Sunday, September 08, 2013

Attrition is Killing College Budgets

Southern Illinois University is facing a problem that many schools are finding
themselves in. It simply does not have enough state support to pay for all its expenses. It is short on revenue. So it increases tuition; in its case to $11,527 a year. More than enough to cut out many students who might consider attending SIU. But this is not the real cause of its financial problems.

SIU like many other schools blames its woes on the decrease in state support. That is an old complaint which has some validity. In fact it seems that SIU has only increased its state support by $1 million since 1995. The result can be calculated as a loss in state support what with inflation and rising costs to produce education for students. But that is too easy a reason for the University’s problems. It has yet to really help itself by looking at a core issue it needs to deal with – retaining the students it recruits. It has instead focused on the two most popular approaches to increasing revenue – raising tuition and bringing in more students.

Increasing tuition seems to be the most common normative approach to meeting the budget needs of most schools. Doing so is almost counter-productive in a world in which college costs are outpacing the ability of potential and current students to afford them. The more tuition is raised the more the school works against its other most common way to increase revenue. That way to increase revenue is to increase the number of freshmen who come to the University.  Rev up the admissions machine and bring in more freshmen. Keep churning the admissions flow and that’ll solve everything they seem to think but that is far from the truth.  SIU and many other schools need to keep increasing the size of its freshman class to pay the bills simply because it does a woeful job of keeping the students it attracts.

In fact the University it has a 55% annualized average attrition rate for a cohort according to a study published by the Educational Policy Institute. That simply means that 55 of every 100 students it brings in leave prior to graduation.  Fifty-five percent of all the students it recruits do not graduate. They leave sometime after the fall semester they started with 40% leaving after the freshman year. That is a huge number of potential students to lose along with their tuition. 

This is why the University is having budgetary problems. Not because it does not bring in enough students or money but it does not retain enough students to retain its revenue stream.  If the University retention numbers of 45% were given a letter grade it would be an F for failing.

To learn what that means for its revenue all we need to do is apply the formula for this calculation from the Power of Retention: More Customer Service for Higher Education.
 Here it is: CSF1 = [(P X A= SL) X T]
In the formula, P represents the total school population; not just the starting fall freshman number. Most schools use the fall incoming freshmen number and that is an error. The assumption is that attrition occurs most in the first six weeks of the freshman year. That may have some validity for the freshman year but the reality is that students are leaving colleges and universities in any one of the average six-plus years of a four-year degree and in the four-plus average years of a two-year degree. Students leave a school throughout their experience at the college. In fact, some schools are beginning to realize this and worry about the sophomore bubble. But they really need to worry about the super soph sluff, the rising junior jilt, the junior jump, super junior split, the fourth year flee and so on. Every year, every semester, in fact every day is a chance for a student to drop out. Colleges need to be concerned with every student every day of their attendance, for it could be his or her last. So we look at the total population.
Annualized tuition is the number a school should use to figure its real attrition. Not the retention between the first and second semester and the freshman and sophomore years, which are very popular ones. That leaves out all the students who already dropped out before the end of the second term or semester. That number fudges failure. For instance, if a college began a year with 100 new freshman and 99 left in week one but the remaining student stayed the whole year and returned for a sophomore year, the freshman to sophomore percentage would be 100 percent.
In CSF1, A equals attrition. Again not just from freshman but an annualized attrition rate. And this rate is to include ALL students who leave for any reason. It does not matter if the student says he or she will be back. They are not in the population bringing in revenue until they actually do return. If they pay a place holding fee, that does not count them as a student until they are actually back in classes.
IPEDS states that the SIU Fall 2012 enrollment was 18,297. Considering that the University has lost 55% of its students each year, the University will lose 10,063 students. Multiply that times its tuition and the problem it has with its revenue stream comes into very clear focus. 

The University is losing $115,996,201 as a result of attrition. 
If the University focused on retention and saved just 10% of its total attrition or 1006 students, it would immediately retain $11,596,162 into the budget and would not have to increase enrollment another 1006 students just to replace the students it lost. That by the way would save another $5 million plus that it spends on recruiting and enrolling the students. Retention costs little while admission and enrolling is expensive. So the combined revenue to the school if it retained just another 10% of the students it loses would be over $16.5 million dollars.

So how could the University increase its retention numbers in an effective way? Better academic customer service to students and families of students.

We know that 76% of attrition can be related to academic customer service reasons as shown in the following chart of why students leave a college/university. 

These are academic customer service and hospitality issues; not that of retail. In retail the goal is to sell a completed product to a customer. In collegiate customer service the goal is to work on completing the customer through services such as teaching. Our customer is not completed until he or she graduates. And in opposition to the old retail adage “the customer is always right” our customer is wrong as proven on tests and quizzes. In fact one of our goals is to make the customer more correct.

By focusing on retention through academic customer service a school can increase its bottom line significantly and more importantly do what it is there to do. Educate and graduate more students. SIU could start by simply training its people to do something as basic as actually answer the phone. 

Just as a test of its customer service, calls were placed to the University. Out of twenty-five calls made, only eleven were answered. The others went to voice mail. Messages were left but no one called back.  This by the way was not a surprise. Poor phone skills is common across most schools. Not answering a phone or returning calls is a simple issue to fix. Yet for students or others calling to the school, an unanswered phone says that the school does not care about them. And not getting voice mails answered just reinforces that belief. And the college does not care about me is the top reason why students drop out.

It is very likely that if a customer service audit were conducted, the lack of answering phones would be merely one issue that is causing weak customer service. An audit that covered all points of contact with students would likely disclose many other issues ranging from students not being able to get the help they need from faculty (office hours get in the way of research and publications which the University pushes as top bragging points on its website for example) to staff not treating students well to weak and even wrong advising to many other issues that cause students to feel maltreated and leave the University.

Much of that could be changed at the University and retention increased. All it takes is the will to change from a churn and burn enrollments to a more learn and earn revenue approach focusing on retention and bettering customer service to students. What this calls for is a focus not on recruiting more students but on learning what needs to be done to keep the students the admissions department brings in. It means focusing on student expectations, needs and the academic hospitality they demand to feel welcomed and valued. In short, on academic customer service.

If this article has value for you, you'll want to get a copy of the best-selling book The Power of Retention by clicking here.

N.Raisman & Associates has been providing customer service, retention, enrollment and research training and solutions to colleges, universities and career colleges in the US, Canada, and Europe as well as to businesses that seek to work with them since 1999. Clients range from small rural schools to major urban universities and corporations. Its services range from campus customer service audits, workshops, training, presentations, institutional studies and surveys to research on customer service and retention. N.Raisman Associates prides itself on its record of success for its clients and students who are aided through the firm’s services. 

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