Page 51 - Crisis in Higher Education

The Higher Education Conundrum • 25

performance suffered. On top of that, the smoothing of earnings was
largely ineffective.
Although most people would agree that the primary purpose of higher
education is to engage in teaching and research plus the services that
directly support these activities, most colleges and universities have a
diverse set of ancillary businesses that generate revenue:
1. Sport franchise: For most colleges and universities, this has become
a multi-million-dollar operation. For large universities the athletic
budget can be more than $100 million. 26,27
2. Student housing: Dormitories and other types of on-campus hous-
ing were built for and are owned by the institution of higher learning.
In the case of public universities, state and local governments provided
capital dollars to build the facilities.
3. Hospitals and clinical enterprises: A relatively small percent of uni-
versities have hospitals and clinical services, but when they are
present, their size and scope are staggering. Many of these facilities
have revenue in the billions of dollars, which makes them as large
as or larger than the “academic” side of the university. 28
4. Other revenue-generating services: Institutions may offer other
services, including food preparation, book stores, and parking.
These tend to be smaller in scale and in some cases have been out-
sourced, so other companies own the assets and run the operations.

Important questions for leaders of institutions of higher learning
are as follows: What are the synergies among these activities? How do
these activities relate to the institutions’ mission? Do the institutions have
the knowledge to manage these activities successfully? How do the insti-
tutions, their faculty, and students benefit by maintaining management
responsibility? When this list of ancillary services is examined, there
appears to be limited synergy. The commonality between hospital care
and higher education is minimal, and the links between housing and high
education or between sports programs and higher education seem to be
nonexistent. Leaders of institutions of higher learning know little about
running hospitals, on-campus housing, or athletics. Ownership of these
assets does not facilitate resource sharing or create economies of scale.
When a service is fundamentally different from the mission of the institu-
tion and it has its own revenue stream, it may be time to consider outsourc-
ing. Outsourcing is also sensible when the services do not have a separate