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Keynote Address, CIPCO
(March 30, 2010)

[UIU President Alan G. Walker gave the keynote address at the annual meeting of CIPCO (Central Iowa Power Cooperative), the state's largest cooperative energy provider.  He focused on higher education in light of the economic downturn.  While increased enrollments are one change, another is the realization that higher education institutions cannot operate as usual and must provide opportunities for students who are working and taking care of families.  Dr. Walker spoke to the mission and vision of UIU and the economic revitalization efforts under way in Fayette.]

No one has to point out that the last year has seen very troubling economic developments on a global scale. Not a week goes by that I don’t read about the significant challenges confronting U.S. institutions of higher education. Private institutions that rely on their larger endowments for significant portions of their annual operating budgets are now faced with having to cut their budgets. Public institutions are facing significant reductions in state and federal support. In both cases, the effect and fate is much the same: salary and hiring freezes, capital improvement projects delayed or indefinitely postponed, and faculty and staff layoffs. I have seen this cycle several times before during my career in higher education. I am sure conditions in your industry are similar.

During the current recession and beyond, many organizations will recede, some will find ways to maintain what they have, and a few will ascend.

Where an organization finds itself in the coming years will be determined by its relationship to one word: value. In difficult economic times, consumers, constituents, parents, students, politicians, stockholders, etc., develop more discriminating expectations of the worth, usefulness, and importance of the goods and services they receive, and they judge organizations on the basis of cost and quality. Therefore, the message to these consumers must be simple and clear, and it must match expectations for high quality at a reasonable cost with a demonstrable return on investment as well as a promise to improve lives and the human/social condition of our increasingly complex, competitive, and ever-changing world. Institutions that will atrophy in this environment are those not effectively communicating their value to consumers in ways meaningful to them. Those institutions that can-not or are not making a convincing argument for the value of the investment made in them by consumers, by society, by the general public, will continue to lose ground, while those that can and are successfully making that argument will prevail. It’s that simple; whether it’s in the context of higher education, utilities and the power industry, retail, or whatever. To effectively communicate their value, institutions must have:

• the metrics and data to support value claims

• a highly developed and sophisticated marketing/communications capacity

• an energized base of support as well as strategic partnerships and coalitions

To be an ascending in today’s political and economic environment and to deliver the promise of their value proposition, organizations must also be much more strategic. In higher education, for example, except for a few specific fields, federal funding for research is likely to be flat at best, over the next few years and significantly more discriminating. Traditional endowments will always be vulnerable to market fluctuations. Many institutions may also see enrollment declines among their usual demographic audiences. In continuing what has been a steady, long-term trend, state support will represent a shrinking percentage of total operating budgets for public institutions of higher education, even after this current economic recession ends. Let me repeat that…..in continuing what has been a steady, long-term trend, state support will represent a shrinking percentage of total operating budgets for public institutions of higher education, even after this current economic recession ends. As revenue streams for your business and mine continue to weaken, we must be creative and develop new and different sources of revenue.

This requires a strategic plan based on an open and honest review of the organization’s strengths, weaknesses, opportunities, and threats. The plan must be embraced at all levels of the organization and most importantly, there must be the political will to allocate resources based upon the plan.

As part of their strategic plan, colleges and universities, for example, must find ways to be more relevant to the growing diversity of the U.S. population, even in geographic areas of the country that remain largely homogeneous (I am personally aware of past reporting data from some colleges in Iowa with a minority student population of zero!). Why should you be concerned with this? Because the homogeneous enclaves that some high education environments and experiences provide is not the real world. Why should you be concerned with this? Because your children and grandchildren will be out there in the real world working and competing with a highly diverse global society. Even if they stay in Iowa. College should prepare them for that by modeling such an environment in the context of learning and helping them grow their emotional intelligence.

Diversity must be better embraced, not just by higher education, but by all sectors of our economy, through access that exceeds present efforts on financial, academic, geographic, and cultural levels. State and federal government must also be more strategic in the use of resources to a growing segment of the population whose access to higher education is challenged by their financial and academic situations. In addition, it is worth considering that the most rapid growth in demand for higher education and other deliverables may not be in the U.S., but rather overseas in countries with a growing middle class (like China and India), whose culture places a premium on higher education, and where there is less competition. We must find a way to capture a share of this growing international market in countries with friendly governments and trade-friendly policies, and where U.S. degrees and other products are in high demand. For the academic community, this will require thinking beyond traditional study abroad programs, student and faculty exchanges, and recruitment to principle campuses in the U.S. – in other words, the usual embodiment of what is commonly known as “internationalism” on the campuses of most U.S. colleges and universities. Instead, the future is in international centers, branch campuses, and online degree programs that can be accessed from anywhere in the world. But the window of opportunity for doing this may be limited. Remember when the big three U.S. automakers were the undisputed leaders of the industry worldwide? At the height of their glory in the 1950s and 1960s, when they owned the majority of the market share, how many would have envisioned their present-day circumstances? It’s not difficult to imagine that most automakers assumed they would always dominate. To an extent, there may be a parallel to higher education in the U.S. Long regarded as the best in the world, the next decade or two may find us in a different position as other countries identify higher education as a strategic national priority and then vastly outspend the U.S. to catch up, eventually surpassing us. Make no mistake it’s already starting to happen.

The use of technology will continue to be a key strategy for ascending organizations as well. Current and future generations of students and other constituents have a technology-based expectation that must be met. The use of technology can also be part of the solution to maintaining or improving productivity in the face of static or declining resources. In this regard, the goal is always single data entry with multiple outputs. In addition, technology can provide greater access and the ability to reach new audiences, as well as help provide for business continuity in the face of natural or man-made disasters. One key to the wise use of technology is to clearly understand and articulate the desired outputs, match the outputs to the most elegant solution, and to identify the point of diminishing return from an ROI perspective.

The role of endowments and their possible demise has become a popular topic of discussion in higher education. Colleges most impacted by the economic downturn are those who have come to rely on medium-sized endowments for a significant percentage of their annual operating budgets. Although some institutions with mega-endowments have announced with great fanfare that they are cutting back, the fact remains that even after losing as much as 20-30% of their investment, they will still have billions left. Even now, Senator Grassley (R-IA) is right to question tax deferment on such levels of wealth from a public interest point of view.

I suspect many institutions will reform the use of their endowments and enact, or reenact policies that restrict and/or refocus endowment use, which is as it should be. The use of (traditional) endowments to fund significant percentages of annual operating budgets has been to higher education what sub-prime loans were to Wall Street. The pressure is always on the annual operating budget, its legacy and reoccurring expenses. Having or growing a large endowment is not the complete or final solution to relieving that pressure. To use a line from the old John Houseman investment banking commercials, you have to do this the hard way; you have to earn it. For many higher education institutions, financial stability is and always will be largely about enrollment.

Upper Iowa University has never depended on a large “traditional” endowment for support of our operating budget simply because we do not have one. What we do have is a significant and highly resilient “nontraditional” endowment that provides a steady, predictable cash flow for the University even during recessions. In addition, we have a seven-figure cash reserve, largely generated by our academic extension program which includes centers (in the U.S., Hong Kong, Singapore and Malaysia), as well as robust online and independent study programs. This cash reserve is roughly the equivalent of a $125–150 million endowment. To be sure, we have used it in support of reoccurring annual operating expenses much like other institutions have used traditional endowments. In our case, however, our nontraditional endowment has proven to be a dependable income source, even (and sometimes especially) during recessions when students delay entry into a poor workforce market or choose to go back to school to retool for a new career. Our strategy is to grow our nontraditional endowment (as well as our traditional one) by continuing to make strategic investments of our academic extension system into new markets in the U.S., abroad, and online. There are ways to operationalize this while continuously improving the quality, integrity, and efficiency of these efforts and establishing the kind of flat, seamlessness envisioned by our strategic plan as a single global enterprise. In this regard, Upper Iowa University is the antithesis of Antioch College; we maintain but a single academic home, faculty, and governance structure. Our successful academic extension system allows us to continue to make strategic investments at the center of the academy; our principle campus in Fayette, Iowa. Towards this end, we are moving forward over the next six years with plans for the largest capital construction project in our institution’s 151-year history.

This is all part of a nine-point strategic plan for the University that was developed several years ago. The areas of focus emphasized in this plan include:

1. Develop policies and practices that create the seamless movement of students and faculty.
2. Challenge the curriculum and pedagogy to achieve the vision objective of developing global citizens.
3. Enhance the quality of the academic program.
4. Contribute to the development of global citizens by providing co-curricular opportunities that complement the formal academic program.
5. Strengthen enrollment, financial aid, registration, and advising services.
6. Strengthen the information technology infrastructure to provide security, communications and administrative capacities for a seamless, global enterprise.
7. Develop the practices and programs to effectively communicate the UIU mission and vision.
8. Develop a comprehensive advancement capacity
9. Enhance the quality of greater Fayette as the residential, life-style, and economic center of UIU’s future.

There’s no question that Upper Iowa University is well positioned in the kind of economic environment that now exists. We provide a high quality education, and we have the artifacts to support this claim. Among our “peer” institutions in Iowa and regionally, our tuition remains in the lower half, while our graduates carry away less debt. We have impressive facilities, small class sizes, highly credentialed faculty and staff, a unique academic calendar, and many other key student-centered characteristics. Because of our international footprint, we can provide opportunities few other institutions can match. As a result, our enrollment is increasing across the entire University and is at a record high level.

Extraordinary expectations are placed upon colleges and universities. Higher education is becoming increasingly commoditized and driven by market forces as well as political influence on public policy. There is increasing tension between mission and market involving college athletics, pricing and financial aid policies, corporate sponsorship, and commercialization of intellectual property. Accordingly, institutions must be able to move with social and political ease across the stormy frontiers of the disparate and sometimes competitive interests that typically converge upon higher education. We must be able to walk a fine line in maintaining a balance between being responsive to the market and also our core values of academic freedom, the search for truth and knowledge, scholarly standards of excellence, and equality of access and opportunity. Finding the balance between ideals and pragmatism requires institutions that are principled, possess the character to do the right thing, and exhibit a high degree of emotional intelligence.

When I think about how difficult and challenging the environment is for higher education these days, I find myself taking the Winston Churchill view of the situation. This could be our defining moment. Time of great challenge and difficulty can strengthen fabric, not tear it. We can build character rather than see it erode. It can be a catalyst for the kind of meaningful change that will ensure control of our own destiny, rather than condemn us to a capricious and indiscriminate future. This could be the best of times for higher education. We must revel in the dialogue and intellectual exercise this challenge brings to all levels of the academy. It sharpens the senses and places a premium on excellence. We will come out much stronger at the other end.

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