Since 2012, Georgia’s public university system has launched mergers of a dozen state schools to cut costs and improve services, partly inspired by similar moves in the business world.
The latest: Kennesaw State and Marietta’s Southern Polytechnic State universities, which will maintain two campuses but consolidate operations this year.
Up next: Georgia State University and Georgia Perimeter College, creating a 54,000-student institution in one of the nation’s biggest college mergers yet. The combination is slated to be completed in 2016.
But when do such mergers make sense, and how should they be done?
The business world could hold some of the answers, experts say. Many companies have experience with mergers — good and bad. Corporate mergers’ pitfalls, critics say, include empire-building CEOs who pay too much for acquired companies, disastrous culture clashes and exaggerated cost savings or other alleged “synergies.”
One of the biggest bellyflops was AOL’s merger 15 years ago with Time Warner, including Atlanta’s Turner Broadcasting, which resulted in their later split after a $99 billion loss.
Other mergers have gone better. Airline mergers are considered tricky, but the Delta-Northwest combo of 2008 after each emerged from bankruptcy helped forge one of the nation’s most profitable air carriers.
Like the mixed results from corporate consolidations, it appears that the University System of Georgia’s mergers have been hit or miss so far.
University officials say the strategy has produced $12.5 million in annual savings that have helped fund new degree programs and professional counselors to boost student graduation rates.
“We just couldn’t keep on doing the same thing the same old way,” said Hank Huckaby, chancellor of the University System.
Controversial changes
But some mergers were controversial. Students, workers and alumni were angered at the name change to Georgia Regents University after the 2013 merger of Augusta State and Georgia Health Sciences universities.
Students of Southern Polytechnic were likewise concerned their school’s identity would be lost and reputation hurt in the merger with Kennesaw State.
Three out of four consolidated schools in the first wave of mergers in 2013 lost students afterward. Enrollment dropped by 16 percent — the worst drop in the entire university system that year — after South Georgia State College was created by combining two schools 36 miles apart in Waycross and Douglas.
Middle Georgia State College’s 2013 enrollment dropped 10.1 percent after its merger of two Macon-area colleges. Georgia Regents University had a nearly 6 percent drop, the worst decline among Georgia’s large research universities. The only merged school to beat the trend was University of North Georgia, which grew by 2.5 percent.
University System officials blame the enrollment declines on an improving job market — which drew away students — and tighter federal student aid rules.
Theron Madison, a 22-year-old former Georgia Perimeter College student who plans to return in the fall, said he’s not happy about the pending merger with GSU.
“I think it’s stupid. Why would they do that?” he said. He worries that tuition will go up and classes will be in less convenient locations after the merger.
Re-tooling higher ed
A litany of challenges has pushed Georgia and other states to consider mergers and other cost-saving measures: rising tuition costs and student debt; falling enrollment; and financial strains and low graduation rates at many institutions.
Such challenges helped spawn a nationwide campaign to re-tool higher education that is being bankrolled by some of the largest private foundations in the the U.S. The Chronicle of Higher Education reported last year that the Bill & Melinda Gates Foundation has given roughly $500 million in recent years to programs such as Complete College America, whose aim is to get colleges to graduate more students more quickly and cheaply.
Critics worry that the Gates Foundation and Complete College America are having undue influence and pushing prescriptions that rely too much on technology, data tracking students’ progress, and narrowly focused training.
But that’s needed for the “new normal,” said Huckaby. He said Georgia was one of the last of about 30 states to join Complete College America’s alliance, but one of the first to complete its plans for re-tooling its university system.
Soon after he became head of Georgia’s 313,000-student public university system in 2011, he toured the state’s 35 colleges and universities and came away with a stark conclusion: there were too many.
Hobbled by state funding cuts, the universities didn’t give pay raises for years, and were losing academic staff and suffering drops in enrollment in recent years, said Huckaby.
Huckaby said he concluded that Georgia needed to merge several colleges and universities and to re-direct the savings to academic staff and improved programs for students. He said he was partly inspired by similar moves about six years ago with Georgia technical schools.
“If you’ve got 35 institutions, you’re going to have 35 presidents” and many other officials and workers who will be redundant if some units are combined, said Huckaby. The savings from cutting those jobs can be used to do “a better job serving who you are supposed to be serving, which is students,” he said.
The mergers have resulted in 152 job cuts, about two-thirds of them at Kennesaw State and Georgia Regents University, university officials said. Most were through attrition; 23 employees were laid off, they said.
Merger challenges
Some experts said such mergers often don’t produce the expected savings or other benefits that their architects envisioned.
“It’s much more expensive to merge organizations than people realize,” said Michael Goldstein, a former investment banker and finance professor at Babson College in Wellesley, Mass.
Even companies in the same industry are often tripped up by costly distractions, as people worry about jobs and units fight over different ways of operating. “All that just makes people less efficient,” said Goldstein.
To avoid such problems, merging organizations need to clearly communicate goals and plans to employees and other stakeholders, said Campbell Harvey, a finance professor with Duke University’s business school. Consolidation shouldn’t happen too hastily, especially at colleges and universities, which have a slower pace than businesses, he added.
“The one thing that is really toxic in mergers is a clash of cultures,” said Harvey. “You can’t shock and awe.”
Richard Vedder, director of the Center for College Affordability and Productivity, wonders whether mergers are even a very useful tool in the academic world. The center advocates other cost-saving approaches, such as online classes, more intensive use of campus buildings and faculty, and trimming of athletic programs.
One of the underlying reasons businesses merge, said Vedder, an economics professor at Ohio University, is to realize so-called “economies of scale,” or capturing more sales and profits by combining two businesses and cutting redundant staffs.
“The business world and the higher education world are different in so many ways,” he said. “When you use traditional technology, which is a professor lecturing in front of a class, the economies of scale seem to be limited.”
Huckaby acknowledged that Georgia’s college mergers have come with challenges, but said they are meeting the state’s goals and improving students’ experiences.
“We knew it wasn’t going to be easy. Some people were going to lose their jobs. That always creates anxiety,” he said.
But he said students in Waycross, for instance, now have access to physics classes that they didn’t have before. And the University of North Georgia is growing fast after adding about 20 new degree programs.
“Preliminary results show that (the mergers were) a good decision,” said Huckaby. “We would not undo any of them.”
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