Nonprofit Resources
When Your Institution Is Facing an Uncertain Future: Closing the Right Way
As economic conditions shift and post-secondary enrollment declines, many small and rural higher education institutions face significant financial pressures. Our previous articles in this series explored strategies such as revenue enhancements and mergers and acquisitions. However, some institutions may ultimately find themselves nearing the end of their life cycle, requiring leadership to make the difficult decision to close.
If your institution is in this complex and challenging situation, the decision involves both practical and emotional components. The desire to serve your students, faculty, and staff honorably may lead you to delay announcing the difficult decision until the last moment, especially if you are making quick budget cuts in an attempt to redirect funds to areas that might be more sustainable. However, to avoid abrupt closure, consider the following steps:
1. Anticipate the future.
Even if your institution doesn’t have an official business analyst, your business office likely tracks certain metrics that can provide a clear picture of where your institution is headed. Many factors play into the long-term sustainability (or unsustainability) of an institution, including:
- The increased cost of living prompting more families to pursue alternatives to traditional colleges and universities
- The ebbs and flows of birth rates and other population shifts affecting the number of college-aged students
- Increased staffing costs due to inflation
- Changes in the popularity of certain programs or disciplines
A basic analysis of enrollment trends and operating costs can often predict whether an institution can survive without monumental change. We recommend using a three- to five-year financial forecasting model to guide decisions.
2. Recognize when it is time.
Every organization, including higher education institutions, has a life cycle of growth, development, and eventual decline. When a higher education institution is founded, extensive time and effort are spent creating awareness and growth. This is typically followed by an expansion of programs, buildings, staff, and faculty to accommodate increased enrollment, and then stability and the expected seasons of expansion and compression.
At most institutions, the leadership team does its best to navigate these fluctuations and make strategic decisions in the mutual best interest of all stakeholders while being agile and adaptable to changes. Sometimes even the best efforts cannot fill in the gaps, however, leading to the end stage of the institution’s life cycle. Recognizing and accepting when your institution has reached this stage is essential to closing at the right time and with integrity.
3. Develop a closure plan.
Academic calendars are cyclical and offer natural transition points. Once closure is on the horizon, work backward to set milestones that allow for a thoughtful, timely process with a reasonable sense of urgency. Your plan should include:
- Providing clear communication to faculty, staff, and students, followed by alumni and the greater community
- Evaluating whether to phase out certain departments or programs early
- Considering whether to give staff members the option to be reassigned from areas like admissions to student support services to help students determine their next steps
4. Ensure financial stability through closure.
Incorporate as much buffer time into your closure plan as possible to allow for a smooth transition at the end of a semester or academic year. Ensure you have sufficient cash reserves to pay faculty and staff through the closure period.
5. Negotiate teach-out agreements.
Ideally, your students have plenty of options for continuing their education at comparable institutions, but you may need to take steps to support your faculty’s career prospects. One way to support your faculty beyond the lifespan of your institution is to negotiate teach-out agreements with other institutions. This can provide professors with a short-term solution while they look for other employment opportunities or transition into long-term employment at that institution.
6. Communicate the plan transparently and early.
Try to give all students, faculty, and staff written notice of an impending closure at least one year in advance. Include information on:
- The rationale behind the decision
- A timeline for the next six to 12 months
- Your continued commitment to their success and growth
- Details about transition support and opportunities
Initial communication should come from the president or board chair, followed by communication from department, program, or residential leaders. Consider providing open forums — whether in person, via email, or online — to address questions. Keep these stakeholders informed as the plan evolves and milestones are met. Communications to alumni and the public should focus on the relevant facts and express gratitude for their support and participation over the years.
Closing with Integrity and Purpose
Deciding to close a higher education institution and then working through the ensuing process is never easy. But with thoughtful planning and transparent communication, you can guide your community through the process with care, providing stakeholders with closure and setting the stage for new beginnings.
If your institution is considering closure and would like guidance in this area, please contact our team to learn more.
Authors: Rachel McMichael, Partner, and Justin Carrell, Supervisor – Consulting
Additional Resources:
When Your Institution Is Facing an Uncertain Future: Revenue Enhancement Considerations
When Your Institution Is Facing an Uncertain Future: Merger and Acquisition Considerations