Polish Your Staff's Performance
Three training approaches prepare business office employees for greater accountability within and across departments.
By Howard Teibel
“Educate fiscal officers on policies, procedures, and systems so that they are accountable to their department as well as to the overall university mission.” That sounds like a great strategic goal, but how would this be evident in staff performance and what can an institution do to support this vision?
The demand for fiscal officer expertise has emerged from a growing need for colleges and universities to comply with internal and external requirements. As a result, “broad fiscal competence” is fast becoming the mantra for higher education business officers. Where oversight used to be left to each school or department to manage at its discretion, the Sarbanes-Oxley Act of 2002 and other federal requirements have institutionalized the need to better administer programs, services, and grants. “No CFO or controller can possibly keep the institution in compliance with the myriad of regulations that exists without the assistance of competent business staff at the unit level. We must work as a team to succeed in our fiduciary responsibilities,” says Peter McKenzie, financial vice president and treasurer, Boston College, Chestnut Hill, Massachusetts.
One inherent challenge in these activities is the tension between the desires of a department and the fiduciary responsibility of the larger institution. This dynamic has a long history, with academic departments expecting to focus on their primary mission of teaching and research, and administration trying to keep the larger institution financially secure and free of sticky compliance and reporting issues.
What skills do colleges and universities need to develop in their business officers to balance these seemingly competing priorities? What best practices exist for a comprehensive approach to developing fiscal expertise that encourages accountability down to the department level?
Broad fiscal accountability in higher education can be achieved by focusing on three fundamentals.
1. Develop business officer financial skills and institutional knowledge. Raising the bar on fiscal competence begins with the recognition that it is not sufficient to simply train frontline staff to process financial transactions. Fiscal officers and department administrators oversee business units that would benefit from a comprehensive understanding of the financial landscape. This includes developing knowledge and skills in areas such as procurement, internal controls, business ethics, facilities, contracts, and budgets.
2. Integrate subcertification to ensure fiscal accountability at the department level. Subcertification, the process of departmental officers signing off on the accuracy of their financial reports, is an invaluable tool that brings accountability to the level at which the actual work takes place.
3. Redefine roles and responsibilities to best serve the needs of interdependent departments. To ensure that the right people are doing the right tasks at the right time, institution leaders must explicitly examine responsibilities performed by all staff, including those in local departments and in central roles. A “this is how we've always done it” culture is fast becoming a liability in maintaining an effective workforce. Integrating service centers, especially in large organizational units, can supplement this redefinition process and greatly benefit departments living with fewer dedicated resources.
Each of these fundamentals brings its own challenges and opportunities. While many institutions have begun to implement one or two, it is rare for an organization to tackle all three. In general, the more holistic the approach, the better are an institution's odds for instilling fiscal expertise and accountability throughout the organization. For instance, professional development is one important piece of the puzzle, yet without considering how roles and responsibilities should change, fiscal officers may not have the best operating environment in which to test their new skills. This article examines the specific approaches taken by several institutions to enhance the fiscal acumen of their business officer staff and sharpen fiscal accountability across the entire institution.
Bolster Professional Development
One fundamental approach to boost overall fiscal competence is to provide relevant professional development opportunities for business officers institutionwide. Administrative work essentially falls into two categories: the goals and activities of a department (academic or administrative), and the fiscal management of these related resources. For some time, fiscal management was the sole responsibility of a central group, which was responsible not only for managing departmental budgets, but also for inputting daily transactions. Today, much of the data entry has moved down to the departmental level, minimizing the work for which a central finance group is responsible.
While training has focused on ensuring that departments can use the financial systems tools to perform administrative data-entry functions, what has often been neglected is focus on the knowledge and skills needed by business officers managing these units. This shortfall in fiscal officer training and development has placed colleges and universities in a precarious position, especially with regard to compliance. Consider recent audit findings against institutions for not adhering to federal reporting requirements.
While these errors or omissions may not be intentional misrepresentations of financial data, without proper fiscal officer development, complying with financial requirements can easily slip through the cracks.
“Change is happening all around us,” says McKenzie. “Thus, staff training and development are critical to our ability to effectively manage our institutions in this challenging time.”
A centralized approach has been proven to work well. In the late 1980s, Indiana University (IU), Bloomington, shifted to a philosophy of responsibility-centered management, the practice of moving operational authority to major academic units. During the next 10 years, IU introduced technology and modified processes to support this forward-thinking approach.
This was accompanied by the introduction of new financial software and a strong emphasis to get frontline staff trained to use the tools that keep the university in business. Although frontline staff did become skilled, working well with the new business and technology process requirements, their managers had little knowledge of how to be fiscally accountable in the newer financial system environment. Operational success, not fiscal management, was stressed.
While operational staff were keeping new financial tools and functions on track, it became apparent to IU's senior leadership that a gap existed for those charged with overseeing financial systems who did not necessarily touch these systems. The fiscal officer's role had shifted to require a higher level of financial expertise, yet his or her training did not reflect the newly needed skills.
Who should be aware and involved when we implement new financial policies and procedures?
Fortunately, during this period of transition, leadership asked an important question: Who should be aware and involved when we implement new financial policies and procedures? For IU, the answer was 150 fiscal officers across the university with important roles in daily operations and oversight of key responsibility centers and other operational units. Leadership recognized that, as the liaisons between their individual departments and the overall university's financial administration, these 150 fiscal officers would benefit from professional development that provided broader institutional knowledge and financial management skills.
A second question jump-started the process of developing a training program: What tools are needed by these business officers, and how do we ensure they get them and are trained to use them? The answer became the foundation for an entirely new approach to fiscal officer development, which included the following three actions:
1. Think in terms of ongoing development. In February 2000, Kathleen McNeely, then IU's managing director of financial services, and Barry Thomas, director of management advisory services, agreed to serve as committee co-chairs of the university's fiscal officer development initiative. Their goal was to create a curriculum for financial staff who manage the business operations of schools and departments. Within a short time frame, they brought together key players from various functional areas and all IU campuses to develop the university's fiscal officer development series, which launched in September 2000.
The committee decided that the curriculum would emphasize helping this group of 150 make decisions that enhance fiscal management of university resources, with a focus on internal controls. In short, the mission of the program was to provide current, new, and prospective fiscal officers with a toolkit for success. Success would be defined as the ability to carry out roles and responsibilities of the fiscal officer in a manner that benefits the university, the unit, and the individual.
Upon completing the series, business officers would gain knowledge of:
- Technical tools (policy and procedure knowledge).
- Organizational and cultural tools (an understanding of the unique and diverse operational environments found at IU).
- Resources for building and improving personal and management skills (courses and other opportunities).
An important distinction was made early on that the series would focus on development, not training, since training was viewed as synonymous with systems training. The goal of this program was to emphasize developing financial management skills that would lead to better fiscal leadership and solid decision making.
2. Detail program structure and quantify costs. The program was designed such that each IU campus nominates fiscal and other administrative staff to participate. Sessions run from September through April, exposing approximately 25 to 30 fiscal officers each year to a wide range of competencies needed to manage their departments. Each monthly one- or two-day session covers a different core topic such as facilities management, financial policies, managing indirect costs, employee benefits, Department of Labor requirements, and treasury management and tax law. At the concluding session in April, participants review the entire year's curriculum in an interactive session that helps reinforce the objectives of the series.
Several key factors contribute to the effectiveness of IU's program. First, the committee continues to use human resources (HR) staff as experts for program development and evaluation. Second, the series is developed and presented by IU leaders and managers. Presenters are expected to work with HR on their sessions and then perform dry runs for the committee to ensure effective programs. A third success factor is that annual program costs run approximately $25,000 and are paid for with general funds from the office of the vice president and chief financial officer. By comparison, external programs of this caliber can cost as much to train only one person.
“The success of [the series] went beyond expectations at Indiana, with fiscal officers actively working on getting a seat at the table,” says McNeely, now IU's associate vice president and executive director, financial management services. The program quickly gained a reputation for assisting fiscal officers in working through the complexities of their positions, she adds. “This was underscored by the relationships that were developed between fiscal officers and administrators at the university and campus level.”
Since the program's inception nine years ago, Thomas and McNeely still serve as co-chairs for the committee. Today the committee includes representation from human resources and internal audit. Its ongoing goal is to ensure the program continues to meet the needs of IU's fiscal officers. Participants evaluate the sessions at the conclusion of each monthly event, and the committee reviews this feedback on an annual basis to determine needed program changes and improvements. Over the years, curriculum changes have been made to add sessions from every major administrative area. In addition, an alumni session is held each fall to provide ongoing development opportunities for those who have completed the series.
3. Adapt, don't reinvent, the wheel. In January 2006, McNeely visited the University of Arizona, Tucson, and spoke with academic business officers about IU's program. This event planted the seed for Arizona to develop its own financial administrator training series. By April 2007, the university had established a committee and developed a mission statement, goals, and curriculum.
Charles Ingram, associate vice president, financial services, helped spearhead the development of Arizona's program. He describes its importance this way: “These are not how-to sessions, but information-sharing sessions that make fiscal officers aware of the many things that they could encounter on a daily basis. It also gives fiscal officers an opportunity to work with and get to know their peers and central administration.”
Arizona's series is similar to IU's in that it provides development and networking opportunities. One-day sessions are held monthly from September to May, covering a variety of topics at a high level, with case studies and activities to promote critical thinking.
Arizona's mission statement and goals, modeled after IU's, stated that the series would:
- Focus on development, not training.
- Establish a relationship between financial administrators and central administrators.
- Put financial administrators in a position to know whom to call.
- Assist financial administrators with understanding the responsibilities of their role.
- Encourage and facilitate critical thinking.
One program difference between the two series is that IU's human resources department administers the Myers-Briggs Type Indicator tool to participants and the results are incorporated into monthly sessions. From a logistical standpoint, IU's program is held at different campus locations across the state, while Arizona's sessions take place at various locations throughout its main campus.
A common theme shared by these two training models is that the institution must take responsibility for raising the bar on fiscal officer competence. Although occasions exist for outside facilitators and experts to participate, for the most part sessions are developed and facilitated by institutional leaders, including the assistant comptroller, chief internal auditor, assistant vice president, director of risk management, and various faculty members.
Another commonality of the programs is the initial commitment to get something established as quickly as possible versus waiting for development of a comprehensive proposal. Over time, both programs have evolved into their fully formed nine-month offering, though each started with a more modest agenda. “If I were to do anything differently, I would have started even sooner,” notes Ingram.
Finally, because both programs were developed and are facilitated internally, they are not encumbered by huge development and delivery costs. Especially in times of economic uncertainty, this becomes a critical component for rolling out any broad fiscal officer training agenda.
Introducing a subcertification process offers another fundamental approach for building financial accountability and enhancing business officer performance.
At the close of a fiscal audit, many institutions require sign-off by management on a set of documents. The overall intent is for management to attest to the accuracy of financial statements, confirm the existence of accounting policies, and verify that internal controls are enforced.
In truth, the accuracy of financial statements is only as good as the information included in them. The controller's office may be responsible for the “final book of record,” but individual departments determine whether data is entered accurately and policies are followed. Subcertification is a process that helps ensure business-unit accountability for financial reporting. Often for subcertification to be successful, underlying internal controls must be documented and adhered to.
Harvard University, Cambridge, Massachusetts, embarked on this challenge in 2003. With 12 schools and colleges, its Radcliffe Institute for Advanced Study, 50 high-level units, countless subunits, and 15,000 employees, Harvard epitomizes the need for effective decentralization of duties with established accountability for university financial statements. When subcertification was first introduced, the impetus was to assist senior university leadership with signing the external audit representation letter.
As Jay Bounty, Harvard's controller, explains: “It was not realistic to expect our president, provost, vice president for finance, and me to have intimate knowledge of the activities at each and every school and unit within a complex, decentralized university like Harvard. We needed a way to have our schools and business units assure senior university leadership that their systems of internal control were sound and that their financial results were accurate. We saw subcertifications as a way to help accomplish this.”
The key to effectively bringing subcertification to the university was to achieve buy-in from the schools and business units. The controller's office was already working closely with the schools and departments across the university on the accuracy of financial results. Subcertification was perceived as a reasonable extension of what was currently happening.
“Our schools and business units recognized their responsibilities around controls and financial results and came on board quickly with the subcertification process,” says Bounty. He identifies three actions that contribute to the successful rollout of a subcertification program.
1. Establish the tone from the top. Senior management and board members embrace and support the importance of internal controls. They also emphasize the importance of the subcertification process and set an expectation of local responsibility for sound internal controls and accurate financial results.
2. Acknowledge local responsibility. Local units acknowledge their responsibility for establishing, maintaining, and ensuring compliance with a system of internal controls and for reporting accurate and timely financial results. Each school and department performs an appropriate level of due diligence in support of its representation. The criteria for internal controls at the business unit level are that they are in place, functioning effectively, and can be trusted to produce reliable financial results. Interestingly, the very process of having business units evaluate local internal controls against these criteria helps strengthen the controls. Putting internal controls in place also helps those signing subcertification documents to feel more comfortable doing so.
3. Develop knowledge and skills at the academic and administrative dean level. Three elements of subcertification are clearly communicated to this group: purpose (what subcertification is and why it is important); materiality (what this process means and how it is determined at the subunit level); and related parties (who is involved and how transactions are identified and reported).
Because many decentralized business units rely on central finance and administration for some of their internal controls, staff in individual units may feel uncomfortable signing subcertification documents. It may be useful for larger units to obtain subcertifications from their individual departments to feel comfortable signing subcertifications. Finally, business officers may have questions about legal liability associated with signing subcertification documents and whether it's possible to define legal indemnification for individuals. This is a question that may require legal counsel. In the end, subcertification is a practical mechanism to move toward a higher level of local accountability while maintaining the necessary autonomy of university departments.
Hone Roles and Responsibilities
A third approach for polishing institutional fiscal competence and accountability is to reassess staff roles and responsibilities. What does it mean for business officers and staff to be focused on the right tasks? Whether it's the budget office, accounts payable, payroll, or administrative deans or directors, fiscal officers in these areas have learned the work of university administration through years of on-the-job training, with many of them growing into business officer roles. Furthermore, the culture of university administration often calls for promotion from within, and many business officers find themselves inheriting complex systems and a commensurate need for broader institutional knowledge.
While training is one method to address potential gaps in knowledge and understanding, just as important is making sure people are charged with the right responsibilities. One qualitative way to gauge whether business officers and support staff are performing the right tasks is to ask this question: If university financial leaders retire this year, would they be leaving the institution with sufficient expertise to support and improve financial operations in an uncertain future? That is, do people know their jobs well enough to be proactive heading into the next five years? Based on conversations and interviews with many senior leaders at numerous institutions, the answer is a resounding no. This dilemma is consistent across colleges and universities. Technology continues to drive change in business process even though institution leaders may not have a clear sense of how roles and responsibilities should be modified.
Senior management must step back from the question of “Who's doing what?” and ask, “What should we be doing?” This becomes the basis for decoupling roles, responsibilities, and organizational structures from the people currently doing the work. Here are some guidelines for making sure that staff are in the right places:
Senior management must step back from the question of "Who's doing what?" and ask, "What should we be doing?"
Measure value and cost. In 2007, Boston College's McKenzie began to evaluate how to streamline roles and responsibilities in the business office. To that end, managers across general accounting, endowment and investment accounting, cash services, plan fund, and the controller's office began the process of deconstructing every task and project performed over a fiscal year. The result: an Excel database that captured the 774 unique tasks performed by 21 managers and staff. Each task was identified within major categories of cash management, compliance and taxes, fiscal administration, fund administration, oversight, and general and system support. These major categories were then sorted and organized into minor categories. For example, fiscal administration was broken into 12 minor groups, such as the interim audit, journal processing, reconciliations, and administering auditing standard SAS 112, among others. Finally, the hourly equivalent cost of each person was determined, thereby allowing a unique view of the relative cost of each task and each minor and major grouping.
This exercise made it possible to get a quantitative view of the cost associated with every activity performed across each group. Rather than a time-based view of activities performed, management could see precisely what the work cost in real dollars. This became an invaluable source of information, allowing managers to question whether they were getting the equivalent value of the cost associated with particular tasks, and to evaluate whether they wanted to spend time doing certain tasks.
In the end, this unique view of organizational activities allowed McKenzie and Michael Driscoll, the university controller, to make structural changes based on their long-term vision for the institution's financial units. “By analyzing the roles performed across our finance departments, we were able to make critical decisions about reorganizing responsibilities. The evaluation of people's time and per-task cost helped us immensely in our decision making,” says Driscoll.
Once leadership has a solid understanding of time and cost, the final three steps to reorganizing roles and responsibilities include:
- Creating an organizational chart based on the responsibilities needed, not on the people currently filling those roles.
- Reintroducing existing employees into the “roles-based” organizational chart.
- Identifying gaps to be closed by adding human resources.
This type of exercise can uncover key opportunities for adding fiscal luster to the institution's mission.
Offer pockets of expertise with services or support centers. Many institutions have implemented department self-service tools, such as online procurement, to support the decentralized structure of higher education departments. The dilemma with distributed technology, however, is that the more people who touch the system, the higher the error rates typically climb.
Expecting every administrator to have institutional knowledge about specific policies and procedures related to these add-on tools is also unrealistic.
At the same time, service centers can provide an important lever to maximizing existing talent and creating pockets of expertise in areas of finance, human resources, and technology. Three primary service center models can be developed. Each can act as a bridge between departments and central administration, and each provides a different benefit:
- Consolidate previously unrelated departments. Examples of this one-stop shopping model include consolidating student service functions such as registrar, financial aid, student accounts, and student loans.
- Consolidate like functions. For example, make procurement processing available to multiple departments.
- Provide a service that previously did not exist. For example, assign technology consultants to each school and departmental unit.
To establish useful and realistic service centers, start by evaluating the common tasks performed across groups, and ask key departmental managers what would help them better perform their jobs. Service or support centers offer an efficient and effective way to meet the needs across departments that otherwise might be ignored or only partially fulfilled. Positioned correctly, such hubs can be in everyone's interest.
Build a Spirit of Ownership
For any of these fundamentals to truly succeed, a spirit of ownership must be created at every level in the institution. Developing fiscal officer competence and departmental accountability cannot simply be ordered by senior management. If the “What's in it for me?” question is not addressed, these approaches will become another management mandate for which all will drag their feet.
Raising the bar is a collaborative effort. By helping departments understand why it's in their best interest to embrace these forward-thinking approaches, you can achieve greater fiscal accountability with surprising ease, and staff performance will shine.