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Higher Education Leadership in Rough Financial Seas

 

Larry D. Shinn

 

 
The collision of several intense high- and low-pressure weather systems can produce a once-in-a-centurey "perfect storm." The combination of sub-prime mortgages, financial derivatives, and the collapse of liquidity produced a perfect financial storm in fall 2008 and winter 2009, the devastating effects of which are still unfolding for all colleges and universities in America. Imagine the impact of this financial storm on a college that charges no tuition and funds 80 percent of its operating budget from its endowment. This financial collapse was a perfect financial storm for Berea College.
 
As the first interracial and coeducational college in the South, Berea College still welcomes “all people of the earth.” Our student body is 20 percent African American and approximately 75 percent Appalachian, along with 120 international students from more than 60 countries. The average family income of our students is $29,200, and all students work in labor positions to support our community. This uncommon mission was funded during the 2008–09 school year with a $43.5 million operating budget, of which 80 percent came from its endowment (with another 10 percent from annual gifts and the final 10 percent from federal and state scholarships). And it was this uniquely funded mission that was threatened by the perfect financial storm now called the Great Recession.
 
Integrating Budget and Planning Responses
On one level, the 2008–09 financial crisis had an immediate effect on Berea College’s budget as we “banked” the horrific quarterly endowment values of the winter and spring. Even though our endowment was down by “only” 20.7 percent on June 30, 2009 (compared with our market benchmarks, which declined by 24 percent), when coupled with a -4.7 percent return in 2008, it was clear that Berea’s endowment income stream would decline by approximately 25 percent by the 2011–12 budget year as numerous negative quarters worked themselves through our 12-quarter spending formula.

Now, two years later, we have taken $6.4 million from our $43.5 million 2008–09 budget base, eliminated more than 60 positions (43 of which were empty), and eliminated salary/wage increases for two years. Even with the increase of the student/faculty ratio from 10:1 to 12:1 and the elimination of 13 faculty positions, no teaching faculty were dismissed.
 
On a second level, we sought not only to downsize through budget reductions, but also to engage in a planning process that sought to create a stronger, if smaller, Berea College. In February 2008, with assistance from the dean of the faculty, I created an 11-person Scenario Planning Taskforce. The taskforce charge had four components: (1) maintain the whole of Berea’s complex mission; (2) do not charge tuition in any scenario; (3) reduce Berea’s 2008–09 budget base of $43 million by 25 percent by the 2011–12 budget year; and (4) present three alternative scenarios with balanced budgets to the campus by October 1, 2009.
 
After seven months of intense work, the taskforce delivered its 133-page report, Of Journeys, Landscapes, and Destinations, to faculty, staff, students, and trustees on October 5. Each of the three scenarios had a distinctive thematic focus and 10 financial/programmatic building blocks that accomplished the desired budget reductions selectively. The two most controversial ideas suggested that we integrate our centers (Appalachian, Service, International, etc.) and that we eliminate 26 small (three- to seven-person) academic departments/programs and create six to eight larger academic units with 12 to 15 faculty in each. Not surprisingly, many students could not imagine the centers without their distinctive identities. And about half the teaching faculty and nearly all of the department chairs were strongly against the dismantling of academic departments.
 
The vice presidents and I decided just to listen for a month. From October 5 through early November, I met with 17 separate faculty, staff, student, and trustee groups and held 31 meetings with individuals and small groups—more than 600 Bereans overall. The Administrative Committee (i.e., the vice presidents and I) considered the ideas from those meetings, combined key features from the taskforce scenarios, and created a fourth scenario called Engaged and Transformative Learning with its 10 financial building blocks. This scenario was supported by a 116-34 vote by the general faculty on December 10, 2009, while the controversial academic restructuring building block received a 77-69 positive vote. The Board of Trustees unanimously approved the proposed scenario and all building blocks on February 20, 2010.
 
Current Work
In spring 2010, a group of 10 faculty members worked with the dean to find readings to aid in the design of new academic units. This past summer, four faculty groups with more than 40 total participants were responsible for producing two alternative academic restructuring models each that would support “(a) excellence, flexibility, and innovation in Berea’s faculty and curriculum, (b) opportunities for increased faculty oversight of the whole curriculum, and (c) flexibility and cost management in the faculty and academic units’ budgets while continuing tenure” (Engaged and Transformative Learning, p. 8). A synthesizing group met in August to consider the eight alternative structures and provide recommendations to the full faculty, who will meet at a two-day retreat in September to consider the options. In a real sense, the faculty’s difficult and adaptive work with the dean is still a work in progress.
 
Lessons Learned
Because so many look to the president for direction in times of crisis, the insights I offer come from one who continually sought solace, insight, and calm in the eye of our storm when vocal winds were raging and the turbulent financial waters threatened to capsize Berea’s ship. From this reflective and retrospective viewpoint, here are some of the lessons I learned.
 
1. Keep your eyes on the horizon. Those of us who have fished on the Great Lakes know that when waves grow high and your boat is tossing wildly, it is important to keep your eyes on the horizon to calm churning stomachs. This is a good metaphor for leading a college campus in turbulent times. For us at Berea, it meant keeping one’s eyes constantly on the whole mission of the college in the context of the world around us—not just holding up isolated ideals one at a time. Recommendations to adopt simplistic and partial financial solutions were common (e.g., cut across the board, just cut administrative salaries, change the spending formula, etc.). Likewise, some recommendations would have undermined the mission of the college. For example, avoiding any cuts at all would have required charging only $2,400 tuition per student. Though this figure pales in comparison to many institutions’ rates, Berea’s unique mission would have been permanently compromised.
 
Keeping one’s eyes on the horizon also means remembering that institutional structures and programs are just current manifestations of a college’s mission and not the mission itself. When all three of the taskforce’s scenarios eliminated small academic departments in favor of more flexible and sustainable larger divisions, some faculty protested loudly. But when looking at the horizon, we see the students of 2020 expecting more flexibility in their studies than traditional departments and majors provide. Likewise, many younger faculty come from graduate schools where the boundaries between disciplines are porous and interdisciplinary studies are common. The horizon clearly reveals a world of rapid change that requires curricular adaptability and the ability to navigate the rough financial waters with long-term tenured faculty positions in larger and more nimble academic units.
 
2. Draw on leadership within the community. In his book Leadership without Easy Answers, Ronald Heifetz says:
In a crisis we tend to look for the wrong kind of leadership. We call for someone with answers, decision, strength, and a map of the future . . . in short, someone who can make hard problems simple. . . . Instead of looking for saviors, we should be calling for leadership that will challenge us to face problems for which there are no simple, painless solutions— problems that require us to learn in new ways (p. 2).
 
As should be clear from the brief description of the scenario planning process above, I did not believe that I or my senior staff had any simple answers to the complex question we had to address—namely, how could we restructure our programs and institutional structures to maintain or even strengthen Berea’s unique mission in a way that was financially sustainable into the future? So I decided to trust the dean of the faculty and an innovative group of faculty and staff to engage the larger questions of higher education at 30,000 feet, while boring deeply into Berea’s budget and institutional structures to seek three different ways to conceive a more flexible, more adaptive, more sustainable Berea College.
 
After giving the charge outlined above, I neither met with the taskforce nor sent them any materials to read. I wanted them to operate as an independent think tank without the president looking over their shoulder. This trust in innovative leadership from within our community was rewarded with an excellent report worthy of any graduate seminar in higher education. The taskforce did discover the complexity and enormity of the challenges we face at Berea because of our uncommon funding method. It also grasped the changing landscape of higher education and the students we seek to teach. The group’s proposal to end small academic departments and create larger academic divisions focused on long-term curricular, programmatic, and financial imperatives.
 
3. Communicate, communicate, communicate. For the past decade, I have written a monthly President’s Report to the entire campus community. During the past two years, each report has presented our challenges and emerging solutions. I sometimes answered critical questions such as, “Did Berea’s endowment underperform?” and “Did Berea’s administrators manage the budget poorly?” Although my answers were sometimes seen as having an administrative spin, the effort often led to productive conversations.
 
It is also important to communicate through official governance channels. When developing the taskforce’s charge, I sought guidance from the faculty’s Executive Council as well as from the trustees’ Executive Committee. Likewise, the charge was appended to the monthly President’s Report. It is important that every planning and budgetary document that is created to address significant institutional challenges be shared with the whole campus to provide as much transparency as possible. Trustees, too, were informed fully and participated thoughtfully.
 
The taskforce created a third communication channel as a web-based portal on which it posted all of its readings, meeting minutes, preliminary thoughts, and all written comments from the Berea community—positive and negative. When the Administrative Committee developed the fourth scenario, the portal provided a place for additional responses. Finally, as the president at the center of the storm, I sought to listen to all Bereans’ views of the scenarios. I received up to 80 e-mails a day and answered every one personally, often into the wee hours of the morning. Communication requires listening, and listen I did to more than 600 Bereans in that one month alone.
 
In a crisis situation, we must communicate in many ways to reach different people. A corollary lesson is that we must listen carefully to all voices, even as we speak primarily to the often silent or undecided center of the community. I truly believe that all campus constituencies ultimately arrive at reasonable, if diverse, positions when they are informed. Thus all constituencies must be informed because all will be a part of any final solution.
 
4. Don’t let the sideshows become the main show. Kent Chabotar, president of Guilford College, published a Chronicle of Higher Education article in November 2009 titled “Crisis Fatigue in a Difficult Economy: 5 Mistakes to Avoid.” During the past two years, we at Berea committed his entire list of mistakes: • Declaring victory too early (“The financial markets are improving so we don’t have to restructure.”).
  • Looking for easy outs (“Just change the endowment spending policy.”).
  • Getting mired in the process (“We [faculty or students] demand direct access to trustees.”).
  • Forgetting the facts (Berea’s endowment dropped 4.7 percent in value the year before the crash so we were dealing with a two-year decline of 25 percent.).
  • Fighting among ourselves (“It is someone else’s fault.”).
Hindsight always reveals mistakes in judgment, timing, or communications that clairvoyance of the future would have helped avoid. We all made mistakes during the past two years, and when so much is at stake, concerns about process and employee rights, as well as suspicions of administrators’ motives are bound to heighten. But what is also likely to occur are ad hominem arguments, which in our case focused on the faculty appointed to the taskforce, the dean who led the process, and the president “who surely was the puppeteer.” Personal attacks on the president by a few Bereans ultimately became public in fall 2009.
 
In November, a nontraditional student argued that Berea should not pay market salaries for top administrators and, particularly, that the president should not receive a salary more than six times that of the lowest paid employee. That 6:1 ratio would have made my annual salary $120,000 and less than that of 17 current Berea employees. That same month, a disgruntled faculty member—and former provost—published a letter in the student newspaper inviting me to resign because of my poor leadership and overcompensation (he repeated the 6:1 ratio argument). A few critics invited an investigative reporter from the Lexington Herald-Leader to campus, but his published essay turned out to be balanced and fair and did not satisfy the disgruntled.

In the Herald-Leader article, I called the 6:1 ratio argument a “sideshow . . . that actually poisoned our community’s capacity to have a good conversation about salaries in relation to mission.” Several months later, a journalist from Inside Higher Ed picked up this sideshow in an article titled “A President’s Last Stand.” This essay reduced a complex Berea College storm to a simplistic story about its president. The essential lesson here is that we must address the myriad claims that arise, large or small, but keep our eyes on the horizon. Although I have long understood this principle, the past two turbulent years have reinforced the adage, “Keep the main thing the main thing.” Or, “Don’t let the sideshows become the main show.”
 
Seeking Sanctuary
Although liberal arts college presidents know that shared governance distributes leadership widely among faculty, administration, and trustee colleagues, the buck does finally stop on our desks. And during the angry winds of a perfect storm, one must seek the calm in the eye of that storm. Heifetz gives this advice: “Listening to oneself requires a place where one can hear oneself think. Working amidst the cacophony of a multiple-band dance floor, one needs a sanctuary to restore one’s sense of purpose, put issues in perspective, and regain courage and heart. . . . We need sanctuaries” (p. 273).
 
I have sought such calm in reading, reflection, spiritual practice, and, of course, in the comfort of my spouse of 47 years. If any lesson stands out among the others, it is this one—the eye of the storm is where calm can be found and from which strength to battle the storm can come. We all need our sanctuaries. I have often felt inadequate to address the enormity of the challenges of the past two years and to respond to the diverse and conflicting voices, but by sharing the leadership with others, they too have shared this burden. The real satisfaction of this journey for all of us is the realization that Berea’s unique educational mission will not only survive, but thrive, by restructuring our budgets and academic structures. That is the calm eye of Berea’s storm and the place to which we must return again and again.
 
 
​Larry D. Shinn is president of Berea College.