Supporting Employee Engagement Is Critical for Your Own Success As a Leader

In previous articles I have discussed how the requisite skills and traits of contemporary leaders have evolved in fairly profound ways, to the extent that more traditional methods often not only don’t work, they can actually be detrimental. One example has to do with behaviors that support or mitigate against employee engagement. In fact, research by Gallup suggests that only about a third of employees in the U.S. regularly display behaviors associated with “engagement.” This matters, of course, because engaged employees are far more productive and the work they do tends to result in greater performance, particularly around outcomes that are most important to the organization. They also tend to be more resilient in the face of challenges, have a greater sense of their own efficacy, are able to work with less direct supervision, manifest a more internalized sense of accountability, and are more likely to feel that they are an important part of the organization.

What is the relationship between managers and employee engagement?

Further research by Gallup found that roughly 70% of employee engagement is tied to management variables. In other words, the extent to which employees are highly engaged is more influenced by management behavior than employee variables. Any employee can be engaged at some level, but the depth of engagement seems to be more tied to what managers and leaders do or don’t do.

Traditional managers, for example, tend to be more transactional, i.e., they give the employee a discreet task, usually with narrowly defined outcomes, resulting in a “you do this and I’ll give you that” dynamic. As one can imagine, this situation tends to result in employees doing the minimum and rarely taking initiative on their own, because such transactional arrangements leave accountability with the boss, while also keeping the employee dependent.

Leaders with the ability to succeed in contemporary environments, on the contrary, tend to function more as coaches, providing the support and resources that allow employees to expand both their abilities and their sense of ownership and accountability. They do not micromanage the “how,” instead focusing on a shared understanding of desired outcomes, with the specific intent of empowering employees to work and succeed based on their own efforts, insights, and motivations. One key element of engagement is being able to do the job in ways that feel right/rewarding and play to the individual’s strengths. A traditional, transactional approach is often deadly for engagement precisely because it restricts those very things!

What does engagement look like?

There are traits and behaviors associated with engagement, which can be observed in both employees and leaders. They include things such as intentionality, planning, collaboration, internalized motivation and accountability, resilience, and a tendency to play to strengths to get the job done—including accepting challenges that stretch one’s capabilities. Engaged workers are also comfortable working for extended periods without supervisor feedback, but do not hesitate to request input when they believe the boss might have an insight that would be helpful. In other words, they don’t reach out to a supervisor for approval or permission, they reach out for support.

What manager/leader behaviors support engagement?

Fortunately, supporting engagement in one’s employees is not complicated, but it does require a contemporary leadership frame of reference. For example, in order to support engagement, leaders must surrender control to employees, they must see themselves as coaches and facilitators whose success broadly comes from others rather than technical experts who closely manage employee activities. As an example, an engagement-creating leader ensures that employees have clarity around expectations and the necessary resources to succeed rather than explicit instructions on what to do or how to do it. Engagement-oriented leaders welcome and honor employee opinions and choices, trust their judgment, and de-stigmatize “failure” such that it represents an opportunity for learning and a course change, rather than a mistake to be avoided. Without this approach, employees will limit risk-taking and experimentation and the organization will suffer. Of equal importance, the most engaged employees have managers who ensure that their reports are likely to feel the greatest sense of purpose, with a good understanding of why their efforts matter.

In short, the difference in value between engaged and disengaged employees is not trivial. Both the performance and attitudes of engaged employees bring significant direct and indirect benefits to organizations that go well beyond work or project tasks and impact things like dedication, loyalty, advocacy, and ultimately turnover as well. Because, on average, only about a third of U.S. workers are regularly engaged, it also represents a substantial opportunity in many organizations. As a leader, your success in supporting engagement is central to your own success as well!

Leadership Greatest Hits

I was recently asked which of my articles and posts on leadership are most popular. Well, I don’t know about “popular,” but it’s clear which ones get the most attention. My posts about the human side of leadership and organizations far and away resonate the most, with magnitudes greater views, “likes,” and shares. That isn’t surprising, really, and I think it is primarily because that is where we have the greatest needs and often see the greatest failures in leadership and organizational culture. We are also operating in turbulent and even volatile times, which tends to create more stress, both for organizations, and importantly, the people in them. Because of that, I’ve created this page on my website that is specifically dedicated to the human factors in leadership and organizational dynamics.  Thanks for the continued interest and comments!

Your Business is a People Business

Don’t Forget the “Human” in Human Resources

Be Successful by Supporting Others

Don’t Hurt People’s Feelings

I’m Sorry to Bother You

What Does It Mean to Be a Good Boss?

Employees Pay Attention to What You Do Rather Than What You Say

Everyone Needs Encouragement

Want to Be a Better Leader? Be a More Likable Person

What Might the Dalai Lama Have to Do with Your Professional Life?

The Most Powerful and Easy Life and Leadership Hack Is Free

Why Humility and Vulnerability Are Core to Strength and Courage

Treating People Well Pays Dividends – And It’s the Right Thing to Do

Struggling Through Good Times: Why We’re So Stressed Despite a “Strong” Economy

Image credit: “Lily” Money.com

Interestingly, despite what is statistically a relatively strong economy overall, many organizations are feeling significant stress while navigating deep challenges and even crises. In fact, some industries such as higher education, manufacturing, agriculture, and many government agencies are in decline, while others are being powerfully disrupted (media, hospitality, transportation) and others are “thriving” while going broke (such as healthcare and heavy industry). The reasons are varied, including everything from demographics to technology to tariffs, but the resulting challenges are the same: despite what are supposedly good times, many organizations (and the people in them) are struggling. One manifestation is the decreasing tenure of executive management as the complexity, ambiguity, and turbulence of operating environments exceeds the experience and capabilities of many leaders. This phenomenon transcends industries and includes nonprofits as well.

One structural issue is the significant and growing uneven distribution of wealth and liquidity across both organizations and individuals. For example, the recent 1.5 trillion dollar federal tax cuts overwhelmingly favored large corporations and wealthy individuals, further increasing liquidity for those beneficiaries without meaningful “downstream” benefits for employees, small business, and less wealthy individuals. In reality, companies by and large spent big on stock buy-backs and put cash in the bank, while making more investments overseas than in the U.S. during the same period! Relatedly, despite claims from the current administration that the cuts would generate increased tax receipts and family income due to economic growth, federal tax receipts have declined by 40% and family income has been flat for most Americans since the tax cuts went into effect. In effect, over a trillion dollars were shifted from public coffers to corporate and private wealth for a small percentage of the population since 2017. And, in 2018, for the first time ever, American billionaires paid a lower effective tax rate (23%) than the average paid by the bottom 50% of tax payers (24.2%). Relatedly, for individuals and families, the distribution of wealth is more unequal today than at any time since the early industrial revolution of the late 19th and early 20th centuries. Bloomberg reports that the top 1% now possesses wealth nearly equal to the entire middle and upper middle classes combined (those in the 50th to 90th percentiles), and roughly 40% of all the wealth in the country, which as been primarily driven by stock market gains. Another example of the growing divide between haves and have-nots can be seen institutionally in the nonprofit higher education space where less than two dozen colleges (out of several thousand) control 50% of the nearly $500 billion dollars in endowment assets.

This deep and structural inequity is a primary reason that many organizations are struggling despite a “strong” economy. Healthcare providers, for examples, are serving more “customers” than at any point in American history, but the average revenue per patient is actually declining due to the number of individuals who do not have insurance or whose insurance is inadequate relative to cost of service (and two thirds of all bankruptcies are caused by medical bills). The growing number of patients on Medicare and Medicaid also results in reduced reimbursement (often well below cost) for providers. In higher education, the average “discount rate” in private institutions is now over 50%, meaning students are paying less than half of the advertised tuition rate—and this is happening in the midst of an eight year decline in enrollment overall. In the private sector of the economy, agriculture (bankruptcies are up 24% year over year), manufacturing, and heavy industry in particular have been badly hurt by the current tariff wars and the negative effects on GDP and employment are likely to be felt for years due the long-term impact on markets that will likely shift to alternatives rather than be rebuilt to pre-tariff levels. And of significant importance, despite nearly a decade of modest economic growth, wage growth has been stagnant and a majority of workers who were unemployed during the Great Recession are now working for less income than before they lost their jobs, with only the top 20% of earners seeing an increase (6%) over the last decade. Of potentially greater importance, roughly a third (about 57,000,000) workers are now employed in the “gig economy” without benefits, sick or vacation leave, or any kind of job security. In short, the current recovery from the last recession is structurally different than those in the past with very unequal distribution of the benefits and even declines for about half of Americans. As noted by the Institute for Labor and Employment, through the recent recovery, “the general pattern in the labor market has been rising inequality… and stagnating wages for working and middle-class workers.” Unemployment is statistically low, but the economic value of current employment is still below pre-recession levels! One of the greatest impacts of the current situation is simply the effect of uncertainty. Whether it is corporate investment in R&D, small business investment in inventory or consumer spending on discretionary items, the current economy is teetering on top of growing insecurity and fundamental weakness for the majority of Americans.

Surprisingly, the current period of economic growth has come with the kind of stress, unease, and anxiety that are usually associated with recessions! Although there are certainly sectors of the economy, companies, organizations and individuals that are thriving, there is a surprising collective morass underlying society in general and the economy in particular. In fact, the American Psychological Association says that Americans of all ages and backgrounds are more stressed out now than at any time since the APA has been tracking societal stress levels. While the causes also include mass shootings, divisive politics, climate change, and fears about healthcare, for example, the economy is also a leading factor with calls to the FarmAid Hotline, for example, increasing nearly 110% from 2016 to 2018.

How does this uncertainty affect organizations?

When faced with complexity, ambiguity and even volatility, which many organizations are facing now, rather than embracing risk and an entrepreneurial spirit, many are choosing to circle the wagons and go back to basics. In other words, at the worst possible time, organizations are driven by fear to do more of what they’ve always done rather than encourage experimentation and innovation. Despite over a trillion dollars in tax breaks, companies did not materially invest in R&D or expansion. They paid themselves in equity and put money in the bank. Unfortunately, there also continues to be a focus on short-term results rather than long-term sustainability, with primarily transactional rather than transformational thinking and a tendency to centralize control rather than empower people broadly across organizations. While this is not unusual behavior in times of fear and uncertainty, it is the wrong behavior for surviving and thriving.

As an example, not long ago I was conversing with a board chair and I asked her what she was prepared to do if necessary to save the organization if it came to that. Her response was that making changes to the core business was “off limits.” While her passion for what had historically been central to the operation was admirable, the idea that riding the ship to the bottom of the ocean was preferable to redesigning the ship to keep it afloat was emblematic of how many organizations are facing (or avoiding) the realities of today’s turbulent environments.

The current challenges also explain why the average tenure of executive level leaders is declining, turnover is high, and organizational instability is growing. It is important to remember that even if external operating environments are volatile internal organizational environments do not have to be. However, those environments (and cultures) have to support things like teamwork, risk-taking, innovation, and long term thinking—and, of course, they need leaders who think that way too!

So, you are not imagining things. Despite nearly a decade of economic growth, organizations and individuals are highly stressed, buffeted by uncertainty and foundational problems with distribution of liquidity and wealth, tariff wars, unstable and declining markets, stagnant, and in many cases declining wages, job-insecurity (despite low unemployment), and a destabilizing macro political environment as well! While you cannot control the external environment, you can mitigate the deleterious effects of a stressful reality by prioritizing your own health and well-being and by carefully evaluating what matters to you in your professional life. For example, we often exacerbate stress by choosing to work in an environment that pays more, but that does not align with our values. Or, we take a promotion or new job so that we can increase our status, but at the expense of working more nights and weekends. And maybe more importantly, because so much of our time, effort, and energy are expended in the workplace, we probably ought to give careful thought to choosing environments that sustain, honor, and fulfill us as human beings even if that requires other “sacrifices.” It is both astonishing and dispiriting to realize how much of our lives we often dedicate to work that we don’t actually believe in and in environments that are subtractive to us as human beings! The challenges of the current reality are real and significant, but if we focus on what genuinely matters to us and we are willing to make appropriate compromises, we can, in fact, create better professional situations for ourselves.

Footnote:

Recent research by the Federal Reserve confirms deep weakness in the economic “recovery,” particularly as it relates to economic vulnerability for a substantial percentage of Americans.

  • Forty percent of American adults don’t have enough savings to cover a $400 emergency expense such as an unexpected medical bill, car problem or home repair.
  • Forty-three percent of households can’t afford the basics to live, meaning they aren’t earning enough to cover the combined costs of housing, food, child care, health care, transportation and a cellphone, according to the United Way study. Researchers looked at the data by county to adjust for lower costs in some parts of the country.
  • More than a quarter of adults skipped necessary medical care last year because they couldn’t afford it.
  • Twenty-two percent of adults aren’t able to pay all of their bills every month.
  • Only 38 percent of non-retired Americans think their retirement savings is “on track.”
  • Only 65 percent of African Americans and 66 percent of Hispanics say they are “doing okay” financially vs. 77 percent of whites.

Failing to Think Big Holds Us Back

One of the results of aversion to risk and fear of failure, for both individuals and organizations, is a world in which we rarely pursue audacious goals or visions. In fact, those who do are truly outliers.

Relatedly, we are typically socialized in professional contexts to be “realistic” rather than daring in our thinking and strategizing. Interestingly, on the other hand, we are frequently incentivized to pursue aggressive performance goals, often confusing those with bold strategic goals. Even when we are successful with big stretch goals related to performance, however, those successes are short term and, by themselves, usually do not support sustainability.

I’ve been facilitating strategic visioning and planning activities for about 15 years, both in organizations I have led and those for whom I’ve consulted. One reason I have always pushed for bold thinking is that when we edit ourselves while we’re still brainstorming, we dramatically limit the possibilities, and of course, our future achievements as well. The reason to think big in terms of a strategic vision (which may be different than strategic goals) is not so that we actually achieve our most audacious dreams (although that can happen). The value is that we do great, previously unachievable things simply through the process of going beyond what we thought was possible or likely. The most daring goals also tend to be about things that are bigger than the daily grind and thus ensure that we are engaged in pursuits that are also bigger than ourselves. By aggressively moving the goalposts, by definition we broaden what’s possible to achieve on the playing field. One way I achieve this kind of thinking is by building in a component of strategic planning that I call, “crazy talk.” It is an opportunity specifically designed to elicit the most outlandish ideas. The editing comes later and I always try to ensure that at least a couple of the crazy talk concepts make it into the plan. Unfortunately, due to the cultural pressures against bold thinking, I often find myself swimming up stream!

As an example, not long ago, I was leading a senior leadership team through a strategic planning process and they found it really difficult to talk about being the leader in their field, being much more comfortable with being a leader. They were down right perplexed when I asked them in what ways they could change the world. First, they had never been “set free” to think like that, but secondly they were burdened with the fear of articulating a vision that was frankly not likely to be fully achieved. We spent some time discussing this and it became clear that they felt it was “safer” to commit to a path that they were more likely to attain, even if that meant a much less compelling or even sustainable future. Their concern turned out to be quite rational when I discovered that their Board of Directors was equally cautious! This is unfortunately common in contemporary organizations.

This same phenomenon limits us individually as well. In another recent conversation in which I was interviewing for a potential chief executive role, I made the comment that a core motivation for me personally was for my professional efforts to actually make the world a better place. One of the interviewers skeptically replied that my objective might be a little impractical!

We all know intuitively that the greatest innovators and entrepreneurs and strategists are not driven or hemmed in by practicality. Most of what is truly creative and sublime in this world would not exist if the creators had been “realistic” and “practical.” Giving ourselves license to dream, regardless of our specific role in an organization, not only increases the likelihood that our contributions will bring far greater value, but it will also increase our own personal sense of accomplishment and purpose.

Thinking big has significant implications for leadership as well. In slower change, less complex, and less volatile operating environments, more conservative, status quo thinking is quite defensible. In the world in which most leaders operate today, however, those who think boldly, embracing risk and an audacious vision for the future are the “game changers” that most organizations need. Thinking big does not guarantee success, but it does tend to inoculate us against a slow death from doing the same things the same way until we have to turn the lights off for the last time.

Of course, as leaders we must also honor big thinking in those around us as well. As noted in a previous article, we must create environments that support innovation, which, by definition, requires that we give everyone in organizations the freedom to think boldly. As Eric Schmidt, co-founder of Google has said, you need to position your employees to be thought leaders. In fact, over time, far more innovation comes from the large number of people that make up most of an organization than from the C-suite.

Because so few organizations truly support bold, audacious thinking, those that do have a genuine competitive advantage. Whether you are engaged in developing strategic paths to the future or supporting innovative solutions for pressing ongoing challenges, game changing breakthroughs require the courage to think big—to dream about how things might be if we simply unshackle ourselves from the typical organizational constraints against creativity and risk.

Treating People Well Pays Dividends over the Long Run–And It’s the Right Thing to Do

Every day we are presented with opportunities to interact with the people in our professional lives. This includes subordinates and supervisors, colleagues, customers, vendors, business partners, etc. Over time, all of these interactions add up to how others see things like our reputation, management style, and temperament. This “body of work” is also how people judge things like honesty, integrity, kindness, character, and other traits.

We generally do not think about this at the time of each interaction. Likewise, it is not possible to behave exactly how we want to every time. Sometimes a lack of time or stress or multiple demands get in the way of how we would prefer to act. However, on balance, we determine who we are via how we behave. Over time, the sum total of our interactions paints a pretty clear picture for those around us. This is as much about values as it is about leadership, which is not surprising since personal values influence how leaders see the world and thus the same values influence the decisions they make, including how they treat people around them. In fact, leadership without values is a frankly dangerous proposition.

The unfortunate truth is that there are people in the professional world who have enjoyed “success” (usually financial), even though they have hurt people in the process, sometimes quite purposefully. On the other hand, when we talk about legacy as I have in other posts, being a rich “SOB” who trampled other people’s lives is something that even the rich SOB probably does not aspire to. Another way to think about this is the old axiom about what you want on your tombstone. When our time here on earth is all over none of us wants our legacy to be that we were a jerk. On the contrary, since we can’t take anything with us, material success at the expense of other people is worse than a hollow victory—it’s a moral failure. This also applies to how we treat those with less leverage or power than we have in any given interaction. Kwame Anthony Appiah, in a recent Ethicist column in the NY Times Magazine, was responding to a reader about how an employee was being terminated when he noted, “It’s particularly important to respect your ethical obligations to employees when they have no legal recourse.” This is a critical point. He is saying that leadership decisions (and how we treat people) must come from an ethically defensible place especially when we have the power to do whatever we want.

In the end, we are better off and those around us are better off if we have consistently treated people well and fairly; if we have taken the time to listen; if we keep our ego in check; if we take an interest in their issues and their success. We are better off for two reasons. First, treating people around us well and fairly tends to motivate them and engender commitment, which makes us more successful. Second, and probably more importantly, if you have genuinely treated the folks around you well and you have done that over time, those same people will be supporters when you need it most. Those same people will go the extra mile precisely when you need them too. And it will come from the heart.

A Critical Key to Your Leadership Success: Keeping Your Best People

As organizations and operating environments become more complex and the success of leaders becomes more tied to what their employees accomplish rather than to their own technical skills or task completion, building and retaining human capital is becoming central to the viability and success of all leaders (and the valuation of your organization). And, unlike technology or equipment or fiscal capital, human capital (and teamwork) is a competitive advantage that cannot be commoditized. If you care about your own success as a leader, you’ll care about keeping your employees and particularly your best people! If you need a financial argument, replacing employees can cost as much as 200% of their annual salary.

There is a spectrum of commitment to employee retention across organizations, with some basically ignoring retention as a purposeful activity and others investing significant effort and resources. What is interesting is that most employers and bosses misunderstand what employees actually value most. As a result, even where there are employee retention efforts, they often focus on the wrong things. Most typically organizations believe that compensation and benefits are core to employee retention. While the research confirms that employees need “adequate” compensation and appreciate good benefits, actual employee retention (or turnover) is usually driven by other factors. And it seems that we fail to get this right early on because over 30% of new hires quit their jobs within six months! Likewise, at any given time, about 25% of all employees are “retention risks” and it turns out that managers usually don’t even know who’s at risk!

What the research shows is that while employees will leave an unfulfilling job for improved compensation and benefits, those are actually lower on the list of importance of what they want from work than other items. Most studies put compensation anywhere from number 4 to 8 on employee lists of priorities.

So, what should you do to keep more of your employees?

Assuming that compensation and benefits are “adequate,” your leadership focus needs to be on the work environment and the work experience. There will always be turnover, but it’s become clear what factors can limit the loss of employees over time.

Crunching lots of data, Facebook recently found that people stayed with the company when the following three things were true: They enjoyed their work, they used their strengths more often, and they believed they were growing professionally. All of these factors superseded compensation and benefits. As Lori Goler, Head of People at Facebook says, “If you want to keep your people — especially your stars — it’s time to pay more attention to how you design their work.”

Although there is some variability in the research, there is also a strong consensus about what factors support employee retention over time. The most important variables tend to be:

  • Flexibility and Autonomy
  • Appreciation/Recognition
  • Professional Growth and a Visible Career Path
  • Engagement and a Sense of Purpose
  • Compensation and Benefits
  • Rewarding Relationships
  • Job Security
  • Work/Life Balance*
  • Ethical, Transparent Managers

*The notion of “work-life” balance is also often misunderstood and is addressed in another article.

Even though the prioritization is often somewhat different from individual to individual, compensation almost always shows up in the middle of the list or lower. As a manager, while you must compensate people equitably, it is liberating to know that your retention efforts tend to be less about money than most people think. On the other hand, creating an environment and work experience that will retain your people is a lot harder than just writing bigger checks!

The good news is that much of your effort toward employee retention also applies to other leadership imperatives around healthy organizations, empowering employees, sustainability and a number of other things you need to be doing anyway. And, in the end, improving retention is a win-win proposition that provides a positive, re-enforcing cycle for everyone involved.

What We Can Expect for the Future of American Higher Education

I have written many articles on the current state of U.S. higher education, with a focus on the nearly decade long contraction in enrollment and the related downsizing in the number of colleges, particularly private institutions, in the United States. While there are opportunities for powerful innovation within higher education and many institutions will survive in one form or another, the golden era of U.S. higher education as we understood it is simply over. The financial model is broken in a majority of institutions, public sentiment in general about higher education has turned negative, state funding continues to decline, and students themselves have determined en mass that the value proposition of five or six figures of debt is no longer viable. It’s not necessarily that the future of higher education is bleak per se, but that post secondary education will be markedly different, with clear winners and losers. As a result, if nothing fundamentally changes, the outlook for higher education will include:

  • Many fewer colleges and universities (and traditional degree programs)
  • Chronically underfunded and downsized “mid-tier” public institutions
  • A growing disparity between a small minority of super wealthy elite institutions and everyone else
  • The rise of several mega universities with six figure enrollments.

Of course, there will continue to be colleges and universities that look familiar and operate in largely traditional ways, but there is a finite and shrinking space in the higher education ecosystem for those institutions (and the degree programs that sustain them). Part of what is driving the “shrinking space” is what the Education Design Lab refers to as the Learner Revolution, which is the shift away from degrees and toward skills based competencies, combined with a decreasing tolerance for debt and inability to fit a degree into the constraints of life. As an example, research by the Education Advisory Board (EAB) found that graduate certificates have been growing at six times the rate of master’s degrees. There are similar examples within undergraduate education as well. And, in a paradigm-shifting trend, some industries are also beginning to invest substantial resources in ab-initio training, thereby circumventing post secondary institutions as the go-to source for employees. This is impacting career and community colleges now, but will move into more traditional higher ed space soon, materially affecting institutions delivering bachelors and graduate degrees in the near future. As Bill Conley, Head of Admissions for Bucknell University noted in a recent Chronicle of Higher Education article, “For too long, colleges — public and private, liberal arts and research-driven, rural and urban — have operated as if they’re solely in the higher-education business rather than in the broader postsecondary-education sector.” Industry

The simple reality is that there are not enough students who can or will pay enough tuition to support the actual costs of operating all of the college campuses in the country  as they function today. The average tuition discount rate in private institutions is now over fifty percent (meaning colleges are collecting less than half the published tuition rates from students)! This reality is particularly acute in small, tuition dependent liberal arts institutions with less than 1,000 enrollments. There is a baseline overhead of direct and indirect costs below which, regardless of efficiency, colleges cannot operate as colleges. The smallest enrollment institutions, without material endowments or other revenue streams, cannot spread all of their fixed costs across such a small number of tuition paying students.

On the public side of higher education, we are at a point in many states where it probably is not correct to even use the term “public” as it relates to how those institutions are supported financially. Across all state, 4-year institutions in general, a minority of funding now comes from taxpayer appropriations and funding overall has decreased by $9 billion dollars since 2008. In some cases, state appropriations comprise less than 10% of public university revenue. Under the circumstances, there is a minority of public institutions that have developed robust, non-taxpayer revenue sources and, in effect, operate as private universities, despite their governance obligations to state oversight. At the other extreme are some second tier publics that are technically insolvent and are only functioning due to borrowing, downsizing, deferred maintenance, and delayed accounts payable, among other unsustainable tactics. Some institutions in the middle will maintain enough enrollment and other funding to continue operating, but stuck in a sort of higher ed purgatory, without the political support, reputation and alternative revenue streams necessary to thrive.

So, where do we go from here?

First, we must accept that, like any other industry, higher education has finally succumbed to actual market forces. For decades U.S. colleges and universities broadly avoided the realities faced by organizations in the “real world,” evading the imperative to innovate, relying on borrowed money (by students and the institutions themselves), and assuming that faith in the value of higher education would sustain the unsustainable. The good news is that, as happens in other industries, market forces ultimately reward those who do, in fact, innovate and who present a compelling value proposition to consumers. Outside of the most exclusive and elite institutions, there will be a group of more nimble, customer focused, and relevant post-secondary education players, unencumbered by much of the anachronistic thinking that has kept the bulk of American higher education stuck in the last century. Those institutions will thrive despite, or perhaps because of, the hard realities in contemporary higher education, but only if they are purposeful about being different in ways that address the “learner revolution.”

In addition to the scenario described above, we will likely see

  • A few cataclysmic situations with public institutions (see the University of Alaska, North Dakota, and Chicago State) and overall downsizing of mid-tier public institutions
  • The end of “public” universities as tax payer funded entities
  • New, less-tuition dependent financial models (and more private sector-like practices)
  • Improving equilibrium between supply and demand
  • A smaller private college sector, both for profit and not for profit
  • Significant contraction and disappearance of many vocational programs in both career colleges and community colleges (as industry assumes entry-level training)
  • Fewer liberal arts colleges, particularly those with enrollments below 1,000 students
  • Fewer four year degree enrollments as a percentage of post-secondary students
  • Growing obsolescence of the “degree” as the gold standard credential
  • A shift to “professional” programs, even in liberal arts institutions
  • A shift to competency based and other more relevant and efficient delivery models
  • Increased applications of technology and “big data” in everything from enrollment to services to instruction
  • Partnerships that re-define higher education
  • Expanded, non-university post-secondary options

While the future is, in some ways sobering, it also reflects a significant opportunity for higher education to embrace imperatives that it has long avoided relative to innovation, value proposition, access, accountability, and sustainability that will strengthen the institutions that have the foresight to act. In fact, those institutions have an opportunity to thrive while re-inventing higher education for the reality of today rather than the increasingly irrelevant thinking of the past. We can choose to see the current situation as a glass half empty or half full, but what is clear is that higher education as an industry is in the midst of a forced reckoning that will result in something that looks much different going forward.

The Most Disruptive Change in Higher Education Since WWII Is Here And It’s Not What You Think

I recently completed a research project for Career Education Colleges and Universities (CECU) designed to determine the industry perspective on in demand knowledge, skills, and abilities (KSAs) that might be missing in graduates when they enter the work force. The project focused on the eight industries with the highest percentage of employees who have graduated from career colleges—anywhere from roughly 40% to over 90% of all employees in a given field.

While the research provided important insights into in demand KSA gaps, it also revealed a potentially profound trend in industry today: the move to conducting their own entry-level training for new employees.

Industry has invested in “on the job” training for existing employees for many decades. That is not new. And as the pace of change, particularly related to technology has increased, the need for more frequent and more in-depth training has also grown significantly. However, in a paradigm-shifting trend, some industries are also beginning to invest substantial resources in ab-initio training, thereby circumventing post secondary institutions as the go-to source for employees. The new trend poses a potential existential threat in the short term to vocational-technical/career colleges and it is wide ranging. The longer term threat extends to all of higher education.

College based training for automotive and diesel mechanics, allied health, aviation and trucking, plumbing and welding, IT, and other fields are at genuine risk as many employers have made the calculation that adding entry-level training as a cost of doing business is cheaper than enduring unfilled positions, competing for college graduates, and re-training upon hiring. Probably of greater importance, they get a known quantity and quality of guaranteed employees with proprietary training upon completion of their own, internal training programs.

In the automotive sector, BMW, Advance Auto Parts and Carquest, Toyota, and others are investing hundreds of millions of dollars collectively to build training facilities across the country that will serve as employee pipelines into their own companies. Large health care systems are operating in-house health science programs to train nurses, surgical technologists, medical imaging techs, medical assistants and other clinicians to staff their hospitals and clinics. Airlines and trucking companies have built their own educational infrastructure to train pilots, mechanics, and truck drivers. In many cases the training is free, requires no out of pocket expense, or debt is paid off by the employer, and in other cases the students get paid to go to school! Even unions have created paid apprenticeship programs where students learn to be pipe fitters, welders, and electricians at zero tuition cost, while earning apprentice wages.

Why are employers getting into the education business?

As Bill Conley, Head of Admissions for Bucknell University noted in a recent Chronicle of Higher Education article, “For too long, colleges — public and private, liberal arts and research-driven, rural and urban — have operated as if they’re solely in the higher-education business rather than in the broader postsecondary-education sector.” As a result, industry has chosen to incur the “hassle” and cost of the work traditionally done by community and career colleges because they can control the curriculum, customizing it in real time, in most cases without any accreditation approvals or regulators or boards looking over their shoulders, while filling their own hiring pipelines. The biggest advantage is simply speed. They can also deliver highly proprietary training that meets very specific employer needs. Fields with the lowest barriers to entry have gone first, but over time, this phenomenon will spread to higher-level post-secondary education and well beyond vocational programs. For example, the BMW STEP program, delivered at multiple regional sites, trains mechanics to work on BMW automobiles, with BMW technology, in BMW dealerships serving high-end BMW customers. Ultimately, the millions in cost is a bargain for their business model. Even in cases where industry has to jump through regulatory hoops such as in health science with boards of nursing, airlines with the FAA, or professional organizations that control licensing, they are still finding it preferable to use their own training/work sites and resources to custom train practitioners, virtually all of whom will go to work for the same companies upon graduation. Moreover, unlike colleges and universities, employers already have the exact equipment, technology, practice protocols, site supervisors, and clinical settings that graduates will work with on day one after program completion.

In most cases, these in house industry “colleges” require that students agree to work for the employer for a specified period of time after graduation. In the case of trucking, for example, students typically earn their Commercial Driver’s License (CDL) at the expense of the company by agreeing to drive for at least a full year exclusively for that company. Compared to potentially overwhelming debt, agreeing to work in a job you want to begin with, even if your choice of employer is temporarily limited, is a value proposition that typical colleges cannot come close to competing with. For the companies themselves, even if they lose modest numbers of employees after the contract period, they are still ahead by building a custom trained and loyal workforce, already socialized to employer values and norms.

Some programs for which employees have historically been trained in community and career colleges will become rare or even cease to be offered at the college level in the foreseeable future and will shift broadly to industry. Examples are likely to be truck driving, lower end allied health and even some nursing programs, and automotive technicians. Some types of computer programming, certain aviation roles, and vocational trades such as electrician, welding, and plumbing are also likely to shift broadly out of vocational schools and into industry. The same could happen for HVAC, culinary arts, hospitality, and manufacturing over time. What the current trends also suggest is that this phenomenon does not have to be limited to technical and vocational training. Similar models could be applied by industry to engineering, what are now graduate level health care positions, accounting, finance, HR, management, and other “professional” roles. This is particularly so if industry chooses to pair the training with apprenticeships and forgoes “liberal arts” curriculum as well. As an example, Amazon has created a free, in-house education program in computer engineering, which traditionally would have only been the purview of higher education. While industry will not be able to accommodate every student now served in post-secondary education institutions, they will “cherry pick” the most capable individuals, leaving schools with a smaller and even more challenged student body than they have today.

It was once thought that online education would be the jarring disrupter in higher education. That has not come to pass. The true disruptor may be something as simple as industry deciding that incurring the cost of educating the employees they want, the way they want, provides too great an ROI to pass up.

What are colleges and universities to do?

The only way institutions of higher education can counter this trend is to offer a better value proposition, to students and employers, than employer based education does. Based on current trends that will require profound change within colleges and universities—an industry and culture that, with rare exceptions, are not particularly known for innovation. The good news is that based on the many in-depth conversations I have had with industry for the in demand skills research cited earlier in this article, employers are very open to, and even enthusiastic about, deep collaboration with educational institutions. Those institutions that aggressively pursue such partnerships, with a willingness to take ground-level direction from industry, will enjoy a powerful competitive advantage within the higher education ecosystem and will at least stand a chance of generating the necessary value proposition to compete with industry led education programs.

The Higher Education Contraction Is No Where Near the Bottom. Does Your College Have a Plan?

Over my career as an educational leader and consultant, I have developed many operational models for just about every functional area in a college or university. I’ve done that simply out of necessity as a chief executive and now have a substantial list to choose from. We can provide a free assessment of many game changing options for your college or university. One example is based on increasing the likelihood that a given school is among the group of institutions of higher education (IHEs) that survive and thrive the industry contraction vs. those that don’t.

In just the last five years, more than 1,200 college campuses have closed across the U.S., both for profit and not for profit. At a minimum, hundreds more will merge, close, or reorganize in the next decade, with the 800 or so private, not for profit colleges with enrollment of less than a thousand students being at greatest risk. In fact, helping colleges liquidate after closure has become a small growth industry in higher education. The good news is that we already have a baseline understanding of what successful institutions are doing and others will have to do, in order to survive and thrive. Every college and university has attributes and characteristics that are unique, both favorable and unfavorable, that influence what specific strategies and an overall plan look like, but there are some fundamental, shared requirements for the majority of IHEs that are at some level of risk. A sample list is below.

  • Have Alternative and High Margin Revenue Streams
  • Incur More Variable than Fixed Expense
  • Are Differentiated in the Market
  • Give Students What They Want
  • Have Programs that Require College for Employment
  • Pursue Value-Added Partnerships
  • Have Finance as a Core Competency
  • Are Really, Really Good at the Basics
  • Possess a Culture for Success (Innovative and Entrepreneurial)
  • Have Dynamic Leadership

In my experience the biggest barrier to success, or even survival, in the current environment is internal: Denial. In many of the more than 2,000 college campuses that have already closed going back to 2010, there was no meaningful acceptance of the crisis, let alone a comprehensive plan to survive, until the doors closed for the last time. In some cases, schools flailed around, cutting costs or juicing marketing, but they did not fully understand their situation and did not have a plan to address it. The biggest external barrier looming on the horizon is the growing trend of industry offering entry-level education and training on their own and simply ignoring colleges and universities as the source of their employees. That is the subject for another post!

The most basic elements of the survive and thrive plan require that an institution:

  1. Conduct a deep dive assessment of where there are gaps between what needs to be true both structurally and culturally to succeed versus what is actually true.
  2. Engage in a purposeful effort to identify, then prioritize what missing components will be assertively addressed (usually based on agreed upon ROI).
  3. Develop an enterprise level action plan to ameliorate the most pressing missing components.

This exercise often takes place in the context of an overall strategy review as well. The truth is that there is nothing mysterious or highly technical about the process. However, it is time and people intensive. Institutions that are transparent, willing to embrace risk, open about the breadth and depth of their challenges, and motivated to meet them head on, will dramatically change their likelihood of surviving and thriving. Those that remain in denial or are slow to act, will dramatically compromise their likelihood of success.

A common and heartbreaking observation I frequently make is how many institutions are so head down in the daily grind that they are either incapable of taking the time and making the effort to positively influence their future or they simply aren’t willing to make the investment. A shocking number of institutions, in effect, choose a slow death with a known, declining process and risk avoidance rather than embracing a path that, although potentially out of the collective comfort zone, might just ensure a long and prosperous future.

Change Management Has Become a Core Leadership Requirement: A Few Things You Need to Know

In a previous article I suggested that the current demands on executive leadership have become so deep, broad, and complex that it is basically impossible for any one person to possess all of the competencies required of contemporary organizations and operating environments. As a result, I further suggested that we are probably better off focusing on a narrow set of competencies and traits that are essential to effective leadership. One of those—and possibly the most critical at this point—is change management. The reason for that is because contemporary environments are so dynamic that much of what a leader does on a day to day basis is to identify and manage initiatives, strategies, projects, etc. that all represent change of one kind or another. It is change management itself that ties most of a leader’s efforts together. This phenomenon has been in play for at least a few decades, but the rate of change and the volatility of change are qualitatively different and more challenging now than in the past. In effect, much of the change we deal with today is less incremental and more transformational, whether we want it to be or not! Additionally, technology is an accelerant of change and a disruptor of the status quo, often exacerbating what would already be a difficult management and leadership challenge.

So, what are the implications of this reality for leaders and what do you do about it?

First, both individuals and organizations are inherently stressed by change itself. In other words, just the presence of change elicits reflexive stress responses from people individually and from organizations collectively. Because of that reality, although we cannot control the macro-environment in which we work, it is important to limit the depth and breadth of change within our control that anyone or any organization must absorb at one time. This can be really challenging for leaders who possess a bias for action. We often evaluate ourselves based on how much activity we are driving, how many strategies are in play, etc. While understandable, a much more productive approach in the current environment is to very carefully and purposefully prioritize initiatives or strategies based on the relative return on investment (not just monetary) and/or criticality of each initiative. Because there is a limit to what people and organizations can effectively absorb relative to change, both leaders and their organizations are better off if they engage in fewer distinct initiatives at a time, but get more value (and successful change) out of the ones they choose.

Second, because of the first point above, it is critical to realize that the success of virtually any initiative or project is as dependent on the extent to which it is viewed as a change management challenge, as are the actual strategies and resources connected to the execution of the project itself. As such, leaders must build a change management plan into the process of executing on the initiative or project or strategy.

Lastly, we frequently talk about “change management” as this thing that happens rather than a thing we do. Leaders must approach change management itself as a formal process with best practice steps and components in the same way they would address conflict resolution or budgeting or strategic planning, etc. It is beyond the scope of this article to present an entire change management process, but you can see an example here. It is also important to fully understand the extent to which organizational change is transactional vs. transformational. Even transactional change such as implementing a new enterprise level technology application can be disruptive and stressful, but transformational change implies a fundamental evolution in the nature of the organization, which presents a different, culturally based change management effort.

In short, it is extremely unlikely that leaders can be effective today without understanding that change management is core to just about everything they do and that because of that reality, leaders must be as purposeful about managing change as they are about executing on any strategy, project or initiative deemed critical to organizational success.