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Data • Insights • Strategy

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Data • Insights • Strategy

Program Sustainability:Integrating Market and Economic Data

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Introductions

Bob AtkinsCEO

Bob Atkins - Bob is the CEO and founder of Gray Associates. He has over 30 years experience in strategy consulting, including ten years focused on higher education. Bob continues to lead large engagements as well as the firm’s development of new services, including Program Economics and Program Portfolio Strategy.

William F. Massy

William F. Massy - He has been active as a professor, consultant, and university administrator for more than forty years at Stanford University. Dr. Massy earned tenure as a professor in the Graduate School of Business where he also served as Director of the Doctoral Program and Associate Dean. He then moved to Stanford’s central administration as Vice Provost and Dean of Research, Acting Provost, and Vice President for Business and Finance.

Gray AssociatesAll Rights Reserved

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Program Sustainability: An Integrated View

Heathy programs have four strong foundations.

Program Economics

Institutional Mission

Academic Standards

Program Markets

Foundations of Program Sustainability

Traditional Academic Review§ Capacity§ Quality

§ Fit


Maximize Mission Attainment,

subject to:

Market Demand

Program Profitability Thresholds

Not-for-Profit Entities

“Money is a means to an end.”

Integrated Program Evaluation

Looking at profitability does NOT undermine academic values.

Maximize Program

Profitability, subject to:

Market Demand

For-Profit Entities

“Money isn’t everything, it may be

the only thing.”


Integrated Program Evaluation

Universities need to balance Mission and Money.

§ All programs should further the university’s mission, but some need to make money so that others can operate at a loss.

§ These cross-subsidies enable universities to assert their academic values. For-profit entities let the market dominate and thus have no permanent cross-subsidies.

§ Good estimates of the margins for all programs are essential for maximizing mission attainment in a not-for-profit university.


Program Economics

A little background on estimating program margins:§ I’ve been doing research on teaching cost and profitability for decades.

§ It’s only recently that university data systems could support good measurement.

- Improved timetabling and student registration systems

- Software improvements now enable meaningful cost and margin estimates for individual students and courses.

- Then these course-level estimates are aggregated to the program level.

§ Interest in these developments is growing rapidly, but significant first-mover advantages remain available.

§ Bob and Mark will describes Gray’s approach, and how it meshes with their PES market data.


Why Bother?

Improve financial sustainability.

CostEnrollment

+Revenue


Growth

Selecting the right new programs can drive substantial growth.

Actual

Plan

New Programs Launched Ending Enrollment

Data Disguised (Real Results Were Higher)

Ending Enrollment


Cost Reduction

There is room for productivity improvement…

Source: Gray analysis of IPEDS completions

6% 7%

39%

48%45%

18%

30%

7%

0%

10%

20%

30%

40%

50%

60%

Over 99 50 - 99 10 - 49 Less than 10

Percentage of Programs or Completions

Program Size(Number of Completions)

Program Productivity

Programs

Completions

Over 99 50-99 10-49 Less than 10


Cost ReductionA few schools have developed extremely productive program portfolios.§ 52% of Western Governors’ programs have over 99 completions.


Program Economics


Academic Standards

Program Markets


We will start with market analysis and then focus on program economics.



Program Scoring

We suggest using four categories of market data.

StudentDemand

Employment

DegreeFit

CompetitiveIntensity


Program Scoring Rubrics: Student Demand

Scoring rubrics enable an objective evaluation of the market data. Sample Scoring Rubric

Student Demand: Google Search


Program RankingWith data and a rubric, you can score and rank hundreds of IPEDS programs.


Program Scorecard: Medical Assistant

A one-page summary of market data makes program decisions easier.


Program Scorecard: Competition

Competitive information is critical to program decisions.


Program Economics


Academic Standards

ProgramMarkets


We will start with market analysis and then focus on program economics.



1. What Is a Program?

2. How Do I Determine the Economics of Current Programs?

3. How Can My Institution Use the Data to Make Decisions?

Program Economics

Program Definition

So, what is a program?

Academic Program: All courses, including electives, taken by students in a major.


Program Definition

Program Case Study: Nursing


0 100 200 300 400 500 600 700

NUR108

NUR202

NUR203

SPN105

SOC106

MAT150

HIS216

HEA201

HEA120

HEA130

ART130

Student Credit Hours (SCH)

Student Credit Hours (SCH)

Distinct Financial EntitiesPrograms cross departmental lines.

§ Many of the courses that nursing students take are outside the nursing department.§ Most credit hours are within the department.

Non-Departmental Courses

Source: Gray’s Program Economics Project

Illustrative


$64.54

$51.66

$43.66

$133.43

$72.18

$68.44

$42.93

$56.49

$214.67

$131.46

$54.08

$0.00 $50.00 $100.00 $150.00 $200.00 $250.00

NUR108

NUR202

NUR203

SPN105

SOC106

MAT150

HIS216

HEA201

HEA120

HEA130

ART130

Cost Per SCH

Distinct Financial Entities

For nurses, cost per SCH varies widely across departments.

Average Departmental Course Cost per SCH:

$53.29

Average Non-Departmental Course Cost per SCH:

$96.71

Source: Gray’s Program Economics Tool

Illustrative


$271

$202

$202

$174

$174

$174

$174

$174

$380

$380

$380

$0 $100 $200 $300 $400

NUR108

NUR202

NUR203

SPN105

MAT150

HEA201

HEA120

HEA130

SOC106

HIS216

ART130

Revenue Per SCH


For nurses, per course revenue per SCH varies by $200.§ But, the variations average to an 11% difference between courses in and out of department.

Average Departmental Course Revenue:

$251Average Non-Departmental Course Revenue:

$225

Source: Gray’s Program Economics

Illustrative


207

150

158

(41)

40

42

105

117

307

325

337

-$100 $0 $100 $200 $300 $400

NUR108

NUR202

NUR203

SOC106

SPN105

HIS216

HEA201

HEA130

MAT150

ART130

HEA120

Contribution Per SCH


Course margins per SCH vary by $377.§ These variations average out to an 11% difference in- vs out-of-department.

Average Departmental Course Contribution:

$172Average Non-Departmental Course Contribution:

$154

Source: Gray’s Program Economics

Illustrative





Program Economics

Indirect Costs

Direct Shared Costs (e.g. Academic Deans)

Course-Level Input

Direct Variable Economics(e.g., Faculty, Tuition)

Line-Item Input

Department-LevelInput

Program Economics: Methodology

We start with a focus on direct variable economics.§ The intent is to support program decisions.§ Program decisions are unlikely to change fixed costs.


Program Economics: MethodologyAccumulate student revenue and instructor cost per credit hour by course.

-

+

}= Program Cost and Revenue

Tuition-

Institutional Scholarships

Students



Nursing is one of the college’s top 10 programs for variable margin.

Source: Gray’s Program Economics Tool

Illustrative


Economic Scorecard

The Scorecard summarizes and compares results to other programs.§ Metrics per SCH enable apples-to-apples comparisons with other programs.§ The color coding shows the program’s rank vs. other programs at the college. § Metrics by SCH also enable schools to use cost benchmark data from other institutions.


Drill-Downs

Program leaders should track how other departments affect program margins.


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Drill-Downs

They will want to explore how each course influences program margins.


Drill-Downs

Then, they should drill down to instructor productivity.

Instructor ContributionFor Students in the Nursing Program


Indirect Costs

Direct Shared Costs (e.g. Academic Deans)

Course-Level Input

Direct Variable Economics(e.g., Faculty, Tuition)

Line-Item Input

Department-LevelInput


Overhead analysis and allocations are frequently requested.


Overhead AllocatorGray enables flexible overhead allocations, so alternative allocations can be explored.


(Partial Table)

Overhead Allocation Table


Fully-Allocated EconomicsIncluding allocated costs, Nursing falls off the top 10 list.

9/11/18


Fully-Allocated EconomicsNursing indirect costs are in-line with other programs.

9/11/18


Fully-Allocated EconomicsHowever, Nursing’s departmental costs are several times higher than other programs.

9/11/18

Net Margin, after Allocations: -8,606




Program Economics

Integrated Report Cards


Program Portfolio Strategy: Workshop

We recommend broad participation in Program Portfolio Planning Workshops.

Day1 Day2§ Present workshop objectives

§ Summarize approach

§ Share initial scoring outcomes

§ Discuss and refine scoring system

§ Evaluate scored programs

§ Select new programs

§ Review Day 1 outcomes

§ Rank current programs

§ Discuss high- and low-scoring programs

§ Select programs to Stop

§ Select Programs to Grow

§ Wrap-Up

§ Programs to Start § Programs to Stop§ Programs to Grow

Illustrative Workshop Agenda and Outcomes



A heathy portfolio of programs is critical to institutional growth and viability.

Program Portfolio

Program Economics


Academic Standards

Program Markets



Program Portfolio AssessmentMap market, institutional, and economic data to assess portfolio health.

-40%

-20%

0%

20%

40%

-20 -10 0 10 20 30 40

Percent Change in Market Share

Completions 2016-2017

Market AttractivenessPES Scaled Overall Score

Attractive MarketGaining Share

Weak MarketLosing Share

Weak MarketGaining Share

Attractive MarketLosing Share

Contribution per SCH


Program Portfolio AssessmentMap market, institutional, and economic data to assess portfolio health.§ Many of this institution’s programs have below-average contribution in weak markets.

-40%

-20%

0%

20%

40%

-20 -10 0 10 20 30 40










Program Portfolio AssessmentMap market, institutional, and economic data to assess portfolio health.§ Fortunately, its largest programs are contribution-positive in attractive markets.§ However, its largest program is losing share.

-40%

-20%

0%

20%

40%

-20 -10 0 10 20 30 40









What’s Next?

§ Call or email Bob with questions:- [email protected] Phone: 617-366-2836

Have Pete run a demo for you and your team!


integrating market and economic data associates - understandi… · program economics a little...

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