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Business Officer Magazine

Favored Strategies for Facing Fiscal Constraint

A 2005 research study finds that, when higher education administrators at public colleges and universities face budget challenges, they prefer generating additional revenue and developing outside partnerships to taking across-the-board cost cuts. Position type also plays a part in determining strategy preferences.

By Mark Garrett

When economic times are tough, decisions about dealing with financial shortfalls vary greatly depending on who's doing the deciding. At least, that's what indicated by the study “The Influence of Financial Pressure on Academic Administrators' Selection of Management and Resource Allocation Strategies,” which I conducted in 2005. The study used a survey to explore the type of management and resource allocation strategies that college and university administrators implement to handle fiscal constraint. The most preferred actions were activities that generated additional revenue or developed partnerships with outside entities. The least popular were those strategies that required any type of reduction in, for example, staffing, cost of instruction, or other forms of budget cuts.

While based on responses to earlier periods of economic difficulty, the study provides insight into the wide variety of management and resource allocation options available to higher education leaders and how a leader's position—chief business officer, provost, or academic dean—might affect the decision preference.

In Search of Preferred Strategies

The survey instrument presented 34 statements designed to address the issue of the ways higher education leaders at public institutions would prefer to deal with economic challenges. Each of the statements represented a specific resource allocation or management strategy that can be used to handle fiscal constraint. The survey queried administrators as to how likely they were to adopt a particular strategy, with choices based on a five-point Likert scale ranging from one (never) to five (always).

Examples of the type of resource allocation and management strategies that survey respondents could choose from included deferring maintenance, increasing the number of adjunct faculty, initiating a hiring freeze, and so forth. Use of the Factor Analysis statistical procedure reduced the 34 individual strategies to a total of 8 index variables:

1. Increase revenue generation and partnerships.

2. Increase technology.

3. Introduce innovation.

4. Reduce cost of instruction.

5. Reduce staff positions.

6. Reduce funding.

7. Reduce activities.

8. Adopt across-the-board funding reductions.

Ranking Responses

The attached table shows the resulting means for each of the 34 management and resource allocation strategies, based on the ranking preferences of provosts, chief financial officers, and academic deans. The higher the mean, the more likely the administrator was to implement the designated strategy. The table is organized by category and includes a miscellaneous category of strategies that did not factor into any of the other eight categories. The overall mean for each category was calculated by adding together the total means for each strategy in that particular category and then dividing by the number of strategies in the designated category. The table is organized such that the category with the highest overall mean is listed first, followed by the second-highest category, and so forth.

Overall, the most popular category of strategies chosen to be implemented by administrators was the one that could be defined as generating additional revenues for the institution and developing partnerships with outside entities. Other popular types of strategies among all administrators included increasing the use of technology, and implementing innovative strategies that focus on improving the overall operations of the institution through resource sharing and a greater emphasis on teamwork.

The categories of strategies not favored for implementation by administrators were those that result in any type of reduction, whether in positions, funding, or activities. It would appear that administrators do not want to implement resource allocation and management strategies that they perceive could potentially harm the institution. It should be noted that these are preferences—for example, most institution leaders “prefer” not to have to reduce staff or make other budget cuts. But, we have seen during this recession and others before it that, if necessary, institution leaders can and will make such cuts.

Defining Differences

Analyzing the mean responses to specific strategies by category type indicates there are similarities as well as differences among administrators based on their staff positions, as to the likelihood they will implement certain responses to fiscal constraint. Analysis of the eight categories resulted in the following findings:

Increase revenue generation and partnerships. These options were quite popular among all three types of administrators, with the strategies of increasing fundraising and development and cultivating alternative funding sources being the most likely to be implemented of the 34 types presented in this study. Use of the ANOVA (analysis of variance) means tests found the mean difference in responses to the strategy of cultivating alternative funding sources to be statistically significant, with provosts and deans more likely than chief financial officers to prefer this way of dealing with fiscal challenge.

Increase technology. The actions that make up this category are generally favored by all three types of administrators, with provosts and CFOs more likely than deans to implement such initiatives. One only has to look around our campuses to see how much the use of technology has increased in our day-to-day operations and how technology solutions can increase productivity and efficiency.

Introduce innovation. Based on mean responses, it appears that all three categories of administrators were more in favor of implementing new and creative ideas as compared to some of the other types of strategies. CFOs were more likely than provosts and deans to implement reengineering work tasks. It makes sense that CFOs would spend time examining work-related tasks and seeking ways to improve them. However, CFOs indicated that they were less likely than provosts and deans to favor options that emphasize coordination and resource sharing among academic units, which is appropriate given the business officer's areas of focus.

Reduce costs of instruction. These are also popular among all three types of administrators. The cost of instruction can be significant for an institution of higher education, so seeking out methods to reduce this cost while not devaluing quality seems appropriate.

Reduce staff positions. Actions in this category are not overly popular, especially those that result in any reduction in the number of faculty. There is a significant mean difference among strategies that reduce the number of administrative positions, with deans being less likely than provosts and CFOs to opt for such human resources changes. It could be argued that deans are more closely aligned with the staffing needs of their departments and thus are not as willing as other administrators to reduce positions as a cost saver. At the same time, all three types of administrators favored reallocating positions when openings became available, with provosts exhibiting a significantly higher mean response than that of deans and CFOs. It should be noted that, during the current recession, a number of institutions have, in fact, cut positions (many in the adjunct area).

Reduce funding. The options in this category were not favored by those in any of the three surveyed positions. The strategy of deferring maintenance was found to have a statistically significant mean difference among administrators, with academic deans being less inclined toward deferring necessary renovations and upgrades than provosts and CFOs. Similar to the surmised reason why deans would be less willing to reduce positions, it could be argued that deans are also more in tune with the physical needs of their buildings, thus not as accepting as other administrators to deferring maintenance needs.

Reduce activities. Administrators were less likely to select the actions that make up this category. It is conceivable that administrators interpreted these strategies as resulting in a negative circumstance for their institution, and thus were less inclined to consider them.

Adopt across-the-board funding reductions. These options were not favored by administrators, as indicated by mean responses, although CFOs were more willing than provosts and deans to allocate funds based on equal increments across programs. It can be argued that provosts and deans realize the need to allocate additional funds to certain programs based on need, prestige, and other factors.

Miscellaneous strategies. Various resource allocation and management strategies that did not fit in one of the other eight categories were grouped in the miscellaneous section of the table. Although these options could not be categorized, they were still important to the study because of their popularity or lack thereof. For example, the idea of increasing student tuition and fees was favored by all administrators, especially provosts and CFOs. While not popular with the public or elected officials, raising tuition and fees is one sure way of generating additional income. Of course, in many states, the setting of tuition is controlled by the state legislature—so it is sometimes the case that CFOs and presidents might not want to raise tuition or have a preference for that strategy, but they have no other choice than to do so.

The strategies of encouraging the development of new programs, allocating funds based primarily on program needs, decentralizing and revamping administrative functions, and outsourcing services previously provided internally all exhibited significant mean differences in responses depending on administrator type. The strategy of limiting institutional enrollment is not one that is implemented by administrators to any great extent.

MARK GARRETT is graduate programs coordinator, Weldon School of Biomedical Engineering, Purdue University, West Lafayette, Indiana.

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