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Higher education is in the midst of great change and transformation, and SPH Consulting Group is here to guide you. Not unexpectedly, major future-oriented institutional restructuring, including mergers, acquisitions, consolidations, corporate conversions, and closures, are increasingly common. An environment that is characterized not only by significant challenges, but also by even greater opportunities. Important and complex institutional transformations that require careful consideration of many potential partner opportunities, a defined pace and process, and expert support.
SPH Consulting Group is ready to serve as the partner of choice, advising, guiding, and assisting college and university governing boards and executives as they consider major future-oriented institutional restructuring strategies. SPH Consulting Group is a team of experienced higher education experts who have actively and directly managed to success the many major restructuring events institutions of higher education face and consider in today’s climate. We provide a variety of services that will help ensure full and complete consideration of the strategic options for major institutional transformation available to higher education leaders and, when it is the right decision, the successful execution and implementation of the chosen strategy.
Gary Stocker (00:01.484)
Welcome to the multi-podcast discussion of the new higher education book, Leading Existential Change in Higher Ed, Mergers, Closures, and Other Major Institutional Restructuring. Hi, everybody. I'm Gary Stocker, founder of College Viability. Author Dr. Ricardo Aziz and I have created a series of seven podcasts we will use to review this book. But more importantly, we're going to dig into the topics in much greater depth.
and get Dr. Aziz's input on all those topics. If you have questions about today's podcast or for future podcasts on this book, send them to me, Gary, at collegeviability.com. Dr. Aziz, welcome for this first in the series. You've actually written two books, not just the book, but two books on mergers and acquisitions in higher education. Briefly, step the listeners through the two recent books.
and what your thought process was behind both of them.
Ricardo Azziz (01:04.357)
Well, thank you, Gary, and thank you for having me. So let me just bring you back a little bit. I was, many years ago, about 15 years ago now, was actually recruited to Georgia to serve as president of what was then called the Medical College of Georgia, but also to merge various clinical entities into what would be the state's only public academic health system. And subsequent to that, that was very successful. Subsequent to that, we...
then proposed that perhaps we should become a larger university. We were only standalone health sciences university. And so we then proposed to merge with a proximate nearby liberal arts master level institution to really create an R1. And so we undertook that merger. It was complex and complicated. In fact, probably the single most complicated merger that the University System of Georgia undertook.
And it was successful. But one of the things that I think became very clear to me at that time was that nobody had a clue what was going on. Not the system, not external advisors, not ourselves. And so I took some time off. I spent some time at the Pullia Center for Higher Education. Began working on the book. And the first book that we have is called Strategic Mergers in Higher Education.
It's a much more detailed kind of manual, if you would, of the do's and don'ts of mergers in higher education. know, lots of times before that we had case studies, right? People would talk about their experiences. That's very helpful. But really, this is distilling the experience of hundreds of mergers in that. So that was the first book, Strategic Mergers in Higher Education. We very immediately, very quickly realized that
mergers and successes or not were really about leaders and leadership and the right leadership, right? Both governing board and executive leaders. And so we began to study that with my team as part of the Center for Higher Education Mergers and Acquisitions, TEMA. And we began to study that and then we now published our second book, Leading Existential Change, which you mentioned at the beginning of the podcast. So,
Ricardo Azziz (03:25.52)
Those are sort of the two books and why they have happened. These are obviously their other works currently in planning and in drafting, but that will come at another time.
Gary Stocker (03:38.03)
And let's talk about leadership for a moment. Early in the book, you discuss how the type of leadership that brought us here, the industry, the type of leadership that brought us here generally can't get us there, referencing the future. And that is going to be a challenge for many college leaders. What's your thought process behind that belief?
Ricardo Azziz (04:00.112)
Well, I think that that is correct. I you you can't fix problems using the same reasoning and the same thought process that you actually use to create it. mean, that's a, you know, not to quote Einstein, et cetera. but the issue is as follows. I mean, the tackling the crises that we have currently in higher education, which by the way includes massive excess capacity.
a somewhat softening demand and a softening valuation of it, increasing costs that is actually becoming difficult for many families to afford, a changing demographics, right? We simply have less young people and that's going to continue for the foreseeable future. And of course, rising costs, right? Inflation has not just affected the...
day-to-day consumer, but it has affected all parts of the higher education enterprise. So all of those forces are really creating significant stress. And one of the things that I think people underestimate is that there's massive excess capacity in the United States around higher education. Now, that doesn't take any consideration. Geographic distribution, we have to understand that. Because again, students do want to go often to schools that are close to them.
But nevertheless, I mean, it is very, very difficult actually to maintain all of the different schools at the level that they are accustomed to maintaining enrollment when simply there are just not enough students to go around. So yes, the leaders of the future will have to think differently than the leaders of the past.
Gary Stocker (05:39.618)
And the
Gary Stocker (05:48.652)
And I noticed Dr. Aziz as I read the book that you pretty effectively use case studies throughout the book. How can this approach help college leaders using case studies? How can this approach help those leaders put your content and suggestions into real world applications?
Ricardo Azziz (06:07.664)
Well, I think we used a series of both case studies and vignettes, but really the case studies were well-researched studies around the leadership aspects of major mergers, mergers that people are aware of, the Connecticut Community College mergers, the University System of Georgia mergers, the Technical College of Georgia mergers, and many other private institutions as well.
You know, but we focused primarily on leadership. know, what was leadership thinking, what the leadership experience, what things can we learn, what things can we learn about what to do, what not to do, and so on. So I think that the case studies really provide a realistic picture of the concepts that we're discussing in more abstract form throughout the book.
Gary Stocker (07:04.238)
Big scary change is the phrase you use throughout the book to talk about what's going to happen and talk about how you came up with and use big scary change as relates to mergers and acquisitions in higher ed.
Ricardo Azziz (07:19.472)
You know, we did want to call the book Big Scary Change in Higher Education, but our publisher, Johns Hopkins University Press, did not particularly care for that title. They just thought it was a little bit too dramatic. Frankly, I don't think it's too dramatic at all. For those of us who have actually undertaken mergers or closures, right? I mean, these are major restructuring events. They could be mergers. They could be massive strategic partnerships that are near mergers. They could be...
Gary Stocker (07:28.962)
Hahaha
Ricardo Azziz (07:49.179)
land closures, all of these things are things that all leaders will have to deal with during their tenure. But I will tell you that these are big and scary. mean, they're big changes, right? mean, they define an institution, they define at least one of the institutions, if not more. And two, they're scary. I mean, this is not what we are trained to do in higher education.
If we were perhaps in the auto industry, perhaps it was different, or if we were another kind of industry or IT, et cetera. But to be fair, in higher ed, we are hired as leaders to maintain the heritage, the traditions, and the history of the institution that we're part of. And that does not include major restructuring.
Gary Stocker (08:40.866)
You talk about, today's podcast is covering chapters one, two, and three in the book. And you talk about laggards, you talk about early adapters. And of course we've heard that phrase in other contexts as well, Ricardo. In today's higher education market, which of those two types of leaders, the laggard or the early adapter, which one of those put their organizations at greater risk?
Ricardo Azziz (09:06.916)
That's a great question. So I think often we tend to view laggards as the safest, right? I mean, we tend to view them as the safest approach, right? I mean, well, let's just not do, let's not rock the boat. Let's not have anything do, you know, happen. This is actually the general strategy of most higher education leaders, right? Let's just sort of let things move the way they have been and we'll see what happens.
The problem is that the environmental change, the changes in the environment, the changes in competition, have started to accelerate, right? And again, you know, it's a little bit of the Jack Welch thing. You know, if the change externally is faster than change internally, then, you know, the end is near, right? And that's what's happened. So all of a sudden, the crises that is upon us is much faster, right?
The drop in enrollment is happening super fast, the drop in finances super fast, the drop in public confidence, the increase in inability of families and students to pay. All of this is happening very, very fast. So I would argue today that actually the laggards, the usual which, you know, generally survived in higher education, are actually putting their institutions at greater risk. Because there will be a window for many institutions
on finding a merger partner to become part of a larger organization. And for other institutions, there will be this narrow window where they will have the opportunity to grow based on a merger or an acquisition if people want to talk about that. But the window is not forever. This is a narrow window because things are changing very rapidly. And that's, I think, what's changed.
the laggard to early adopter risk pattern.
Gary Stocker (11:08.738)
I know in a lot of the media that I have done, a of my own social media that I put out there that
Higher education really hasn't been through its merger and acquisition phase unlike most other industries which have had significant consolidation. You think about airlines and hotels and fast food and banks and you name it. You use a quote from Lamar Alexander on page 19 that humorously I thought suggests that there is nothing harder than being a college president.
In that context, is it even reasonable, Dr. Aziz, is it reasonable to believe that higher education will indeed enter a period of substantial M &A activity?
Ricardo Azziz (11:53.829)
So that's actually another great question. So I will simply start out by saying that having been a university president, it truly was one of the hardest jobs I've ever had to do. You have a myriad of constituents, all of them have a right to weigh in on your decisions, everything from alumni to faculty to faculty unions to the elected officials of your public institution.
the community, your students, and so on and so forth. So the truth is that there's lots of stakeholders in your decision making. It's not just one, right? It's not the stockholder who actually is, calls the shots or the owners, right? I mean, so this is different. So we are truly servant leaders in, as presidents of higher education, okay? So it is an extraordinarily hard job. What has happened with that is that the risks
tolerance of leaders in higher education is very low, right? Is very low. The risk tolerance is very low and the desire to preserve one's job is very high. And that is not a great combination for the sustainability of an institution in a time of great challenge and change, right? So if executive leaders are more worried about keeping their jobs and more worried about
not making waves and more concerned really about sort of keeping things the way they were, right? We're not realizing that actually the times have changed and so on. So I think what we're gonna start seeing and continuing to see is not perhaps mergers and acquisitions will increase. And that's my view, they will increase.
because people are now becoming more proactive, right? Institutions become more proactive about it. But unfortunately, we're going to see a much greater rise in either closures or what we call zombie institutions, Institutions basically are dead. They barely have enough financing to stay afloat. And they just sort of live on this kind of, let's find money this year to keep going.
Ricardo Azziz (14:11.318)
It reminds me a little bit of when I was a kid and you know my parents were professors and we didn't have a lot of money so we'd spend the weekends fixing cars so that they run during the week right and so then the weekend we'd like you know work on them tune them up and that kind of thing. And this is what happens with many institutions they sort of if they could just keep the machinery going with just a little bit. But the problem with that is that they are basically already so fragile that any kind of
crisis, ransomware attack, etc. can just put them over.
Gary Stocker (14:47.339)
Authority and power is a topic I'm going to talk about for those first couple of chapters. In page 53, in chapter 3, the title of that chapter is called A Different Kind of Leadership. You suggest that the legitimate use of authority and power by the college president and its governing board is greatly broadened in the vision that you have. In that same section, Dr. Aziz, you write that higher education &A's
require a much faster pace of implementation than almost any other major initiative in higher education. If you would, please expand on both of those.
Ricardo Azziz (15:26.564)
Well, I I think this is one of the things that our authors, or my co-authors and I spent a fair amount of time trying to understand. It's very clear that &A and even closures don't start at the faculty level. They don't start at the student level. They don't start at the alumni level. They truly start at the executive leadership and the board. And in the end, it's the board who actually has full authority, right?
executive leader is just there to carry out the general directives of the board. So this is very different than most change and transformations that we talk about higher education because most of these are really partnerships between faculty and staff and often start with the faculty. You know the faculty say, hey, you we need to have a new college or we need to expand on whatever it is that it is. So it's a partnership. But in this case, this really begins and emanates with the governing board
and the executive leader thinking this through as to whether, because they are responsible for the corporate structure. when I say corporate, I'm not talking about a corporation like an industry, but I'm talking about a corporation because all schools, all institutions, colleges and universities have a corporate structure, right? And the governing board is responsible for the corporate structure. So that's what happens, you know.
the role of executive leaders and the board in considering, evaluating, weighing these kind of options is significantly greater than it would be at other times when we talk about transformation in higher education. The other thing we know, and data strongly supports this, is that speed is the element of success.
When you have these kind of changes, you can't not linger. Because lingering basically spells out failure, right? Why does that do that? Because lingering creates even more uncertainty and more lack of clarity. And when is this going to happen? And what's going on? so on and so forth. It even allows... Opposition is a good thing. Everybody is important to speak and be vocal.
Ricardo Azziz (17:44.604)
But other times, just the pace, the slowness of the pace leads to inadequate decision making. So the mergers and acquisitions, so sometimes it'll take two or three years to consider what to do and what to acquire and who to partner with and all that kind of stuff, right, and whether we want to do that. But once a decision is made, you've got to move fast. And fast means 18 months or less.
Gary Stocker (18:14.176)
Interesting. So many things to talk about, and I'm glad we're doing a series of podcasts on this, Ricardo, but I want to step back and talk about big scary change again. And it's easy to argue, it's easy to note. It's a fact that the history and culture of higher education is effectively the opposite of big scary change. It is a slow industry, it is a deliberative, sensitive,
and it is encumbered, I make the argument, it's encumbered in decades of, for the most part, ineffective business practices. What's your sense based on this book and your experience, what's your sense of how that will change?
Ricardo Azziz (18:56.101)
Well, you I think you've spelled it out very well. mean, and I'm a long-term academic whose parents were academics. So I'm a second or third generation academic. So I know universities. In fact, I tell the story always that I had the great misfortune of actually having to live on faculty housing in the college I was going to, University of Puerto Rico at Mayaguez. And so I lived actually in my parents' home on campus, right? And so I couldn't even escape that.
Gary Stocker (19:24.878)
Thank
Ricardo Azziz (19:26.565)
But the point is, universities and colleges, higher education does an incredible good. mean, we provide higher thought process. We drive a lot of the innovation and the discovery in the world. We provide a sense of civic duty and a understanding of our history. I mean, we do so much that it's actually a tremendous, tremendous asset, not to speak about.
professional training, physicians and nurses and so on and so forth, right? But the problem is that we are also tremendously traditional, right? We wear robes as they were worn two, 300 years ago, right? We believe in traditions that sometimes are 300 years old, right? We believe in thoughtfulness, but we confuse thoughtfulness with, you know, with
Gary Stocker (20:15.32)
Ha ha ha ha!
Ricardo Azziz (20:23.131)
basically incrementalism, right? And incrementalism depends. mean, you could be incremental if the pace of change on the outside of the environment is very slow. if everything else is moving fast and you're moving at the same speed, then you've got a real problem. So do I have hopes that more and more leaders are going to be grasping the importance of doing this? Yes, absolutely. I think I see it. I see...
more more cases of potential mergers and certainly or planned closures, right? Sometimes you can't keep your institution open, but you have to then, for the sake of students and alumni, have a plan for closure, right? Figure out what you're gonna do, how you're gonna preserve your heritage and so on and so forth. What are you gonna do with your students, right? So all of these are changes, but unfortunately they happen fast and they require leaders with a significant amount of courage, okay?
There's a number of other qualities that we talk about in the book, seven qualities to be exact, but the reality is, the ultimate one is courage. If you don't have courage to do what is probably the right thing at the right time, even knowing that you don't know if it's the right thing, right? Then we're going to fail our institutions and our students.
Gary Stocker (21:38.286)
Thank
Gary Stocker (21:44.27)
And the last question for this first episode in the series is on page 58, you have a table in the book that lists leadership skills that in the normal course of business, leadership skills for the normal course of business and what those should be in the face of big scary change. I'm going look at three and I'll do them separately for you. In the normal course of business, you say transparency is expected, but in the face of big scary change, you say confidentiality becomes more important. Talk about those two.
Ricardo Azziz (22:14.737)
So I think that transparency is always a good default, you know? But there are parts of a merger and acquisition and even closure, the whole planning consideration part, that actually has to occur in relative confidentiality, right? I mean, you don't want to be discussing a potential merger deal or a business deal or a closure until you're absolutely certain that this is what needs to happen.
And so, in that first part of these majors restructuring, there's a fair amount of confidentiality until you do that. And that's one of the things that sometimes leaders have a great difficulty, particularly leaders who come up through the faculty ranks. They just have difficulty because I'm a long-term faculty, 35 years in the making.
So I want to have as much transparency to me as possible, but I also know as a former leader of a university that that's just not possible. And so that's where I think the dichotomy occurs.
Gary Stocker (23:22.286)
And then the second of the three, in today's normal course of business, it's a deliberative, it's a slow process. And you talked about this a little bit earlier. It's deliberative today in the face of big scary change. The pace needs to be rapid.
Ricardo Azziz (23:36.146)
Yeah, and so that's one of the things that I think, you know, we're all accustomed to incrementalism. We're all accustomed to thoughtfulness. You know, we're all accustomed to lots of committees considering whatever the issue is. You know, tongue in cheek, there are many presidents who remind me that the best way to kill a project is simply to refer it to a faculty committee without any deadline, because then it'll never happen, right? I mean, so...
So, but in this case, you have some finite things that have to happen. There are number of regulatory accrediting key steps and milestones that you need to complete that need to happen at the right times. And so the pace is significant and the structure is significant, you know. We're often colleges don't do a lot of project management. They'll talk about it, but they don't really have their own business development project management units.
But unfortunately, these kind of initiatives require that kind of planning.
Gary Stocker (24:37.324)
And in the final comparison, in the normal course of business, today's college promotes unity, and in the face of big, scary change, you suggest that they will need, or the industry, higher education will need to recognize there will be winners and there will be losers.
Ricardo Azziz (24:55.419)
Well, that is true. mean, unfortunately, as the situation in the country gets tougher and tougher, there will be simply institutions that will not be able to survive. And my hope is that leaders have sufficient thoughtfulness and sufficient vision of the future to realize that and to plan for a orderly closure. In other cases, some institutions will be...
literally acquired. I don't like to use the word acquired when I talk about mergers, but some other institutions will be acquired and will basically disappear into the belly of the beast, if you would. In other words, disappear into a larger organization. My hope again is that most of these mergers, whether they're, you know, small institution, larger institution, etc., are able to orchestrate a way to preserve their traditions and their history so that
Both institutions are recognized over time, right? But yes, are definitely the stresses of the current higher education system are going to create that. We looked at our data as we analyze this and we found, for example, that over the last 12 years or so, all sectors of higher education have lost students when you consider them by size, right?
The sector of less than a thousand students lost 35 % of their students over the last 12 years. And then, you know, believe it or not, the second highest loss was experienced by regional universities, those of 10 to 20,000 students. They've also lost about 25 % of their enrollment, right? But every sector by size has lost enrollment except
the schools that are larger than 30,000 students. Those very large schools in general have gained students and in general have gained more than a million students over the last 12 years. So size matters. Survivability is based on not just how good we are and how differentiated we are and what is our
Ricardo Azziz (27:15.803)
target or market population, but it's also determined by how big we are.
Gary Stocker (27:22.638)
And let's do wrap on this in the first of a series of seven podcasts on the new higher education book, Leading Existential Change in Higher Ed, Mergers, Closures and Other Major Institutional Restructuring from Johns Hopkins University Press, in addition to Dr. Ricardo Aziz, Drs. Lloyd Jacobs.
Bonita Jacobs and Richard Katzman are all contributing authors. The book is available at Amazon and other online retailers. Dr. Aziz is always a pleasure. We'll be back again with a second episode of the podcast soon.
Ricardo Azziz (27:54.076)
Thank you very much, Gary, and you are a contributor to that book. Your expertise was able to help our pages become better. So thank you very much for that as well.