Shared Services and Consolidation Strategies for Small Colleges:

Changing Higher Ed podcast 263 with host Dr. Drumm McNaughton and guest Jason Duggan

Transcript: Changing Higher Ed podcast 263 – with host Dr. Drumm McNaughton and guest Jason Duggan – How Small Colleges Can Go from Surviving to Thriving with Consolidation and Shared Services

Introduction to Changing Higher Ed^®

Welcome to Changing Higher Ed^®, a podcast dedicated to helping higher education leaders improve their institutions. With your host, Dr. Drumm McNaughton, CEO of The Change Leader, a consultancy that helps higher ed leaders holistically transform their institutions. Learn more at changinghighered.com. And now, here’s your host, Drumm McNaughton.

[00:00:20] Introduction and Guest Background

Drumm McNaughton: Thank you, David. My guest today is Jason Duggan, CEO for Thesis Elements, a cloud-based student information system purpose-built for small to mid-size institutions. With more than 15 years of experience in EdTech and enterprise software, Jason brings a unique blend of strategic vision and operational expertise.

Before stepping into the role as CEO, he helped guide the company’s growth as its CFO. Jason’s an expert in the challenges that small institutions face: limited budget, overburdened staff, and lack of students. And he joins me today to talk about how small colleges can flip the switch through consolidation and shared services from survival to thriving while balancing institutional traditions with modern technology.

 Jason, welcome to the program.

Jason Duggan: Hey, Drumm, how you doing?

Drumm McNaughton: I’m doing well. It’s good to have you on the program. Looking forward to a great conversation today.

Jason Duggan: I greatly appreciate you having us on. Really excited to talk to you today.

Drumm McNaughton: My pleasure. Before we get into the conversation, because this is going to be a new area for me, small colleges, we work with some small colleges, but we really are very niche in that area. You work with small colleges all the time, including a lot of Christian-based, faith-based colleges.

[00:01:42] Jason Duggan’s Career Journey

Drumm McNaughton: Before we get into that, give us a little bit about your background, if you would.

Jason Duggan: Yeah, absolutely, Drumm. So again, listeners, Jason Duggan, I reside in Cincinnati, Ohio. I am the CEO of Thesis Elements, and my career has been a good one, Drumm, but it’s had some turns. So, I started out my career after graduation and manufacturing and machine tool automation, great owners, but I was never connected to the mission and the value of what they were delivering. It creates unemployment, and after I got my master’s degree, I went into the job market and was fortunate enough to land a job at Hobsons. And Hobsons was a place where they provided higher ed and K 12 services.

And while I was there early, early on, we held an event and invited one of our clients there, and they were from an inner-city school in Indianapolis. And so, we were at Lucas Oil Stadium and the principal was discussing, how our solutions were increasing their graduation rates and their applications to college, and they couldn’t do that, and they would not have that without these solutions. So, right then connected my dots and put my endeavors into trying to be in the higher ed education technology space for the remaining of my career, if possible. And from there, I left after we sold Hobsons, and I was fortunate enough to again join Thesis. Thesis has been around via previous names and ownership controls but been around since 1987 providing student information systems to small and medium sized institutions. And so today I have the fortunate ability to run this place and work with a fantastic leadership team and individuals at this organization.

Drumm McNaughton: That’s a fantastic background. It’s not unlike mine where I discovered I really enjoyed teaching and academics when I was flying airplanes, but, we won’t spend a lot of time connecting those dots.

[00:03:40] Thesis Elements and Its Mission

Drumm McNaughton: Thesis, you guys work with a lot of small colleges. You work with a lot of faith-based colleges. Give us a little background on Thesis if you would.

Jason Duggan: Absolutely. So, Thesis has a mission to provide student information systems to the small and medium sized markets, and that advancement in technology that’s been evolving for years and providing modern, cloud-based solutions to these institutions at a price they can afford to make advancements at their institution. So, they can get out of the day-to-day doldrum of manual task and move to more automated time where it allows them to provide their services to the students versus the IT world and working on an old database system. Gets them out of the day to day and puts their work into the hands of the students. Like I mentioned, we have been around since 1987, providing student information systems, evolving the technology over that time from on-premises to our new cloud basis solution, Elements, and really putting a solution in place that fits the parameters of what these colleges need to operate and can afford to operate.

Drumm McNaughton: That makes so much sense, and as you’re in this market, you see the challenges that these small colleges face between, a thousand and five thousand students. We generally say, if you’re above 2,500 students as a trend, then you’re probably going to be okay. But that depends on a lot of factors. We’re seeing a lot of schools close, being acquired.

[00:05:17] Challenges Facing Small Colleges

Drumm McNaughton: What are some of the pain points that you’re seeing for small colleges?

Jason Duggan: It is a difficult market for them right now. They’re at the perfect intersection of challenge, so there’s declining enrollments, there’s rising operational costs, there’s increased competition, and the evolution of what a student is today is different from what it was years and years ago. The traditional, “I’ll start in September, and I’ll go for two semesters and four years of that” student demands and needs and what their evolution is for their career paths have changed over the time in these education institutions are finding themselves having to evolve at the same time.

Drumm McNaughton: And that is a big challenge for higher ed. We’re hearing so much of students graduating saying, “I was not prepared for a job”. So, the workforce development is now becoming a far greater need, and colleges and universities are having to transition over to that area.

Jason Duggan: Absolutely. Absolutely. And you think about the hottest topic right now is AI. Institutions will have to evolve AI into their course curriculum to help students become the workers that are building AI for the future, but it’s ever evolving. So, we’ve seen quite a bit of things as we’ve been talking to customers and perspective customers, Drumm, and it’s a tough world for them from financial stability right now. And they’re working through those things and there’s different levers they can pull or options they can do. And I wanted to give you some ideas there on the challenges that they’re facing here?

Drumm McNaughton: Yes, and those challenges besides enrollment between finances. Many of them have gone out, especially during COVID, restructured debt and that wasn’t necessarily the best thing. So, what are some of those colleges doing and have done to stay afloat?

[00:07:13] Strategies for Financial Stability

Jason Duggan: So they’re in a tough spot financially, and we’ve seen a shift and there’s options. It doesn’t mean that one institution’s doing it right, wrong, indifferent. But there’s different options for them from a cost cutting to more strategic thinking. Some are looking at new revenue streams, like workforce development programs. Some shifts to online education, I know online’s been around for a while, but able to consolidate those, eliminate the needs for their infrastructure in terms of the total campus. But as we look at some core areas, of what schools are doing, some are moving to like a consortium model, a back office shared service kind of offering. So pooling IT, HR, financial aid, and finding the best talent to be a shared service. These rural schools, Drumm, there might not be 50 financial aid experts in that small rural town. So, finding the best in breed and sharing that resource across multiple institutions is a lever that they are polling today.

We’ve got a great client, and I met with their CFO, and he said, ” having data analytics at my fingertips is huge. I’m looking at what courses were offerings were we’re providing that are the giving me the be biggest return so that I can use those monies and invest those”. And it was their grad student programs. And so you say, how do I get more grad students into our doors so that I can fund or recalibrate, shut down, some of our lower performing type of curriculum offering? So strategically planning around what they can offer, what they will offer, and what is getting a return for them in those sections.

Drumm McNaughton: And one of the things that we were going to talk about was the consolidation, the backend model, and things like that. But before we get into that, there’s some other things that colleges are doing to stay afloat, some are effective, and some are putting colleges at risk.

For example, job placement. Obviously needing curriculum changes for that, but having institutions become partners for job placement. You’re seeing that, how’s that working and what are some of the risks?

Jason Duggan: You know we have seen a few institutions where they have taken on job placements in lieu of loans for these students, and it hasn’t worked well. Right? In a market where there’s tons of available jobs in all the sectors that they’re looking to go into, brilliant idea, it hasn’t worked out that way in the market. And so those are not going as well.

When you think about other things like debt offerings. Some are taking out strategic debt, some are taking out some debt just to stay afloat for a time where they’re hoping enrollment will increase. Maybe Fall was a dip, but they’re looking at Spring, and Spring may be a bounce back. Those are pending some hopes, but debt is not cheap right now and it’s not easy to get. So when they’re taking out that, most are doing it, or attempting to do it, in a very strategic, targeted way for campus upgrades, can I build a new building and shut down my four residence halls so there’s one eco-friendly, cost savings one or capital improvement projects for technology that do advancements. So, there are options out there for cash generation, but the debt is difficult to do and providing funding or job placement guarantees has not been a well-rounded solution.

Drumm McNaughton: And just recently I read, and I’m sure you’ve seen it as well, some of the changes that, I call it T2, Trump’s second term, are holding higher ed institutions accountable for partial debt, partial loans that aren’t being repaid, default on loans. I struggle with that one a little bit because why is it the college’s fault if someone doesn’t find a job? But that’s just me, and maybe I’m too liberal, I don’t know.

Jason Duggan: No, no, no, no. If something’s in place for one moment and it shifts to another, it puts the pressure on these institutions and it shifts the responsibility. But we definitely are monitoring the market very closely on all the changes at the Department of Ed and with the T2 as you call it.

But it does have colleges worried. They are actively monitoring as well and solutions providers like ourselves are monitoring to be able to fit the needs of what does happen.

[00:11:46] Innovative Solutions and Partnerships

Drumm McNaughton: How, much are you seeing institutions getting creative in their offerings? We talked a little bit about the online and the AI. What other things are you seeing? For an example, certificate programs becoming more and more common.

Jason Duggan: Yeah, it a hundred percent. As we were talking about, the evolution of a student has changed, some students aren’t capable, afraid, not willing to see if they can have a recoverability by taking out the large student loans to attend universities. So because of that enrollment has either shifted in what this student is looking for.

And so we’ve seen a lot of different things around workforce aligned micro credentials. So where they’re either going that trade school or the school is providing a credit-based offering for them to go take those learning courses or trade skills. Trade schools is something we’re going to need in the industry for forever, those are going away. There’s been a shortage of those, so they’re high paying jobs in some sectors. And we’ve seen where colleges will provide an outsource to a nursing program, for example, and do a rev share. You go train my student, we’ll do a rev share, and they’ll be an accredited position and capability at the institution for them.

And so how do they look to fast track that career relevant learning and generate new revenue off that is an area that they’re looking at to do these things. Like I mentioned, the day-to-day, my background, finance, accounting, there’s a shortage of accountants out there. How do we get people trained up to at least be generalized accountants, GL people, or fully blown accountants at big four institutions. So they’re evolving.

Drumm McNaughton: It’s interesting you bring up the nursing. We did a project recently for a fairly large university with multiple branch campuses, and the campuses had been losing money. We made some recommendations with nursing, creating partnerships with major hospital change in that area to where they could hold classes there, they could help finance, if you’ve got somebody going through the program, the hospital could help finance the degree for people because they were looking at a nursing shortage of at least 50,000 in their specific general area. These are all things that institutions, especially smaller ones, can do in creating these partnerships.

Jason Duggan: We touched on some faith-based institutions. We also do quite a bit of business with nursing colleges and colleges of medicine. And we see them doing this exact same thing, both delivering on that kind of shared commitment to solve the gaps in the skill base that they need coming in and those revenue shares.

Hospitals generate profits. They give some back to the institution. That’s different than the traditional student model. So there’s a piece of the pie for everyone and helping them stay afloat by doing these things. So getting creative in those course offerings and shared revenue models is big right now.

Drumm McNaughton: And I would say a good CFO who’s got outside experience on putting together this kind of revenue sharing models is probably worth his or her weight in gold.

Jason Duggan: Absolutely. So my background being in finance and doing finance and investments and such, I’ve been able to speak with many CFOs at these institutions, and they are all very bright gentlemen and women that I’ve spoken to that are trying to pull those levers exactly what’s needed. Because, where I sit today, we’re providing a technology solution. Where they’re sitting today things change so rapidly with their technology, with their student demands, with students wanting different offerings and to shift that large boat at even a small institution, it takes a bit of time. So these financial people have to be on the cutting edge in understanding what the mission is at the institution, and the vision is for the students and the technology behind these institutions to drum up that recruitment, acceptance, graduation, and the evolution of what’s underneath that and the technology stack and the affordability of these at the institutions.

Drumm McNaughton: And of course, drumming up. There was no pun intended

Jason Duggan: No, none. No, I forgot to say.

[00:15:53] Consolidation and Shared Services

Drumm McNaughton: So one of the things that I am seeing, and you alluded to this earlier, there’s more and more consolidation going on. Everybody knows the example of PASHE, the Pennsylvania State Higher Education system that consolidated six universities, three in the east, three in the west to two main campuses. But we’re seeing far more of that sharing backend stuff, sharing marketing information, sharing classes, et cetera. Talk to me a little bit about that and what you’re seeing if you would please.

Jason Duggan: The institutions that we work with in those 3000 mainly and under, and really a lot of them a thousand and under, they don’t have more than one or two people in their IT staff, for example. They have one registrar; they have one financial aid expert in-house. That is a limited staff that have a lot of work to do, and when you think about declining enrollments and options, they have either consolidation or shared service, both those, I’ll touch on a little bit both. In a consolidation method you’re able to bring the best in breed to the same institutions. We do a lot of business with faith-based institutions and so finding the values and missions that align and bringing those two schools together to increase enrollment and offerings and course offerings and capabilities to the students, we’re seeing quite a bit of that. So, two faith-based, same mission, let’s consolidate and move forward as we build up our enrollment.

The second piece, as you were talking about, that shared service, and we talked a little bit about this. The IT services, there’s one or two at an institution. That’s not enough in today’s world for these solutions. So, taking two at this institution, two at this institution, two at another, and now you have a staff of six that can be a shared service, working on different projects and services for these institutions at any given time, lowers your cost of overhead, providing returns at a reduced rate for all these institutions. So it’s a brilliant method and one that we’re seeing come up more and more.

Drumm McNaughton: Well, you’re seeing it from a technology perspective, which makes all the sense in the world, but we’re also seeing it from a academic offerings perspective, from a registrar perspective, from these types of things. There are companies out there, without giving any of them a commercial, but there are companies out there that do these kinds of things and bring people together. I am curious though, when you’re seeing these kinds of digital transformations or the digital consolidations, are they geographically in the same area? Are they dispersed? What are you seeing?

Jason Duggan: They don’t have to be geographically in the same area. And why I say that is, colleges and universities have always had multiple campuses. So the foundation and principles in place to have multiple campuses is possible. But the consolidation piece, the key cost lever there is eliminating a lot of overhead, meaning your campus. So they would likely consolidate under one of those institutions. Right? So we will now accept all of your students to our degree programs and such to consolidate down to one central place. So we are seeing that in a geographical sense.

Drumm McNaughton: But especially because of the cloud-based solutions that you and many others provide, they don’t have to be geographically co- located. They can be all over the country.

Jason Duggan: Yep, exactly. So you know, the evolution of technology, when I was in college, way back when, online courses, you might have had two offerings in a semester, and everyone would try to jump into those. Now, the technology and the webcam and the integrations and stuff, just like right now, we could be having a course. Right? It’s that easy one-to-one and have advisor follow-ups and everything. So that has opened up the opportunity for someone on the West coast to be at an institution on the East coast and maybe their school consolidated with the East Coast School, and nothing has changed for them except for they now are a remote learner and have capabilities at their fingertips with computers and technology to continue to advance their career in the institution.

Drumm McNaughton: And it’s interesting you bring that up because some of the back-office functions are critical. Human resources, you’ve got to have those, you’ve got to have people who understand, you’ve got compliance requirements, you’ve got remote employees. All of these things go into this consolidation or this partnership model.

Jason Duggan: Yes, yes. As I was mentioned on the IT side and where we assist on that, all of those functions are a key component of being able to offer that shared service. So, payrolls in that HR department and personnel issues. Finding three people, bringing them together to then share services across 5, 6, 7 institutions, the lower cost offering, and the right talent in the right places can provide those opportunities to those institutions.

Drumm McNaughton: How do you see, or have you seen how these institutions come together to do this type of consolidation? Is it usually the president of one institution reaches to the president of another institution? Is there a particular model that you’ve seen that works well?

Jason Duggan: I haven’t been privy to all those conversations with these individuals at these institutions. What I do know is they go through a rigorous process. Right? That it’s an option. It’s not the end result that they’re always looking for. They’ve gone to debt financing, they’ve gone to donors for raising funds, and this is something that they can see happening in discussions from other institutions of, “how did you do this? How did you consolidate?” So at conferences and professional associations where presidents are getting this information, that is how it’s being brought together. And how those decisions are being made internally, I haven’t been privy to that, but they’re looking out for the best interest of the institutions and the students, and that becomes an option on the table.

Drumm McNaughton: And you just said the key, looking out for the best interest of the students to make sure that they are taken care of and that they get the education that they’re paying for. One of the things, and this is an area that we have done some work in, is bringing these presidents together, whether it be through a conference, whether it be through a presentation, getting them to have these conversations of what possibilities could be like, and then getting them down the process of signing a letter of intent, memorandum of understanding, doing the due diligence necessary, et cetera. But getting those presidents talking and then getting the boards involved is such a critical step for doing this.

Jason Duggan: Absolutely agree.

[00:23:00] Digital Transformation in Education

Jason Duggan: Part of your other question was on that digital transformation piece, we had talked about the consolidation, digital transformation, and we’ve seen that be an evolution now at this point too.

Drumm McNaughton: Mm-hmm. Tell me more.

Jason Duggan: Alright. The institutions that we work with, prospects, all those that we meet at conferences and such, the digital transformation is one of the levers they have, as I was mentioning, in how they structure their finances in the ongoing operations. So a lot of institutions at this size are on the cusp of changing their technologies. They’re on old, on-premises, legacy solutions, all a lot of point solutions, and reducing that infrastructure, that technology stack, and the capabilities that these have with now modern, cloud-based solutions. We talked a little bit about debt. It could be donor funded; we have definitely seen donor funded. For advancements in technology that will allow institutions to get off of these old point solutions, on-prem solutions, move to a better IT infrastructure where they can eliminate manual processes, cumbersome workflows, literally paper stuff, you walk it down the hall, get it signed, and moving towards automation. That allows that maybe one person in the registrar’s office, financial aid, IT, if they have tools at their fingertips, they have the capabilities then to not be overburdened with technology items in the manual process world and solutioning to that point. So, technology can free up time and reduces errors and you eliminate some of those hidden costs from outdated tools.

Drumm, I’ve got an example, I was on a demonstration a couple weeks ago where the IT staff said anytime a report is needed it has to go to the IT department, they have to take the SQL database, create the report, and it takes time, so they’re backed up. There’s no value at an institution, the report is valuable I’m sure, there’s no value at an institution for that individual who needs that report to be waiting that long for data at their fingertips to make informed decisions on how they can execute better, how their entrance rates are, how the cost base of the off-course offerings like. Technology can do that in five seconds today. That frees up that IT department to build out on services and offerings for those institutions.

Drumm McNaughton: Yeah. And another way that these colleges and universities can help save money by updating their equipment, includes plant equipment. When we were talking the other day, Rob Hartman, a good friend of mine, who used to be the CFO at Columbia International University, which is a Christian based university in South Carolina, they swapped out all their plant equipment. They had a great deal with Siemens and the savings that they realized from swapping out the equipment, enabled the payment for all of the things. So I.

Jason Duggan: We touched on it with those savvy great C CFOs that are at these institutions. They’re looking at the return on investment. There is going to be an upfront cost, as you mentioned, to either get implemented, buy plant equipment, whatever there is. But the return on investment that these CFOs are looking at provides relief in the future years to invest in those students and other things that are important to them, and those shifts.

So I actually, former CEO of mine, a former mentor of mine, used to always talk about the original iPhone. Drumm, what phone are you using today? It might be an Android, but it certainly isn’t the original iPhone. And you know that’s the same thing with technologies. Yeah, you could hack into those phones, but it had no facing camera, no recording, no copy paste, no flashlight.

That’s what old technology is. The new iPhone’s not cheap, everyone agrees with that. But the capabilities it gives you at your fingertips is the same thing that these institutions are looking at and transitioning to. Do they want to run their institution on an old iPhone or they want to run it on the iPhone, whatever, at 16, 17, I don’t even know now there. But the advancements of that are similar to the advancements in technology offerings to institutions and allows them the capabilities to do things that you couldn’t do before.

[00:27:08] Three Key Takeaways for Small College Leadership

Drumm McNaughton: Especially with the consolidation model. We have talked about a lot of things, what are the best things that small institutions can do to help themself grow?

Jason Duggan: I would say for them it’s really understanding who you serve best. You got to double down on that. So not every institution can be everything to everyone. So clarity around your mission, your core audience, it’s critical. The second thing is invest in student success, not just the enrollment function. So retention, engagement, outcomes, those are essential levers for growth. It’s actually, probably more cost benefit to retain that student than to recruit a new student.

Drumm McNaughton: Absolutely.

Jason Duggan: And third, honestly, that’s why we’re talking, you got to embrace that innovation, back to my iPhone example. But if you’re not embracing that innovation, how do you deliver that value? That can be, you can do this through your credentials, those partnerships with employers, more flexible learning models. But growth today comes from not just doing more, but like doing things differently and you have to be able to transition out of, “I used to do it this way, this is the way I do it. Well, I’m going to continue doing it that way”. You’ll be left behind.

Drumm McNaughton: Absolutely. It’s like that old definition of insanity, doing the same thing over and over again and expecting different results.

Jason Duggan: Yep. A hundred percent.

Drumm McNaughton: Yeah. Or as one of my mentors said, ” if you keep beating your head against the brick wall, it’s going to feel really good when you stop”.

Jason Duggan: I’ll have to start using that one. I have. That’s a good one.

Drumm McNaughton: Please.

[00:28:49] Bonus Takeaways

Drumm McNaughton: Well, I think we just got our three takeaways like we always do. Those were fabulous. Thank you.

Jason Duggan: The only thing I would add to some of those takeaways, Drumm, as we were talking about, is thinking of that digital transformation. It’s not just technical. It should be driven by institutional goals, not just the IT needs.

And you don’t have to go at it alone. We talked about that shared service, that partnerships and outside expertise. There’s great companies that help make this transformation for you. So, these are smart individuals running these institutions. They know what’s best. It just, it’s difficult to get there.

Drumm McNaughton: I remember a survey done by Ernst and Young and the American Quality Association years ago, they looked at almost 700 different processes, they looked at companies across Canada, the US, Japan. They found three things that helped institutions grow, one of which was doing strategic planning and sticking with it. The other was business process improvement. As long as it’s focused on the customer, and in our case the customer is the student. And lastly, leadership development and training for your senior and mid executive teams. Doing those three things we just talked about that third, focused on your customer. Everything has to be about student outcomes. I’m sorry, I just got on my soapbox.

Jason Duggan: That’s fantastic because, we sell student information systems. Who’s the beneficiary of those directly is the institution and those working those roles. But indirectly it’s the students. We want the institutions to be able to provide time and services to those students to deliver their mission. So direct versus indirect, that’s the goal. The customer is the student.

Drumm McNaughton: Absolutely.

[00:30:35] Conclusion and Farewell

Drumm McNaughton: What’s next for you? What’s next for your firm?

Jason Duggan: Yeah, so Thesis is a fantastic caveat, I love it here. And we have launched Thesis Elements in the late 2023. The market had spoken to us, we had on-premise solution before, and we’re transitioning people to our cloud base for a more secure environment to protect themselves against cyber and ransomware attacks. But Elements has already seen rapid adoption. We’ve signed around 28 clients in that 18 months as people were making this change to the ever evolving technology stack. So it’s a SaaS solution, cloud-based solution where, we’re pushing updates, product enhancements, feature development, monthly. Right?

And we take that lift and shift from the IT staff to my staff, my team developing their needs and capabilities. And so we are in this for developing a software that’s modern, technically advanced for small to medium sized institutions to provide those things exactly like we talked today, to free up resources and to put that emphasis back on the student.

Drumm McNaughton: That sounds great. Jason, thank you so much for being on the program. I’ve thoroughly enjoyed our conversation. I look forward to the next time our paths cross.

Jason Duggan: Drumm, this was fantastic. Thank you very much for your time.

Drumm McNaughton: Thanks for listening today, and a special thank you to my guest, Jason Duggan. Jason, thanks for being on the show. I’ve thoroughly enjoyed our conversation, and I look forward to the next time our paths cross. To my listeners, thanks again for tuning in. I look forward to seeing you next week.