The challenges facing higher education in the United States, including fiscal pressure at the state and federal levels
The quality and reach of higher education in America has been a major force behind the nation’s social, cultural, and economic preeminence. Yet dramatic changes in the environment are forcing institutions to rethink traditional ways of doing things to sustain these contributions in the years ahead. The forces buffeting the sector are greater than at any time in memory—including permanent fiscal pressure at the state and federal level; public resistance to rising tuitions and student debts; skepticism in some quarters about the link between academic credentials; increasing pressure for accountability and affordability; and disruptive technologies that transform learning’s reach even as they upend longstanding business, governance, and instructional models. In this context, McKinsey believes it is imperative that universities and higher education systems aspiring to leadership look with fresh eyes at how they define their strategy and how they execute plans to serve students and society.
Our ongoing dialogue with educators, as well as our experience helping top private-sector organizations navigate similar storms in their sectors, convinces us that six major thematic areas now deserve fresh scrutiny. The stakes of this rethinking are high; indeed, some observers say higher education’s legacy of impact could be at risk unless the sector takes a hard (and sometimes uncomfortable) look at traditional practices.
Which six areas stand out for special attention? In this fast-changing world, universities and higher education systems must:
- get clearer on their strategy and sources of distinctiveness
- think through options to expand the reach of their system (including access and affordability, as well as global and online)
- examine every aspect of their economic model to ensure they are viable for the long term
- lift graduation and retention rates across all student populations
- if relevant, boost research excellence and commercial productivity
- work more closely with employers and governments to prepare students for work in ways that bolster the country’s competitiveness
On their own, none of these areas will strike educators as wholly new. But taken together, they represent a set of simultaneous challenges that are extremely difficult for even high-performing organizations to manage well. In addition, beyond the question of management complexity, it’s clear that innovation in these areas presents practical challenges vis-à-vis a number of stakeholders.
Yet there’s little choice but to tackle these issues if higher education is to meet its duty to society. And the progress some institutions are already making is inspiring. Western Governor’s University, for example, has taken the fully online degree beyond the for-profit and professional learning realms to the undergraduate setting, with more than 32,000 students now enrolled at an average price of $27,000 per degree. MIT’s Media Lab, largely funded through 70 corporate sponsors, invites the sponsors to participate in its shared IP pool without paying license fees or royalties. BYU–Idaho has created a third semester dramatically improving capital productivity and expanding access to the institution. Stanford professors have founded Udacity and Coursera, which already offer nearly 50 courses that reach 1 million students around the globe, and Boeing partners with universities, including the University of Michigan, to enhance undergraduate curricula, support continuing education of Boeing employees, recruit for internships and employment, and collaborate on research that benefits the long-term needs of their businesses. Meanwhile, Arizona State University has reduced cost per degree by 15 percent through a range of productivity initiatives, including system-wide shared services and the consolidation of duplicated or low-demand programs.
These and other developments suggest the climate is ripe for bolder agendas that in normal times might be off-limits, and arguably unneeded.
The attached survey describes in more detail the six thematic areas that higher educational institutions need to pursue today, as well as examples of leading practices and transformational impact in each. We hope this document—a work in progress to be refined as our dialogue with the sector continues—helps higher education leaders organize their own thinking on new approaches and initiatives their institutions might adopt.
Download the full report on which this article is based, Rethinking 101: A new agenda for university and higher education system leaders? (PDF–1.9MB).