By Rick Beyer and David Clinefelter
Originally published in the September/October 2014 issue of Trusteeship magazine.
Board members have many responsibilities, from being the guardians of their institution’s mission to acting as fiduciaries of an evolving economic model. The rapid and continuing burgeoning of online education calls for boards to fulfill such responsibilities in new ways. A vast sea of innovation is occurring outside of our campus walls, and growing trends are starting to shape a dramatically different landscape for colleges.
A decade ago, the concept of online learning was new to higher education. Today, more than 1,000 colleges have some type of online programming. For a few colleges, such programs have provided a much-needed economic boost, while others have seen only modest rewards. Why do some institutions flourish with online programming, while others flounder? And what of the third group, that sits on the sidelines?
One of us, Rick Beyer, has an unusual combination of experience in higher education and business; he’s been a college president, board chair, technology CEO, and senior operating executive of a $1 billion public company. The other, David Clinefelter, has been a college president, provost, and chief academic officer at both nonprofit and for-profit colleges and universities. Together, we have learned a lot about online education and how it influences both governance and administrative issues at various types of higher education institutions.
We have explored these issues, in a Q and A format, with Rick interviewing David. We have also shared our individual reflections, covering how board members can support institutions in their quest to implement online learning and looking at questions administrators need to ask (and answer) when considering online programs. Together, these perspectives may provide you with concrete, actionable items that both your board and administration can use to make online learning a success at your institution.
Rick Beyer: Dave, you have vast experience in the field of online learning. Today, for example, you are chief academic officer at Learning House Inc., which partners with more than 100 colleges and universities to offer online degree programs. What are the characteristics of colleges and universities with successful online programs?
David Clinefelter: Institutions with successful online programs have several characteristics in common. First, the president and chief academic officer (CAO) are fully supportive and actively promote the strategy of online learning. It’s very helpful if the other members of the senior leadership team are also champions, but the president and CAO are essential. Developing successful online programs requires a number of changes in processes, procedures, and policies as well as considerable resources, so resistance is inevitable. Almost every department in the institution has to make changes and some will drag their feet. The unified effort of the president and CAO can overcome that resistance. Having the support of the board has also proved to be vital to success.
A second characteristic is high aspirations for the online programs. Institutions with leaders who want to “test the water” or “try it out” typically aren’t successful. Rather than hire new staff, they try to make the change by adding this responsibility to the workload of existing staff members. They take a short-term view, looking for immediate results and focusing on expenses rather than investments. Unless administrative leaders and trustees see high potential and have ambitious goals, they don’t make the commitment necessary to implement this level of change. Board members play an important role in setting ambitious yet realistic goals. Online programs aren’t a panacea that will solve all institutional problems, but they can be a vehicle to grow the institution and make it more responsive to consumers.
A culture of innovation is another characteristic of these institutions. They have tried new programs and services in the past and are open to doing things differently. And when a culture of innovation exists, it can usually be traced back to a supportive board of trustees. Also, innovative institutions often have a track record of serving adult students. Eighty percent of online students are nontraditional, i.e., over the age of 24. Institutions that have already developed programs and schedules for nontraditional students and have experience dealing with them have a much better chance of success when moving online.
Concordia University in St. Paul, Minn., exemplifies these successful characteristics. In 2011, a new president appointed a former faculty member as senior vice president and chief operating officer. Along with the vice president for academic affairs, they developed a six-part strategy to grow the university. One part of the strategy was “Fostering an Entrepreneurial Culture.” Programs in high-demand fields were added for a total of 35 online programs. Many were offered initially as fully online programs, and then moved to a blended format with some on-the-ground classes—the reverse of the process at most universities. Another innovation was to significantly lower tuition and the discount rate simultaneously. The fall 2006 enrollment was 2,046. By spring 2013 it was 3,015, and the (ambitious but realistic) goal for 2018 is 5,000.
Finally, successful institutions are able to execute effectively. Online students are demanding. They comparison shop. They are motivated to earn their degrees as quickly as possible. The majority complete their search and enroll in less than eight weeks. They have a strong preference for academic terms that are eight weeks or less. Most have previous credits, and they won’t enroll until they know how many transfer credits they will receive.
To successfully serve these students, every department needs to operate efficiently and effectively. Enrollment counselors must respond to inquiries within hours, not days. The registrar’s office must request transcripts on behalf of prospective students and complete transfer reviews and degree audits within a few days. The financial-aid office must help students complete FAFSA (Free Application for Federal Student Aid) forms and package them rapidly. Faculty members must participate regularly in discussion forums and grade assignments in a timely manner—days, not weeks. The list goes on and on. Successful online providers develop the procedures and processes to provide this level of service, and then they measure their performance to drive improvement.
RB: What personnel are needed to launch and run successful online programs?
DC: The key individual is an academically qualified leader with business acumen at the level of associate provost or dean. This person needs to work with the senior academic leaders to develop programs and policies. He or she also should know how to analyze markets to develop an appropriate array of programs, as well as how to use metrics to track and improve performance.
The next crucial players are instructional designers. Faculty members need help developing online courses. They typically don’t know the technology or the andragogy that is appropriate for online courses. Instructional designers do. When paired with faculty, they save time and improve course quality. Online and classroom courses may have the same student outcomes, but they are very different in organization, learning activities, and materials.
Along with instructional designers come enrollment counselors. It requires a different skill set to recruit an online student using only the telephone compared to meeting prospective students at college fairs and giving campus tours. In addition to excellent telephone skills, online enrollment counselors also need to be able to use technology to keep track of contacts.
Success coaches or academic advisors are needed to assist students as they progress through their classes. These individuals are the primary point of contact between the student and the institution. They provide much of the information and services needed by students who can’t come to campus. One advisor or coach is needed for approximately every 250 students.
Finally, a marketing expert is needed who can use all forms of media to reach prospective students. The marketing plan for online students differs from marketing that targets traditional students; it requires a dedicated leader. Southeastern University, for example, has used advanced social-media marketing to grow online enrollments. It has developed a robust online campus site that is integrated with the “.edu” site, resulting in more than 20,000 likes on Facebook. A recent social-media advertising campaign generated 1,125 Facebook likes and 23 new leads in nine days.
RB: What are the financial implications for online programs?
DC: These programs can generate substantial net revenue. For example, a 30-credit master’s degree with tuition of $500 for each credit will generate $15,000 per student. If the program takes two years to complete and 100 people graduate each year, the annual revenue is $1.5 million. Operational expenses may be considerably less, especially if some of the expenses are spread across multiple programs.
That simple formula looks good, but consider what is required to make this happen. The people listed above—an administrator, instructional designers, enrollment counselors, success coaches, and marketing experts—must be hired. It is a good rule of thumb that, in addition to the marketing staff, it will cost $2,000 per enrollee in marketing expenses. In addition to those personnel and marketing expenses, most colleges need to invest in technology upgrades and systems.
A difficulty for many institutions is that a lot of the expenses for personnel, marketing, and technology are incurred before any revenue is generated. Marketing should begin six months before the program launches. Courses have to be developed (a four-month to six-month process), and enrollment counselors must be in place as students begin to enroll. The program will have a healthy margin when an appropriate critical mass of students is graduating each year, but it may take several years of gradual increases to reach that number, and, in those early years, the program will require continued investment. From a board perspective, it is important to understand the total financial investment required to achieve appropriate aspirations.
Considerable capital is necessary to develop, launch, and operate online programs. Institutions can obtain this capital in several ways: by reducing other operations, taking money from reserves, borrowing, or partnering with a vendor.
In addition to capital, a vendor may also provide some of the personnel or expertise listed above. Outsourcing online operations has pros and cons, and the decision requires careful research and thoughtful analysis. A good resource is the best-practice checklist for choosing and working with third-party providers published by the Western Interstate Commission for Higher Education (WICHE) Cooperative for Educational Technologies (WCET).
There are two other financial considerations. First, it is helpful to account for revenue and expenses of the online programs. In a recent survey by the American Association of State Colleges and Universities, 41 percent of public chief academic officers and 32 percent of those at private institutions reported being unable to calculate the revenue from online programs, so it is difficult to know if they are successful. In order to accurately track revenue, the student-information system has to identify students in online classes, and the accounting system has to be set up to segregate those funds. When online enrollment is small, it may not seem worth the effort to take such steps.
A second consideration is how to budget for online programs. A few institutions use an overhead-cost-recovery method in which direct expenses are recovered and then the balance is allocated to the general fund. The majority of institutions, however, deposit all of the revenue in the general fund and then allocate funds through the normal budgeting process.
This latter method can starve the online programs and limit their effectiveness. From a governance perspective, budgeting may require a new board committee structure to address important elements of online programming.
RB: What are the barriers facing institutions?
DC: The two most significant barriers to developing online programs are faculty resistance and inflexible governance systems.
Teaching online differs significantly from classroom teaching. Effective online teaching requires more frequent interactions with students and more feedback from the faculty member. At a minimum, lectures are replaced by online discussion forums, but faculty members who are effective lecturers may not be good at leading discussion forums, and vice versa. Consequently, many faculty members may be uncomfortable teaching online and resist learning the skills or taking the necessary time to design their courses for online delivery.
To overcome this barrier, academic leaders should focus on educating the faculty by providing workshops and classes, as well as assistance in the form of mentors and instructional designers. They also should provide a variety of incentives, encouragement, and recognition. Some may even use online teaching experience as a requirement in the hiring process. For example, Bellevue University, an early adopter, began online programs in 1998. Many programs are offered both online and on the campus in Nevada. At one point, faculty members were required to teach at least one online course each term. The popularity of online classes has grown so much that faculty members now are each required to teach some on-campus classes.
Inflexible governance structures manifest themselves in several ways. Most important is the approval process for opening or closing programs. The online market changes faster than the traditional higher education market, so the leaders of online programs will be more effective if they can make changes in a timely manner. It is advantageous if those responsible for the online programs have the authority to add or close programs and make non-curricular decisions such as term length. Also, from a governance perspective, it is important for the board to set policy and criteria for opening and closing programs so bottlenecks aren’t created and administrators can respond quickly to consumer needs.
RB: What are the most successful strategies for attracting students?
DC: When selecting a college or university to attend online, studies show that the top concerns for students are reputation and price. A strong majority of online students choose a college or university within 100 miles of where they live because an institution’s reputation tends to be strongest near the campus. Successful institutions promote their reputation using a combination of student and alumni testimonials and by publicizing their accomplishments.
Institutions also need to set competitive prices. As more colleges and universities offer online programs, students have expanded their search area, especially at the graduate level. Students are price-conscious, although the majority report that they don’t select the least-expensive option. Institutions with stronger reputations can charge more, but increasing competition will put pressure on price.
Program availability is also a factor in attracting students. Business is by far the most popular program, and would-be students have many options. More-specialized fields—real estate, agronomy, audiology, or interior design, for example—are offered by only a few institutions that, as a result, may charge higher prices. Leaders of successful online programs will emphasize their reputation, price competitively, and offer a mix of in-demand programs.
Online programming is a great opportunity for those institutions that can plan and execute effectively.
Higher education is now in the digital age. Choosing the right path for this journey is a strategic decision that must involve both the administration and the board. Board members must be aware of the changing environment and become more knowledgeable of the trends shaping the landscape of higher education, but they should not develop the solutions. Rather, they can help shape the conversation as well as provide oversight regarding online-program aspirations.
Prosperity in the digital age requires clear thinking and leadership. Key ingredients for success include elements of policy, governance, human-resource talent, and financial investment. For those institutions with the financial resources and leadership, their pathway to success will be their ability to execute their plans. For boards and administrators, aligning vision and goals is a great start toward prosperity.