On September 11th, we shared how colleges and universities are analyzing program economics to strike a more informed and effective balance. Dr. Bill Massy, a past Professor, Dean, and CFO at Stanford University and Bob Atkins, CEO of Gray Associates, shared best practices in the analysis of program economics and the use of this data to inform program reviews and decisions. In Dr. Massey's view, understanding program economics is critical to maximizing mission attainment, especially for a not-for-profit university.

1. Data • Insights • Strategy
www.GrayAssociates.comwww.GrayAssociates.com
Data • Insights • Strategy
Program Sustainability:
Integrating Market and Economic Data

2. 2
Introductions
Bob Atkins
CEO
Bob Atkins - Bob is the CEO and founder of Gray Associates.
He has over 30 years experience in strategy consulting, including
ten years focused on higher education. Bob continues to lead large
engagements as well as the firm’s development of new services,
including Program Economics and Program Portfolio Strategy.
William F. Massy
William F. Massy - He has been active as a professor,
consultant, and university administrator for more than forty years
at Stanford University. Dr. Massy earned tenure as a professor in
the Graduate School of Business where he also served as Director
of the Doctoral Program and Associate Dean. He then moved to
Stanford’s central administration as Vice Provost and Dean of
Research, Acting Provost, and Vice President for Business and
Finance.
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3. 3
Program Sustainability: An Integrated View
Heathy programs have four strong foundations.
Program
Economics
Institutional
Mission
Academic
Standards
Program
Markets
Foundations of Program Sustainability
Traditional Academic Review§ Capacity
§ Quality
§ Fit
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4. Maximize Mission
Attainment,
subject to:
Market Demand
Program Profitability
Thresholds
Not-for-Profit
Entities
“Money is a means to an end.”
Integrated Program Evaluation
Looking at profitability does NOT undermine academic values.
Maximize
Program
Profitability,
subject to:
Market
Demand
For-Profit
Entities
“Money isn’t
everything, it may be
the only thing.”
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5. Integrated Program Evaluation
Universities need to balance Mission and Money.
§ All programs should further the university’s mission, but some need to make
money so that others can operate at a loss.
§ These cross-subsidies enable universities to assert their academic values. For-
profit entities let the market dominate and thus have no permanent cross-
subsidies.
§ Good estimates of the margins for all programs are essential for maximizing
mission attainment in a not-for-profit university.
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6. Program Economics
A little background on estimating program margins:
§ I’ve been doing research on teaching cost and profitability for decades.
§ It’s only recently that university data systems could support good measurement.
- Improved timetabling and student registration systems
- Software improvements now enable meaningful cost and margin estimates for individual
students and courses.
- Then these course-level estimates are aggregated to the program level.
§ Interest in these developments is growing rapidly, but significant first-mover
advantages remain available.
§ Bob and Mark will describes Gray’s approach, and how it meshes with their PES
market data.
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7. Why Bother?
Improve financial sustainability.
Cost
Enrollment
+
Revenue
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8. Growth
Selecting the right new programs can drive substantial growth.
Actual
Plan
New Programs Launched
Ending Enrollment
Data Disguised
(Real Results Were Higher)
Ending
Enrollment
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9. Cost Reduction
There is room for productivity improvement…
Source: Gray analysis of IPEDS completions
6% 7%
39%
48%
45%
18%
30%
7%
0%
10%
20%
30%
40%
50%
60%
Over 99 50 - 99 10 - 49 Less than 10
Percentage of
Programs or
Completions
Program Size
(Number of Completions)
Program Productivity
Programs
Completions
Over 99 50-99 10-49 Less than 10
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10. Cost Reduction
A few schools have developed extremely productive program portfolios.
§ 52% of Western Governors’ programs have over 99 completions.
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11. Program
Economics
Institutional
Mission
Academic
Standards
Program
Markets
Program Sustainability: An Integrated View
We will start with market analysis and then focus on program economics.
Foundations of Program Sustainability
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12. Program Scoring
We suggest using four categories of market data.
Student
Demand
Employment
Degree
Fit
Competitive
Intensity
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13. Program Scoring Rubrics: Student Demand
Scoring rubrics enable an objective evaluation of the market data.
Sample Scoring Rubric
Student Demand: Google Search
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14. Program Ranking
With data and a rubric, you can score and rank hundreds of IPEDS programs.
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15. Program Scorecard: Medical Assistant
A one-page summary of market data makes program decisions easier.
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16. Program Scorecard: Medical Assistant
A one-page summary of market data makes program decisions easier.
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17. Program Scorecard: Competition
Competitive information is critical to program decisions.
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18. Program
Economics
Institutional
Mission
Academic
Standards
Program
Markets
Program Sustainability: An Integrated View
We will start with market analysis and then focus on program economics.
Foundations of Program Sustainability
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19. 1. What Is a Program?
2. How Do I Determine the Economics of Current
Programs?
3. How Can My Institution Use the Data to Make
Decisions?
Program Economics

20. Program Definition
So, what is a program?
Academic Program:
All courses, including electives, taken by students in a major.
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21. Program Definition
Program Case Study: Nursing
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22. 0 100 200 300 400 500 600 700
NUR108
NUR202
NUR203
SPN105
SOC106
MAT150
HIS216
HEA201
HEA120
HEA130
ART130
Student Credit Hours (SCH)
Student Credit Hours (SCH)
Distinct Financial Entities
Programs cross departmental lines.
§ Many of the courses that nursing students take are outside the nursing department.
§ Most credit hours are within the department.
Non-Departmental
Courses
Source: Gray’s Program Economics Project
Illustrative
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23. $64.54
$51.66
$43.66
$133.43
$72.18
$68.44
$42.93
$56.49
$214.67
$131.46
$54.08
$0.00 $50.00 $100.00 $150.00 $200.00 $250.00
NUR108
NUR202
NUR203
SPN105
SOC106
MAT150
HIS216
HEA201
HEA120
HEA130
ART130
Cost Per SCH
Distinct Financial Entities
For nurses, cost per SCH varies widely across departments.
Average Departmental
Course Cost per SCH:
$53.29
Average Non-
Departmental Course
Cost per SCH:
$96.71
Source: Gray’s Program Economics Tool
Illustrative
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24. $271
$202
$202
$174
$174
$174
$174
$174
$380
$380
$380
$0 $100 $200 $300 $400
NUR108
NUR202
NUR203
SPN105
MAT150
HEA201
HEA120
HEA130
SOC106
HIS216
ART130
Revenue Per SCH
Distinct Financial Entities
For nurses, per course revenue per SCH varies by $200.
§ But, the variations average to an 11% difference between courses in and out of department.
Average Departmental
Course Revenue:
$251
Average Non-
Departmental Course
Revenue:
$225
Source: Gray’s Program Economics
Illustrative
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25. 207
150
158
(41)
40
42
105
117
307
325
337
-$100 $0 $100 $200 $300 $400
NUR108
NUR202
NUR203
SOC106
SPN105
HIS216
HEA201
HEA130
MAT150
ART130
HEA120
Contribution Per SCH
Distinct Financial Entities
Course margins per SCH vary by $377.
§ These variations average out to an 11% difference in- vs out-of-department.
Average Departmental
Course Contribution:
$172
Average Non-
Departmental Course
Contribution:
$154
Source: Gray’s Program Economics
Illustrative
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26. 1. What Is a Program?
2. How Do I Determine the Economics of Current
Programs?
3. How Can My Institution Use the Data to Make
Decisions?
Program Economics

27. Indirect
Costs
Direct Shared Costs
(e.g. Academic Deans)
Course-Level Input
Direct Variable Economics
(e.g., Faculty, Tuition)
Line-Item
Input
Department-Level
Input
Program Economics: Methodology
We start with a focus on direct variable economics.
§ The intent is to support program decisions.
§ Program decisions are unlikely to change fixed costs.
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28. Program Economics: Methodology
Accumulate student revenue and instructor cost per credit hour by course.
-
+
}= Program Cost
and Revenue
Tuition
-
Institutional
Scholarships
Students
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29. Program Economics: Methodology
Nursing is one of the college’s top 10 programs for variable margin.
Source: Gray’s Program Economics Tool
Illustrative
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30. Economic Scorecard
The Scorecard summarizes and compares results to other programs.
§ Metrics per SCH enable apples-to-apples comparisons with other programs.
§ The color coding shows the program’s rank vs. other programs at the college.
§ Metrics by SCH also enable schools to use cost benchmark data from other institutions.
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31. Drill-Downs
Program leaders should track how other departments affect
program margins.
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32. 32
Drill-Downs
They will want to explore how each course influences program
margins.
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33. Drill-Downs
Then, they should drill down to instructor productivity.
Instructor Contribution
For Students in the Nursing Program
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34. Indirect
Costs
Direct Shared Costs
(e.g. Academic Deans)
Course-Level Input
Direct Variable Economics
(e.g., Faculty, Tuition)
Line-Item
Input
Department-Level
Input
Program Economics: Methodology
Overhead analysis and allocations are frequently requested.
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35. Overhead Allocator
Gray enables flexible overhead allocations, so alternative allocations can be explored.
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(Partial Table)
Overhead Allocation Table

36. Gray Associates
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Fully-Allocated Economics
Including allocated costs, Nursing falls off the top 10 list.
9/11/18

37. Gray Associates
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Fully-Allocated Economics
Nursing indirect costs are in-line with other programs.
9/11/18

38. Gray Associates
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Fully-Allocated Economics
However, Nursing’s departmental costs are several times higher than other programs.
9/11/18
Net Margin, after Allocations: -8,606

39. 1. What Is a Program?
2. How Do I Determine the Economics of Current
Programs?
3. How Can My Institution Use the Data to Make
Decisions?
Program Economics

40. Integrated Report Cards
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41. Program Portfolio Strategy: Workshop
We recommend broad participation in Program Portfolio Planning
Workshops.
Day 1 Day 2
§ Present workshop objectives
§ Summarize approach
§ Share initial scoring outcomes
§ Discuss and refine scoring system
§ Evaluate scored programs
§ Select new programs
§ Review Day 1 outcomes
§ Rank current programs
§ Discuss high- and low-scoring
programs
§ Select programs to Stop
§ Select Programs to Grow
§ Wrap-Up
§ Programs to Start § Programs to Stop
§ Programs to Grow
Illustrative Workshop Agenda and Outcomes
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42. Program Sustainability: An Integrated View
A heathy portfolio of programs is critical to institutional growth and viability.
Program
Portfolio
Program
Economics
Institutional
Mission
Academic
Standards
Program
Markets
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43. Gray Associates
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Program Portfolio Assessment
Map market, institutional, and economic data to assess portfolio health.
-40%
-20%
0%
20%
40%
-20 -10 0 10 20 30 40
Percent Change
in Market Share
Completions 2016-2017
Market Attractiveness
PES Scaled Overall Score
Attractive Market
Gaining Share
Weak Market
Losing Share
Weak Market
Gaining Share
Attractive Market
Losing Share
Contribution per SCH

44. Gray Associates
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Program Portfolio Assessment
Map market, institutional, and economic data to assess portfolio health.
§ Many of this institution’s programs have below-average contribution in weak markets.
-40%
-20%
0%
20%
40%
-20 -10 0 10 20 30 40
Percent Change
in Market Share
Completions 2016-2017
Market Attractiveness
PES Scaled Overall Score
Attractive Market
Gaining Share
Weak Market
Losing Share
Weak Market
Gaining Share
Attractive Market
Losing Share
Contribution per SCH

45. Gray Associates
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Program Portfolio Assessment
Map market, institutional, and economic data to assess portfolio health.
§ Fortunately, its largest programs are contribution-positive in attractive markets.
§ However, its largest program is losing share.
-40%
-20%
0%
20%
40%
-20 -10 0 10 20 30 40
Percent Change
in Market Share
Completions 2016-2017
Market Attractiveness
PES Scaled Overall Score
Attractive Market
Gaining Share
Weak Market
Losing Share
Weak Market
Gaining Share
Attractive Market
Losing Share
Contribution per SCH

46. What’s Next?
§ Call or email Bob with questions:
- Bob.Atkins@GrayAssociates.com
- Phone: 617-366-2836
Have Pete run a demo for you and your team!
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