Navigating the Tsunami

Buck Goldstein
Entrepreneur in Residence and Professor of the Practice UNC-Chapel Hill

In a former life, I co-founded a start-up that grew into a public company. Every day brought fresh uncertainty, trying to navigate changing markets and regulations while taking care of our customers and employees. What got us through those constant travails was time — enough time to make mistakes, learn, and recover. We also had the flexibility to make quick decisions without multiple layers of reporting and accountability, so we could adapt as conditions changed.

I keep flashing back to those intensely stressful years as I think about the environment college presidents are facing right now. The most serious crisis in the history of American higher education is forcing campus leaders to act like start-up CEOs, making huge decisions with limited information and fast-changing conditions. But they’re doing it with all the bureaucratic and regulatory constraints that make universities some of the more rigid institutions in our society. By their very nature, it’s almost impossible for colleges to respond as quickly and decisively as current circumstances require. Universities are not corporations and can’t operate with the same freedom. Holden Thorp and I wrote an entire book on this subject. But until the coronavirus subsides, universities will need new ways of operating that maximize the chance more of them will survive intact.

What already looked like a perfect storm for higher education has now grown into a tsunami: a pandemic, a major recession, and a long-overdue reckoning on race in America are hitting campuses at the same time. An analyst at Moody’s characterized the situation as “a greater systemic shock” than the financial crisis of 2008 or the terrorist attacks of 2001. I have seen estimates that up to 25% of colleges and universities will go bankrupt in the next year.

And this is only June, where the work is mostly planning. Come August and September, every college campus that has chosen to reopen will be in uncharted territory, engaged in a massive set of experiments where there are more questions than answers. Will new COVID-19 cases and deaths continue to decrease over the summer, leading to more confidence in a fall reopening? Or will optimistic plans have to be scrapped in favor of another scramble for online-only classes? What happens if there’s a major outbreak traced to a college campus? How serious will the current recession become, and what impact will it have on enrollment, financial aid, and on state and private funding?

On top of all of those concerns, colleges will be wrestling anew with their response to the national call for racial justice. The past few years have already seen major unrest on university campuses, and it seems inevitable that there’s more in store when students return.

With so much unknowable and with so little time to respond, decisions will have to be made quickly and with imperfect information. Yet the structures and traditions that have over time made American higher education great are ill-suited to the current environment. Endowments, grants, and appropriations all come with restrictions and conditions that make them hard to deploy for the immediate challenges posed by the pandemic. As Peter Salovey, the President of Yale, wrote recently: “The endowment is neither a savings account nor a rainy day fund but rather a collection of gifts… usually with restrictions on how the earnings can be spent.” Foundation and government research grants are similarly restricted.

Schools are already looking to loosen these constraints through modifications to endowment gift agreements. Donors might be asked to opt into a program where all constraints on endowment and contributions would be suspended during the pandemic. The broadly expendable funds could flow directly to the school or department that previously received the endowed funds, or it could go to a general fund to be used for the whole institution. The simplicity of the approach would allow schools to mount a broad-based campaign asking donors to opt-in, giving leaders the flexibility to take quicker action at a time when speed and flexibility may be the only things to stave off financial ruin.

The same approach can be applied to foundation grants and government appropriations.  Most grants are already immediately expendable, but an opt-in program for increased flexibility would allow grant funds to help meet emergency expenses during the pandemic. The appeal to grantors should be simple: extraordinary measures are required in the short run in order for the original intent of the grant to be accomplished in the long run. A similar appeal can be made to federal and state funding agencies and legislative bodies. It’s unfair to demand that campus leadership be agile and decisive if they don’t have the tools and discretion to do it.

Trust is a two-way street. If traditional funding constraints are temporarily abandoned, the responsibility falls to campus leadership to build confidence in how the funds will be spent. Ideally, they should have been cultivating that trust long before this moment of crisis. But there are plenty of examples of proactive university presidents reducing planned expenditures, instituting hiring freezes, and being honest about the uncertainty associated with any plans for the months ahead.

On my own campus, a think tank of infectious disease specialists and university administrators has outlined a general plan for reopening the campus, undertaken a series of faculty and student surveys, and promised to be forthcoming with details as they are finalized. Hiring and discretionary spending have been limited and backup plans are being tested. Openness builds trust with alumni and other supporters, opening the door for the kind of flexibility that will be required for colleges and universities to survive the epidemic of uncertainty they now face.


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