possible responses.  

  • Entry requirements will need reconsidering.  Most pathway providers will, at some point, say that recruitment or progression is being hindered by unrealistic academic standards.  Every university with a few years of successful recruitment will want to raise grades and then gets surprised when applications drop off. 

Be realistic and conduct ongoing research into what is happening in the market – not just in your country but around the world. Too many universities fail to fully understand international equivalencies or the difference between school systems in other countries.

  • Cost of acquisition is going up and universities should invest. Competition is tough and commission deals are a complex range of standard, special, emergency and wrapped in deals for marketing, trips and exhibition slots.  The suspicion is always that higher costs are simply an excuse to cover poor recruitment planning.

Understand the providers commercial plan for engaging with agents and why they believe it works for your university.  Then keep asking how it is going and what evidence exists – term sheets are relatively easy to get from friendly agents.  Consider the lifetime value of the student to the university and work with the provider to consider that return holistically. 

  • Academics should travel to support recruitment.  Some academics have been global road warriors with great success and some senior management teams spend weeks on the road at key times.  Some try never to leave the university campus because it interferes with their research or they don’t have budget.    

In the battle for students an academic title can make a real difference and overtime the winners will have academics who travel regularly.  Get used to it and build an internal team that is willing to trot the globe and work hard to recruit. Also, make sure there is a budget to support international travel – time in country is never wasted.

  • Admissions times are rarely fast enough.  This usually become a running sore and it needs to be dealt with quickly. Standards should be agreed before the deal is signed but even then the provider will want to move the goalposts.     

Admissions processes are part of the recruitment arms race and sometimes responses are needed very quickly to optimise enrollments.  Work with the provider to make the internal investment case for improved systems, people and processes.  Start from the point that admissions is a bridge not a gate – the objective should be to secure every student who has a reasonable chance of completing their academic programme. 

  • Targets will be missed.  In the heat of deal making the pressure to close is intense and people, on both sides, sometimes get greedy and fearful in equal degree. Too many partnerships then work under a fog of misunderstanding and misinformation about target, stretch target, baseline, quotas etc.  Even worse can be a lack of realism and prompt feedback about changing market conditions.

Start by presuming that first-year recruitment may be well below target (and that it is not necessarily the providers fault).  Make sure university budgets, assuming progressing students, have a reasonable buffer.  Do the work to review second year and third year targets as early as possible in the light of experience.  Understand what can and will change to make ensuing years better.   

  • Universities expect the provider to do it all.  It can seem reasonable to hand the controls to the ‘experts’ and sit back to watch the students roll in.  And there is always a get-out clause or a contractual stick to beat them with if targets are missed.

That is not partnership and universities should want to be involved in anything that involves their reputation.  It’s not just about money because students and staff have a stake in the outcomes.  University staff know their institution better than any external provider ever will – the more generous and helpful they can be the better for everyone.  And providers need to socialise new thinking carefully rather than launching a new plan that is seen as counter-cultural.

  • Senior people and champions will leave.  A partnership deal is often partly the result of a meeting of minds and ambitions.  But it is rare for the original movers and shakers to be as regularly involved after three years.  Incomers will have different understandings and motivations and the glow of ‘mutual benefit’ can be tarnished by competing interests.

Providers need to be alert to changing University personnel and work hard at relationships– not just at senior level but by embedding themselves at several levels.  Taking time to understand new thinking while establishing a common knowledge of history pays off.  Universities need to make sure they are allowing good access and taking time to keep their internal audiences informed.

This list is not intended to be exhaustive and there is plenty more that could be said about building long-term, productive partnerships in student recruitment.  Neither partner should expect to have it all their own way but the search for optimal outcomes should be ceaseless.  Perhaps the best advice is to have ‘the qualities of an old political fighter’ as Boris Yeltsin once ascribed to a colleague – ”patience and flexibility, always searching for intelligent compromise.