Business is Booming–We’ve Got to Cut Back

Let’s say you run a local company that has just experienced sales growth of about 30% in the last few years–business is booming!  Orders keep coming in, including many specialized or custom orders, and everyone in the company is scrambling, working almost around the clock,  and “hitting on all cylinders” just to keep up.

In this business scenario, would now be the time to put plans in motion to downsize the company, cut back on operations, stop taking orders and scale back to offer a limited line of products or services?  Are you kidding?  Doesn’t make sense.

Yet that is exactly what is being asked of Fox Valley Technical College right now by way of the proposed State Biennial Budget for 2011-13.  And the business scenario above is exactly our organization’s scenario.

The College’s executive team and I have been working on how we are going to close about a $6 million budget gap in each of the next two years given that two of our three primary revenue sources (state funding and local tax levy authority) are proposed to be severely restricted. The third funding source comes from student tuition, which is also regulated at the State level.

Yesterday someone mentioned to me that businesses have had to do this now for several years. I’m keenly aware that the economy has really struggled the last few years. But businesses were cutting back because sales were down, orders were sluggish, inventories were more than adequate to meet demand, and customer activity was slow.  We know all too well that they were tightening their belts, as the students who have made up most of the College’s 30% growth in last few years were a direct result of the business and economic slowdown.  Local companies’ former and current employees have been spending a lot of time with us retraining or gaining new skills to be competitive in this market.

FVTC is inextricably tied to the region’s business climate and the region’s workforce…in good times and bad.  If demand for our services was down, skill levels of the adult working population were where they need to be, we could not fill programs and classes, or our graduates were not getting jobs, we should be making serious adjustments and cutting back.  But does scaling back our operations in light of booming demand really make good business sense?  And how will it support the region’s employers when they are ready to grow and expand their businesses again?

9 thoughts on “Business is Booming–We’ve Got to Cut Back

  1. Brian Donovan

    An excellent article, Dr. May and I feel your pain in this as my fiance, Becca Heflin happens to be just one of those large numbers of students who are benefitting from FVTC’s programs. It doesn’t make any sense at all that our educational budgets be cut like this, but it doesn’t make any sense, either, that the greatest nation on Earth and our great state of WI are facing (and rushing toward) bankruptcy, either. I wish I had more answers for you and for our leaders. All that’s left is prayer, alot of hard work and hard choices, I’m afraid.

    Reply
  2. Carol Tyler

    The illogic of these cuts is staggering! FVTC is often the only ray of hope for people out of work. Now, when there are more people out of work than ever, some will have limited access to the college and its resources. What happens to them? I thought it was well established that a country’s economy was directly tied to its support of the education of its citizens. Doesn’t that apply to a state? A region?

    Reply
  3. Pat Pollock

    I fully agree with your comments. Education is the answer for the future, and sometimes you just have to invest up front for the long-term solution. Perhaps some focus groups consisting of staff and students, including displaced workers, could add some insight or suggestions to the work of the executive team. The wildly opposing views of the two major political parties and lack of leadership are hindering any attempt to come up with compromises at the state level. At least at the technical college level, this is still possible. If we all pull together, we can come up with a solution.

    Reply
    1. Susan May Post author

      Thanks, Pat. I know that departments all across the College right now are working on creative solutions to help address this resource challenge…and every little bit will help. I am very grateful for that work and the ideas that are being advanced as well as our staff’s on-going efforts in identifying efficiencies and addressing process improvements that not only save money, but offer better services to our students.

      Reply
  4. Al C.

    I apologize if this is going to sound harsh, but your analogy is pretty awful. Believing growth is always a positive is misnomer, especially in the business contexts. In fact, there are hundreds of examples of companies that experience tremendous growth that ended up having to fold because the cost of the growth was too high. The problem in many of these organizations is the cost structure behind the growth is unsustainable. To put it a different way, anyone can have tremendous growth if they are offering a product/service at a price that is way below the cost.

    This is exactly the position we are at with the Tech and our government in general. I love the services the tech provides. I would love if government could provide a healthcare for every man, women, and child. I would love if we could give every person a job and a home and food for their families. I would also submit that nobody would disagree with me……assuming there were unlimited funds. Right now our cost structure is way too high and we need to cut to live within our limits. You are offering $10,000 worth of education for $2,000 (appologize if the numbers are not right…more an illustration of the issue)

    All that said, I will concede that there is the point on tuition that should be left to the localities. This would allow you to raise tuition to a point that the market would bear, and presumably to a position of stability.

    Reply
    1. Susan May Post author

      Al,
      I’m sorry you feel my analogy is awful, but I can tell you that for those of us who have been working and living the mission of this organization the last few years, it has been our reality. The demand for our services has been at a level we’ve never seen in our history, and while affordability may be one factor, it has been only one of many driving this growth. You do make several good points, however, I think there may be a few other considerations to examine.

      You are very correct that tuition covers about 20% of the actual cost of a student’s technical college education. Public higher education in this country is, without question, subsidized by the public. We could certainly debate about “how much” the public should support all levels of education, but there shouldn’t be a debate about the fact that some support is necessary and appropriate given the benefits to the community.

      If only the individual benefits, then market-based, full-cost tuition might be appropriate, although unaffordable for most. I think we also need to consider the incredible public return on this investment as well–people prepared to provide essential services, the tax revenues that employed graduates will bring to a community, a pool of skilled talent for employers in the region, the ability to attract companies because of that talent pool, less likely expenses for social services, etc.

      Nationally, community and technical colleges are the key access point in higher education allowing everyone with the desire and commitment to learn, to do so. Affordable tuition has been central to this open access philosophy to support an educated citizenry. Today, a high school education is simply not enough for most living-wage employment opportunities and less than 40% of the adult population in Wisconsin has completed an associate degree or higher, so we’ve got our work cut out for us.

      You may be surprised to know that student tuition for two-year colleges in Wisconsin is among the highest in the nation. Many other states have made access and tuition substantially more affordable than we ever have, but our level of state funding and support has nothing but eroded over the years to what now is being proposed as a 30% game-changing reduction, coupled with no ability to turn to other sources of funding.

      State budgets, college budgets, and personal budgets are really about priorities–what is most important, what is essential, what is most needed at a given time. The State of Wisconsin will spend billions of dollars in the next two years and even before the proposed budget cuts for 2011-13, all of the state’s technical colleges combined recieved only 1% of that budget plan.

      Given the role we play for so many individuals, companies, and communities, (especially in this economy), don’t you think we should be just a tad higher on that priority list?

      Reply
    2. Al C.

      Reading my post again, I appologize for using the term “awful”. In hind sight it was a stronger word than I would have liked to use. Also, thank you for the response. You make some wonderful points and are a tremendous advocate for our system.

      Reply
  5. George T. Bowman

    Well trained workers create tax revenues. Untrained workers collect unemployment. Technical positions like machinsts, programmers, CNC operators are now opening up across the valley. These are precisely the types of positions for which FVTC can prepare our workforce. Given the importance of FVTC’s mission, what are some other more creative ways to fill this funding gap?
    LOWER COSTS
    1. Lean out and automate processes — for example, require all registration to occur online.
    2. Use more adjunct faculty.
    3. Make some hard choices on which programs are “on the border line” in terms of attendance and participation. Focus on the core.
    4. Based on VOLUNTARY agreement of the staff, freeze wages for one year. (A tops down approach will just create resentment. Each staff member should be approached one on one to discuss the issue. My bet is that you will get broad based agreement, if this will help avoid layoffs.)
    RAISE REVENUES
    1. Ask for a contribution from employers who want access to a proprietary database of FVTC grads – to decrease the cost of the development, this database could be created by a special class whose mission is to create IT tools to market the college’s graduates to employers.
    2. Send FVTC staff into the corporate world to consult and collect fees that can be shared and benefit the college.
    3. Create a “profit center” business within FVTC that focuses on corporation’s critical leadership development areas — based on FVTC’s differentiating strengths, this should focus on manufacturing and technology leadership vs. straight business topics that the MBA programs emphasize. It will not be a stretch to create an operation and technology leadership certificate that could bring local company managers to the next level.
    5. Invite thought leaders from industry and government to FVTC to address critical global and regional issues. Charge an entrance fee for these events and turn them into networking bonanzas.
    6. Solicit a “LEADERSHIP BOARD” at the entrance of FVTC to recognize and promote those companies who have weighed in with voluntary contributions in 2011 to support FVTC’s mission.
    7. Start giving real $5 tickets when students park in the faculty parking lot.

    Finally, create a visible metric board that shows cost reductions and revenue raisers … sort of like the United Way goal board. Celebrate when you get there!

    Reply
    1. Susan May Post author

      This is an incredibly thoughtful list filled with many great suggestions, George. Thank you!

      Reply

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