Financial crisis and SNHU

Posted on November 22, 2008

The question posed to me this week was:

Are you worried about the financial crisis?

Yes, of course I am, as is everyone I know. I suspect the real question here is “Are you worried about the university ‘s prospects given the financial crisis?” and the answer is again “Yes.”

In an earlier memo to campus I outlined our plan to convene a task force to develop contingency plans for various degrees of financial distress. The group, headed by our CFO, Bill McGarry, has begun its work. However, even as we await the group’s recommendations it seems prudent to take some initial steps in the face of worsening economic news and new levels of unemployment.

While we do not rely on our small endowment for very much of our operating funds compared to wealthy schools (they derive as much as 30% of their operating revenues from endowment earnings), we are vulnerable to unemployment trends. We have seen softening in our evening and weekend programs and while we can’t be sure it is directly tied to economic shifts – indeed, CE and Grad enrollments often increase during tough economic times and Online continues to see good growth– in this climate almost everything is seen as a potential red flag.

So we will look at currently open positions to see where we might hold off or defer hires. We will look at capital projects that might be deferred. We’ll also be more proactive in outreach to non-traditional learners who have “stopped out” of their studies.

We very purposefully dialed back our discount rate over the last five years in anticipation of more difficult times ahead and while those have arrived sooner than anticipated, we now have more ability to handle upward pressure on our discount rate. We are likely to feel that pressure as families come to us with increased need. We also have multiple revenue streams and are thus less vulnerable than colleges with only one primary market.

So I am indeed worried, but not panicked. We will take smart, prudent steps to pull back the budget and build greater resiliency for the times ahead, but there is not now a need to do anything drastic. Success in executing our Strategic Plan, with its focus on retention, better service, and expanded enrollments, is a far better response to the current challenges than simply cutting budgets.