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As compared to just a few years back, many universities and colleges are now financially unstable. Our entire educational system is at the tipping point due to this. We are no more a global leader in teaching and creating knowledge.

According to a recent report released by a global business consulting firm Bain & Company and a private equity global education investor Sterling Partners, most of the educational institutions in our country operate on the “Law of More”.

This means, they assume that the more they expand, diversify, spend and build, the more they will prosper. What actually have happened is that universities and colleges have become very complicated.

They are unable to make the necessary changes necessary for their survival.
In our country, there is a 12 per cent yearly increase in the university debt on an average. As compared to what instruction-related expense really is, this is at least two and a half times more.

The situation is economically damaging especially at a time when our traditional endowment growth and revenue sources are seriously challenged by the economic, demographic and market forces. This has led to a situation where unsustainable business model is the base of at least one third of our educational institutions.

According to Tom Dretler, the Alliance for Business Leadership co-founder and Sterling Partner’s executive in residence, the current trend indicates that in just about twenty years our country will not have enough resources to meet the demands of the growing student population. This puts forth staggering economic and social implications.It is imperative for us to make necessary changes now.

Severe liquidity crisis is being faced by our country right now says the head of Bain’s North American operations and the report co-author. He says that the focus must shift on creating core values. He put forth a valid question as to who will pay a phenomenal amount of fee to study in a totally undistinguished institution.

Some of the innovative presidents of universities and colleges have taken steps to find financially sustainable and differentiated solutions. Solutions that could make a difference include –
In the most differentiated area where the university in question derives its identity from, it is important to develop a powerful and clear core strategy.

Reduce cost of administration and support by building from inside and cutting from outside starting from the core of research and teaching. Identify innovative models and strategically invest in the same. The models chosen must make a significant difference and offer differentiated value to grant providers and students.

Innovative asset management can free up a lot of cash in many educational institutions. The focus must be on freeing capital from non-core assets such as physical assets, real estate and intellectual property.

According to the authors of this report, the ability of an educational institution to lead change across the university’s complete spectrum plays a key role in restoration of its financial health. A clear path forward through a compelling case must be built with the help of faculty, especially those who have the intention to support the institution’s mission.