Case Presentation

MAPLE UNIVERSITY

Agenda

Executive Summary Mission Statement External Analysis SWOT Financial Analysis Strategic Alternatives Recommendation Implementation Operational Issues Action Plan Value Creation Conclusion

Executive Summary

• MU is a small Canadian university in Central Ontario

• Focus on quality teaching and post-grad employability

• Less attention given to research

• Despite nation-wide growth, MU has experienced operating deficits and declining enrolment

• Four strategic alternatives available to the Faculty of Business

1) Create a business research and consulting centre

2) Initiate a co-operative education business program

3) Establish a not-for-profit undergraduate program

4) Offer business education seminars

Executive Summary (continued)

• Recommendations

• Initiate a co-operative education business program

• Create a business research and consulting centre

• Operational issues addressed

• Facility size/growth constraints

• Alumni donations

• International student enrolment

• Intra-university competition between faculties

• Results

• Enrolment increase of over 20% in the first five years

• Operating surpluses after the second year

Implied Mission Statement

To provide innovative yet fundamentally sound undergraduate and graduate business education, as well

as related applied research that serves the needs of students, employers, and the community.

External Analysis Enrolment is driven primarily by the youth cohort

Intense competition within the industry (LINK)

Full-time enrolment increasing, due to labour market demand for university education (LINK)

International student enrolment increasing rapidly (LINK)

Business Management programs rising in popularity

External Analysis Competitor Strengths and Weaknesses (MAKE INTO VISUAL AND LINK)

Strengths Weaknesses

Large Universities - strong reputation, renowned - quality of teaching - profs focused on research(>20,000 students) - high research funding - large class sizes - reduced individual attention

- top notch professors- large variety of programs of study

Small Universities - more focused on teaching - reputation, not well-known(<20,000 students) - smaller class sizes - scarcity of resources

- small-town atmosphere

Colleges & Trade - cheaper to attend - not very prestigiousSchools - high job placement - many jobs require a university degree

- work-related skill development - training very specific - not well-rounded

International Student Enrolment (use for LINK)

• 1/5th of international students studied Business and Management in 2004

Canadian Labour Market Trends (LINK)

Key Industry Success Factors

1. Well-educated, experienced and dedicated professors

2. An atmosphere suitable for learning

- Acceptable student/teacher ratio

- Access to adequate facilities & resources

3. Progressive programs that give students a competitive advantage in applying for lucrative, full-time employment

4. Research which benefits society and the community

SWOTStrengths

• Low student : faculty ratio • Experienced professors across departments• Strong Accounting program • Safe, well-maintained campus

Weaknesses • Enrolment is declining• Current facilities are inadequate• International student enrolment is below average • Inability to retain and attract talented faculty members • Lack of intra-university cooperation among faculties • Alumni relations deteriorating

Opportunities

• Business programs showing largest increases among Canadian undergrad programs • Number of international students expected to grow rapidly • Increased demand for university education in the labour market• Business investment in university research continues to increase

Threats

Increased competition for international students Competition boasting higher job placement rates Thriving business programs at neighbouring institutions

Current Value Curve

Current Financial Analysis

• Operating deficit of $2.8 million in 2007/2008 academic year• Student enrolment down 4% over the past 4 years (282 students)• Costs increasing, leading to significant losses

Profitability - % 2007

Waterloo Queen's Laurier Lakehead Laurentian Industry MU

Total # of Students 24,160 20,550 14,750 8,050 8,800 6,644

Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Revenue / Student $25,397 $35,681 $14,448 $16,892 $14,921 $15,184Growth over last year 9.9% 8.1% 13.5% 6.8% 1.4% -0.7%EBITDA 13.1% 11.9% 11.8% 23.3% 5.1% 2.1%EBITDA / Student $3,318 $4,255 $1,704 $3,932 $763 $320Net Profit 8.4% 5.2% 2.7% 8.8% 0.2% 7.8% -1.7%

Industry Profitability Benchmark

Current Financial Analysis

Debt Service Benchmark

Debt Service - (000)s 2007

Waterloo Queen's Laurier Lakehead Laurentian Industry MU

EBITDA $80,170 $87,444 $25,134 $31,653 $6,710 $2,123CPLTD + Interest $5,242 $5,549 $7,760 $6,872 $875 $4,469

Debt Service Ratio 15.29 15.76 3.24 4.61 7.67 - 0.48

Liquidity Benchmark

Liquidity - (000)s 2007

Waterloo Queen's Laurier Lakehead Laurentian Industry MU

Current Assets $118,737 $97,371 $53,379 $39,181 $51,158 $5,081Current Liabilities $77,443 $190,337 $33,909 $28,443 $16,123 $5,923

Current Ratio 1.53 0.51 1.57 1.38 3.17 1.90 0.86

Working Capital $41,294 ($92,966) $19,470 $10,738 $35,035 ($842)

Strategic Alternatives

Alt 1: Create a Centre for Excellence in Business Research and Consulting

Alt 2: Offer a Co-Operative Education Business Program

Alt 3: Offer a Not-for-profit Undergraduate Program

Alt 4: Offer Business Education Seminars

Board Mandate

1) Increase overall enrolment by 15 percent over 5 years  1 faculty member and 1.5 staff members may be added for every 40 additional students.

2) Ensure that each new program or initiative should generate a small operating surplus by the end of its third year.

3) Develop alternate revenue sources so that tuition increases can be held to 4 percent per year.

4) Focus on meeting increasing demands, on the part of students and employers, for employability-based education.

5) Develop initiatives that have long-term sustainability for MU.

Alt 1: Create a Centre for Excellence in Business Research and Consulting

Pros Cons

• Alternative revenue source • Attracts professors who want to do top-quality research• Enhances MU’s reputation• Meets the Board’s faculty hiring restriction• Positive NPV of $1.1M and operating surplus achieved by end of first year• Increased demand for externally funded research

• Professors may neglect teaching duties • Senate wants to preserve academic integrity and not compromise high-quality education• Faculty Union is against “commercialization” of MU• Will not likely meet Board mandate requirements for student growth

Alt 2: Offer a Co-Operative Education Business Program

Pros Cons

• Increases student enrolment by 4-7% per year • MU’s job placement rate for its business graduates would increase • Positive NPV of $1.7M, exceeds Board’s profitability requirements• MU builds strong relationships with corporations • Employers can take advantage of $1K Ontario Co-Op Tax Credit

• Student-to-faculty ratio will increase• Strong competition in terms of co-op programs• Location of university is a distance from large metropolitan areas and corporate offices• Space constraints by September 2012 due to the increased number of students

Alt 3: Offer a Not-for-profit Undergraduate Program

Pros Cons

• Faculty expertise already in-house (Dr. Anita Nakin)• Little cost and effort to develop program• Distinct, niche program• Program delivers a positive NPV of $1.3M and is cash flow positive after the first year of operations

• Relying on expertise of single faculty member approaching retirement• Increase in marketing costs ($25K+ annually)• Does not meet the Board’s student growth mandate

Alt 4: Offer Business Education Seminars

Pros Cons

• Provides alternative revenue source• Positive NPV of $154K meets Board’s profitability mandate • HR professors have considerable expertise in the area of leading teams and organizational culture • Strong demand for HR-type seminars• Enhances relationships with businesses

• Takes focus away from serving current students• Competition locally and from universities located in large municipalities.• Could cannibalize part-time enrolment• Does not address Board’s mandate to increase student enrolment

RecommendationIt is recommended that the Faculty of Business at MU implement the following two strategic alternatives:

1) Co-Operative Education Business Program

2) Centre for Excellence in Business Research and Consulting

Decision Criteria

Mandate

Alt 1-Research

Alt 2-Co-Op

Alt 3-NPO Program

Alt 4-Seminars

Enrolment growth (1) No Yes Yes NoOperating surplus generation (2) Yes Yes Yes YesAlternate revenue source development (3) Yes Yes No YesEmployability-based education No Yes No N/ALong-term sustainability Yes Yes Yes YesCommitment to teaching No Yes Yes NoAdheres to personnel restrictions Yes Yes Yes Yes

Assumptions:(1) 15% growth over 5 years(2) By end of year 3(3) Tuition increases held to 4% per year

Adherence to Board MandateEnrolment growth

Current Enrolment 665Increase required by Board (15%) 100

Enrolment from Co-Op 160Enrolment from Research 0Total Enrolment Increase 160

Enrolment Increase (%) 24%

Staffing Restrictions

Total 5 Years Ended (13-14)Co-Op Research Total

New students 160 0 160

New staff allowed by Board 6.0 0.0 6.0New staff required 2.5 0.0 2.5Staff obtained through re-organization 1.0 0.0 1.0

(Over)/Under Board Restriction 4.5 0.0 4.5

New faculty allowed by Board 4.0 0.0 4.0New faculty required by Co-Op 3.0 1.0 4.0Faculty obtained through re-organization 0.0 1.0 1.0

(Over)/Under Board Restriction 1.0 0.0 1.0

Adherence to Board Mandate

Operating Surplus by Year 3

Incremental Net Income ($)

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Co-Op (175,000)$ 194,651$ 522,385$ 797,080$ 1,228,903$ Research 30,651$ 147,760$ 245,427$ 437,486$ 684,301$ Total (144,349)$ 342,411$ 767,812$ 1,234,566$ 1,913,204$

Strategy Map

Create a team environmentCo-Op management database

IPO Information System

Establish relationships with businesses (employment opportunities for Co-Op,

corporate funding for research)Research programs to attract and retain

talent

Student Focus Progressive programs

Renowned and dedicated professorsAtmosphere suitable for learning

Increase tuition revenue via Co-Op business program and international

students Increase donations and research funding

Revised Mission Statement

The Faculty of Business at Maple University exists to serve its students and prepare them for their professional careers by providing knowledgeable and renowned staff,

state-of-the-art facilities, and a curriculum geared towards employability-based education.

Implementation

Risk Mitigation (Co-Op)

Agreement Between Senate and BoardRisk: Tension has existed between the Senate and the Board as academic goals have conflicted with budget constraints

Mitigant: Approval should be sought before November 2008, to allow as much time as possible for unexpected delays and questions surrounding the program.

Competitive RisksRisk: Nine other Ontario universities with Business Co-Op programs

Mitigant: Information booklets provided to potential employers, introducing and outlining the new Co-Op programMitigant: Director should take an active role in building relationships with potential employers

Implementation

Risk Mitigation (Co-Op continued)

Operational Execution Risk

Co-Ordination with Companies

Risk: May take time for Co-Op program to establish a reputation in the business community

Mitigant: Prompt hiring of Co-Op director and admin staff will ensure early planning and co-ordination of program (establish program scope, potential employers, establish contacts)

Implementation

Risk Mitigation (Research)

Agreement Between Senate and BoardRisk: Senate may view Research centre as a hindrance to academic integrity

Mitigant: It must be communicated that the Research centre will help attract top-quality professors, that will in turn improve the learning environment for students

Competitive RisksRisk: All universities have research capabilities, creating intense competition for research funding

Mitigant: Promote past successes in research to attract corporate funding

Implementation

Risk Mitigation (Research continued)

Operational Execution Risk

Risk: Faculty Union is against “commercialization” of MU’s research

Mitigant: Policies that ensure top researchers selected for course releases should also have excellent teaching performance

Implementation

Change Management

Co-Operative Education Program• Appoint HR professor with considerable expertise in leading teams to position of Co-Op Director• The director will develop and facilitate the integration plan, which includes: communication, program planning, marketing, and staff support.

Centre for Excellence in Business Research and Consulting• Co-ordination between Director of Research and VP of Research to integrate new research operations with Innovation Promotion Office (IPO)• Dean of Business needs to ensure that professors are able to devote sufficient time to courses not released to part-time lecturers

Organizational Structure

Operational Issues

Facilities

• Space constraints – can accommodate only 1,700 FTE students (will run out of room in 2012/2013)

• Classrooms are not suited to the discussion format used in most business courses and there are no small rooms for group projects

Projected Number of Kinesiology & Business Students

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

# Kinesiology students (3% growth) 841 866 892 919 947 975 1004

# Business students (5.5% growth) 665 665 665 702 741 782 825

# International Bus. Students 0 0 0 3 5 14 28

Total # FTE Students 1,506 1,531 1,557 1,624 1,693 1,771 1,857

Facility Growth Constraints

Operational IssuesFacilities (continued)

Recommendation: Build the Harding School of Business

$000's2010-2011 2011-2012 2012-2013 Total

Revenue SourceHarding Donation 2,000 2,000Corporate/Alumni Donations 1,500 2,000 3,500Provincial Govt Grants 2,000 2,000Infrastructure Ontario Loan 200 1,800 2,000

Costs 1,900 3,800 3,800 9,500Surplus/Deficit 100 -100 0 0

Assumptions:- 2.5 years to complete- total cost estimate of $9.5M (incurred evenly over construction period)

Financing

Operational Issues

International Students • Currently MU is well below the national average of international student enrolment (0.5% of current enrolment vs national average of 7.0%)

Recommendation

• A strong advertising campaign would help communicate MU’s commitment to international students • Lower TOEFL entrance requirements to national average• Provide support groups for new international students

Total 5 Years Ended

New International Students 248

New staff allowed by board 9.3New staff required 3.0(Over)/Under Board Restriction 6.3

New faculty allowed by board 6.2New faculty required 6.0(Over)/Under Board Restriction 0.2

Operational IssuesFaculty

Staffing

• Difficulty attracting and retaining high-profile professors due to MU’s location, size, and lower emphasis on research compared to teaching

Recommendation

• New Centre for Excellence in Business Research and Consulting mitigates this issue by providing a more attractive environment for faculty

Quality of Work

• MU’s focus on excellence in teaching is compromised by existing policies that protect tenured professors despite poor teaching performance

Recommendation

• Process of becoming tenured professor should be revised to have an equal emphasis on research and teaching

Operational Issues

Intra-University Competition Between Faculties

• Lack of co-operation between faculties due to conflicting goals• Faculties competing for limited funding dollars

Recommendation

• Create a “stakeholder” balanced scorecard; a framework for decision making and evaluation that considers various stakeholder groups

Stakeholder Balanced Scorecard

Operational IssuesMarketing and Alumni Department

• Alumni Relations have been deteriorating

Recommendation

• Utilize university data on past students’ program of study, and tailor fundraising accordingly• Increase number of alumni functions to create a sense of belonging and care for the school

Source $000's2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 5 Year Total

Actual ProjectedTotal Donations 2,890 2,740 2,927 3,258 3,646 4,243 4,938 19,012

Baseline (2007-08)

increase over baseline year 187 518 906 1,503 2,198 5,312% change from baseline year -5.2% 6.8% 18.9% 33.1% 54.8% 80.2% 138.8%

Revised Value Curve

Strategic Action Plan

Co-Operative Education Program

Action Responsibility Cost Initiate Complete(Qtr/Yr)

Obtain the Board and Senate's approval Dean Q1 09 Q1 09Hire a Co-Op director Dean $85K/yr Q1 10 Q1 10Hire Admin Assistant Co-Op Director reallocate Q1 10 Q1 10Prepare and update a list of potential employers Admin Assistant Q2 10 OngoingHire marketing company to design and publish information booklets Co-Op Director $50K/yr Q2 10 Q3 10Meet potential employers to discuss program Co-Op Director Q3 10 OngoingTrack job availability and job placements Admin Assistant Q3 10 OngoingRedesign course offerings for Co-Op Department Chairs Q3 10 Q4 10Screen and accept Co-Op applicants Co-Op Director Q4 10 OngoingHire part-time coordinator to help students (resumes, interview skills) Co-Op Director reallocate Q2 11 Q2 11Hire one new faculty member per year for first three years Department Chairs $108K/yr/p Q2 12 Q2 14

Strategic Action Plan

Action Responsibility Cost Initiate Complete

Appoint a part-time director from faculty that is an existing top researcher Dean $25K/full yr Q4 09 Q4 09

Hire sessional faculty member to take on director's teaching responsibilities Research Director $75K/full yr Q4 09 Q4 09Develop marketing plan and inform businesses of research centre and benefits Marketing Chair Q4 09 OngoingSpeak with VP Research to establish coordination and communication channels with IPO Research Director Q1 10 Q1 10

Speak to Dean about dedicating area in new building to the research centre Research Director Q1 10 Q1 10

Choose three top researchers for course releases in 2009/10 Research Director Q1 10 Q1 10Oversee research centre, establish contracts with businesses (Half time in first 2 years) Research Director Q1 10 OngoingAssume teaching responsibilities of research director (Half time in first 2 years) Sessional Faculty Member Q1 10 OngoingTeach a few courses in place of top researchers (3 courses in first year, add one/yr after) Part-Time Researchers $6K/course Q1 10 OngoingMonitor research findings and report to VP Research Research Director Q1 10 Ongoing

Centre for Excellence in Business Research and Consulting

Operational Action PlanAction Responsibility Cost Initiate Complete

(Qtr/Yr)International Student EnrolmentSpearhead the university-wide international student growth initiative Int'l Business Chair Q4 09 Q4 09Communicate and get support from every faculty dean, set up an action committee Int'l Business Chair Q4 09 Q4 09

Hire student life coordinators (2010/11, 2012/13, 2013/14) Int'l Business Chair reallocate Q1 10 Q1 13Hire two full time recruiters Int'l Business Chair reallocate Q1 10 Q1 13Develop a university-wide marketing plan and begin advertising and recruiting Action Committee $100-150K/yr Q1 10 Ongoing

Marketing & Alumni DepartmentDevelop & implement university-wide marketing plan to gain increased alumni donations Mr. Rick Plaus Q1 09 OngoingHire 3 part-time students to ramp-up fundraising activities - improve alumni relations Mr. Rick Plaus reallocate Q1 09 Q1 09

Operational Action Plan (cont’d)

Action Responsibility Cost Initiate Complete

New Business Faculty FacilityDevelop plan outlining necessity for new facility to gain Board approval - obtain approval Dean and Chairs Q1 09 Q1 09Obtain financing for new business building through loans and alumni donations Dean and Admin Assistant Q2 09 Q4 12Gather input from faculty and students regarding desired capabilities of new facility Admin Assistant Q2 09 Q4 09Hire a supervisor to coordinate building arrangements and construction Dean incl in budget Q3 09 Q3 09

StaffingPromote job satisfaction through ongoing surveys and feedback sessions Admin Assistant Q3 09 OngoingCreate compensation/incentive programs that tie remuneration to teaching performance Dean and Chairs Q3 09 Ongoing

Competition Between FacultiesDevelop a stakeholder balanced scorecard with all faculties for ongoing evaluations All Faculty Deans Q4 09 OngoingDevelop a decision-making framework focused on the priorities of the university as a whole All Faculty Deans Q4 09 Ongoing

Value Creation

Conclusion

• MU has experienced operating deficits and declining enrolment despite industry growth

• Below average placement rates

• Limited reputation and prestige

• Resolve these issues with:

• Co-Operative Education Business Program

• Centre for Excellence in Business Research and Consulting

• To ensure these initiatives are successful, effective promotion is key

• Communicate value to students and businesses

• Results

• Greater than 20% increase in student enrolment for the Faculty of Business in the first five years

• Stronger reputation

• Sustainable growth

Thank You.