Archives for the month of: December, 2013

I understand that Wikipedia has the popularity or WikiLeaks in some circles but this is as good an explanation of the flipped classroom that I have seen.  As those who follow my blog will note, this concept can be taken to the next level with colleges cooperating with each other, offering flipped lectures from a variety of top professors from different institutions and local help provided to work through problems or research.  Students, particularly those who are entering higher education right after high school, find technology compelling and the traditional lecture irrelevant. In many ways, we have to keep up with them.

The use of the flipped class also helps in meeting the need for a better relationship between economic inputs and outputs. Failure to address mushrooming costs will eventually reduce the options that students have for higher education.

What do you think?

The junior senator from Massachusetts is proposing that the use of credit reports be eliminated in connection with job applications.  The only exception she is willing to consider is for government employees seeking a security clearance.

There does seem to be an incongruity in the ubiquitous use of credit ratings in connection with the hiring decision.  After all, a person who desperately needs a job has likely exhausted all of his or her financial resources and may have lost a house or car while attempting to find the next opportunity.  Job losses and medical disasters can wreak havoc on a credit score, essentially taking away possibilities that would be afforded those who have better credit but may be less qualified.  There are also any number of positions where credit status is just not relevant.  Is she onto something here?

Digging deeper, the credit report does seem to have some merit and it appears that the Senator is unfamiliar with the ways businesses use these scores or the grace they afford those with event-related degradation.  Most of those which I am familiar only require credit reports on those who assume significant responsibilities or who will be handling or accounting for large sums of money.  Some of these positions have to be bonded, meaning that a bond agency will want to have some idea of the risk involved before assigning a rate.  Without a credit report, bonding rates will skyrocket, under the presumption that all applicants have poor credit.

I’ve witnessed companies presuming the best of job applicants when a credit report showed a pattern of responsible use of debt, interrupted by what was clearly a disruptive event.  That is, a company understands the impact of a job loss, medical crisis or being victimized by a divorce.  I do not want to think that our representatives in government presume businesses to be full of cold-hearted managers, desirous of finding any way possible not to hire, well, anybody. Indeed, experience tells a different story.

If a careful analysis is performed, it will likely be found that those with the kinds of life-altering events that presage a diminished credit score represent but a portion of the population with bad credit.  And, one will also find that businesses tend to be gracious toward the truly disadvantaged.  Candidly, most with low credit scores are “deadbeats,” having willingly overextended themselves (and, no, it is not the fault of the credit provider) or merely been reckless in their handling of money matters.  It is true that the way a person handles their personal obligations reflects how they will manage their affairs at work.  Again, I am exempting those with event-based bad credit, commenting instead on the majority who are in trouble due to bad decisions and/or habits. We dare not give the 80% a pass because of the 20% who deserve one.

Getting rid of credit score-based hiring decisions will also inappropriately disadvantage those who have been responsible with credit; those who live life with a buffer and are willing to say “no” to tempting offers from aggressive lenders.  At a minimum, banks and other financial institutions should use credit scores when evaluating an employee.  Beyond that, I suggest that anyone who either sells product, collects funds or accounts for transactions should not be overly tempted to steal.  The credit report is a good mechanism to ferret out such people.  It’s just good business and it is fair, particularly when event-based bad credit is accommodated.

Running a report on everyone does seem excessive to me and should only be done when the organization’s entire operation involves bondable positions.  Some identification of where such a report is appropriate is worth introducing into the conversation and there seems to be an opening for the US Chamber to propose some voluntary guidelines.  Reasonable standards, adopted by most businesses could very well blunt an initiative that is not well considered.  If the seeking of a security clearance merits a credit report, surely there are other positions in the commercial world that are similarly benefitted.

With financial institutions needing to be rid of the characters who brought us the meltdown five years ago, it will be hard to stem the impact of employee greed caused by a barrage of bill collectors.  To protect all of society, it seems imprudent to categorically eliminate the credit report as an evaluative tool for those prospective employees who have significant responsibilities.

This is certainly worth a discussion but I see the current proposal as a ruse to stick business with risky employees in the name of higher employment amongst those who are not all that prudent with their financial affairs.  Call it another idea from our government that flies in the face of reasonableness.  Added to this the recently stated desire to eliminate criminal background checks.  In the end, government becomes viewed as an “other” entity, not interested in protecting the citizenry and promoting an agenda that makes them look better in the short run.

What do you think?

Another article on the demographic challenges confronting higher education.  Thanks to Tim Fuller of Credo Higher Ed for sending this along.  Trends are clear but I believe there are ways to address them if we work with some dispatch.

Another who feels as I do

My friend and CFO Colleague, Craig Mahler, forwarded the above link to me.  Glad to see others who view the issues of higher education in similar ways.  Now, let’s do something about it!

Every so often, one of the classic movies I enjoy has a scene from a horse race.  Here are women dressed in the most amazing outfits one could dream up, with hats the size of snow saucers, accompanied by tuxedo-wearing gentlemen who arrive at the last minute, receipts in hand, ready to cheer on their new-found favorite ride.

Then, throwing away all pretense, these otherwise refined individuals begin screaming and carrying on while their horse and its jockey make a round of the oval.  Unless the famous Mr. Ed is on the track (and he has exceptional hearing abilities), neither the animal nor its rider will hear much of anything.  Nonetheless the two humans strain and scream, in the belief that such actions will cause their horse to triumph. In the end, ecstatic winners of the human variety are a clear minority, with most of the losers dropping their receipts on the ground and sneering at the gloating winners.  I think you get the picture.

So, what does this have to do with higher education finance?  I will stop short of calling the leadership team a bunch of gamblers who wear hats the size of saucers but the analogy is not totally off.  A budget is prepared in the spring and adopted at some point before the end of the fiscal year.  Then, the summer months roll along, with no small amount of yearning to see recruitment, retention and discount numbers.  When all three are in line with budget expectations (a trifecta of sorts), a collective sigh of relief is registered and life moves on as planned.

Regrettably, the three major components underwriting a tuition-driven institution are often not in line with budget benchmarks; and I am not suggesting that they exceed expectations.  Depending on how much they are off, a mid-course correction might be announced as soon as late September.  These comprise the worse sort of budget cuts.  And, if this manner of operation is experienced during numerous Septembers, confidence in the administration erodes and morale plummets.

While a number of reasons contribute to mid-cycle reductions, the most common is a dearth of rigorous forecasting tools.  Even worse is possessing a system but ignoring its insights.  Higher education is actually one of the easiest industries to forecast, believe it or not.  When the turnstiles stop in September, the entire year can be predicted, with reasonable accuracy, and an early preview of next year becomes available.  Even non-traditional operations can be projected with some precision.  For most institutions, over two thirds of non-traditional revenue for any given year comes from cohorts that were underway before the fiscal year began.  New starts are important but will impact future years more than the current one.

In other words, the basis for the budget should be grounded in solid, proven data relationships and not the best wishes of a longshot win.

There are other benefits from using a comprehensive forecasting model.  The board appreciates seeing this kind of rigor, as does the various participants in the budget process.  It may mean that budget preparation will require more difficult expense reductions prior to the budget being finalized.  That is a small price to pay when compared with the upheaval of mid-year cuts; ones that tend to fall disproportionately on staff and are made after a good deal of spending has already occurred.

And, it beats screaming loudly at enrollment reports, yearning for overly optimistic assumptions to become reality.

Do you need a comprehensive forecast model or a non-traditional revenue projection model?  Email me and I’ll send you mine, free of charge.