Allison M. Vaillancourt

Vice President, Organizational Effectiveness at Segal

What if Everyone on Campus Understood the Money?

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Image: iStock

Outrage, rarely in short supply in higher education, is particularly potent lately, sparked by a range of organizational actions — hiring freezes, furloughs, and return-to-campus logistics. Critics are demanding detailed budget reports and calling for the ouster of campus leaders, while administrative defenders assert that academics have no sense of what it actually takes to keep an institution afloat.

It would be wrong to blame anyone for failing to understand “institutional fundamentals,” given that colleges and universities do not make a practice of ensuring that their faculty and staff members grasp those inner workings. Even some administrators are expected to stay in their lanes — routinely denied access to information that could help them connect certain dots, and work more effectively and collaboratively.

To be sure, there are progressive leaders in higher education who see value in educating all members of the campus community about institutional trends and indicators. They are not afraid to admit when things seem dire. They believe in the American Association of University Professors’ principles of shared governance.

But education takes work and a lot of conversation. Some leaders find it easier to limit what they share about their institution’s fiscal status — muttering “This stuff is complicated,” “The faculty are entitled,” or “Staff just don’t get it” — than to take the time to explain intricate performance metrics or discuss the specific ways each member of an academic community could support institutional success.

While there are many things to know about how colleges and universities operate, the lack of financial understanding among those who work in higher education has become increasingly obvious. Faculty and staff members have responded to coronavirus-related budget reductions, layoffs, furloughs, and pay cuts with demands for greater financial transparency.

Suddenly, everyone is curious about how the money works: “How much are we spending on new buildings?” “Why can’t we just borrow money?” “Why is there reluctance to use the endowment to fill budget holes?”

Those are all reasonable questions. But they are reactive, not strategic. Further, it is not possible to answer such questions responsibly without a lot of context. For example, the possibility of borrowing money seems simple enough — until you understand the costs associated with a lower credit rating. Similarly, the idea of drawing down an endowment seems like an easy fix — to those unfamiliar with donor restrictions or unaware that using up that money today will affect the availability of operating funds for next year, and the years after that.

Difficult situations always benefit from an organization’s collective intelligence. Yet how can faculty and staff members weigh in credibly on financial decisions and organizational strategy — in normal times, let alone a crisis — if they lack sufficient knowledge and context to do so?

Whenever I give talks on this subject to higher-ed audiences, I often ask them to take a pop quiz about their own institutions. What follows is a version of that quiz. Try answering these 10 questions about your college’s most recent fiscal year off the top of your head, without referring to any reports, notes, or Google:

  1. What was the annual revenue of your institution in the last fiscal year? What percentage of that was tuition?
  2. What were your college’s top three sources of revenue?
  3. What was the total amount spent on faculty and staff salaries last year? And the total cost of annual benefits?
  4. How much was spent on debt service and utilities?
  5. What was the published figure for undergraduate tuition? What was the average price students actually paid?
  6. What was the size of the endowment at the end of the fiscal year? What is campus policy on the percentage of the endowment that can be withdrawn annually to fund institutional needs?
  7. What percentage of the alumni donated money?
  8. What are the main reasons students choose to attend your two competitors?
  9. What are the top two factors that prompt first-time students to leave your campus after a year?
  10. Name the top three ways that the quality of the overall student experience affects your institution’s short- and long-term economic viability.

Feeling good about the accuracy of your answers? If so, you are a rarity. Most faculty and staff members — and a significant percentage of academic and administrative leaders — struggle to provide correct responses to all or even most of those questions.

After people take the quiz and learn the correct answers, they often defend their lack of knowledge by telling me that it’s not their job to have a command of facts outside their area of expertise. That may be true, but if you want to weigh in on matters of organizational strategy and financial priorities, you need more than a set of opinions. Even those who don’t want to engage in conversations about organizational decisions should be familiar with basic financial indicators and have a sense of the range of issues affecting their institution’s economic viability, including its reputational status, level of alumni enthusiasm, and student retention and graduation rates.

When your home is burning, you generally don’t have much interest in learning about property-insurance options or fire-resistant drywall. Likewise, a profound budget crisis is not an optimal time to begin educating an academic community about the basics of institutional finance and enrollment management.

However, once we move from the pandemic crisis back into the regular existential crisis that higher education was facing before Covid-19, perhaps we will see some change. The institutions most likely to thrive — or at least keep their doors open — will need to engage more voices in conversations about institutional survival and success. That is already happening at some institutions, but not nearly enough of them.

It is unreasonable to be angry with faculty members, staff members, and collective-bargaining units for failing to embrace leadership decisions or new directions when they lack information about how their institution is faring or how the higher-education landscape is evolving. It is certainly time for more open and honest conversations about how money is raised and spent, but those conversations must also deal with the myriad ways that faculty and staff members influence both costs and revenue, and the imperative to consider new approaches.

An intentional strategy to increase general organizational acumen must be the higher-education community’s next priority.

 

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