Operational Analysis: Small Colleges

The inefficiency-trap.

Colleges are universally inefficient, but small colleges have unique inefficiencies such that their cost models may be periodic, not linear (or linear-derived).

For example: most larger colleges look like this:

At a certain point, the incremental admin/academic cost of adding a student approaches $0 (at the University of Florida, for example).

But let’s take a look at another Florida public college, New College, which has fewer than 1000 students.

New College’s peak efficiency for period-1 is likely 500–700 students; inefficiency begins probably around 700–800 students. This inefficiency causes significant resistance, which pushes the college back to its previous efficiency peak.

For New College to grow beyond period-1, it must become more efficient than a standard university (more like a private enterprise). (This is what Elon saw at Twitter when he first arrived — financial inefficiency reflects operational inefficiency, which is the primary barrier to growth. The irony with colleges is that this dynamic is usually an affliction of large organizations in the private sector yet is more common in small organizations in higher education, which, due to public financing, experience public sector financial dynamics regardless of whether a particular school is private or public.)

Alternatively, without increased efficiency, the college may progress to period-2 by substantially increasing inefficient spending.

What does this mean for small colleges? Unlike in the private sector, growth in higher education does not inherently enable efficiency; often, the opposite is the result. This operational dynamic — perhaps counter-intuitive — has proven lethal when a small college falls into the inefficiency-trap.