Managing the Margin

(this article is in development)

What is the margin?

  1. Margin is defined as the point at where a sections enrollment brings in more revenue (through tuition, fees, and or appropriations) than the total amortized cost of that enrollment. Margin is the positive or negative divergence from the break even point. Low section enrollments mean it is below margin. High section enrollments generate margin. Therefore margin points are determined by section size as it affects revenue/expenditure balance.
  2. When low section enrollments are not balanced by high section enrollments then the margin goes in the red, the red is also referred to as the bleed. The bleed can be insidious because it has several beguiling root causes. Lets examine some simple scenarios.
    1. A program with a section cap of 24 suddenly enrolls an incoming class of 30. Good news right? It depends. The program will now be plagued with the following questions ‘do we increase section size to 30, or do we split the cohort into 2 sections of 15—while great for quality—not great fro revenue-expenditure balance. Lets assume that in the example institution has a break even point of 22 learners per section. By enrolling 15 to a section there are now 2 sections at 7 below margin each generating a deficit, instead of one section generating a seven student margin. Margin is lost ONE section at a time.
    2. A department offers a certain course every term. It rarely makes minimum enrollments (A minimum enrollment intended to drive margin). It is an important course so faculty immediately addresses individual student needs through independent studies. By reducing the demand through independent studies the course fails to make in the next term. Enrollment patterns must be managed carefully. Margin is driven by both policy and practice.
    3. An allied health program enrolls 20 students per section in class and 8 per instructor in clinical. With margin at 20 this program will always be in the red no matter how popular or high the demand. Programs that cannot make margin because of their delivery parameters contribute to a structural deficit that must be offset by higher enrollment programs. Overall margin is achieved by managing the balance across the curriculum in order to achieve the institutions mission..
  3. Managing the margin is done in aggregate. Every institution should and will have sections that do not meet margin. The questions are how many, and how are they covered by high enrollment sections that generate margin. The net of all enrollments must generate a margin otherwise the institution is in structural deficit. An institution whose pivot point is a few enrollments either way is said to be managed at the margin. This is not good but better than in structural deficit. A financially healthy institution is said to generate a good margin.

Margin Case Study

Characteristics related to margin

Institutions in structural deficit.

  • Low compensation profile compared to peers.
  • High or growing deferred maintenance.
  • Emergency budget a way of life (travel, professional development, equipment, …)
  • Equipment with aging profile
  • Early disbursement of financial aid funds
  • Large pool of open positions held
  • No investments in future possible
  • Everyone blamed

Institutions at the margin.

  • Low to moderate compensation profile compared to peers. Can either be showing improvement or decline depending on whether the margin trend is up or down.
  • Working deferred maintenance to clear emergency replacements
  • SEM usually inaugurated
  • Equipment moderate age irregular replacement cycles

Institutions with good margin.

  • Working compensation profile compared to peers. Can either be showing improvement or decline depending on whether the margin trend is up or down.
  • Working deferred maintenance.
  • Building to align with future
  • Compensation at median of peers or above

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