TLDR:

Academic programs, as Professor Massy states in his book “Resource Management for Colleges and Universities”, present the institution’s face to the educational marketplace.  Provosts and Deans have to consider a wide range of degree and other programs at their institutions or schools and whether they should expand or contract student admissions targets. Sizing programs is a key element of university steering.  The conversations focus on mission, but they also need to consider revenues, costs, margins, market performance, teaching methods and delivered quality.  Many programs persist beyond what should have been their sell-by dates. In one dataset, for example, a daunting 48 percent of programs turned out ten or fewer graduates per year and collectively accounted for only 7 percent of all degrees. Bob Zemsky puts the matter succinctly ‘ We’ll give students what they want. Most colleges can’t afford to do so without understanding why they can’t'”

How often do you perform deep financial analysis of your programs and courses? Things are changing quite rapidly now, so this analysis needs to be performed at least annually for every program and course, some of our institutions are even looking at moving to semester analysis.

After reviewing the actual usage data of all models across all universities, we discovered the number one use of the model, by far, was Academic Program Review. The following is extracted from a white paper co-written with Professor Bill Massy of the importance of regular detailed analysis of Academic Programs financials.

Traditional reviews look at a program’s curricular structure, the institution’s capacity (in terms of faculty, library resources, infrastructure, etc.) to deliver high-quality education in the area, student demand, and in some cases, the delivered quality of teaching.  Typically, these types of reviews have not examined a program’s operational detail or economic factors like revenue, cost, and margin, despite the fact that these are important aspects of performance. These types of reviews could typically occur every 3-5 years. Things are changing so much nowadays that this timeframe is no longer viable for detailed financial analysis. But with the Pilbara Insights model this type of detailed financial analysis can be undertaken every year and for every Academic Program! Some of our universities are even considering every semester.

Step 1 is to examine the connections between a program and the courses that underpin it. This can be achieved with a simple dashboard that defines the linkages between courses and programs.  Users can click on a course and see the program(s) that the students undertaking that course are registered against, and, more importantly, the revenue, expense and margin of both the course and the overall program(s) as well.

Alternatively, users can click on a program and see the courses that the students in that particular program are undertaking—and, again, the revenue, expense and margin of each course and the overall program.

So, what can program reviewers do with this new information? For one thing, they can see yearly and trend data on every program’s cost, revenue, and margin, both in total and on a per-credit hour basis (or per EFTSL in Australia). Programs, not courses, represent the university’s face to the market. Without the explicit course-to-program linkages described above, there is a disconnect between data for the “production” side of the institution and data about the marketplace. Cross-referencing the two kinds of data should be a major objective in program review.

The linkages also permit reviewers to analyze the operational and economic detail available at the course level. For example, which courses are the most expensive, and which have the highest or lowest margins? What are the class sizes and teacher profiles, and what delivery methods are used? All this is based on the courses actually taken by students in each program, not on catalogue descriptions that include less-than-precise roadmaps about requirements and electives. For example, by looking at how the curriculum works in practice one can see where particular courses (including electives as well as requirements) and costs that may be disproportionately to their value for the particular degree being studied.

Finally, one can begin to identify courses that present bottlenecks to students’ progress toward their degrees. For example, looking at so-called WFD (withdrawal or a grade of F or D) can signal problems that reviewers might want to look into. The same is true for data on which courses are oversubscribed in particular semesters and locations. The model can easily include such variables if the institution’s data system records them, and thinking about benefits such as the above can provide the motivation needed to maintain the records.

Course Quadrant Analysis

Returning our attention to the low enrollment courses that are running at a loss in the plot below, the red dots indicate the same course but taught in three different locations or sessions.  The circled course may be taught at a new campus for the first time, or taught overseas, or may be required to allow students to fast track their degree by being taught in the summer.  Hence there could be legitimate reasons to retain this loss-making instance, especially as the course as a whole is doing well.  Conversely, it could be an instance that should be considered for teach-out whilst retaining the other two high-load instances of that course.

The course is an integral part of a program:

Low enrollment courses are frequently highly specialized third-year or fourth-year courses that form a key component of a program, so it does not pay to review any course in isolation.  For example, a course may be highlighted as being low enrollment and making a loss:

But when put in perspective against the program it is supporting, the program as a whole looks very healthy (note that this program is only receiving 40% (or 0.3 out of 0.75 EFTSL[1] / enrolments) of the course):

[1] EFTSL – Equivalent Full-Time Student Load

So while an individual course may come under scrutiny it is essential to understand its role in the programs being offered, and what the health of the programs are in their entirety.

Are the low enrolment courses actually making a loss?

Just because a course has low student numbers it doesn’t necessarily mean it is running at a loss as shown in the table below.  The delivery methods being used can have a high impact on the cost base of these courses.  The types of students enrolled will also have a direct impact on the revenue, i.e. domestic vs international students.  Courses with low student numbers can be profitable, so it doesn’t pay to just draw a line in the sand and blindly assume that all small enrollment courses aren’t contributing to the university’s bottom line.

In the latest 2024 IHE Chief Academic Officers Report 82% say that financial concerns are a big issue when launching new academic programs and the majority don’t think new revenue will be forthcoming – so addressing these financial concerns within the existing financials of the organization is exactly what these two must-have reports can help with. Particularly since only 35% – 42% think they should or will reduce academic programs – cutting programs requires detailed analysis because cutting programs may reduce SOME of the cost, but it will remove ALL of the revenue. Some of these Programs may be able to be saved if we dig into the underlying course financials and look at things like redundant delivery (multiple times, locations), breakeven analysis, whether they are covering direct costs only or direct cost and some/all overhead etc.