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College Unsustainable Says Bain Analysis
A few years ago, consultants Booz, Allen and Hamilton produced a report that labeled the College one of the world’s “most enduring institutions.” No mind that the report itself cited nothing that had occurred at Dartmouth since the 1970’s, leaders of recent Administrations repeated this finding over and over again, as if it were praise for their efforts.
Well, management consultants Bain & Company, where Mitt Romney worked before heading up its Bain Capital spinoff (full disclosure: I was a consultant in Bain’s London office from 1983-85), have reviewed the finances of America’s most important educational institutions and produced a report entitled, The financially sustainable university. Their conclusion: based on figures from the 2006-2010 period, “approximately one-third of American colleges and universities are spending more than they can afford.”
The College ranked in the least favored section among all institutions: the 15% of American colleges and universities that are financially “at risk.” And no, not a word from the Trustees or IP Folt regarding the now-two-month-old report.
To be fair, all of the other Ivies are in the same quadrant; we aren’t alone in managing poorly. However, only Harvard has spent less wisely relative to its income than we did, and only Yale and Harvard have taken on more debt than Dartmouth relative to their total resources.
Bain used two measures to calculate the evolution of an institution’s financial status:
1) The Expense Ratio:
The expense ratio is calculated by dividing an organization’s expenses by its revenues and indicates the financial sustainability of a business. Simply put, an organization’s expense ratio is an indication of its ability to cover the expenses endured by cash inflow.
We’ve written ad infinitum (OK, ad nauseam works, too) about the College’s bloated compensation packages (salaries, benefits, vacations) and the growth of non-faculty staffing. The end result makes us look bad versus all our Ivy competitors except Harvard and Yale — though their endowments are a multiple of ours, so perhaps they can more easily afford such waste.
2) The Asset/Equity ratio:
The asset [equity] ratio is calculated by dividing net assets by total assets and measures the strength of an organization’s balance sheet. Net assets is a term that indicates the remaining assets on an organization’s balance sheet after removing liabilities.
The College’s slide continues and you can’t say that it isn’t obvious to everyone (except Carol Folt and the Trustees).
October 18, 2009
When Love Beckoned in 52nd Street
We were at San Francisco’s BIX last evening, enjoying prosecco, cheese, and a bit of music. A full year of inhabitation in Northern California has unraveled to me no decent venue for proper lounging, but…
October 9, 2009
D Afraid of a Little Competish
So our colleague and Dartblog writer Joe Asch informed me that the D has rejected our cunning advertising campaign. Uh-oh. The Dartmouth is widely known as a breeding ground for instant New York Times successes,…
September 4, 2009
How Regents Should Reign
As Dartmouth alumni proceed through the legal hoops necessary to defuse a Board-packing plan—which put in unhappy desuetude an historic 1891 Agreement between alumni and the College guaranteeing a half-democratically-elected Board of Trustees—it strikes one…
August 29, 2009
Election Reform Study Committee
If you are an alum of the College on the Hill, you may have received a number of e-mails of late beseeching your input for a new arm of the College’s Alumni Control Apparatus called…
August 23, 2009
Fare Thee Well, Tom Crady
And now Dean Tom Crady has precipitously announced his departure from the College after only 20 months on the job. How to read this? By way of background, prior to coming to Dartmouth, Crady had…
May 31, 2009
Kangaroo Court, Indeed
In an interview with The Dartmouth, alumni-elected trustee T.J. Rodgers ‘70 explained his reasons for declining to participate in future evaluations of trustees up for “re-election,” namely the “kangaroo court” nature of such discussion in…