How to Teach-out a University with Dignity
Over the last several years, colleges and universities across the country have closed. Many experts including myself anticipate that this trend will continue and expand in the future. Many schools close with little notice disrupting students, faculty, and staff. This article tells the story of my experience closing a university in an orderly fashion and with dignity.
Tuesday February 28, 2017, my university president called a special lunch meeting with the leadership team where she told us that the decision had been made to close the university. The reasons are complicated, but the primary issue was that we were running an operating deficit and had been for several years. Four years earlier, the university had adopted a strategy of reducing tuition in half to increase enrollment. Unfortunately, lower tuition did not immediately lead to increased enrollments. We finally were getting traction by partnering with a major employer on a free college program, but profitability was still a future state. We had been living on borrowed time for years, and we finally had run out of time.
The leadership team immediately shifted from working on the next year’s strategic plan to working on our teach-out plan. We gave ourselves ten days to put together our initial plan so that we could first inform our faculty and staff and then our students. Our planning began by asking ourselves what activities we could stop and how soon we could stop them. For example, we knew we would stop enrolling new students, so marketing and advising related to enrollment could be stopped right away. One of the challenges was that we could not engage our teams in this discussion, because we wanted to limit who was in the loop on the closing.
We identified several waves of employee lay-offs based on what activities we could reduce or cease. Each of our 80 employees was assigned to a wave, and then we determined dates for the waves. As provost, my responsibility was for all academic activities. I knew we could stop hiring new faculty, and I also decided that we would not be developing new courses. As the number of courses being taught would be decreasing, I knew I could reduce the faculty services team. Likewise, faculty development was an activity that we could stop. There is a shift that you must make when you transition from having a future-oriented focus where you invest resources in getting better and increasing capacity and a teach-out where your goal is to land the plane as gently as possible. On Thursday March 10, 2017 we announced the closure to our team. Each employee had an individual meeting with human resources to review the severance agreement and the individual employee’s scheduled separation date. In hindsight, this was one of our smart decisions. It removed uncertainty for employees of not knowing when they would need a new job.
Development of the Teach-out Plan
Following the announcement to the team, we announced the teach-out to our students. At that stage, all we could announce was that we had stopped enrolling new students and would be developing a teach-out plan. Our initial teach-out plan included closing in August 2019. This date proved to be wrong for two reasons. First, our accreditor recommended an earlier date. We were due for an accreditation visit in late 2018, and we agreed with our accreditor that a standard visit during a teach-out would be a challenge. The criteria for accreditation are focused on institutions that have a future. Criteria about planning and related activities do not make sense when a university has an expiration date. Second, we failed to include an administrative period after the end of classes to wrap up tasks like graduating students and closing the books. The university needs a buffer after the last classes end to graduate students and resolve any administrative issues.
Negotiations with our accreditor required four months and a campus visit. We were able to agree on an end date of December 2018 for the teaching of courses. We added two months after this date for wrap-up. Based on this schedule, our CFO developed a forecast for how many students we expected to have enrolled. Our courses were 8-weeks long and started every month allowing students to overlap. Prior to the teach-out, few students overlapped. We expected this pattern to continue, but we were wrong.
With a specific deadline for classes, we began reaching out to students individually on what the teach-out meant for them. We grouped students into 3 categories based on our assessment of how likely they would be able to graduate. High probability students would not need to overlap courses and could graduate by December 2018. Medium probability students would have to overlap one to three classes during the teach-out to graduate by December 2018. Low probability students would have to overlap more than three courses, and our estimation was that they would be unlikely to be able to graduate before the closure. Our registrar’s office created a schedule for all students, and during July and August 2017, advisers reached out to students to discuss what it would take to graduate from us or to transfer to another institution. A teach-out is like being through the looking glass. Having spent years working on getting students to enroll and stay in school, our advisors had to shift to encouraging students to leave. I had several pep talks with the advisers explaining the benefits to students to transfer. Graduating from an ongoing university meant an active alumni society and other services. While we could not force students to leave, we wanted to encourage them to do so. This was harder than it might seem. Our students loved our learning model and prior to the teach-out, our student satisfaction scores were very high.
Planning and executing a teach-out requires significant negotiation. It took us over four months to negotiate the teach-out plan with our accreditor. Each of the negotiations with the Department of Education took time, especially with government shutdowns. The state was relatively easy to negotiate with, but their expectations changed during the process. You will not win every negotiating point, so you need to allow time for making alternative plans. As in any successful negotiation, you need to listen to the needs of the other side and collaborate on solutions that meet everyone’s needs.
I have worked in multiple universities, and I had several people I could call about being transfer partners. We needed to offer at least one option for all of our programs, and we wanted to provide students with choices, so they did not feel they were being pushed to one school. As an online university, we had flexibility with transfer partners since geography was not a factor. As it worked out, our four transfer partners were all in our accreditation region. Two were places I had worked previously. One was owned by the same parent company that owned us. One contacted us, though I was familiar with the university through my work with our accreditor. In each case we negotiated discounted tuition rates and favorable acceptance of transfer credit for our students.
To promote our transfer partners, we hosted webinars with each partner. We recorded these and sent the link to students. In hindsight, this was probably one of the least useful actions we took. In general, our philosophy was to get students in direct contact with transfer partners. The most important step we took was providing each student with a specific plan for what they would need to do to graduate. This made it clear to students who were distant from graduation that they would need to transfer. Complicating matters, we were a non-term-based school for financial aid. This means each student had an individual financial aid year, so for our aid students, we had to counsel them on the best time to transfer based on their aid year.
We started the teach-out with 81 employees (71 staff and 10 full-time faculty). Our first round of lay-offs occurred on the day of the announcement, impacting 4 staff. In hindsight, this was a mistake. The impacted employees were advisors who focused on new enrollment. While we were immediately stopping their work, it would not have been costly to keep them on the payroll until the next lay-off at the end of March. Eleven additional staff were let go at the end of March. At the end of April, we reduced staff by an additional 7 staff. In August, we reduced another 10 staff and 2 full-time faculty. This brought us to 37 full-time employees, 46% of where we started 7 months earlier.
We stabilized at this point, and our next staff reduction of 11 people was in March 2018. Our second to last reduction occurred at the end of courses being taught in December 2018, when we let 5 more people go. The final reduction came on March 1, 2019 when the final 14 staff closed the university.
We adjusted faculty lay-offs based on the teaching schedule. Faculty were let go based on how many courses they were qualified to teach and course availability. At the end of academic operations in December 2018, we had 4 full-time faculty remaining. We adjusted along the way. In some cases, we extended people from one lay-off to the next when we realized we needed their unique set of skills. In other cases, we moved people to an earlier date. For example, as we entered fall 2018, we realized that we did not have enough students left to keep four advisors occupied, so we moved two up to leave earlier. Throughout the teach-out we followed our commitment to give 30-days advanced notice if a last day of employment would be moved up or moved out. A key consideration in who to keep was employees that had the ability and willingness to take on new responsibilities. This flexibility was critical in being able to reduce headcount without impacting the quality of services to students.
A key to our teach-out was front-loading planning and other activities. This allowed us to do more when we had more people so that as we lost people, we had to spend less time on reacting and could instead focus on executing on the plans that we had already put in place.
We used March and April to identify what activities we could stop and also review expenses such as software licenses and other contracts that could be ended. As we reviewed these items, we also identified what contracts did not need to be renewed and which would need to be negotiated to allow them to end with the closing of the university. One of the benefits of a teach-out that lasted two years is that we were able to validate our work as we were invoiced for annual expenses throughout the year. The finance team would ask with each invoice if it was something we needed to renew. The other critical activity during March and April was identifying succession plans and cross-training. We knew that as people left, specialized knowledge would need to be transitioned to someone who was staying longer. Our one-person training department put together transition plans for everyone for the duration of the teach-out. As a result of our upfront work, we reduced uncertainty for students and employees. Everyone knew when we would be closing and how it would impact them. Another key project we front-loaded was student records. We contracted with Parchment to provide student transcripts for after we closed. The challenge on our end was preparing all the transcripts from 40 years including long closed international campuses to be transferred to Parchment. We started this project early while we still had many employees to divide the work. One of my concerns from the start of the teach-out was the mental health of my team at the end. Not only would we be losing our jobs, but we would have had to say goodbye to many colleagues along the way. For two years we would be working on ending something that we were all cared about. I had faculty, staff, and board members with over 20 years of service to the university. Planning a funeral is not as exciting as planning a wedding. I wanted to make sure we did everything we could do early on so that when the end came, we had time to take care of ourselves and prepare for our own transitions to what comes next.
During the summer of 2017 while we were still finalizing the teach-out plan, our registrar’s team worked with academics to develop a course schedule based on what courses students needed to graduate. This allowed advisors to have a degree plan for students. It also made it so the provost ad her team could accurately plan on what faculty would be needed and when. When we started the teach-out, I expected that we would have to offer many sections of 1 or 2 students to finish students. We modified the adjunct faculty pay schedule to increase compensation for these courses. In the end, we had very few of these sections. Thanks to effective scheduling, our average class size remained high throughout the teach-out.
Question Assumptions and Think Outside of the Box
One of the ways that we were able to save money was to challenge assumptions. For example, the software we used for financial aid processing had to be updated and licensed annually. This would have been a $160,000 expense for the aid year starting in July 2018. Since we had few students who would need aid in those 6 months, we realized that it was cheaper to use the money to scholarship these students. We considered withdrawing from Title IV altogether, but that would have meant our students who were still enrolled would have entered re-payment on their loans sooner. Per the Department’s suggestion, we scholarshipped students at the cost of attendance to reduce their aid eligibility to zero. This meant students received a stipend above and beyond the cost of tuition. The Department of Education requires a Title IV audit for schools that are closing. The cost for us for this audit was $100,000. We were able to negotiate with our auditor and the Department to combine this closed school audit with the previous year audit. Resulting in a significant savings.
Academically, we also had to use some creativity. At the last minute we discovered that one student was missing a class she needed for graduation. We offered her a special accelerated class in January 2019 to finish this last degree requirement. The course was our standard course and taught by a qualified faculty member, but we shortened the schedule and let her work ahead. In another case, a student failed a course at the end. In her case, we recommend a CLEP exam as an alternative method of credit, and she was able to graduate. We had other alternatives that the provost, registrar, and I had developed, such as having students take a course at another institution and transfer those credits in. Having prepared for these scenarios in advance of needing them meant we could move quickly when we needed to and when we no longer had much time to spare before closing.
In October 2018 we began reporting on student activity against forecast on a weekly basis. We used the categories of graduation probability (high, medium, and low likelihood of graduating) and how enrollments compared to our teach-out plan. We also added a qualitative measure of “at risk” that was assigned by the advisors. The advisors looked at each student and based on past performance and conversations with the students identified the students they felt would not graduate. Our overarching goal was to help students who could graduate graduate and to help those who could not graduate transition sooner rather than later. During fall 2017, we saw a steady stream of students who could not graduate transition to teach-out partners or other institutions. For most of this time, we were ahead of our forecast by 90 days (the active student population was lower than expected). At the same time, revenue was up because students who were active were taking more classes and persisting in those classes.
By May 2018, our lead had shrunk to about 30 days with 427 active students. Slightly over 1 year since the announcement of the closing, we had transitioned most of the students who could not complete. We were doing a better job than expected with retention, and we changed our tracking and reporting to look at students on a more individual basis. On a weekly basis, I received a report from my business intelligence person with a list of all students still enrolled along with their future course registrations. I used the graduation probability to identify what students did not have a clear path to graduation. I then had individual meetings with each advisor to review the status of students who were not on a path to graduation. The advisors used this list to prioritize student out reach. We also put in place a monitoring program so that if a student failed to complete a course, we could revise her/his graduation plan or discuss transfer options. We also aggressively reached out to students were inactive but had not withdrawn from the university. I attempted to locate students via Facebook and LinkedIn who would not return phone calls, e-mail, or certified mail. Another tool in our arsenal was asking students who could not finish a bachelor’s degree if they wanted to switch to an associate degree. We had one former student who had had a serious illness interrupt her studies. We were able to re-admit her in an associate degree program using her existing credits to graduate. Since she never attended class during the teach-out, she does not get counted in our numbers, but hers is one of my favorite stories during the teach-out. We also had a student two classes away from graduating who lost her house in a hurricane. We gave her an incomplete, an extended that incomplete, and she finally was able to finish her work successfully in January 2019. We were not able to do anything for the losses she and her family suffered, but we were able to get her to become a college graduate. As president, my most important responsibility was ensuring that no student was left behind and that my team was doing everything we could do to support our students.
A Better Graduation
We had a graduation event scheduled for August 2017. We canceled that event. With a significantly reduced staff, we knew we could not carry off a traditional commencement exercise. Based on concerns from students, we compromised by adding a graduate recognition to our scheduled honor society induction around the time the graduation had been planned. This was a low-key event on campus, but we still had concerns raised about the lack of a graduation ceremony for the remaining students. To address these concerns, I asked the provost to develop a proposal to the board on three levels of events that we could offer. At the high end would be a traditional graduation ceremony, and at the low end an online only event. In the end, we settled on the middle path. We would recognize graduates at an event that would be both in-person and online followed by a reception. Unlike traditional graduation, there would be literally no pomp and circumstance including no regalia for students or faculty. I required that we hire an event planner and staff to conduct the event, as I did not want staff and faculty to take on this additional work during the final months of the university.
In October 2018, we had out student recognition event in a hotel ballroom near the campus. We invited anyone who had graduated since our last graduation in 2016 and anyone scheduled to graduate. We simulcast the event online. We worked with our regalia vendor so that students could purchase caps, gowns, and tassels. We bought a few ourselves for students to wear for pictures at the event, and we hired our graduation photographer to take pictures of students with a university branded backdrop. We asked students to stand to be recognized rather than to walk. Rather than receiving complaints, students appreciated that they could sit with family and friends. Not having a processional also reduced the time of the event. Students had the experience of being able to celebrate their accomplishment without the usual time spent on these types of events. We also brought back two former university presidents and invited former staff to attend so that the event provided a capstone celebration for the university itself. The expense was $50,000 we had not planned on in our initial budget, but since we were able to save money in so many other ways, we were able to cover this expense.
While we finished as a 100% online university, we still had classroom space when we began the teach-out. We were able to move out of this space, which meant a substantial savings on real estate expense.
The Department of Education, accreditors, and states do not make it easy for a college to change locations. We probably could have saved more money by downsizing our office space, there was no easy way to do this within our current location. Changing locations would have been costlier than any savings, so we stayed where we were.
Make It Hard for Employees to Leave
From early on we knew we needed to retain our employees. I cannot imagine trying to hire new staff for a university that is closing. For employees there is the opportunity cost of not being somewhere that has a future and the potential with that, and there is also the risk of not being able to find a new job when the university closes.
Our first strategy was a retention bonus. Each employee was promised a bonus if they stayed until their scheduled end date. The bonus was based on pay and on how long they were scheduled to stay after the announcement. If we let go of someone earlier than planned, then they would receive their full retention bonus. Our second strategy was to expand our work from home policy and move to a 4-day work week with built-in time for personal development. We had been letting most employees work from home 2-days a week prior to the teach-out. We left this in place, but we closed the university on Friday, so employees only had to come into the office two days a week. We also gave employees 8-hours a week for professional development. That time could be spent looking for a new job, networking, learning new skills, or mental health time. In January 2018, we went to only one day in the office. We also planned team builder events on a regular basis on days we were all in the office. During the teach-out, we only had two employees who voluntarily left the university. That means we had 98% employee retention over a two-year period. One of the defectors was a leader who wanted to invest him time and energy into an ongoing concern. The other person landed a dream job on the other side of the country where she and her family had been hoping to relocate. I was very fortunate to have a dedicated team who was willing to stay as long as needed to help our students. No one ever hesitated when we asked them to stay longer, and those who we let go sooner appreciated the opportunity to move onto the next stage of their careers.
Teach-out as a Strategic Plan
September was traditionally the time of year when we announced our new strategic goals for the year. As we prepared for the transition from my predecessor to me as president, we realized that we need strategic goals for the teach-out. We developed the following outcomes for the teach-out:
- Prepare our students for life after closing either by helping them to continue their education elsewhere or by completing a degree with West.
- Preserve the quality of the student experience throughout the teach-out both within and outside of the classroom.
- Exercise fiscal responsibility as good stewards of financial resources during the teach-out.
- Prepare ourselves and each other for life after closing including supporting professional development and stretch assignments to develop each employee’s marketable skills.
- Sunset all University operations after cessation of teaching activities.
I used these outcomes as the basis for my presentations to the board throughout the teach-out.
During the teach-out (March 2017 – December 2018) we had 1,376 active students. Of those, 706 graduated and 663 withdrew from the university. Only 7 students remained enrolled, and 4 of those had been inactive more than 6 months at the time the university closed. Of the students active September 1, 2018 who had student loans from their studies with us, all graduated. No students at the university are eligible for a closed school student loan discharge.
From a financial perspective, revenue was 110% of forecast. Expenses ran 96% of forecast, including the costs for the student recognition event.
Our teach-out cost $8 million above revenue generated. We were fortunate that we had owners willing and able to provide the resources to close the university correctly. Most institutions appear to wait until almost all cash reserves are spent before starting the teach-out process. Without cash, it is not possible to offer an extended teach-out that allows students time to finish or transfer. We graduated more students than withdrew because we had 20 months of time in the classroom. Students who have more credits will have a harder time transferring, but we provided a path to graduation for these students.
Comparing our finances before and during the teach-out, our revenue on a monthly basis decreased 55% and our expenses decreased by 46%. Expenses included all retention and severance bonuses for employees. While this is a sample of one, it provides some estimate for the final model of a teach-out. A significant variable will be facility expense, where we were able to realize substantial savings. Our space was leased, and our landlord worked with us to reduce our footprint. Also, we had no debt or related fixed expenses that could not be reduced. That can also constrain cash flow.
During the two years of our teach-out, I have seen multiple colleges begin and end their teach-outs, leaving chaos for their students, faculty, and staff. In most cases, the end did not come on suddenly because of a new issue. The end came because delay and denial could no longer be deferred, and the only option was to lock the doors. A teach-out with dignity requires planning and acceptance of what is coming when resources still exist to make the landing as soft as possible.
Planning for No Future
An effective teach-out does not happen on its own. It requires planning for no future. Based on my experience, here are six recommendations for how to plan and act when you have no future:
- Transparency – Announce the teach-out as soon as possible. We had 10 days to make our announcement. We announced that we were stopping the enrollment of new students, that a teach-out plan would be coming, and we have employees an exit date. This limits the impact of rumors and speculation. Developing the full teach-out plan takes time and negotiation with a variety of stakeholders. The initial announcement cannot wait for all of those issues to be resolved.
- Time – An effective teach-out needs about 2 years from announcement to closing. This time frame allows juniors, seniors, and master’s degree students enough time to graduate, if they choose to stay. It also provides students who cannot graduate or do not wish to stay to make an orderly transition to a new school.
- Be Proactive – Do not wait for students, vendors, regulators, accreditors, or teach-out partners to reach-out to you. Be proactive in reaching out to them and begin the conversation with each out about how they can support the teach-out and what their needs are.
- Plan for People – Providing each employee with a planned expiration date removes uncertainty. It is also important to put in place a plan for incentives both financial and otherwise to retain employees. Employees make a professional sacrifice to stay at a school with no future, so other benefits must be provided to offset the opportunity cost of staying. You also have to balance reducing costs while leaving enough slack so that employees are not overwhelmed.
- Plans for Students – Personal plans for students allows the students to know what the teach-out would look like for them in order to make an informed choice about whether to transfer or stay. Then it is important to track student progress against the plan to intervene as appropriate.
- Question Expenses – When you are in teach-out, you are not attempting to attract new students or really retain existing students. Students who choose to stay are making a choice to not transfer. In our case, we reduced services hours to four days a week and limited hours each day. We eliminated career and alumni services. Services required by accreditation and to allow students to finish degrees need to be maintained, but many other activities can be reduced or eliminated. We increased teaching loads for full-time faculty on the basis that other activities were being reduced.
Leading a university in teach-out is unpleasant. You have to say good bye to many people. In a world that provides praise on leaders who make something bigger, it is hard on the ego to make something smaller and disappear. From a creative perspective, a teach-out is not fulfilling. As a servant leader, taking care of students, staff, and faculty and helping them transition is a special obligation. I invested my time in other activities like writing and working to start my own business so that I had other outlets to sustain me during the last two years. It would have been much easier to shut the doors sooner and move on, but I take pride in the work that my team accomplished and the lives that we impacted by landing the university as gently as possible.