Much of the national conversation about financial distress in higher education focuses on individual colleges. But most of today’s students are enrolled in institutions that are part of systems — groups of universities and colleges with a single governance structure. Because of that, the condition of systems reflects the condition of the public sector overall.
To better understand the resilience of systems (and higher education as a whole), I recently analyzed 91 systems, built entirely from public data. Three findings matter most.
- Most systems are drifting the wrong way. Twenty-five systems are operating soundly. Thirty-nine are in some form of distress and 34 of those show weakening enrollment and operating margins at the same time. That pattern is most predictive of structural rather than cyclical decline. The 27 in between look fine on paper, but most are moving toward distress, not away from it.
- Scale does not protect systems. For standalone institutions, size is a reliable hedge; campuses above roughly 20,000 students are far less likely to be at high risk. For systems, the relationship between total enrollment and financial vulnerability is effectively flat. Several of the most distressed systems govern very large portfolios. Systems already have scale. What separates the resilient ones is their ability to turn that scale into coordinated action.
- Capability is the most critical ingredient of resilient systems. Most distressed systems already hold the formal power to rationalize programs, redirect resources and set financial standards. What they lack is the operational capacity to use it. A chancellor without program-level financial data cannot act on authority they’re granted. A board that receives only consolidated statements cannot ask the questions its situation requires. Fragmented administrative platforms show up again and again among high-risk systems and they are among the factors most reliably associated with failed interventions.
That last finding has direct implications for how systems think about technology.
Under financial pressure, the instinct is to treat technology as a cost lever: Consolidate platforms, centralize transactions, bank the savings. Those moves help. But cost-side interventions stabilize a system; they do not reverse its decline.
Enrollment drives the distress in the data. A system that cuts costs flawlessly while enrollment keeps falling has made its contraction more efficient. It has not changed its trajectory.
Timing matters too. Two of the systems with the most mature shared-services operations in the country, including the one I led, remain among the most at-risk. Both built those services under duress. The services softened the blow, but they came too late to change where it landed.
Recovery runs through demand. That means recapturing students lost in transfer between a system's own campuses, bringing stop-outs back, coordinating enrollment instead of letting campuses compete for the same students and aligning credentials to what the regional labor market needs. None of that is possible without the same infrastructure the cost side depends on. You cannot coordinate enrollment across campuses that count students differently. You cannot recapture transfer students whose records do not follow them or rationalize a portfolio without program-level margins you can compare.
Systems, in other words, do not face a choice between cutting costs and rebuilding demand. They face a single infrastructure investment that underpins both. Systems that already run a common administrative platform have built roughly two and a half times as many shared services as those that do not.
For system CIOs and the leaders they report to, that suggests three tests for any technology decision:
- Does the technology produce data that means the same thing at every campus?
- Does it let a process run once instead of being rebuilt at every institution?
- Does it reach student-side functions like transfer, cross-registration, program alignment or only the back office?
A fourth test follows from the finances: Can each campus see value on its own timeline or does value wait on a multi-year, systemwide re-platform that most distressed systems cannot fund?
The technology will not solve a system's problems. It will unlock the capabilities that can. The systems that should be building those capabilities now are the ones not yet in distress, because by the time the crisis arrives, it is too late to start.
For a deeper look at the findings and what they mean for higher education leaders, download the full report, Risk and Resiliency in U.S. University and College Systems.
