Where is Higher Education Headed Next? with Sacha Litman of Boston Consulting Group (BCG)

Sacha Litman is a core member of the Public Sector practice at Boston Consulting Group and the global lead for analytics in education, employment, and welfare (EEW) for that practice. Sacha is an expert in talent gaps, higher education turnarounds, pricing, and student financing.

Sacha advises higher education, employer, and state leaders on building education/employer partnerships that close talent supply/demand gaps in order to improve students' employment outcomes; employer talent acquisition costs and retention; higher education enrollment, brand perception; financial sustainability; and states' ability to attract and retain talent and employers. He has extensive experience in pricing and analytics, and designs models such as outcomes-aligned student financing, financial aid optimization, HR/workforce analytics, and schedule optimization.

Sacha is a former edtech founder and CEO, with the entrepreneurial skills to build pioneering new approaches. Before joining BCG, he was the leader of Public Sector Advanced Analytics for McKinsey & Company, and CEO of the education analytics firm Measuring Success.

Recommended Resources:
A Turnaround for Higher Ed in the US by Sacha Litman, Tyce Henry, J. Puckett, and Lina Bankert
Why Student Financing Must Align with Outcomes by Sacha Litman, Claudia Newman-Martin, Matt Beckett, and John Pineda
How Higher Ed and Employers Can Partner to Power Talent Pipelines by Sacha Litman, Lane McBride, Tejus Kothari, Claudia Newman-Martin, Ruth Ebeling, and Frank Breitling

Transcript

Alexander Sarlin: 0:05

Welcome to Ed Tech insiders where we speak with founders operators investors and thought leaders in the education technology industry and report on cutting edge news in this fast evolving field from around the globe. From AI to xr to K 12 to l&d, you'll find everything you need here on edtech insiders. And if you liked the podcast, please give us a rating and a review so others can find it more easily. Sacha Litman is a core member of the public sector practice at Boston Consulting Group BCG and the global lead for analytics and employment, education and welfare E W. For that practice. Sacha is an expert in talent gaps higher education, turnarounds, pricing and student financing. Sacha advises higher education employer and state leaders on building education employer partnerships that close talent supply demand gaps in order to improve students employment outcomes, employer talent acquisition costs and retention, higher education enrollment brand perception, financial sustainability, and state's ability to attract and retain talent and employers. He has extensive experience in pricing and analytics and designs models such as outcomes aligned student financing, financial aid optimization, HR and workforce analytics, and schedule optimization. Sacha is a former ed tech founder and CEO with the entrepreneurial skills to build pioneering new approaches. And before joining BCG, he was the leader of public sector advanced analytics for McKinsey, and CEO of the education analytics firm measuring success. Sacha Litman, Welcome to EdTech insiders.

Sacha Litman: 1:53

Thank you for having me.

Alexander Sarlin: 1:55

Absolutely. I'm very curious about your opinions about so many things in higher ed and the workforce if you were an ed tech CEO, and founder, now you're the global lead for analytics in education, employment, and welfare at BCG. Tell us about your journey in edtech. And what brought you to this expertise about education and employment?

Sacha Litman: 2:15

Sure, I've always had a fascination with the intersection of education and analytics. You know, I think in the early days, there just was no data, or there was very little data that was really being used in education. And I, my first tech company really focused on the creation of datasets and using, you know, early machine learning techniques to basically identify what drove outcomes and success. And that was a company called measuring success, in fact, and did work with a lot of educational institutions primarily at the K 12, level, early childhood, etc. And then I got really fascinated in the higher ed space, because I saw a lot of the changes that were coming down the pike there. And in terms of the increased pressure on demographics, the challenges are against on return on investment, and a lot of the bifurcation in the space in terms of the elite schools getting only stronger, and many of the other schools struggling to survive. And so I thought it'd be a really interesting place to apply some of my thinking, and about 10 years ago, I sort of pivoted into really focusing on the high red space. But as I think we've all seen, there's been a lot of vertical integration in education. So I still spend a lot of time on the transition from K 12, to higher education within higher education, and certainly the transition from higher education to workforce, which is another big theme of the work I do these days, you know, in terms of BCG, I'm a partner in our education and employment practice. And while I'm the head of the analytics, I'm the analytics lead for our efforts in education. A lot of the work that I do, along with about 10 other partners in the United States and several dozen partners across the globe at BCG is to focus on several key problems. One is how do we turn around higher education institutions who are struggling or take ones that are elite and get them even stronger? Right, number two, how do we really close talent gaps? This continues to be a major challenge in the economy. And number three, you know, how do we really drive the kind of enrollments in higher education, which is, of course, very heavily tied to their success, that are reflective of you know, the impression from University Bound students, both of you know, traditional 18 year old age in other age groups, to see that there's a real return on investment in engaging in higher education. So that's a lot of the work that we do, I tend to approach that work from three angles. One is with the higher education institutions themselves. But to be honest, a lot of the really interesting work that we're also doing isn't with just individual higher education institutions, but those that are distressed and those that are stronger. It's also with states or regions who are trying to figure out how do they address the talent gap in their region, right? Or it's working with employers who are saying, we need to bolster our supply? Have you name it, you know, nurses, teachers, go down the list, you know, computer scientists, whatever the case is, and We are not getting the quantity or quality in terms of the skills from higher education that we need, how can we partner with them to make that more effective. So that's a little bit of my sort of career journey and sort of where my work and BCG sort of fits within that along with sort of our wider practice.

Alexander Sarlin: 5:15

You've mentioned so many hot topics in higher ed in that answer. And so many issues that we talk about a lot on the podcast, you know, the return on investment for education, the transition from higher education to employment, the role of employers or governments in helping education become more relevant, the span of what you think about is so interesting. And so you know, on topic right now, with what you know, where the world is going, where higher ed is, is really thinking about, just to back up a second Boston Consulting Group, BCG is a management consulting group, super highly respected, very, very, you know, they're everywhere. But people don't always think of them in the context of education. And I've met a couple of of BCG education folks, and they're really amazing. But I'd love before we even dive into the actual details of the higher ed, can you zoom out? And tell us a little bit about BCGs? Education Consultant work? You just mentioned there, you know, people around the globe is different divisions. But, you know, who do you tend to work with? You know, you just mentioned higher ed, but also states and regions? I'm just curious how educators find you and think of you, as you know, think of you for solving some of their huge problems, like some of the ones you just named?

Sacha Litman: 6:27

Yeah, good question. So I explained a little bit about the breadth of our practice, but just to quantify it. So the education practice at BCG, and, you know, prior to this, I was at McKinsey. So similarly, there started about, you know, about 1520 years ago. And before that, and I've been around the block, and I actually started my career in consulting as well, before I became an edtech founder, and building out all these data systems. At the time, when I started in consulting at McKinsey, actually, out of undergraduate at Yale. First of all, I had a data science degree, which wasn't called at the time, but it was the least popular major at Yale at the time, and we didn't use any analytics, and I can assure you all the education work that we did was also completely voluntary slash pro bono, as we like to call it, that has shifted significantly in the last 15 years or so. And I think that's been largely driven by the problems in the space getting more intensified. You know, it used to be, you know, if you're a higher ed institution, or if you were a school, you could hang out a shingle and you'd be okay, you know, people will come to your door, you would enroll them, and mostly things were good. But you know, around the time of the Great Recession, roughly, you know, things started, really the demographic started and the, and the return on investment started really kind of turning the wrong way. And the problems of these institutions got really complicated. And that's why firms like BCG have we've gotten so involved in this space is because the we get pulled in. And we are largely by referral, we don't advertise, you know, you're not going to see us, you know, putting out, you know, advertisements on banner ads or anything like that. But, you know, we we really are, we try to be thought leaders and we get pulled in when either presidents or board chairs or you know, heads of school, depending on which type of institution you're talking about, are dealing with a really thorny problem, either around financial sustainability around enrollment around outcomes, or aligning to workforce goals, or attract, you know, trying to figure out how to, you know, deploy funds from federal grants or state grants in a more effective way. Right, this is when we get pulled in, because now that the problems are more complex, and some of the investments are larger, the opportunity costs are greater to sort of, you know, whittle that away. So I think we do get pulled into a lot of situations, there are distressed institutions. And I'll start on the higher ed space K 12, sort of another story for the large firms. But, you know, at the higher ed space, there are distressed higher ed institutions that, you know, are really struggling with their survival, as we know, and this is sort of where we tend to get pulled in there. There are also elite institutions that pull us in, because there's an aspect of their efforts, which, you know, maybe one of their professional schools, maybe their cyber, maybe it was some aspect of the institution that is struggling, and they really need to solve for it in order to really maintain their prominence or maintain their financial sustainability. So that's another source as well. And as I mentioned, states, and employers are certainly important catalysts for a lot of our work as well, because, you know, increasingly, states are seeing talent as the number one factor that drives economic development drives their tax base, quite frankly, right. You need great talent to stay in your state and come out of institutions and be attracted to your state in order to keep the companies there and attract other companies and that obviously drives your overall tax base and your and your overall sustainability of your state and in the especially The Post COVID era where everyone's so mobile, you know, this, this challenge of how do you maintain and keep talent locally is an increasingly important issue for states. So that's, you know, sort of for them, the importance of this, of why higher education is becoming more important to them, after many years of decreasing higher ed funding. Now, everyone's realizing Wait a minute, you know, we need to make investments here in order to really drive the economic vitality of our state. You know, for employers, they're starting to realize, hey, if we want to have productive employees who hit the ground running, when they get here, if we want to reduce turnover, and improve retention, which has been a big issue for employers, if we want to close gaps, you know that I talked to hospital systems every day, just as one example, there are hundreds of open and unfilled positions sometimes being filled through hire, train, deploy, etc. But like that's not necessarily a long term solution. They're trying to figure out if we want to solve this on mass, how do we do this? And again, that's where they start thinking about how do we work with higher education. So that's why those stakeholders tend to be involved as well.

Alexander Sarlin: 11:06

You mentioned hire, train, deploy as a model in there, among many other really interesting things to sort of build on. And, you know, just to put my own versatile cards on the table a little bit here, you know, I went to Cornell University as an undergrad. And even when I was there, as a student, I had a feeling I looked around, and I was like, these people really don't give us any advice about careers about the real world. I was a sociology major, nobody ever mentioned what that could lead to. And I have a little bit of a chip on my shoulder about that experience, personally. And as I've learned more and more about it, I just continue to be shocked at how little higher ed has evolved over the years as everything has changed around them. That's just my personal take. But I want to actually ask you a flip question on the positive side of this, you know, the higher it's going through lots of challenges it colleges are closing, not that many, but a good number, lots of sustainability issues, enrollment demographic issue, ROI, more challengers to track traditional ad, we just saw a survey where, you know, 40% of students said they don't aren't interested in a four year degree, they wanted different ways to get in. So we've talked about that a lot. But I'd love to hear you talk about some of the advantages of us higher ed, like what are some bright spots where they have actually sort of evolved to meet the needs of the workforce and the talent and the state, or when they are they've tried really innovative approaches, I'd love to just hear a little bit about, you know, where it does work, and where, you know, counter narratives to that constant narrative, at least in my mind that colleges just don't get it and do not evolve nearly as fast as literally every different institution around them.

Sacha Litman: 12:47

Yep. Obviously, there's a lot of flack that higher ed is getting, some of it is justified. Some of it is, you know, some of it is shared across the political aisles, even in Washington, terms of cost is going up too quickly. In terms of the you know, outcomes aren't sufficient in terms of wages to support the debt load, all this sort of pressure points, you know, the price is rising, you know, even the net tuition price rising, despite, you know, the increasing discounting, right, the criticisms are there, right, and some of them are fair. But, you know, I don't think we spend enough time talking about the strengths as you said. So first and foremost, you know, you study sociology at Cornell right? Now, I studied applied math at Yale, which is what it was called in computer science at Yale. Now, you could argue that my degree if I had gone in and obtain that through a bootcamp at the time, if such things existed, I would have great hard skills to go into my career. The problem is, and there's a really interesting National Bureau of Economic Research article on this that came out and like studied the graduates of the Class of like, 2000, I think, and track them for about a dozen years or but actually 20 years after graduation. With all the fanfare around hard skills, and how universities aren't producing enough people with computer science skills like I got, as opposed to sociology skills, you actually see that those people who studied liberal arts actually exceed the income levels of those who came out with more career focused degrees, by the time they're 40. And now we can argue cause and effect. A lot of that may be obviously because people who don't study the hard sciences tend to be more social individuals and therefore may be met better managers and therefore in their career are more likely to rise up in the ranks and overtake you know, those who came out with really great career ready skills, they can code phenomenally, but they can't go anywhere in their career. And I think employers are increasingly recognizing that it's great to hire people from boot camps who have like very singular talents, but unless they've developed the critical thinking skills, the managerial and people skills that you tend to get from other disciplines or again, I don't want to, you know, pretend that there's not some cause and effect in there. The people who tend to study those, those topics tend to have a broader set of interests, they're gonna get really limited in their career as the years go on. And so I think really what higher ed provides, it doesn't always do this right. But, you know, yes, I say it applied math and computer science, but because Yale is a liberal arts school, fundamentally, and so it's Cornell, even if you studied hard sciences, I took a ton of anthropology courses, I took a ton of stuff. Related sociology, I took a lot of biology, I took a lot of English, I took foreign languages, I, you know, again, it pushed my brain to think in different ways. And there's a lot of interesting research, I don't know, if you've read books like range and others that suggests that to be the most impactful, you know, in terms of your skill set in the world, it's your ability to draw inferences from many divergent fields, and ability to creatively think and critically think and ability to express and articulate that to others. Right. And that is, in many ways what I think higher education still produces today, in a way that you know, some of the others do not. Now, I'm not knocking the boot camps and hype train deploy, because they often are hiring people who came out of higher ed with that critical thinking skills, but didn't come out with career focused skills. But I think higher ed has to figure out how to put that together. It's a false dichotomy. It's not either or, it's got to be a both and right, you got to come out with career focus skills. And you got to come out with a critical thinking or sometimes another called durable skills that allow you to survive in an environment. But you know, if you step back for a second, you really think about what higher education actually provides, or any k 12. This applies to them too. There are three things you get out of the school environment, right? Number one, you get the actual knowledge, the curricular information, right, that's fairly easily commoditized. These days, you could go to any school, you could go to an online academy, and you could get recorded lectures, it doesn't really matter where you go for that. And I'm not dismissing there are certainly faculty members who are incredibly top of their field that you might get differences. But you know, a lot of those faculty have have made their curriculum available anyway, right, like through edX and other types of types of fora. So that's fairly easily commoditized. Number two is the network. And number three is the character development. I don't think we spend enough time talking about the importance of those latter two, you know, the network is huge. Think about the number of friends that you made that later became context for you are the weak ties, as is suggested by you know, the Malcolm Gladwell now made famous type research in terms of the opportunity to get jobs in the future, right. It's those weak ties, and the network. And sometimes it's your personal friends. And sometimes it's just having Cornell or Yale stamped on your resume right now, obviously, we're talking about elite schools here, and it doesn't work for all schools, but how do you really you know, take advantage of that network, that's a huge value that being imparted, it's not that dissimilar from when you buy a car, like you buy a BMW and you buy a Mercedes, you buy a Tesla, like you're buying into a community, right, and that network becomes a part of your community, a part of your identity, and something that you can leverage as a reflection of yourself later in life, or throughout the time of your engagement in case of university, as an alum, it persists, you know, potentially for for your whole lifetime. And I think we still are accruing the benefits of that network. The other one is character development, you know, most of at least, I think, the at least the on campus undergraduate experience, that the distance learning models have not figured out how to replicate is the character development. You know, we call some of this social propinquity, which is who you surround yourself with influences very significantly more than we'd like to believe. Because at the end of the day, we think of ourselves as individuals, we're kind of herd animals, it influences us too. And so it's those deep conversations, it's that time of life of exploring who we are developing our identity, having those deep conversations, exploring, you know, independent life from our parents for the first time, like, these are all you know, it's sort of it creates sort of that petri dish environment, to be able to really determine like, what kind of person you're going to be and who you're surrounding yourself with in the environment of the school, like yell was a very nurturing environments when the reason I chose it, right, that kind of built into my character, the the sense of community, right. And community has been a big facet for me throughout my life. Right. And so I think it really does impact the kind of person that you become. And I think we put so much emphasis on like, the one dimensional aspect of higher ed that like this is all about just the learning of the skills. It's not it's it's got to be a lot of the reps now, higher ed has to deliver upon that the bricks and mortar institutions have to deliver and some don't do as good a job right. But certainly that's that's the model that I believe higher education continues to hold as a beacon and if it can deliver on continues to be very impactful and many people would argue the ability to do that whole liberal arts exploration is part of the reason that America has continued to stay across a top across the charts internationally in terms of new patent creation and new idea formation and new companies. Success, because people are in these petri dishes of character development, networking, exploration of just critical thinking exploration across many subjects. That gives them the wherewithal to do that. Whereas, you know, in Europe and other places, you basically, your first degree after high school is your professional degree. And you're basically last year, you're a bit more focused in terms of that, then you would be here in the United States,

Alexander Sarlin: 20:24

the liberal arts ideal, especially at elite institutions is definitely one of the prize jewels of all of all of the US, right, we have some of the best colleges. And because we do we have some incredible, you know, graduating classes, but it's a pretty small percentage. I guess my quick follow up question is, you are an analytics person. And I think we're getting to a really interesting moment where some of those three topics you just mentioned, the the knowledge and skills, the character development and the network. I think in the past, those tended to be very hand wavy, like, you'd be like, Oh, I went to Yale. So I have a great network. But that one measure that how do I measure the return on value of that? How do I measure the economic impact of that? How do I actually measure whether everybody's getting the same network or some people are getting a ton of network and some people get in? And I wonder if we're at a moment when, you know, data sciences, everywhere, analytics is so much deeper? Do you see a place where we might actually measure all three of those? And if we do, would schools be open to you know, to setting benchmarks and saying, yeah, here's why you go to Yale, because you're gonna get at, you know, this many network points. And this this, this valuable a character development that's going to be worth 50 grand in your first year of work? Like, do you think we can actually quantify some of these things?

Sacha Litman: 21:43

It's the right question to ask, and let's take for a second off the table, the elite institutions, because we've spent a lot of time talking about them. That's not where the focus needs to be. Right? That brand in and of itself is so powerful that it does last for a lifetime, and it has intangible effects that you're not going to be able to successfully quantify although, you know, I think it certainly has been increasingly, I think, where this really, you know, benefits is for the schools who are outside of the elite, right, which have been the ones who are struggling. And I mean, look, realistically, let's say, to your point, it's only the top 40 or 50 ranked institutions in the United States that are actually selective, you know, we can call it whatever we want. But most of the institutions beyond that their acceptance rates, despite what they say, on their site, they're basically taking everyone who has basic qualifications, they're accepting them, and they're rolling as many as they can. And they're basically buying students, right. So for them, increasingly, there's a lot of pressure to deliver on some sort of return on investment. The question you're asking is, how do you measure that return on investment. Now, there are increasingly better and better tools that are coming out to do this. And, you know, I actually, through the analytics portfolio work with a lot of both ad tech companies that are trying to break into this space, I work with a lot of states that actually have sometimes data that is a lot better than the tech companies do. You know, you can scrape a lot from websites. But there's also a lot of data that the states actually can track, for example, they can get wage records from all employers in the States. And so if you know, you have graduates who are staying in state, or even if you have crossed the data sharing agreements, you can actually track the wages, the occupation, the industry, and you know, you there are increasingly surveys going out to to track the life satisfaction of graduates. And where that gets really interesting, I'm actually working on an engagement with a state on this now is when you start to look at that for institutions, and start to show them that data and start to discuss that together, you can start to see, you know, which programs of study are actually leading to some of the better outcomes, which programs of study are really struggling on this. It's not like uniform, like school, you know, non selective, you know, school ranked 115, which, by the way, still very prominent names. It's not like everything is bad. It's just like some programs of study are doing great. Others are struggling, we're starting to actually really have the data set through the state longitudinal data systems, and as I said, linking education records to wage records and unemployment records. I think whether we like it or not higher ed is being surrounded by increasingly more and more data that measures return on investment. And, you know, it's going to get refined over time, we just not a perfect measure. There are many people who are very happy with their lives, who went into, you know, a faith direction, there are a religious leader, who are teachers who by the way, we need many more of in the state who are healthcare professionals, right. They may not make a ton of money because they're not computer scientists, but they are the key linchpin to many economies and many regions in terms of driving really those communities and so you know, this is not all about money. Yes, we just have the easiest thing to measure. Part of this is Do we just have one, you know, life satisfaction is critical. Another, I would say another one that we don't think about enough is alignment with workforce demand, right? We talked a lot about employers in the beginning, but employers have the demand signal is key, for example, if if in a certain region of the country in our certain state, as we know, like, there's a big move from, you know, to electric vehicles, right, and the, you know, plants that are being invested in, right, or we see, you know, through the chips act, you know, a lot of funding for semiconductors or you know, secrete to really sort of, you know, to bring back the supply chain, you know, sort of on to onshore, the supply chain, as we build out these economies, not just those they're manufactured events, manufacturing, which are these are both obviously, categories of, you know, professional services, etc. All of those like, it's a really interesting question to see our universities producing graduates who end up in these industries. Now, that's a critically important distinction between let me talk for a second about industries versus occupations, right? Because universities are only going to produce a certain number of computer scientists for two reasons. One, you can make the greatest computer science program in the world, not everyone's going to want to study computer science, nor should they, right, some people who want to study psychology, still the most popular major undergraduate, some people want to study business and marketing, probably, you know, top five as well, right? Like those who will continue to be popular majors, right? So the idea of saying, like, hey, everyone needs to be a computer scientists, because we have, we're gonna have a huge technology gap. It's true, we're gonna have a technology gap. And yes, we need more people studying that. And yes, universities need to get more people into that. And yes, we need to track that and measure how many of your graduates are actually getting those degrees and actually ending up in those fields, right. But we also need to look at industries, right. So the semiconductor energy industry, or you know, you pick the industry, those companies have a lot of needs, you need people who are yes, engineers, you also need people who are marketers, you'll need people who are accountants, right? You need all the business functions, and you need people who are really deep in that industry. So I think universities with their primarily a liberal arts mission, can more easily think about themselves as fulfilling the workforce demands an industry or a growing industry, then they can think about, okay, how do I produce 500 more nurses, by the way, that's important two or 500 more teachers a year, right. And we're seeing a lot of interesting ones in the ladder, which we can get into a second. But universities tend to be able to think about more in terms of what are the industries that we really can try to graduate people into. And now we have dated, help them see how many of their alumni are actually in those growing industries, right? Are people going into growing industries or shrinking industries, right, that's a really important indicator for higher ed to look at. On the occupation side? Well, I've said Not everyone's going to be computer scientist, or a nurse or accountant, all these sort of either licensed or highly hard skill set type occupations, but you want to at least track longitudinally and make sure at least it's growing, right? If you're not growing, and some of those which are key drivers of your local economy or of the, you know, jobs of the future, you're going to struggle as an institution. So you should see at least those programs growing, right?

Alexander Sarlin: 28:12

Yes. So what I'm hearing is that universities are very well situated to be able to provide a combination, that sort of both, and a combination of potentially hard skills, but also durable skills through lots of different, you know, liberal arts majors. But aligning to industries, that's a really interesting distinction, instead of aiming at job titles, and occupations, aligning to real world industries, would help close that gap between, you know, graduates and the economy and having all these unfilled jobs, you know, out there, and it's it's so you know, it's never felt right, to sort of steer everything towards computer science. But that said, you also have, you know, there's a great article by Ryan Craig Just today where he's very extreme, but he calls it like a bait and switch where people go to a school because they do want to be a computer science major. And then they can't make it into the major because it's not enough capacity, because they don't have enough computer science instructors, and they, they have to do something else. There's really weird dynamics in this. But I think what you're saying makes a ton of sense. And I love that focus on on industries. You mentioned hire train deployed before. And one of the things you study at BCG that's so interesting is this concept of outcomes aligned student financing. It's like how might financing for these institutions which as you said, costs have still continued to go up? How might there be different models of funding hire train deployed is one of them where people are actually hired on the job and trained while they're working. So they're actually being paid to learn. That's a really an interesting one. Tell us a little bit about alternative financing. And, you know, in this world where things are more measurable, where the ROI is, you know, more is clearer. How can still kids get their way into these programs without it being, you know, student loans and Pell grants and sort of all the old fashioned stuff.

Sacha Litman: 30:08

You know, full disclosure, I spent some time working with the income sharing agreement space in its early days before sort of the regulatory changes really kind of shut down that business for higher education. And that was about five years ago, I think that was sort of the leading edge, but often first mover disadvantage, in this case, essentially, what has become a larger shift to say, Why should students bear all the risk and responsibility associated with their degree, now, there are arguments to say the students have to maintain some level of responsibility, because if they don't risk, then they have very little on line. But the flip side is, is that, you know, obviously, putting all the risk on the students, and none of it on the institution is not a fair way to go. There's a third party involved here. And we're going to have to involve them in this discussion of outcomes aligned financing, which is the employer, which is you know, what kind of risks they take on as well, in this equation, let me explain a little bit, I do a lot of work around education, employer partnerships. Now, one of the models for anyone who started their career, and I suspect a number of you did, who ended up going into, you know, banking or consulting, as you're probably aware that after a couple of years, the old model was you go back to business school, and you know, that to your business, school program costs, whatever it costs, the time, you know, let's say 50,000 a year, it's more now. And you had to figure out a way like what you didn't, you're 2526, you couldn't pay for $100,000 worth of a program plus all the cost of living outside of that. And so what the programs would do, what would the employers would do to get you back is basically say, we will forgive your loans, when you come back here, and you work here for a minimum of two years, that model, which has been around for a long time, is now starting to pop up in a lot of other industries for hiring out of undergrad. So for example, you'll see a lot of hospital systems starting to say, nurses, we have a huge gap. As everyone knows, if you commit to us, and you work here for x number of years, we'll forgive X number of dollars of your loans. You know, for every year that you work here that might be paid off over three years, four years, it depends really on the institution and the amount. But that is one, this sort of employer, this loan forgiveness program to employers is sort of a very elegant and existing solution. And that's important, one of the problems that isas got into it was a very complicated concept. It had to be sold to presidents had to be sold to financial aid officers had to be explained to students and parents, it was hard for everyone to wrap their head around what it was this idea of a loan forgiveness program is much simpler, right? You take responsibilities of the loan it for the loan as a student, because, you know, you need to have the incentive to finish the degree. Right. But you also know on the back end, that if you are doing well, you have some guaranteed options in terms of with your with your employers, presuming that the higher ed institution has partnerships with those employers to bring to the table to say, I know I can get it paid off. So I know I take the risk up front. But there's a commitment on the back end to pay that off. Right? That's sort of number one. Something that I've been working on some other institutions who are a bit more in the elite category is this idea of Loan Insurance. So one of the things that a number of institutions are starting to think about is can we create some sort of a loan insurance package which says, we encourage you to make the intellectually right choice for your career, we recognize that that may mean for a couple of years out of undergrad you do Teach For America or something like that, before you become an ed tech entrepreneur, like maybe some of you listening here or have a path you may have chosen? How do we ensure that you're not overburdened by loans when you come out for those first few years, while you're taking a mission aligned effort that gets your career launched, but recognizing that your career is not going to really give you the kinds of wages to offset your loans until you know you're later into your career? Right. So that's sort of the idea of like Loan Insurance. Another really interesting one that I've been working playing with a lot is this idea of non monetary, meaning the university is not on the hook financially. But the University says, Look, we are committed to ensuring your success in your career. If you come out of undergrad or grad school, and you cannot get a job that pays you at least x right in your field. You can continue to take additional courses here for free, or whatever restrictions they have on them until you get the qualifications you need to do so right. It's part of like a guarantee prints like an ROI guarantee. There's another version of this, which is I think going to be going to start emerging, which is the idea to say well, what about the fact that half life of skills now is best basically under five years, so it's great if you learn how to code you know, if you know how to code in Python now great, but if you learn to our 10 years ago, you're in a bit of trouble. Now, right, you now need to now learn Python, right? So what does it mean to say, Hey, we are committed to your upskilling or your reskilling as well, until let's make it up age 30. So you can come back to us after you get your degree, as long as you successfully completed your degree. And if you didn't think things didn't work out in your initial career direction, you come back, and you can retrain, or you can upskill in certain areas, because your skills are out of date, or because you realize, hey, I wanted to go, you know, work in x field. And it turned out not to be a very successful field. And now I need to retrain as a as an ex. Right now, again, universities are putting certain restrictions on that, but it's something people are exploring to improve the ROI of the offering. So those are some, those are some different ways of sort of improving the ROI and taking the risk off the students. Of course, the model in ad tech that is often talked about is the hire, train, deploy, right? You don't pay anything, you get essentially paid the not that much to basically gain a set of skills, be deployed somewhere and then get a job, right, and someone else is treating you as human capital that they're investing in to place you somewhere. But you know, again, I think there are versions of that, that essentially higher ed can do as well, in some of the aforementioned examples. And I think a lot of it to do that successfully, it does come down to building stronger employer partnerships so that students can get a lot of the applied training, whether internships or apprenticeships while they're in school. So they get a little bit more exposure to industry, because it kind of puts the higher ed institutions on the line to be like, hey, very graduate people out there, we better try to if we can't have everyone coming back in five years, saying, hey, computer science program, you trained us in Fortran, and that's not really going to help us right now. I'm kind of at a bumping up against the roof of my skill set, I need to come back right, it'll force them a little bit to get a more aligned with Okay, well, what do we really need to create in our curriculum? How do we make sure they're applied trainings like hire, train, deploy, so that you actually get it while you're in school, which, by the way, every employer should want, right, you just reduced your own training cost by basically shunting them on the universities and said, That's a good ROI for the university. So I think a lot of these dynamics and these types of partnerships will hopefully enable a lot of the more creative outcome aligned student financing going forward.

Alexander Sarlin: 37:15

I love how you think about this in terms of risk. And you know, as you talk about it, I've been reading some of your articles and that you often define, you know, the financial outcomes in the financial aid in schools as risk and the idea that, you know, outcome aligned student financing distributes the risk, instead of, you know, students taking all this risk from loans and, and financial aid taking the risk for educational institutions. I think that's fascinating. I want to drill in on this employment, university partnerships, because there was a 2020 BCG study with Google that basically said that this is the good news. 88% of the respondents and business leaders said that higher ed could help potential hires acquire advanced technical skills, durable, soft skills, and industry specific knowledge. So business people are saying, higher ed could do this, almost all of them, but only 36% are saying that they do. Right. 36% say that they are giving graduates adequate training. And you see this gap between what colleges think Career Ready is and what businesses think Career Ready is. And clearly a partnership would help. But you actually outlined a bunch of really, really interesting challenges to those types of agreements, including decentralized engagement, you recommend the idea of a transformation office, I'd love to hear you talk about that workforce and timeline disconnects, difficulties describing the competencies, pushback from stakeholders who might say, Hey, I don't want to change teach something else. I like teaching this or I prefer teaching that. And this one was really interesting, uncertain student demand. So when a school starts a new major, or starts a new program, even if it feels like workforce to line they've never done it before. They don't know if students are even going to show up. Those are all such good points. This is all quotes from your articles. I'd love to hear you dig into this employer higher ed, institutional partnership, and why you recommend this idea they have a TMO you know, a transformation management office.

Sacha Litman: 39:10

Well look for the beauty here of education, employer partnerships is we know there's vertical integration going on in a lot of industries higher ed is no different, right? It makes sense. At some level this idea that like higher ed has to be on some academic Castle, up on the clouds and like totally divorced from everything around it is bogus and hogwash, like the reality is that research sponsors, you know, Team sponsorships, everything like you have to be embedded in the world around you. And certainly that applies to student talents as well, just focusing on the question of talent specifically as partnerships because there's a lot to say around research partnerships and many other types of partnerships with employers that universities can be benefiting from and many universities have done and have benefited from but on the talent side, fundamentally First, the potential obviously is it helps improve the return on investment for the universities to say, hey, we've got a huge pipeline of students going from our school to x companies, by the way, any you went to business school, that was probably the first thing you looked at, you know, when you looked at the business school, they publish, how many people went to BCG. So I don't think you know, this idea is all that different from what we see in the professional school programs. I think the reason that it is important and challenging is that, for instance, let's talk about nursing. Almost every hospital in the country has a shortage of nurses, or is overpaying for traveling nurses to come in and basically fills in those slots are paying very a lot of overtime hours, and burning out their existing nursing staff. They would love, you know, they should want higher ed to step in and say, great, you know, there are a lot of nursing programs in the country that have about 150 graduates a year, that's nice, that's not the number that we need to meet workforce demand, they probably need to double or triple that number. In many cases. In order to do that, though, if you're a university, you can't find nursing faculty right now, because there's such short demand because there aren't enough people to go around. Similarly, you can't get enough clinical rotation slots, either, right. But if you work with an employer, you can solve both those problems, right? The employers can say, Okay, we'll give you the clinical rotation slots, because we're preferred partnership, but you're gonna have to help us guarantee certain number of people coming in getting employed here so that we can give you those very valuable slots, because we know we're going to actually those aren't just going to be rotating through here and then moving on out somewhere else, but they're actually going to become our employees, right? Similarly, you can say, hey, what about dual appointment faculty? What about this, some of the employees at the hospital who are you know, master's degrees, or experienced Bachelors of Science in Nursing or whatever the case is, or who have you know, a doctoral degree in nursing and nurse practitioner and say, like, hey, you know, for extra compensation, you can now teach at the university, and now you've expanded their capacity. So working together, you can actually solve a lot of bottlenecks and actually solve problems for both sides. The hospitals actually need to retain people guess what the best way of retaining people is, you have to show them how they can advance in their career and show them flexibility in their career, guess what teaching at a university, or learning or by the way, upskilling through university is a great way of doing more than just being told, hey, just sit at the patient bedside for the next 20 years, that's not a career, a career is constantly learning, growing, developing, and teaching others right universities can unlock that, on the university side, they need these hospital partnerships or whatever employer partnership to basically give them you know, these applied training opportunities that are critical for the degree they need the teachers to come in here because they can't find them. Right. So they're huge amount of opportunities. Now, the problem is, is that that's all good in theory, right? And, you know, yes, I know many higher ed institutions that would be happy to double or triple the number of nurses or, you know, graduates that coming out of any program. The problem is, is that one to do this, the employers have to be able to project their strategic workforce planning needs in the future, universities will talk about two years or four years, take at least two years, even with an accelerated degree program, accelerated bachelors program or just with an associate's program to graduate the students out, you gotta go recruit those students do so you're talking at least three years before that can really pop out people in the workforce, which is why by the way, hire train deploy is going to still be around for a while to plug some that gap. But you know, the employers have to project their needs in the future to be able to say, I can commit to another 300 nurses hired from your school or 200 accountants or you name it, and then higher ed can basically ramp it up. So that's like the first you need a clear demand signal in terms of the quantity, then you need clarity on the quality, what are the actual skills that you need these people to come out with? In order to be able to fit in, right? How do you really take a cocreation role in terms of the curriculum to ensure that the end product that the employer is hiring, actually does improve their productivity, right and reduce their training costs, because I can tell you a lot of employers complain a lot, that once they get people, they have to train them all over again. And it takes a year before they're even productive, by which point half of them have left anyway, right. So this is a very easy way for them solve for this, again, obvious but not easy to do because higher ed and employers work on totally different timelines. Employers tend to be just in time, they don't want to think about the future higher ed thinks for the long term and is designed to be fairly immune to short term changes, right? So you got to bring those timelines together. First and foremost, there's a big financial investment in it, which is really challenging. You know, there's a lot of money that has to be put up student financing, as we were discussing earlier, investments and faculty investments in dedicated educational units, like there are a lot of costs that are involved in this too, that require a lot of serious financial projections. And then as I think were saying before, even if this is all set up, how's the school going to find another 300 nurses to recruit? Right now, nursing is not exactly the profession that everyone desires to go into. Because everyone's been reading throughout the pandemic, about how difficult profession it is, and how people get easily burnt out. That's not exactly an easy, you know, marketing sell. So there's also the cooperative effort to then go into the high schools go into, you know, people who there's a big growth in the accelerated bachelors programs in nursing, for instance, for people who took healthcare related fields like biology, but went into career that like, bottomed out, they went into biotech, but there's no investment in biotech, and they can't get a foothold. And they say, you know, maybe I should retrain, right? There's got to be a lot of effort in marketing to that field in order to actually bring in to build a solid pipeline of people who are interested in this, right. And there are a bunch of ways to do this. So anyway, I think the point is that education, employer partnerships are part of the vertical integration that is part of the future, undoubtedly, of higher ed, even at the undergraduate levels, and not just at the professional levels. And there are a lot of cultural obstacles that have to be overcome to get there, and a lot of capabilities that are not currently in place that need to be put in place to get there. And that really needs to be worked out

Alexander Sarlin: 46:14

very, very well. That was a great argument from start to finish. And you painted this picture of this sort of utopian picture, really, really lovely picture of the university and the employers working together to their mutual benefit. And I agree, that's absolutely how it should be. But then, of course, you say it's obvious but hard to do, because, you know, they work on different timelines, it's totally true. So this is an ad tech podcast. And there are a couple of edtech companies that are playing with this relationship. We recently saw guild education rebrand itself to Guild and expand their offerings to career mobility, basically, to combine higher ed university education and degrees with short form training directly from employers. That's very much in line with what you're saying. We've also seen Coursera launch career academies, which they offer to universities, that allows the university to ensure that everybody graduates with certificates for hard skills no matter what major they're taking. So like, there's some really interesting stuff happening in the EdTech sector to make this happen. So that leads to our final wrap up questions, which is, what do you see as some of the most exciting trends in the EdTech landscape right now, that can support some of the ideas you've been saying here that are very exciting.

Sacha Litman: 47:28

So this was sort of the subject of one of the panels that I was facilitating at ASU GSB, a couple of weeks ago. And, you know, we had several different sort of former publishers, you know, wildly Cengage, on the panel, we had a few leaders of higher education institutions from Duke and National Louis University. And we had to simply learn on the panel as well, like, it was an interesting mix of attack and higher ed. And I think the debate really centered around this question of who owns the capability, right? And I think at the end of the day, and I think that tech, this is the challenge for ad tech entrepreneurs out there is if you want to play in these spaces, how do you build in your own natural obsolescence, right? Or how do you figure out how to pivot what you offer? When universities inevitably say, Yes, initially, we need to engage, you know, you mentioned Coursera, and their offerings, or guild or whatever. And we need to engage those offerings. But then over time, they start to build their own internal capacity to really manage it themselves. We're seeing this certainly in the OPM market, which is really shaking that market up, its will play out through all of that tech, higher end institutions are built for the long run, their job, ultimately is to figure out how to build their own capabilities to own this for themselves. So I think your challenge has got to be how do you build products or capabilities that will be at the front end of a trend, that will get a lot of the early movers before the universities have their own internal capability to do it. And yet also build the business model allows you to transition more and more of those capabilities, to the higher ed institutions for them to have more ownership over it. Because if they don't, they're not going to hire you in the future years, right, they're going to hire more flexible solutions. And that still allows you to maintain some continued revenue source so that you continue to benefit from some of the tails because obviously, your funders expect you to have recurring revenue,

Alexander Sarlin: 49:24

fascinating planning for the eventual shift of capability back into the partners are the customers, basically back to the higher ed institutions, and not assuming that this sort of dependence or the relationship will always stay the same. That's really interesting. And we're or keep or keep

Sacha Litman: 49:39

acquiring evolving new capabilities to the Euros, you know, and up on a platform company where you and that's what I think a lot of these former publishers have done successfully is they even as some of the things like oh, PMS become you know, universities want to own it. They say, Great, okay, well, you only want to buy a couple of our services from that great. We also have this other, you know, doesn't set so I do think it'll create some more consolidate shouldn't attack as well. And for some of you, founders who are on the younger end, like, obviously you think about acquisition. And you know, there's an important acquisition element here to make sure some of these bigger platform companies who have the relationship with a lot of schools can add to their portfolio and say yes, but you may not need x anymore, because that's retired, but I've got y now is a new capability you don't know yet how to do and you can engage us to deploy.

Alexander Sarlin: 50:23

Yeah, everybody's got to keep evolving from the students, to the companies to the, to the universities, it's a great third line. I usually ask for a resource here. But you know, I know we're over time. So I'm just going to put in the show notes. The three articles that you've recently written about this, they're all really interesting, as well as some of the recent BCG reports about this world, which are incredibly interesting. So we'll put a whole suite of interesting resources for anybody who wants to go deeper. Sacha Litman. This has been a terrific conversation really, really interesting. I think we went deeper on this than I think I've ever gone in it. I really appreciate your expertise.

Sacha Litman: 50:58

Absolutely. Thanks for taking the time and appreciate the chance to speak to you and your audience.

Alexander Sarlin: 51:03

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