Illustration by Yann Kebbi
What are the key indicators that help struggling seminaries know or predict when it is time to close or restructure? How can an institution plan its own destiny to finish strongly, allowing students, alumni, faculty, staff, donors, and other community members to remain proud of its faith-filled legacy? How can trustees prepare for the possibility of closure to ensure the mission continues and financial and contractual obligations are met when the seminary has dissolved?
An In Trust Center webinar last August featuring experts from Design Group International and The Stevens & Lee Companies – consulting firms specializing in organizational change and strategic planning – addressed these questions and other issues around the complexities and emotional implications of closure.
“Part of being responsible in your strategic planning is to really consider the implications of an unwanted closure,” said session moderator Becky Delia, a financial services advisor and leader of the higher education vertical at The Stevens & Lee Companies. Seminary boards and other leaders, she said, should “own their destiny by being responsible in finishing well, rather than closing in a crisis.”
Delia introduced the webinar by showing a slide of headlines reporting recent seminary closures, cuts, and mergers. Recently, Association of Theological Schools Executive Director Frank Yamada told Inside Higher Education, that there have been 11 closures and 32 mergers since 2010, with the rate of mergers increasing to one every three to four months.
Delia observed that financial and enrollment trends are the primary indicators of sustainability for seminaries and theological schools. These trends are amplified in smaller institutions where she noted “a difference of just 10 students in a semester can be meaningful and have a significant impact.” She said that 7% of ATS-accredited institutions reported declining enrollments for the previous five years, even as ATS reported an overall increase in Fall 2020 enrollment.
Financial indicators of impending closure are shown in trends of shrinking annual budgets, increased dependence on investments or endowment funds for
operations, and continual low liquidity.
Delia added that “less obvious signs of potential stress” – including unusual and unplanned management or board turnover, votes of no confidence, accreditation issues, heightened financial monitoring, unusual delays in producing financial information or providing audits, concerns over the accuracy of financial statements, and ongoing litigation or reputational issues – could indicate a school needs to plan for closure.
Although she didn’t suggest that all institutions experiencing one or more of these indicators should close, Delia said, “the more of these indicators you have, the more likely you should be thinking about this possibility.”
Ron Mahurin, a process consultant for Design Group International with 35 years of faith-based higher education experience, offered advice to potential institutional stakeholders who “may be in denial of the financial sustainability of their institution.”
Identifying fundamental stakeholders, including board members, the executive team, and senior staff is important. Mahurin suggested adding more stakeholders such as key faculty members, as well as alumni board members and possibly major donors “who have been very faithful supporters of the institution.”
Mahurin said it is important to have a clear picture of financial and other data indicators, along with the context of this data, to provide a foundation for internal and public discussions. The voice of an outside consultant, he said, may be better received and will likely have the time and resources to dedicate to an impartial analysis and presentation of this information, establishing a “no spin” credibility upon which to base further discussions.
Establishing a disciplined communications plan is the next step, starting with identifying who will speak for the institution – likely the school’s president or its board chair. Confidentiality, and determining when and what information will be shared publicly, Mahurin said, is an important component of protecting the institution’s interest and building trust with constituents.
“Be prepared for criticism,” he said, suggesting than the establishment of an advisory team will help presidents and board members weather critiques. “This may be the most difficult professional decision you will ever have to make...(and) the critics will come.”
Blake Marles, chair of Stevens & Lee’s Higher Education Group, addressed the fiduciary and legal responsibilities required of an institution considering the possibility of closure.
“Assuring a clear understanding of what you are obligated to do [financially and legally] before you act at all will protect both you and your school from liability,” he said. “What you are legally obligated to do will provide a framework for everything that follows.”
Fulfilling the mission of the institution to the best of your abilities, Marles added, is the primary responsibility of trustees. Meeting financial obligations, satisfying accreditation standards, and graduating students in a manner consistent with terms outlined upon their enrollment are critical, and when these obligations can no longer be met a school can either change its mission or close. It does not mean a school must stay open at all costs, he said.
Marles cautioned that different constituents will receive the news of institutional closure in different ways. Having a trusted team and strong board that will communicate consistently – even among friends and professional colleagues – is important, he said, to avoid a “death spiral” of bad news that deters new enrollment or donor engagement while the school is either working through restructuring or preparing to close.
Other considerations that affect the communications plan, timeline, and structure of closing an institution, Marles said, include available financial resources, denominational or ecclesiastical obligations or oversight, state or contractual employee protections, possible litigation to prevent closure, and the objections of supporters who are determined to keep the school open.
Design Group’s Mahurin advised schools not to lose sight of the faith commitments that brought the institution to life. Even as schools prepare to close, he asked stakeholders to consider the following questions: “What are the spiritual and theological dimensions of your conversations? What roles do prayer and spiritual consultation play in making these difficult decisions? Are you living out your mission in a way that demonstrates serious consideration in the context of the various faith commitments of your mission?”
In doing so, he said the legacy of the school can be preserved and the mission can continue even after its closure. Other ways the mission can continue, he suggested, are to establish endowed scholarships for existing students to complete their studies at other institutions, endow a chair at another school in the name of the school or a famous alumnus, create an institutional Festschrift to honor the school’s history, or establishing an annual lecture series.
“This is a very difficult and emotional topic,” Delia said. “Nobody wants to be the president or trustee that’s known for shutting his or her seminary down.”
To see the webinar, click here
9 Critical Operational Practices Institutions Should Consider as They Prepare to Close
1. Establish a transition team that will stay through the entire transition, even if that means augmenting existing leaders – who are likely to look for other positions at other organizations – with consultants or other advisors whose employment is not bound to the school’s continuation.
2. Make a close review of the institution’s articles and bylaws. That is required. They may dictate terms of closure.
3. Review debt instruments that have terms that could be enacted or enforced upon closure.
4. Budget for the cost of teach-outs or degree guarantees for existing students, a well as staff and faculty buyouts.
5. Budget for library and records retention.
6. Provide a financial contingency for legal challenges to closure and/or contractual obligations.
7. Budget for obtaining court approval for the distribution of assets upon closure.
8. Plan to address accreditation and/or regulatory requirements for closure.
9. Formulate a communication plan for a variety of constituents: the board, faculty and staff, students, alumni, the church, donors, and the communities served by the school.
Question for consideration: What information do you need as board member?
“Because the issues with which boards must deal are complex and often have no single obvious solution, ample time should be allotted during meetings for discussion and learning. Board members should be provided with opportunities to grow in their understanding of the school, the wider world of theological education, and the present realities of the churches and communities served by the institution.”
– From the In Trust Center’s Wise Stewards Guide