Herbert M. Allison
President and CEO, TIAA-CREF

“…I was asked to give you an overview of how the world economy is changing, and to bring an executive’s perspective to what these changes mean for private colleges and universities.… Difficulty predicting the economic environment makes it especially challenging for businesses and institutions of higher education to plan for raising funds, managing expenses, and sizing their facilities appropriately.… We have to make decisions with far-reaching consequences, and those decisions are more complicated than ever before because our institutions have themselves become more complicated.… In the past few decades, several emerging forces have started to change the conditions of leadership, not only in academia but also throughout industry. Five of these forces are technology, globalization, demographics, collaboration, and budgetary constraints.
     New technologies, especially the Internet, are challenging the advantage larger institutions have gained from their massive libraries and traditional research facilities. For better or worse, students and faculty at all levels are increasingly turning to the Web instead of libraries to conduct their research. As institutions supplement their physical libraries with low-cost, online ‘Cybraries,’ the historic advantage enjoyed by universities with large libraries will diminish, and smaller, less well-endowed institutions will have an opportunity to compete at a more equal level.
     The second powerful force for change is globalization…. Recently, and mainly for reasons of national security, America has raised barriers to foreign students and researchers who seek entry to our schools.… We all need to work with our government to find practical ways to keep the doors open to foreign students in even greater numbers than before…. Globalization and the volatility of the dollar make it all the more important to consider diversifying your financial assets. Endowment portfolios and retirement savings alike can use international investments to protect their purchasing power.
     The third force I see driving change in business and the academy is demographics.… Over the past 30 years, higher costs, the changing family, and shortcomings in many of America’s K-12 schools have altered the demographic patterns of higher education.... One demographic trend that we are watching closely at TIAA-CREF is the aging of faculty. Many schools are actively involved in helping senior faculty make the transition to retirement. We need to work with you to make sure your institutions’ retirement and retiree health plans help you hold on to your best people. And help them move on when it’s time.
     The fourth force is the growing sense among leaders of government, business, and higher education that they must cooperate to prosper. Mayors across the country have discovered that the largest employers and the most successful enterprises in their communities are universities, colleges, and affiliated hospitals. Therefore, and this is a key trend, the importance of colleges and universities as economic engines for their communities is growing. This means that your institutions can be more assertive in calling for the local participation, sponsorship, and financial support that you need to thrive….
     That brings me to the last major force I see driving change in higher education. It is pressure on budgets from slower growth of endowments, seemingly unending increases in operating expenses, and growing efforts of government leaders to slow increases in the cost of college educations and to limit the government’s share of those costs.... Paradoxically, budgetary challenges can lead to strength.… Institutions may decide to outsource the management of services such as campus security, cafeterias, maintenance, payroll, purchasing, and even dormitories. More may also decide to share some course offerings, as a number of local college consortia already do…. Focusing available resources for maximum effect is how small companies become leaders against bigger, more entrenched competition, and it can open new opportunities for your institutions as well.”

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