Kaplan – View From A Bridge – management, education and personal thoughts

INTO AT WORK IN A LAND DOWN UNDER*

Rumours of INTO University Partnerships (INTO) striking a deal with the University of Western Australia (UWA) seem to be gathering pace**. It’s certainly clear that Study Group’s operation aligned with UWA, Taylor’s College, is closing in December 2021 and is currently not accepting any more students. Meanwhile UWA has announced the opening of UWA College, a new pathway institution, in February 2022 and it sounds as if this could be where INTO has landed its first ‘partnership’ in Australia.

The loss of UWA takes Study Group down to three university partners in Australia, according to its website, but it continues with its links to the top-ranked Australian National University and University of Sydney. Navitas currently lists 11 Australian partners with only one from the Go8. Just for the record that’s Adelaide which also appears on Kaplan’s list of three partners.

INTO’s entry into the Australian fray makes it the newcomer and comes some years after casting eyes at the opportunities . Discussions with La Trobe (currently a Navitas partner) were fairly advanced in the early 2010’s and there were other flirtations. The questions – why now and why Perth – would lead to an understanding of whether this is opportunism, an emerging strategy for diversification or a desperate throw of the dice.

The company’s problems with losing partners have been well rehearsed in recent months but there seemed some logic to taking joint ventures accruing debts to INTO out of the portfolio. While it is doubtful that all the decisions to close were driven by INTO, the remaining partners include some top names in the UK at a point when international recruitment is bouncing back. Almost every pathway group has had to take some pain with closures in the US so INTO’s troubles there were not uncommon.

It still seems something of a leap to take on a new partner in a country where the company has no infrastructure and limited operational experience. Even more so at a point when that country has a very uncertain path to being able to welcome international students back in the numbers it once enjoyed. It’s also reasonable to say that Perth has not historically been the epicentre for international student growth in Australia and that enrollment has lagged behind the country’s impressive upward curve to 2019.

Sources: UWA Annual Report (showing student load) and Australian Department of Education Skills and Employment

While UWA is one of the Group of 8 of top universities in Australia but is also behind some of the more illustrious names in terms of global ranking and attractiveness to international students. So, even when the borders reopen there is little to suggest that UWA will be at the front of mind for international students looking to find a top ranked university. All the while, there is also the drumbeat of Australian politicians and pundits who are keen to see the 2020 reduction in international student numbers go down even further to reduce university dependence on international fees.

	THE 2021 Global Rank	QS Global Rankings 2022	% of international students (THE measure)
University of Melbourne	31	37	48
University of Sydney	51	38	43
Australian National University	59	27	47
University of Queensland	62	47	38
Monash University	64	58	43
UNSW Sydney	67	43	44
University of Adelaide	118	108	29
University of Western Australia	139	93	29
Uni of Technology Sydney	160	133	36
University of Canberra	184	436	36

Business Insider Australia and other publications have set out the broader risks to Australia’s booming international student market as its Government struggles to find ways to allow inward mobility. UWA has taken the opportunity to roll out $40m in ‘structural cost cuts’, including ‘university-wide redundancies’ while flagging heavy investment in its campus. All of this plays out against the background of continuing tensions between the governments of Australia and China with the latest spat over the Great Barrier Reef and complaints at the World Trade Organisation being just the latest examples.

It is fair to say that the jury is out on how soon and how robustly Australia will return to the international student recruitment party. Those who have travelled the scene for many years know better than to write them off and they have overcome dips in enrollments before. But the resurgence of the UK, the Biden bounce and Canada’s continuing surge means that the competitive market they face will be more challenging than ever before.

All in all the link up, if it is confirmed, seems out of context for a business that has focused so heavily on the US for the past five years. The geopolitics of the enrollment potential are also difficult to divine at this stage and may make the partnership a harder sell. It’s going to be interesting to watch and see if INTO find it the “land of plenty” or whether those making the decision will think they’d “better run…better take cover.”*

NOTES

* It’s sometimes irresistible to allude to the mighty Men At Work and their song Down Under which topped charts around the world between 1981 and 1983. In September 1983 it was adopted as the theme song by the crew of Australia II in their successful challenge for the America’s Cup yacht trophy.

** As always, I would welcome any clarification or correction from an authoritative source at the University of Western Australia or INTO University Partnerships and amend the copy accordingly.

Image by Katrina_S from Pixabay

US University Pathways – Build It And They Will Come?

In 2014 Karen Khemka, a partner with the Parthenon Group, said “The U.S. third-party/outsourced pathway market is less than half the size of the Australian market despite having a higher education system that is 10 times the size.We anticipate that growth will be constrained only by the pace at which private providers can develop the market.” (Inside Higher Education, Bridge or Back Door? 30 April, 2014). With reports recently indicating that two leading providers in the US, Study Group and INTO, are for sale it’s a good moment to see what has happened.

Khemka’s statement came towards the tail end of a period when more than a billion dollars was invested in private pathway providers with the potential for pathway development in the US a strong incentive. But the next billion-dollar question facing potential investors may be whether US pathways were really a field of dreams where you could, to borrow loosely from the film, ‘build it and they will come’. Or has attention to the supply side of the equation ignored the challenges of changing patterns of demand around the world?

To size the growth in capacity in the US I took the NAFSA publication Landscape of Third-Party Pathway Partnerships in the United States (NAFSA, 2017) as a starting point. The publication identified eight providers who were partnering with 45 institutions on 1 April 2016. The criteria was that these partnerships had to be ‘contractual agreements between universities and third-party entities to provide English language courses along with academic credit.’

I revisited each of the third-party entities listed to determine what relationships they have added. It is reasonable to say that the wording of some media statements and the content of web-sites is, either by accident or design, unclear about the exact nature of the relationship or offering. However, Table 1 summarises my understanding of new partnerships that meet the original criteria and notes the dates they were announced.

Table 1 – New US Pathways of Eight Providers Announced 2016 to 2018

* Source: Landscape of Third-Party Pathway Partnerships in the United States (NAFSA, 2017)
**I can find no public announcement of the Shorelight partnership with Utah but it is reflected on the web-site of each organisation

Table 2 shows arrangements listed on the providers’ websites but which I have omitted. I am happy to accept any authoritative corrections in my understanding of the nature of the partnerships or courses provided and to add any partners I have missed. I have not gone beyond the original group of providers although a number of additional providers, such as EC Higher Education, have also developed pathway courses in recent years.

Table 2 – Partnerships listed on provider websites but not meeting criteria

The eight providers have added 21 new partnerships to the 45 shown in the original study – a growth of 47%. This suggests that the private providers have set about growing their businesses in the US with a good deal of vigour and some degree of success. At the time of Khemka’s quote in 2014 Shorelight was a new player but they have moved on to secure the most partnerships just four years later.

That growth in pathway capacity comes at a time when the global balance between supply and demand is in a state of flux and the future is somewhat less certain. The expanding availability of degrees taught in English and the ambitious targets of both traditional recruiting countries and emerging destinations has radically changed the competitive environment. While much of the world is adding rocket fuel to its recruiting engines the US looks to have loaded its unleaded petrol engine with diesel.

In the US a decline in non-degree new enrolments in 2015/16 was followed a year later by both graduate and undergraduate new enrolments declining. And non-degree enrolments continued to fall in 2016/17 which may be a leading edge indicator of further decline. The IEE Fall 2017 International Student Enrollment Hot Topics Survey says ‘Responding institutions report a 6.9 percent decline of international students enrolling for the first time at a U.S. institution, continuing the declines first seen in Fall 2016.’ (IEE, November 2017)

Table 3 – US New International Student Enrollment, 2006/07-2016/17
Source: Institute of International Education (2017). Open Doors Report on International Education Exchange. Retrieved from http://www.iee.org/opendoors

Like many sectors higher education is being obliged to rethink the fundamentals of supply and demand as demographics, competition and disruptive technologies undermine the old certainties. It is a challenging moment to be launching new initiatives and building capacity based on past performance.

NOTES AND CORRECTIONS

This post was updated on 24 September 2017 to include Lynn University as a Study Group partner announced in May 2017. Other related statistics have been updated. At the time of announcement it was billed as ‘is set to open in January’ – presumably 2018. As of the date of this correction the partner is billed on the Study Group site as ‘Launching Soon’.

GETTING TO GRIPS WITH PATHWAYS – A THORNY SUBJECT?

After looking at the broader picture on winners and losers in HE recruitment I’ve focused on a small number of high profile university partnerships to give some texture about those with pathway providers. Diving into the detail published by universities gives some insight as to whether pathway provision is delivering a stable stream and enhancing direct recruitment through global brand-building. Comparisons against the national picture indicate whether they are doing better than the sector overall.

Detailed breakdown of pathway volumes and progression rates are usually deemed commercially confidential and are rarely matters of public record. As a proxy I have looked at overall international student enrolment for the institutions involved as one would expect a thriving pathway of any size to provide a solid underpinning for broader recruitment efforts. Where possible I have supplemented this with Quality Assurance Agency for Higher Education (QAA) or University Annual Report data (available through the BUFDG site.

The examples I have chosen show sharply different outcomes at the university level. The underlying detail from supplementary sources suggests that the pathway is a contributing factor to those outcomes. In a broader context some institutions have done better than average and some not as well.

While the detail is UK related there is little reason to believe that the same isn’t true of the US and I’m doing some more work on that hypothesis for a later blog.

Three Big Players and Partners
Institutions are never wholly comparable but the universities of Newcastle, Liverpool and Sheffield are all large, metropolitan, Russell Group universities with substantial global ambitions. In the Times League Table 2018 Newcastle is 26th, Liverpool is 42nd and Sheffield is 21st. Newcastle and Liverpool have partnered with INTO and Kaplan respectively since 2007. Liverpool recently extended for another 15 years while Newcastle opened a new London campus with INTO in 2015 and are also in for the long haul. Sheffield was with Kaplan but switched to Study Group from September 2015.

Information published in University Annual Reports on overall international student enrolments in the five years from 2012/13 to 2016/17 suggests that Liverpool have, to date, weathered the headwinds facing the UK better than Sheffield or Newcastle. Source: University Annual Reports and Financial Statements 2012/13 to 2016/17

The university financial statements suggests that any changes to fees have not been sufficient to make up enrolment shortfalls. The fee income reflects the down-turn in student numbers for Sheffield and Liverpool in the 2016/17 year but also suggests weakness for Newcastle over the past two years.
Source: University Annual Reports and Financial Statements 2012/13 to 2016/17

To provide a comparative performance for the universities I have used HESA data for all international enrolments (all levels, full-time and part-time) in the 129 universities in the 2018 Times League Table. This is a measure which should include students enrolling across the whole year and should account for pathway progression from all intakes. It usually differs from the University Annual Report enrolment figures which are generally taken from a count in December of the academic year. I review the complexity of the broader HESA data in an earlier blog.

All the universities outperformed the average in the first two years under review. Liverpool and Sheffield achieved this between 2014/15 and 2015/16. Liverpool continued to outperform the sector from 2015/16 to 2016/17.
Source: HESA

Understanding The Pathway Performance
There is some insight into the changes at the pathways for Liverpool and Sheffield through the Quality Assurance Agency reports. For INTO Newcastle there has been no similar educational oversight although my understanding is that the changing visa situation will mean that ISI will provide oversight in the future which may lift the veil. My observations below are drawn from published material including university annual reports.

Newcastle and INTO
The University notes in its 2016/17 Annual Report that the enrolments at INTO Newcastle ‘had a disappointing year with a 7% reduction in student volumes’ which was comparable to the University’s direct recruitment decline. As a 50/50 joint venture partner the University also reports on its share of joint venture income and surplus/deficit. For completeness I have shown both the Newcastle-based and London-based operations but note that the latter has substantial undergraduate and postgraduate intakes in addition to pathways.
Source: University of Newcastle Annual Reports 2012/13 to 2016/17

The London joint venture is still in start up mode and student numbers are reported as having grown from 24 in year one to 184 full time and 20 part-time students in year two. The income and operating surplus/deficit are reported as:
Source: University of Newcastle Annual Reports 2014/15 to 2016/17

Liverpool and Kaplan
What is most striking about reviewing performance through the lens of the University Annual Reports is that it can reflect a level of engagement and shared commitment – or in some cases not. On page three of the 2016/17 Liverpool University report the Vice Chancellor reflects on the long-standing relationship, the renewal agreement for the next 15 years and the investment in new facilities for the pathway. The report notes that the partnerships with both Kaplan and Laureate International ‘are vital to the University’s international outlook and global ambitions.’

The Annual Report notes that Kaplan’s International College opened in 2007 with 146 students and has seen 6,500 students study at the College, with 20% of the institution’s international recruitment achieved via its pathways. Future investment includes construction of a new, 47,000 square foot, 13-storey college building due to open in 2019.

A key determinant of a successful pathway relationship is the extent to which the University partner embraces the strengths of the private provider and clears roadblocks to innovation and recruitment. Both parties are undermined if the University does not engage productively at both a senior and operational level. The 2016 QAA Report for Kaplan International College at Liverpool notes ‘The close working relationship with the partner university, which enables highly effective and regular processes for developing, monitoring and reviewing of programmes’.

Sheffield and Study Group
Sheffield International College was first established by Kaplan with the University in 2006. In 2010/11 it had over 1100 students and this number had ‘grown’ by 2013 despite no new programmes being introduced (QAA Reports 2012 and 2013). Over a period from March 2014 to September 2015 there was a transition to Study Group.

The November 2016 QAA Review indicates that 933 students were in the Centre and the next report in October 2017 says that ‘student numbers fell by around 12 per cent between 2015-16 and 2016-17’. On the upside it was noted that 7 per cent more students entering programmes at USIC being eligible for progression to the University. The timing of the QAA review makes it difficult to draw firm conclusions about full-year recruitment.

It’s still early days in the partnership and the whisper in the sector is that the University protected its commercial interests in the event of any performance issues – perhaps a sign that universities are becoming more commercially minded. The PIE noted in August 2017 that ‘Providence Equity Partners, which owns higher education provider Study Group, is reportedly preparing to sell the company for £700m’ so there is a lot at stake as the company manages the expectations of its large stable of partners. Interesting times as the UK itself comes under relentless market competition from Canada , Europe, Australia and the emerging destinations in Asia.

Closing Thoughts
Nobody who is looking from outside can full understand the dynamics of a relationship between University and pathway provider. Anyone who has been at the sharp end knows that personalities, department politics and academic apathy are all facts of life as is, from time to time, a revolving door of senior decision makers. An initial meeting of minds at the highest level is usually not enough for sustained success so the working relationships need to become rapidly embedded.

What is for sure is that the chances of maximising performance are vastly enhanced by realistic expectations, responsiveness to market and action on shared commitments. Universities need to see the pathway as being fundamental to their success and treat the provider as an equal partner with important skills. Providers need to be honest about what they can deliver and manage how their portfolio is balanced to meet targets and business plans.

And perhaps, given the age of the pathway model and the way the market is changing it is time to consider whether further innovation is needed. Over the years I have heard several major pathway players define their approach as ‘disruptive’ or ‘transformational’ but it is difficult to see how pathways are any different now to when they were introduced.

Notes and Corrections

Comments are always welcome and I think it is a good thing to note any corrections or amendments to the text.

30 April 2018 10.05amPDT – amendment to correct ‘Newcastle and Liverpool have partnered with Kaplan and INTO respectively..’. Correction to clarify that INTO partner with Newcastle and Kaplan partner with Liverpool.

PATHWAY, DEAD END OR TIME FOR A U-TURN?

August 2018 will be the fifth anniversary of Shorelight’s first partner, Bath Spa University in the UK, being announced with suggestions that the university would ‘see its overseas intake swell to around 2,000 students over the next four years.’. The four years would run from 2015/16 to 2018/19.

It seemed a good moment to look at the pathway market and what happens when relationships don’t work out. This is partly because we may be entering a period where the pathway sector has matured and circumstances make it ripe for realignment. The stakes are high on all sides and the factors are particularly relevant to the UK and US where growth in pathways has been rapid and international student recruitment has been under substantial pressure.

As finances tighten university management is under more scrutiny and is likely to demand more in terms of targets and delivery from partners. The consequences of a failing pathway are becoming increasingly difficult to hide as direct recruitment gets harder. Providers have their own problems with unprecedented global pressures and ubiquitous competition. Some may be reaching a point where optimising their portfolio is more important than simply adding or maintaining capacity.

In the UK a number of institutions have been following the University of Sheffield to see how the switch from one major private provider to another might work. Loyalties are under pressure as university leaders who signed the deal move on and some pathway providers look to change hands after the glut of private equity investment from 2010 to 2014. Pressure to perform has never been greater.

So, when a pathway becomes a dead-end there is every incentive for one or other party to make a U-turn. Or, as Warren Buffett is quoted as saying, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.” And it doesn’t really matter if it’s a long-term contract (where remedies for under-performance are usually written in) or time for a tender after five years.

IT HASN’T ALWAYS ENDED WELL IN THE PAST
There is, of course, precedent and although closures can be hard to trace I have listed below those that I have uncovered in my research. New partnerships are usually heralded with a fanfare and people smiling as they shake hands on a deal done. Unsurprisingly, a veil is drawn over partnerships that end and those that are public are usually dressed in anodyne media responses.

For both universities and providers that is unfortunate. Considering and addressing failure is a good way of learning and often more informative than the bright, shiny case studies which are so popular as sales tools. In my time with two leading universities with private providers and as COO and CEO with two providers I saw many factors that can make or break a partnership. These are worth sharing.

I make no comment on the reasons for the ending of the relationships noted (but have referenced reports where available). Neither do I claim that this list is exhaustive and I would be interested in any other examples. For organisations contemplating partnerships an open and honest discussion with those who have tried and moved on is probably worth as much as hours of expensive contract development.

Study Group
i) Stirling University (Opened 2007- Closed 2013) Source: QAA

INTO
i) University of East Anglia London (2010-2014) Source: THE) ii) University of Stirling London (Opened 2014 – Closed 2015?) iii) St George’s University (Opened 2012 – closed 2017 Source: St George’s University Annual Report

Oxford International
i) Canterbury Christchurch (Opened 2015 – closed 2017?)

Kaplan
i) University of Utah (Opened 2010 – Closed?) ii)University of Sheffield (Opened 2006 – Closed 2015)

Navitas
i) Western Kentucky University (Opened 2010 – Closed 2016)
ii) Edinburgh Napier (Opened 2011 – due to close 2018)

PRIVATE PATHWAYS MAY NOT BE ACCESSIBLE OR GUARANTEE SUCCESS
UK universities with the greatest decline in overall international enrolments in the past five years often have no pathway partner or are relatively late to the party. Several of the non-aligned universities here have been actively seeking providers but there is, inevitably, caution from providers about taking on institutions that do not have underlying strength.

It remains to be seen whether some of the new partnerships can materially alter the trajectory of underperforming universities. Sector sources suggest that Oxford International and the University of Bedfordshire are parting company and the provider is not currently listing this university on its website.

Table 1 – UK Universities With Greatest Decline In International Enrolments 2012/13 to 2016/17

Source: HESA (enrolments), QAA and University/Company websites

And that brings me full circle to Bath Spa and Shorelight. HESA data (supported by the University’s Annual Report narrative) showed strong growth in international recruitment from 2012/13 to 2014/15. In the first full year of the partnership with Shorelight (2015/16) there was a weakening of growth which was followed by declining international enrolments in 2016/17. There is some way to go for the university to reach the anticipated 2,000 by 2018/19.

Table 2 – Bath Spa University International Enrolments 2012-13 to 2016/17

Source: HESA

Perhaps more troubling is that in December 2017 the THE reported that ‘figures available on (sic) Companies House show that Bath Spa Global – an international pathway college venture set up in 2014 in partnership with US firm Shorelight Education – has lost about £1.4 million in the three years to July 2016, while its parent company Bath Spa U has lost about £736,000 over the same period.’. The 2016/17 Financial Statement from Bath Spa showed international student income and numbers declining year on year and noted that the joint venture partnership, Bath Spa Global, ‘remains fragile’. At the time of writing I can find no mention of Bath Spa University on Shorelight’s web-site and no current reference to Shorelight on the University’s site.