Into the Crisis

In early 2005, I wrote a short article titled, “Lean in Higher Education.” In it, I said:

“The time is right for higher education administrators, faculty, and staff to begin applying Lean management to their business. The consequences of not doing so could be fatal… University administrators, faculty, and staff have a choice. They can change voluntarily, in an orderly manner while the opportunity still exists to do so, or be forced to change when power inevitably shifts to those who pay the bills. Every institution will be affected in some way – even the top-ranked ones – and the shift could occur very rapidly as the cost to deliver information and knowledge drops.”

Unfortunately, more than eight years have passed, and Lean, while having gained entry into college and university administrative processes, is largely non-existent in academic processes (courses and programs) – the value-creating activity that students come to school for.

High tuition prices, a static or declining value proposition, new (global) competition, an oversupply of capable higher educational service providers, fewer students, declining full-time employment, increasing part-time employment, and declining real wages for graduates has set higher education on the path of major change, one which will likely be worse for students in many ways. I am certain that most university administrators will fail in their efforts to guide their institution through the next 25 years because they simply do not know how to respond in any way beyond the usual budget manipulations.

When an industry faces oversupply, the usual response is to cut prices. We have now begun to see that, in addition to the usual budget cuts. Oversupply should immediately signal the need for higher education to improve the value proposition for students and payers by creating much better products and services. While this has not yet happened, it is exactly what Lean management can do for the university and Lean teaching can do for the classroom. If done correctly, the cost of educating people will decline and margins will improve as better products and services are created. But, only with sustained efforts can such improvements be maintained and expanded upon.

If administrators, staff, and faculty do not rise to the challenge, then the likely outcome will be much the same as it has been for other industries: years and years of budget cuts. Universities will be forced to focus on (profitable) educational niches (at all degree levels), versus their long-standing existence as comprehensive (full-line) educational institutions. If administrators, staff, and faculty do not rise to the challenge, then technology (software and automation) will be purchased to replace labor, both staff and faculty. Online courses, MOOCs, and their variants will deliver 20 to 50 percent of the teaching, presumably at lower cost. If administrators, staff, and faculty do not rise to the challenge, then courses taught (hours worked) will be allotted based on demand, and salaries for workers will decline by 20 to 30 percent, as will benefits. Labor, invariably, takes the biggest hit.

All of the “solutions” available to senior administrators will revolve around zero-sum budget cutting and re-allocation of existing resources. That’s what happens when the price of your products and services exceeds value. It does not have to be that way, but it will be that way if university leaders remain uneducated in Lean – either by choice or by ignorance. Budget problems do not exist when value exceeds price. Yet another great reason to adopt Lean.

I also said in the 2005 article:

“The question is, will college and university administrators, faculty, and staff wait until the crisis lands upon them, or will they act now to improve?”

The crisis has arrived. University personnel have lost the opportunity to be proactive. Now, they must be reactive. So, here is some advice: See Lean as a practical strategy to make your institution a more desirable place for students to get educated because it has better products and services, and a more desirable place for employers to hire graduates – at above average salaries.

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