CCCU PRESIDENT’S CONFERENCEStructuring Tough Choices in Tight Economy Times: JBU’s Strategic Planning to Sustain Mission in Challenging Economic TimesDr. Chip Pollard, John Brown University

January 28, 2011

Informing Strategic Choices• Different choices for different institutions• Sustainability of traditional undergraduate “business model” is

under pressure▫ Demographic trends▫ Pricing/discount trends ▫ Marketing/communications trends▫ Fundraising potential

• Framing Strategic Choices• Leading the Institution

30.8% and above

24.4% - 30.7%

17.1% - 24.3%

25.3%

29.6%

27.1%

24.7%

24%

25.1%

21.9%

35.6%25%

23.6%

28.1%

29.1%

31.5%

29.6%

27.1%

25.1%

22%

26.9%

22.2%

30.7%

27.5%

29.9%

24.3%

25.7%

18.8%

26.1%

19.4%

31.9%

20.3%

26.3%

22.9%

24.7%

24.1%

19.7%33.7%

22.9%

25.4%

23.7%

25.8%

17.1%

Percent of Adults With a Bachelor’s or Higher Degree, 2008

27.3%

29.1%

32.1%33.3%

38.1%

30%

34.4%27.5%

35.2%

48.2%

35.6%

Source: U.S. Census Bureau, 2008 American Community Survey (Table R1502) 1-Year Estimates

Market for Advance Program

30.8 % and above

24.4 % - 30.7%

17.1%-24.3%

30% or more

15% - 29%

0% - 14%

34%

7%

30%

30%

9%

52%

25%

15%

18%

101%

25%

32%32%

15%

25%

24%

20%

24%

11%

6%

43%

14%

45%

15%

35%

26%

34%

19%

22%

23%

23%

21%

19%

53%33%

30%

21%

29%

37%

31%

Change in Undergraduate Enrollment, 1997-2007

8%

7%

16%11%9%15%

22%

12%

40%

80%

21%

Source: Center for the Study of Education Policy, Illinois State University,found in The Chronicle of Higher Education, August 28, 2009, Vol. 56 No. 1 Almanac Issue 2009-10

Market for Traditional Undergraduate

7% - 26%

0% - 6%

-32% - -1%

17%

-4%

-8%

-1%

0% 0%

24%

26%

-1%

4%

16%

1%

-1%

-2%

19%

17%

-5%

-2%

6%

18%

-6%

-1%

-3%

16%

1%

5%0%

13%-2%

-10%

-18%

-11%

-25%

-8%

-14%

-10%

-3%

15%

-10%

-8%

Projected Change in the Number of High-School Graduates 2009-10 to 2019-20

-9%

-6%

-23%-9%-10%-13%

-3%

+6%

-8%

-32%

-11%

Source: Western Interstate Commission for Higher Education, found in The Chronicle of Higher Education, August 28, 2009, Vol. 56 No. 1 Almanac Issue 2009-10

Market for Traditional Undergraduate

Demographics and Race/Ethnicity

Market for Traditional Undergraduate

Conclusions about Demographics• Growth rates for traditional undergraduates are likely to be much more limited than previous ten years

• JBU Response: strategic plan based on conservative growth projections and innovation depends on funding other than growth (endowment)

•Location matters – most students are within 300 miles of home

• JBU Response: focus recruitment efforts in six state radius

•Much of the growth in our region will be North American Hispanic students. How well are we prepared to recruit and educate those students?

• JBU Response: set up Hispanic task force to reach out to local churches and pastors and to identify and overcome barriers both externally and internally to recruitment of Hispanic faculty, staff and students

Price Trends: Parents’ perception of maximum affordable annual out of pocket expense for college

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (est.)

Actual Discount Rate 28.4 30.1 30.6 30.6 31.3 30.1 30.5 30.4 30.6 32.6 35.2

Budgeted Discount Rate 31 31 31 31 31 31 31 31 30 31 32

National Private Discount % 32.3 32.8 33.3 33.7 35.5 36.3 37.7 38.2 39.1 41 NaN

CCCU Average Discount % 25.1 26 26.6 27.2 26.5 28.1 28.6 30.9 31.5 34 NaN

24

26

28

30

32

34

36

38

40

42

Discount Percentage Fiscal Years Ended 2001-2011

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 BGT

2011 EST

2012 EST

2013 EST

2014 EST

2015 EST

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Income and Tuition DependenceNet Tuition w/ Other Revenue

Net Tuition/FFTE w/funded aid projected at 4.94% annualized2004 Proj Net Tuition/FFTE w/funded aid projected at 6.46% annualizedOther Revenues/FFTE at 1.69% annualized growth2004 Proj Other Revenues/FFTE at 1.66% annualized growth

1994 Tuition % of revenue

= 53%

2004 Tuition % of revenue = 64%

2010 Tuition % of revenue

= 68%

2015 Tuition % of revenue

= 70%

Price Trends: Change in JBU’s Family’s Capacity to Pay

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

50000

55000

60000

65000

70000

75000

80000

85000

90000

Income

Income

20002001200220032004200520062007200820098000

9000

10000

11000

12000

13000

14000

EFC

EFC

Pricing Trends: Change in Endowed Scholarship per Student at JBU

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$426

$519

$617

$737

$842

$942

$231 $203

$288 $303 $304 $339

Average Endowed Scholarship Per Student

JBU vs. CCCU (2004-2009)

JBUCCCU

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School Costs – Stated Tuition

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Public Universities - Out-of-State

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Conclusions about Pricing•Perception (and reality) of our sticker price as increasingly out of range

• JBU response: control tuition increases• JBU response: focus message to differentiate with public

universities, and to communicate better net price and value

•Increase discount undermining net revenue but essential to enrollment

• JBU response: hire outside help to review our strategic use of discount

•Endowment for scholarships mitigates but does not solve problem

• JBU response: prioritize raising endowment for scholarships and programs

Marketing to Students and Parents•CCCU Marketing Study

• First important factors in college decision

• Quality of the academic program or major

• Preparation for future careers

• Faculty who are excellent teachers

• Faculty who are well qualified in their fields

• Later important factors

• Christian life and community

• Integration of the Christian faith and learning

• Christian faculty

• Faith commitment of fellow students

Market to Students and Parents: Preferred Channels of Communication

Marketing to Students and Parents: Expectations when visiting campus

Marketing to Parents: Factors that cause immediate rejection of a college

Conclusions about Marketing• CCCU and Longman Studies

• JBU response: Lead with quality, and follow with Christian community

• JBU response: Focus on web page development

• Catch-22 of facilities -- essential for mission/recruitment but pressure on budget

• Debt is cheap now but often depends on enrollment growth to justify

• JBU response: maintain focus on gifts for new facilities

• Operating costs increase by 30-40% of the cost of facility• JBU response: raise goal for endowment for facilities from 20%

to 30%

• Not always able to budget for deferred maintenance • JBU response: refinance debt to fund deferred maintenance• JBU response: capitalize deferred maintenance projects in

campaign

Fundraising Potential

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$9,

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20

40

60

80

100

120

140

160

180

200

$0.00

$10,000,000.00

$20,000,000.00

$30,000,000.00

$40,000,000.00

$50,000,000.00

$60,000,000.00 56821822.4

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14484683.9

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Keeping Faith Campaign Gifts

Donor CountAmount Given

Alumni Gift/Non Alumni GiftBy Dollars

Non-Alumni Gifts; $55,008,684

Alumni Gifts; $18,379,665

Non-Alumns who live within 100 miles and more than 100 miles by Dollar

Non-alumni live within 100 miles; $53,976,949

Non-alumns live more than 100 miles; $5,254,112

Conclusions about Fundraising Potential•President as the “magic money” person to solve the problems with the model

•JBU response: what is a reasonable stretch goal for the institution?

• Look to the past to set expectations

• Average length of time between first gift and seven-figure gift-8 years

• A few give the most -- $80 of $90 million came from 50 giving units

• More from non-alumni than from alumni• Non-alumni give locally

Framing Strategic Choices• What should be the capital campaign priorities/capital structure?

▫ $1 for endowment for every $1 for facilities▫ Endowment challenge for scholarships, programs, and operations▫ Capitalizing deferred maintenance projects▫ Refinance debt and use savings for deferred maintenance

• What should be the focus of marketing and recruitment efforts?▫ Focus 300 miles from campus and on families with higher capacity to pay▫ Lead with quality at top of funnel, follow up with Christ-centered education▫ Develop partnerships with key Christian schools and Hispanic churches▫ Recruitment is a university-wide effort

• How do we advance the mission in these tight times?▫ Innovation will more likely be funded by gifts rather than growth in students or tuition

revenue ▫ Trade-offs are inevitable ▫ Funding for compensation is important for mission and takes fiscal discipline in programming▫ Current mission still has great value even with slower innovation▫ Opportunities to expand mission exist even with challenges▫ Programs outside of the traditional undergraduate program increasingly important to mission

Leading the Institution

•Transparency about money and mission ▫Encourages confidence in decisions▫Generates creative responses to challenges▫Offers data-informed rationale for saying yes

and no▫Helps to align interests of students, families,

faculty, staff and board